What's Next for Apple: 3D Gaming?

 |  Includes: AAPL, IMAX
by: Jason Schwarz

What's next for Apple (NASDAQ:AAPL)? While we're waiting for the 3G iPhone release, the company is well down the road on the next big thing: 3D gaming.

When Apple jumps into the gaming industry don't expect them to copy Microsoft's (NASDAQ:MSFT) xBox, Sony's (NYSE:SNE) Playstation, or Nintendo's (NTODY.PK) Wii. In a March 4th interview Steve Jobs also deflected interest in going head to head with Microsoft in the PC gaming business. It seems that once again, Apple is gearing up to break the mold.

The most influential names in entertainment are furiously working with the latest breakthrough 3D technology, and you can now add Steve Jobs to the list that already includes three-time Academy Award winner James Cameron, U2 visionary Bono, Lord of the Rings Director Peter Jackson, and Imax (NYSE:IMAX) co-CEOs Richard Gelfond and Bradley Wechsler.

For those of you whose only 3D experience has been watching Captain EO while wearing those paper 3D glasses, I've got news for you, this new technology will blow your mind. If you want a sneak peak, go to your local Imax Movie Screen and check out U2 in 3D. Frank Miller, writer of Batman, 300, and Sin City, had this to say: "I saw U2 3D and I thought that the 3D effects were not just remarkable but historic." According to U2 3D executive producer Sandy Climan, "We think this is going to usher in an era of filmmaking that causes a paradigm shift not that much different than silent films to talkies, or black and white to color."

Titanic producer James Cameron agrees, "There will eventually be major titles available from all studios at some screens in almost all multiplex cinemas worldwide. I would say the horizon for this is five years...3D's broad acceptance at theaters will generate enough content that consumer-electronics manufacturers will make home players and monitors available. The technology exists now, but is not readily available as off-the-shelf products. 3D display will become a must for video and computer games. The density of information one can place on a small screen becomes much higher if it's stacked in three dimensions."

Apple has officially filed a patent for a 3D gaming controller that will work with the Apple TV. As reported on Appleinsider.com, in the November 2006 filing, published for the first time this week earlier this month, the Cupertino-based electronics maker notes that the three-dimensional remote control systems can detect an absolute location to which a remote control is pointing in first and second orthogonal axes (e.g., the x- and y-axes) and an absolute position of the remote control in a third orthogonal axis (e.g., the z-axis).

There have been a number of hints over the past year to suggest it may only be a matter of time before the set-top box, like the iPod and iPhone, will double as a casual gaming console. Last February, Greg Canessa of PopCap games singled out Apple TV as a platform he expects to embrace casual gaming over the next five years, and suggested that work was already in progress at his studio to deliver games for the device. "[Casual games] are going to continue to grow into non-core demographics," he added. "This is relevant as it pertains to devices that are not currently earmarked as gaming devices: mobile, set-top boxes, Apple TV, MP3 players and other devices in the home that will reach the non-gamer -- people who don't think they want to play." A month later, references to gaming on the Apple TV were discovered in the company's iTunes code.

What could possibly bring these non-gamers into gaming? We're at the beginning of a new era in gaming as evidenced by the success of the Guitar Hero franchise -- Activision (NASDAQ:ATVI) and RedOctane -- as well as the success of Nintendo's Wii. Physical participation in a game brings the user experience to a new level -- a level that turns non-gamers or casual gamers into serious gamers. Imagine a physical gaming experience that was more than just a game; what if your time spent playing games was actually teaching you a new skill? Educational gaming has been tried before, but Apple might be the ones to bring it mainstream. I wouldn't be surprised to see the integration of current Apple software into some new games. Imagine combining the physical instruments of Guitar Hero with the real life mixing and recording capabilities of Apple's Garageband. Such a game could actually teach its user to play the guitar, or any other instrument.

By developing a 3D gaming platform, Apple is a serious candidate to deliver the next big thing. You actually want to learn to fly a plane, to sail, to race Nascar, or to improve your golf swing? 3D Apple could bring these real life simulations to the mainstream. Just another reason to buy some more Apple stock. With this company, there are too many catalysts to ignore. Buy some January 2010 $220 call options and shut down your computer while Steve Jobs triples your investment over the next year. Stay tuned for more 3D news...

Disclosure: Long AAPL, long IMAX