Apple rumored to be eyeing video game market

[AppleInsider]

A recent series of checks by Prudential analyst Jesse Tortora indicate that Apple Computer has hired video game designers and may have aspirations of entering the video game market in long-term.

"We think the video game market represents a distinct possibility for Apple, especially considering that it recently announced the availability of video games for its iPod through its iTunes store," the analyst told clients in a research note on Monday.

Tortora said Apple's design superiority, along with its well-recognized brand name, is sure to provide the company an advantage should it decide to enter the market. He said the company could approach the video game sector in one of two ways -- via a home game console or a handheld device.

"The game console device could be morphed out of some combination of the MacMini and iTV, while the handheld player could be developed as an enhancement to a future version of the widescreen iPod," the analyst explained.

Still, Tortora said such a move "would introduce a complex set of market conditions" for Apple, which has traditionally made its real money through hardware sales. "The video game console market is notorious for subsidizing hardware to sell profitable games," he wrote. "Apple would then have to either rely on the sales of its games and downloadable movies to make enough profit to cover losses on hardware or figure out a strategy to make profits on hardware itself."

Given the challenges presented by the video game market, Tortora believes the company's decision to enter the video game market could depend on its need to defend its position against the competition in the battle over the digital home. He noted that Microsoft recently introduced a video download feature to its Xbox 360 gaming system and said he expects Sony will follow.

"There are no technical limitations to this capability, and Microsoft is already aggressively wooing the movie studios," he wrote. "This could adversely impact Apple’s iTunes Movie download business longer-term, along with its iTV and video iPod sales."

The analysts believes Apple will ultimately have to decide "whether to accept this challenge head-on" by entering the gaming market, or conclude that Microsoft and Sony pose little risk to its business and continue on with its current strategy.

In his note to clients, Tortora said Apple has recently hired game developers at both the software and hardware levels.

[ View this article at AppleInsider.com ]

[SpamSandwich]

Bad idea. Apple should stick to the business of building "containers" (players) for purchased and downloaded games, music, video, etc. If Apple makes a new game business, they should immediately spin it off so it can be self-sustaining and competitive with other companies in this market.

[eAi]

Seems unlikely to me - it'd be hard for them to enter the sector at this stage, unless they make a really unique product.

[Rhoq]

Originally Posted by eAi

Seems unlikely to me - it'd be hard for them to enter the sector at this stage, unless they make a really unique product.

Nintendo has already go that covered with both the Wii and DS.

[Hobbes]

Not a chance. Apple has little to no understanding of the non-casual game market, and very little interest.

Any hiring of game developers is almost certainly about more small, casual games for the iPod / iPhone.

Which is a good thing, for sure, but it has almost nothing to do with the upcoming clash between Sony, MS, and Nintendo.

[JohnnyKrz]

I agree. Bad idea.

I could see the iTv being compatible with iPod games and imporvements to iPod gaming (such as previously rumored gyroscopes, etc.), but I don't even think mac-faithful would be interested in an Apple PlayStation/XBox.

[solipsism]

Originally Posted by Rhoq

Nintendo has already go that covered with both the Wii and DS.

Buying Nintendo and integrating the features of iTV into it wouldn't be a bad idea, but I can't see Apple entering th market with it's own, original game console.

[g3pro]

Apple has little to no understanding of the non-casual game market, and very little interest.

Do you guys pull those statements out of your asses?

[Rhoq]

Originally Posted by solipsism

Buying Nintendo and integrating the features of iTV into it wouldn't be a bad idea.

Never going to happen, however an Apple/Nintendo partnership could be profitable for both companies.

[MacRR]

I could see moving along as it is- little baby steps.

The first step was games on iTunes for the iPod.

It is not far fetched that they would build on that at their leisure. Why not?

[SpamSandwich]

Originally Posted by Rhoq

Never going to happen, however an Apple/Nintendo partnership could be profitable for both companies.

They would be wise to partner with as many of the top companies as possible to create an iPod games division (if it's deemed critical to future growth) and not risk their own capital and waste time on game development of loser titles.

[dancm2000]

It would be so much easier to jump in and out if they just teamed up with Nintendo.

[lepton]

I'm sure they are simply working on bigger and better games for the bigger, better iPods that will be coming out next month. Remember, most mobile phones play games too! -Mike from myallo.com, the site that finds without searching

[hmurchison]

Getting into gaming is fairly easy.


1. Develop a powerful gaming API for OSX
2. Aquire a large gaming company with great upcoming game.
3. Develop a console that plays games, downloads movies, streams video/photos
4. License the hell out of the platform.

