Is It Game Over for Video Game Consoles?

November 20, 2013 Leave a comment

Is It Game Over for Video Game Consoles?

By Cliff Edwards and Takashi Amano November 14, 2013

As a kid, Jared Cate spent long hours playing Nintendo’s (7974:JP) Pokemon and The Legend of Zelda video games. So when the company released its Wii U console before Christmas last year, Cate, 23, rushed to a local GameStop (GME) store in Atlanta to buy one. “I was about to move to San Francisco and figured it’d be a great thing to play with my family in my last few days at home,” he recalls.Cate’s Wii U has mostly been gathering dust since. Like many other Nintendo fans, he’s lost interest because of a lack of must-play titles for the $300 console. That’s left him plenty of time to play games developed for smartphones, tablets, and PCs. Since April, Nintendo has sold 460,000 Wii U’s, about 5 percent of its global target for next April of 9 million machines.

As Sony (SNE) this month begins sales of the PlayStation 4, and Microsoft (MSFT) delivers its Xbox One, their first full-size consoles in more than seven years, Nintendo’s woes are raising concerns about how new entertainment platforms—from iPads to cheap Android phones—are chipping away at the $58 billion global market for traditional video games. “There’s a lot of uncertainty in the business right now,” says Blake Jorgensen, chief financial officer of Electronic Arts (EA), the No. 2 video game maker.

The console business, which historically doesn’t make money until tens of millions of the machines are in living rooms, is introducing the hardware into a much-changed industry. U.S. revenue from sales of mobile games and those downloaded to computers rose 16 percent last year, to $5.9 billion, according to researcher NPD Group. Sales of the standard $60 packaged titles for consoles fell 21 percent, to $8.9 billion. THQ, the former maker of console shooter game Saints Row, went bankrupt in 2012 and was liquidated this year. Even Zynga (ZNGA), the maker of casual games for Facebook(FB) that once looked to be the biggest threat to traditional developers, missed a shift to mobile play and was forced to fire hundreds of workers in June.

Microsoft and Sony are giving their new machines 10 times the processing power of their predecessors, offering plenty of punch for hard-core gamers who line up first for consoles, as well as the ability to connect to the Web and tap into online games and entertainment.

The Xbox One will offer exclusive content, including a live-action TV show produced by Steven Spielberg and based on Microsoft’s best-selling Halo alien shoot’em-up game. Sony also has been trying to line up content to deliver a TV-like service via its new machine.

In a nod to the open-architecture revolution that encouraged small developers to create content for casual players on mobile devices such as the iPhone, the Microsoft and Sony consoles will allow self-publishers to sell titles through the companies’ online game stores. “It’s going to be very much a challenge … to capture a casual consumer who is on the fence about replacing their console,” says David Cole, founder and chief executive officer of researcher DFC Intelligence.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment