Speculating on the Emergence of an iConsole

This is pure speculation, but more than eminently possible. Apple (AAPL) went from being a computer manufacturer to a consumer toy maker with the iPod. They then morphed into also being a phone manufacturer with iPhone. And in the process they have seen the massive profits that can be made by owning a proprietary gaming platform standard. Having seen what Apps store is making for them, they obviously want more. One obvious route this can take is to join Microsoft (MSFT), Sony (SNE) and Nintendo (NTDOY.PK) in the home game console market. Apple certainly have the technical expertise to do this.

It costs billions to launch into the console market, as Microsoft will tell you. Fortunately Apple have $29 billion in the bank. Yes, that’s right, $29 billion. You could buy a country or two with that. Also, you need management who know what they are doing. Apple’s management seem to have had all the right ideas thus far. But that is not stopping them currently from recruiting some of the top management in the console game industry.

Then there is the strongly rumoured takeover of Electronic Arts (ERTS). Apple could very easily afford this and it would give them the guarantee of lots of content as and when iConsole is launched. In fact, it wouldn’t make much sense unless Apple were launching a game console.

But the best thing about an Apple game console and the thing that makes it most likely is that it will allow them another opportunity to take on the old enemy, Microsoft.

Disclosure: No positions

Comments

[raytayzmd:]

...another game console?...you're joking, right?...Nintendo is already sweating Wii's loss of luster...and as I recall Sony doesn't make much off of PSP...and Microsoft's profit margin I don't know...but still, why on earth would Apple want to throw down against Sony and Microsoft?...I don't see the reward as comensurate with the risk...use the 29 billion either to buy back stock or invest in some area not dominated by 800 pound gorillas.

May 07 09:10 AM

[mbabigd:]

people said much of the same when apple entered into the cell phone market .... there is no reason they can't enter the console gaming market and do quite well.

May 07 09:58 AM

[mollytjm:]

they don't need a 'console gaming market' product..,they already have one...the iPhone and iTouch...it just needs a T.V. or large screen link and a joy stick. i think we'll see a larger version of the iPhone or the iTouch available and they're already giving gamers a lot to play with.

May 07 10:09 AM

[Zinny:]

"Apple have?" "Seen what Apps store...?" Where did you learn English, proper grammar and syntax? I sure hope the website does not pay you. It should be "Apple has" and "App Store" is Apple's proper brand name for their application distribution section in iTunes.

May 07 10:13 AM

[brewer:]

iPod isn't a toy, it's a computer. So is the iPhone, so would be a console game. It would be more than that though, it would most likely tie in some computer or at least iTunes music/video systems. IT would be nothing like the current offerings.

MSFT could stand to get hurt in so many ways by Apple. Say for instance they decide to release Snow Leopard for the generic PC.

Remember Steve Jobs worked for Atari before Microsoft even existed. And also remember that MSFT built their massive money LOSING machine, XBox on top of a former Mac-only software company, Bungie. They made the #1 game for Xbox--Halo, which was originally going to be for Mac (until Microsoft bought them).

@ raytayzmd: Microsoft bought back a lot of stock a few months ago, that all just went up in smoke. Don't expect Apple to follow suit. Microsoft is having to pay investors to keep their stock. It'll work for awhile I expect. Heck, they are even paying some people to buy PCs now, but I don't expect that will last long either.

May 07 10:27 AM

[Tom B:]

Great point about the danger of buy-backs. Hard to believe, but just a year ago, everybody was touting them like some kind of sure-fire, great idea.


On May 07 10:27 AM brewer wrote:

> iPod isn't a toy, it's a computer. So is the iPhone, so would be
> a console game. It would be more than that though, it would most
> likely tie in some computer or at least iTunes music/video systems.
> IT would be nothing like the current offerings.
>
> MSFT could stand to get hurt in so many ways by Apple. Say for
> instance they decide to release Snow Leopard for the generic PC.
>
>
> Remember Steve Jobs worked for Atari before Microsoft even existed.
> And also remember that MSFT built their massive money LOSING machine,
> XBox on top of a former Mac-only software company, Bungie. They
> made the #1 game for Xbox--Halo, which was originally going to be
> for Mac (until Microsoft bought them).
>
> @ raytayzmd: Microsoft bought back a lot of stock a few months ago,
> that all just went up in smoke. Don't expect Apple to follow suit.
> Microsoft is having to pay investors to keep their stock. It'll
> work for awhile I expect. Heck, they are even paying some people
> to buy PCs now, but I don't expect that will last long either.

May 07 12:11 PM

[cczaphod:]

I recently sold a Pippin (Apple's last gaming console) on EBay for over $600, so there's at least some sort of demand for an Apple console :-)

May 07 12:50 PM

[User 409520:]

@ zinny: If you read the bio, you'd realize that the author learned their English in the UK, which explains the use of "Apple have" and "Apps store". "Proper" (UK) English grammar is to treat an aggregate as a plural ("Apple have" or "England have"), and to carry the pluralization through to a shortening ("Maths" instead of "Math", which is short for "Mathematics", and "Apps" instead of "App" when short for "Applications").

Yes, the proper name is "App Store", but before you shoot off your mouth, perhaps a little bit of research might be in order.

May 07 02:10 PM

[Cheat Sheet:]

Extend the AppleTV and you have a game console. Make it play iPhone games and hook up to AppStore and you have a game machine with a large library. Only missing piece of hardware are controllers. At average $30-40 per unit, it represents another revenue stream. If touch controls are needed, this is a perfect opportunity to introduce touch based remote control that can act as remote for AppleTV too - iPod Touch without the iPod or flash memory but contains all the input functions. Or just allow iPod Touch and iPhone to control the thing. Makes developers for AppStore happy too.

Later on, add AppleTV specific games on AppStore to introduce more sophisticated games. Or introduce new AppleTV hardware in this regard. They'd be leveraging their foundation of distributing digital assets to the console market. It might work.

Also, there's opportunity to extend MobileMe to support console online functions like X-Box Live. There's a lot to leverage on their foundation technologies and provide service which can generate new revenue streams.

There's no reason other non game apps would not work either. May increase sale of wireless kb and mouse. Also create netbook effect of the cheap desktop for home use. AppleTV is $299. Kinda a full circle thing since Apple II used to use standard TV as display.

May 07 02:22 PM

[Camden:]

I think the ERTS acquisition rumor is extremely unlikely to come true and an iConsole is just as unlikely. As pointed out also by mollytjm above, Apple has already developed a new gaming platform with the iPhone and iPod Touch.

May 07 02:23 PM

[Constable Odo:]

Wall Street and the news media are always calling Apple a high-tech toy manufacturer. This is not an unusual thing to hear. Apple is not taken seriously as a company that makes business products. The magnificently engineered Mac Pro doesn't count since they don't seem to sell in high enough numbers to offset the strictly music-based iPods that teenagers play with.

Even Leopard Client and Server are considered home OSs. Nothing a really large corporation would consider using despite their robustness and low price tags.

Even now that Apple is setting up the iPhone and iPod Touch platform as a major gaming platform, it only reinforces WS into believing the company is merely a bigger toy company. Apple is basically a joke to WS and that's why it stays undervalued. Apple is doing nothing for the enterprise and that's reinforcing it's image as a toy company. WS sees it as: If you want to play, buy Apple. If you want to get some serious work done, buy RIM. Geez, if Apple released a home gaming console, they might as well call the company Apple iToys-R-Us.

Supposedly, Apple makes almost no money from the App store and it's not driving sales of iPhones to compete with BlackBerry sales. Since WS and investors don't give a damn about deferred revenue or huge cash reserves, it doesn't make Apple draw investors to itself any more than, say, RIM, Google or Amazon with far less cash capital.

I'm really puzzled about where Apple is going. They seem to be just scattering devices all around with no particular focus.

May 07 03:14 PM

[User 409571:]

iGame. Games work on the console, iPod touch, iPhone. Buy via the App Store, works on all w/shared account. I'd buy it.

May 07 03:16 PM

[User 409597:]

Great contribution, Zinny. You've really moved the discussion on there...

May 07 03:58 PM

[BankOfTooBi...:]

It's not just devices. It's the platform. OS X and iTunes are the platforms. It's extensible through new categories of devices. In turn, new device categories extends to new market space. The platform grows when footholds in new markets are established. Apple has found a way to use the razor blade business model work for consumer electronics. They're doing it via digital distribution. First, it's music on iPods. Now it's applications and games on iPhone. If this model can be sustained and expanded into new categories such as game consoles, it just means more business for Apple and its developers. This is Apple's "holy trinity": device (HW), OS X (SW), iTunes (Digital Content Distribution Engine). The amazing thing is, they are not sacrificing profits to make it work.

There's a fourth element coming that can strengthen this platform: Cloud computing. In Apple's case, it's MobileMe. It sounds generic but has potential to increase the utility of portable devices they already have. There's no reason why processing cannot be done remotely on a server and return desire results to the terminal device. This is the old unix model. In the case of iPhone, it can make background processing on it unnecessary. Apple already hinted this with the first MobileMe announcement. Future processor intensive tasks can be handled by an application server (maybe the user's own PC that is online) and allow manipulation and consumption of resulting data on an iPhone via a proxy application. Sort of a NetPC touted by Oracle's Larry Ellison back in mid 1990s. Changes in their SDK can offer this utility. It would certainly be a new paradigm of computing for the user in the future. I believe others such as Google is thinking in these terms also.

On May 07 03:14 PM Constable Odo wrote:

> I'm really puzzled about where Apple is going. They seem to be just
> scattering devices all around with no particular focus.

May 09 01:44 PM