Microsoft has created a winner in just 3 generations of Xbox consoles. Apple can cut that down to 2 generations if they just follow the pattern of success and avoid the pitfalls.

Bring on the iGame Console!

[marchhare]

I think this is out of context. Consider the PC as a gaming machine. If you ask any semi-knowledgable person why they would buy a Windows box over a Mac, they will either say something about specific applications for work or games. I think Apple may just be working to get a "Gamer's Mac" together. Maybe a super-iMac or something similar.

So, it wouldn't be a completely new stand-alone box to compete or even just another version of Tetris for the iPod, but fine-tuning the graphics and other capabilities of their current hardware to outshine Windows in the PC gaming market.

[SpamSandwich]

Originally Posted by lepton

I'm sure they are simply working on bigger and better games for the bigger, better iPods that will be coming out next month. Remember, most mobile phones play games too! -Mike from myallo.com, the site that finds without searching

I think I read about you, spammer boy. You're one of those posters who now sticks a link into their comments and gets paid for it. Screw Myallo.

[monkeyastronaut]

Originally Posted by hmurchison

Microsoft has created a winner in just 3 generations of Xbox consoles. Apple can cut that down to 2 generations if they just follow the pattern of success and avoid the pitfalls.

Bring on the iGame Console!

xbox and xbox360... just 2 generations of xbox consoles.

[Rhoq]

Originally Posted by hmurchison

Microsoft has created a winner in just 3 generations of Xbox consoles.

Microsoft has only been in the video game console race for 2 generations.

2001 - XBox
2005 - XBox 360


*Edit - monkeyastronaut beat me to it*

[palegolas]

Nintendo is currently the Apple of videogames. They drive the inovation in my opinion. If Apple chooses to really compete in the gaming industry, who will they compete with? Nintendo or Sony? I think they could have a chance of accomplishing something in the portable sector but I think what they're really going after is something simpler.. like an extension of what they're already doing.

For instance, once their "Mini OX X" is out on a few products, they can create a market where 3'd party developers can make games for their devices, such as iPod 5G, iPod touch, iPhone, iTV etc, and let the games be purchased easily through the iTunes store. The games will be developed with Apple's API. Plus with all Apple's patents we've seen the last year they could offer interesting platforms for developers, and a huge install base.

I don't think Apple will join the game industry as we know it today, but rather make it an extension of the iTunes games model we see today.

[mcloki]

The video game market is a market Apple should just stay away from. Stick with Films and music. Games would kill them. Unless they bought Nintendo or Sony. Then it's a different story. Both mergers would be nice but the Apple/Disney /Nintendo combination would be pretty scary for the competition.

[waytogobuddy]

Buddy is out to lunch.
Smoke grass write reports get paid for being an analyst?
(sure, sign me up!)

[hmurchison]

Right on y'all had my back.

Just two generations of consoles and Microsoft's a player. Apple can do this. They have to open up the coffers and buy some good IP but the hardware is simple with Nvidia and ATI doing the heavy lifting.

Plus this will allow them to focus on keeping OpenGL a factor in the gaming sector.

When you look at the consoles they are no longer just gaming boxes. They are mini entertainment devices. The Xbox 360 now can download HD content, playback HTPC media centre contenet and game. This and the Playstation 3 are a threat to the future of Apple products that seek to do the same minus the gaming.

Apple has all the pieces put together. iTunes for music and videos. OS X/Quicktime for infrastructure and the funds to become a player quickly. I'd buy an Apple console.

[Splinemodel]

I'm not so sure about your evaluation of the xBox. A few years ago, Jobs dismissed rumors that Apple was developing a PDA, saying that, "the PDA market is not a happy place to be." I'd argue that the game console market, today, is also not a happy place to be. MS's xBox units is still hemorrhaging money out the ass, and Sony looks to lose quite a bit on the PS3 for at least the next year or year and a half. Nintendo seems to be doing alright for the time being, but for how long? There's no guarantee that people won't get tired of the Wii -- that the novelty might wear off.

The only reason why MS is in the game console market is because they have a carte blanche thanks to all of the money that comes in from the desktop monopoly they enjoy. They will try to dominate any new markets that they can, but it hasn't been easy with xBox. Nothing that they have done has really gotten them any closer to turning a profit, much less dominating the industry.

If Apple is said to be working towards their advancement in the gaming market, you can be almost certain that this is little more than a push to try and get better game support to the mac desktop, rather than some grand plan to enter the console market. Now that they use x86's and EFI, it's presumably much easier to leverage existing hardware products, and it undoubtedly reduces the amount of snafu bugs that show up (and have to be debugged) due to the difference in PPC and x86 architectures.

[SpamSandwich]

Originally Posted by hmurchison

Getting into gaming is fairly easy.


1. Develop a powerful gaming API for OSX
2. Aquire a large gaming company with great upcoming game.
3. Develop a console that plays games, downloads movies, streams video/photos
4. License the hell out of the platform.

Microsoft has created a winner in just 3 generations of Xbox consoles. Apple can cut that down to 2 generations if they just follow the pattern of success and avoid the pitfalls.

Bring on the iGame Console!

MS has created a "winner" that continues to lose billions for them. Wow, a few more winners and they could really be hurtin'.

[Macvault]

Hey, maybe this would force Apple to put a real GPU in the Macbook!

[TBaggins]

Originally Posted by SpamSandwich

MS has created a "winner" that continues to lose billions for them. Wow, a few more winners and they could really be hurtin'.

Yep, and its amazing how many people forget this, and also aren't even aware that the US is the only major market where the Xbox has done anything at all. In Europe, the Xbox has done much poorer in sales, and in Japan you can't hardly give them away. Pfft. Some 'success'.

Hey, give me a couple of billion dollars to chuck away, with no hard milestone date by which I have to start turning a profit, and I can grab 15 percent of the console gaming market too. Not much of an achievement under those conditions, really.



.

[Johnny Mozzarella]

Microsoft's next major version of the Zune will be very similar to the current PSP.
It will be designed and marketed by the XBOX division.
It will be a media and gaming platform.

Solution...
Apple will be first to market with its "true video/gaming" iPod.
It will have a form factor similar to the PSP but smaller.
Apple will also be releasing the iTV its home theater/entertainment platform.
You will be able to buy a game through the iTunes store.
It will download digitally and be playable on the iTV
Apple will probably sell bluetooth controllers seperately
The same game can be transfered to the the true video/gaming iPod.

Apple's competitors(MS, SONY, and Nintendo) have to make their money back on games.
Their games are primarily sold on physical media and cost $60-70.

Apple will sell the iTV at a profit and then make more money by selling
Music, AudioBooks, TV Shows, Movies, Games
All their distribution is digital and games will probably cost $10-20.

[vinney57]

I think Hobbes has it. Apple can find a nice little niche with games designed for the next gen of video iPods (i'd love ports of the old arcade stuff for instance). There's not much elbow room in the console market and little chance of success without a multi-year, billion dollar investment.

[TBaggins]

Originally Posted by Macvault

Hey, maybe this would force Apple to put a real GPU in the Macbook!

No. Because that (or an option to upgrade) would be logical.


.

[bgeerdes]

All this speculation based on Apple hiring some game developers? Hello? Apple is already in the game market, writing games for sale for the iPod. They already have the hardware, the API and the delivery mechanism. And you can be sure it'll all work seamlessly with the upcoming iPhone. (Right?)

[LiquidR]

This would be another uphill battle for Apple. If I were to speculate I'm guessing that Apple is exploring this avenue. Doesn't mean it will happen. However if Apple is succesful in selling a set top box for movies and music to a large market segment, what's to stop them from adding video game capability 2-4 generations into it's life.

[hmurchison]

Originally Posted by SpamSandwich

MS has created a "winner" that continues to lose billions for them. Wow, a few more winners and they could really be hurtin'.

I don't know where you got this information.

http://www.neoseeker.com/news/story/6312/

Xbox 360 cost reduced by as much as %40

According to electronics supply chain iSuppli, the manufacturing processes involved for Microsoft's Xbox 360 have "matured" enough to the point where related costs have been reduced signifigantly. The latest teardown analysis of associated components for the Xbox 360 show that the average estimated cost for producing a console comes out to around $323.30 US. Looking at the retail pricing for Xbox 360 consoles, the manufacturing costs are actually $24.30 US lower than the price of a "core" Xbox 360 package, and $75.70 US lower than a "premium" one.

Clearly some of you are working with assumptions or old info. Add in Xbox live Gold subs and Microsoft is making money folks.

[Kickaha]

Bingo, bgeerdes. I can't see them getting into the console market, but they're going to continue to add games to the iPod and iPhone.

[tink]

Originally Posted by hmurchison

Getting into gaming is fairly easy.


1. Develop a powerful gaming API for OSX
2. Aquire a large gaming company with great upcoming game.
3. Develop a console that plays games, downloads movies, streams video/photos
4. License the hell out of the platform.

