Nope, Apple Is Not the Apocalypse of Gaming Consoles

Ashley is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

There are rumors circulating about Apple’s (NASDAQ: AAPL) entry into the gaming console world with its gaming-enabled Apple TV. There’s also this one very interesting post claiming that if Apple does enter this market segment, then big time players like Microsoft (NASDAQ: MSFT), Sony and Nintendo (NASDAQOTH: NTDOY.PK) would not only be negatively affected but could meet their demise. 

While those claims are strong, they do pose a question surrounding whether Apple’s gaming-enabled TV console can even make its mark in the gaming division, let alone destroy the existing gaming console makers.

What exactly is Apple cooking?

Well, all we have are a bunch of rumors that Apple's offering is basically a TV filled with apps. But here’s where it gets interesting – Valve Founder Gabe Newell (the guy who’s running the company that brought you awesome games like Half Life and Portal) and Nat Brown (who is one of the first engineers to create an Xbox) both sounded the alarm bells about Apple’s threat to Microsoft, Sony and Nintendo.

These guys also do have a point. Apple’s entry into gaming does seem like a move that will expand its portfolio, since their other competitors -- Samsung and for their smartphones and tablets -- all have a stronghold in other areas too. Apple’s current stock performance has also been shaky at the least, so getting into gaming does open up options. Also, the company has a great app ecosystem that can be taken to the living room and it can find success in this.

All this sounds fine, but will it replace your Xbox, PS3 and future gaming consoles? Well, I really don’t see it. Why? Because gaming consoles have got games like Bioshock Infinite.

Is there a future for gaming consoles?

Honestly, I find it very hard to believe that gaming consoles are a dying breed. Why? Because the market has become much more than just gaming consoles. It has evolved into home entertainment systems, which support TV streaming services such as Netflix, Hulu Plus and others.

There’s a huge demand for these services and it's still coming together. But its future does not lie solely on these services. Saying that gaming consoles will become extinct is basically like saying that gaming is coming to an end. Well, it’s not.

Let’s take a quick look at stock performance at Sony, Microsoft and Nintendo and determine the importance of the gaming division to each company. 

Sony’s revenue comes from a variety of sources and, their Playstation brand brings in a major chunk of it. Microsoft reported revenue of approximately $21.5 billion for the second quarter, but its Xbox division reported an 11% year-on-year decrease, from $4.2 billion to $3.8 billion.

This decrease has been attributed to the lower number of consoles sold during the quarter, but this is only because the life cycle of this console version is coming to an end. The Xbox division has started to strategize for the next generation of consoles and once that’s out, the numbers should come up.

Nintendo posted an overall profit of $153 million by lowering its forecast for console sales from 5.5 million to 4 million devices but Wii U console sales are suffering due to a lack of new releases.

This highlights the importance of the development of new games for consoles. But while Nintendo is struggling to attract developers, Sony and Microsoft are not.

The future has never been brighter for games and the biggest example for it is the 2kGames latest release Bioshock Infinite. I've just seen the trailers and I've yet to buy the game, but wow, it’s such a beauty. Early reviews of this game are excellent and the one aspect they've all unanimously praised is its story narration and its plot.

Games, nowadays, have come a long way from the '90s arcade games. If you see the Call of Duty series, you’ll find the difference in the very first CoD to the latest one (Call of Duty: Black Ops 2). Not only have the graphics and game play developed with each release, the narration has become more sophisticated and engrossing.

In short, console games have become much more than games, they've become more cinematic in nature and will continue to push the boundaries in the content they offers. Mobile devices have decent games and they are fun, but Xbox and PS games are miles ahead of them when it comes to providing living room entertainment. There will always be a market for them.

Bottom line

I strongly believe that the ‘end of gaming console’ talk is just premature and that there’s really no basis to it. True, other platforms (like the rumored Apple TV) have massive potential and downloadable content (games and other media) are surpassing the sales of physical products, but I really don’t see them replacing (or even challenging) a platform that enables the development of games like Bioshock Infinite. Games are what drives this competitive division and there will always be a market for high-production games.

Ashley Sales has no position in any stocks mentioned. The Motley Fool recommends Apple and Nintendo. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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