Apple and Console Video Games

9 09 2010
I’ve had an article by Dean Takahashi of Venture Beat queued up for reading for a few days now, and when I finally got to it,  How Apple could undermine console gaming with TV app games reminded me of exactly why I find it so hard to post here sometimes – other people are just better writers than me!

In short, I believe in Dean’s premise, that Apple could disrupt the console gaming industry at the fundamental level.  They could be making double-digit millions sales by the end of 2011 just by including the Games Center and the App Store on the new Apple TV.  But I’m not sure they are going to do that right away.  Sure, that’s easy to say now that the new Apple TV has been announced without an App Store – but here is my reasoning for why they don’t do that within the next year or so (although I really really wish they would):

1. Apple is only looking to fight for MAJOR pieces of business right now.  When I had the chance to pose a console-gaming question to Phil Schiller, Apple’s CMO, he told me the management team had had discussions about a move to console gaming in the past, but just didn’t think the market size (~15 bn in video game software sales per year, and probably shrinking) warranted their attention.  My counter argument was that very little development costs would be necessary to enter into the market.  But I think Phil was also looking at the future (and the products in the pipeline) and seeing potential battles with Sony and Microsoft looming on other fronts as well.  While I believe Apple does want to dominate the consumer electronics markets, they want to be very focused and ensure excellence in each category as they do it.  If they could not enter the video game industry and completely dismantle the Microsoft and Sony model (meaning deliver HD and in-depth games, as Microsoft and Sony are moving towards, at a fraction of the price) they probably wouldn’t do it.  Apple would not want to simply replace Nintendo as the #1 casual games supplier (which they basically already have), they would want to demolish the entire market.  And as Phil pointed out, the costs to do that (both physical costs and engineer focus costs) would outweigh the possible gains.  They would rather fight these giants on a larger playing field.

2. Apple is looking to slowly change the consumer mind-set about the boxes connected to the TV.  While those of us who actually talk about this stuff would immediately grab a “fully-functional” ATV that incorporated 1080 video, App Store/Game Center, 1 TB+ of video/audio storage, ability to stream from iTunes, etc. the larger public may not be excited to pay the $400+ per unit that would cost.  While the product would be excellent, the sales would likely not reflect it.  The negative press Apple would take for an “overpriced” TV-related flop would set them back years in trying to convince the public to purchase their envelop-pushing products.  So they are slow playing their hand.  This $99 dollar Apple TV is not as revolutionary as it could have been, but it’s a step in the right direction.  They will see how the public plays with it, when/where they use it, what functionality they demand.  While us geeks can continue clamoring for the high-end updates we want, Steve & Co. know where the real money is.  They will wait to hear the cries from the mainstream before the update the product (by which time, they might be able to offer all of that high-end functionality for under $200 anyway).

I for one and hoping I’m playing some fun and intense games through my TV using my iPhone as a controller soon.  But I’m not so sure Apple sees that in their immediate future, no matter how awesome it may seem to us.

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