Microsoft has created a winner in just 3 generations of Xbox consoles. Apple can cut that down to 2 generations if they just follow the pattern of success and avoid the pitfalls.

Bring on the iGame Console!

I agree to the API would be key. I think a big game isn't the way since most of the big games push the hardware. I think the best model is more like the Nintendo Wii in that the hardware isn't hardcore like Sony's or Microsoft's and the games aren't as demanding. Nintendo is making money both on software and hardware. Microsoft while 3 generations is still losing mega $$$ on hardware (as is Sony) and Microsoft is still is not making money on the software side( which was fundamental in their gaming business model).

The iPod / iTV ~ Mac mini / cell phone / front row / iTunes in conjunction with a solid gaming API and easy licensing program to create a value added feature of the whole widget. .

Leave the bad ass mega games to the $$$ loosing Xbox's and Playstations. Go for fun smaller Wii type games that make the combined uniform Apple platform that much more robust without diverting too many resources and without heading out in uncharted waters.

Later if the API and licensing is a success and the Apple Game ecosystem is robust enough, then that might merit entering a dedicated gaming device.

[hmurchison]

Gaming is the one market where there's literally room for just about anyone who can deliver compelling games and service.

Apple doesn't have to compete directly with the Playstation/Xbox 360/Wii on the gaming front. They can slant towards movies/Audio with some cursory gaming support as well. With multi-core cpu and the power of GPUs the hardware isn't becoming something you need to go too deep into the red over anymore. It's swinging back to "just create good games" the hardware is commoditizing right before our eyes.

[Ireland]

Originally Posted by Johnny Mozzarella

Microsoft's next major version of the Zune will be very similar to the current PSP.
It will be designed and marketed by the XBOX division.
It will be a media and gaming platform.

Solution...
Apple will be first to market with its "true video/gaming" iPod.
It will have a form factor similar to the PSP but smaller.
Apple will also be releasing the iTV its home theater/entertainment platform.
You will be able to buy a game through the iTunes store.
It will download digitally and be playable on the iTV
Apple will probably sell bluetooth controllers seperately
The same game can be transfered to the the true video/gaming iPod.

Apple's competitors(MS, SONY, and Nintendo) have to make their money back on games.
Their games are primarily sold on physical media and cost $60-70.

Apple will sell the iTV at a profit and then make more money by selling
Music, AudioBooks, TV Shows, Movies, Games
All their distribution is digital and games will probably cost $10-20.

Now this is what I was thinking!

If Apple is going to sell games, they're going to do something like this.
You download the games with your iTV and use the remote control to play them, if you have a video iPod you can send them to the player and play them on the road too.
The games will be very basic, and will cost $10 at the very max.

[TBaggins]

Originally Posted by hmurchison

I don't know where you got this information.

http://www.neoseeker.com/news/story/6312/

Xbox 360 cost reduced by as much as %40

That's just a teardown analysis of the hardware. Doesn't include things like marketing costs (which have always been considerable for Xbox) and shipping. Best guesstimates are that MS is probably just now starting to break even on the 360, or is getting close. However... (see below)

Clearly some of you are working with assumptions or old info. Add in Xbox live Gold subs and Microsoft is making money folks.

Since you bring up old info... breaking even really isn't helping MS's Xbox division dig their way out of the $4 billion hole the first-generation Xbox put them into:

Forbes: Xbox lost Microsoft $4 billion (and counting)

http://www.joystiq.com/2005/09/26/fo...-and-counting/

[TenoBell]

The latest teardown analysis of associated components for the Xbox 360 show that the average estimated cost for producing a console comes out to around $323.30 US. Looking at the retail pricing for Xbox 360 consoles, the manufacturing costs are actually $24.30 US lower than the price of a "core" Xbox 360 package, and $75.70 US lower than a "premium" one.

Clearly some of you are working with assumptions or old info. Add in Xbox live Gold subs and Microsoft is making money folks.

I think you have to look at it all though murch.

How much money has MS lost through the entire course of its Xbox venture?

EVen if they've gotten the cost of building each unit below its retail price how many units do they sell and how much actual real profit are they making?

Add all this up the balance sheet is still in the negative column.

[jamezog]

I agree with the consensus - getting into gaming is a bad idea, unless it's a mild expansion of the existing gaming service for the iPod.

...though it would be neat to see Apple stick it to MS by successfully attacking Xbox as retribution for MS attacking the iPod line with Zune. But seriously, the console market is too fierce to attack head-on. They'd need to niche.

Partnering with Nintendo might also be a good idea - they have enough in common to benefit from working together.

[Feynman]

Might we see CoreAnimation in the iPod soon?