Video Game Firms Becoming User-Friendly
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the release of two major consoles approaches, video game companies are preparing for what could be a very eventful fall. Two video game companies have decided to work with gamers in an effort to increase the appeal of their consoles.
Nintendo's free game
In a move on June 21 to increase users, Nintendo (NASDAQOTH: NTDOY.PK) announced it is attempting to develop its first free-to-play game. That shows the company is willing to change its traditional business practices to help spur the appeal of its Wii gaming console, and that's a good sign for investors.
The game is slated to be released in March and would be a free version of Steel Diver, a submarine strategy game; it will be available on Wii U and Nintendo 3DS.
The move to offer a free game is a positive sign for the outlook of this firm, because it shows Nintendo is moving away from a strict business model, which has stayed far away from new technology such as smartphones. Even a slight change in tactics could indicate Nintendo is ready to work on gaming apps, which could substantially boost profits. Even just the free game offer will get the attention of new users.
The company looks like it needs to make a major change to strike a chord with gamers. Nintendo has had a lack of major game releases, and reviews of Wii U are mediocre, unlike the rave reviews it received for its 2006 launch of Wii. Probably the biggest challenge Nintendo faces is competition from two companies that have received praise for their consoles: Microsoft (NASDAQ: MSFT) and Sony (NYSE: SNE). Each company is scheduled to release a new console this fall.
Microsoft listened to gamers
In a previous post, I criticized Microsoft for the company's announcement in June about the upcoming Xbox One. The firm originally was not allowing gamers to give away a game more than once, and it had to be to a friend for at least 30 days. Furthermore, the company initially required users to check in at least once a day online for the system to function. Many others felt the same way I did, and Microsoft listened. This is a very positive sign for shareholders and those wanting to buy the stock, because it shows the company is at least trying to be user-friendly. If the Xbox One manages to beat the Sony PlayStation 4 in sales, the company will be in for a share price surge.
Microsoft's business holds a lot of stake in Xbox sales. According company figures, full year Xbox 360 sales ending in June were $10.2 billion. Overall revenues at the company for the same period was $77.8 billion. That represents 13% of revenue, playing a major role in share price.
Sony faces tougher competition
Nintendo's plan to increase efforts to attract gamers to its console should be somewhat discomforting for both Sony and Microsoft. Sony is further challenged by Microsoft's new-found commitment to accommodate users by giving them more freedom. However, Sony is used to the competition, as sales of the Sony PlayStation 3 are almost identical to sales of the Microsoft Xbox 360. Sony will need every inch it can get in order to come out on top. Sony looks to be fairly valued right now, with a price-to-book ratio of 0.9, but expect a price hike once the holiday sales numbers of the PS4 roll in.
Listening to consumers will help
In the end, it is the ease of using each console and the freedom each manufacturer gives to the gamers that will decide which company comes out on top. It will also boil down to the quality of each console and the superiority of each game offered on the devices. Both Nintendo and Microsoft improved their outlooks by working with the users, and we will see who comes out on top as the sales start rolling in.
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Nintendo. The Motley Fool owns shares of 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!