Apple Inc. (AAPL) Is Moving Into Video Games

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The last six years have been terrible for Nintendo Co., Ltd (ADR) (OTCBB:NTDOY)‘s shareholders. After peaking in 2007 with a market cap near $85 billion, Nintendo has steadily collapsed and has now lost over 76% of its value over the last five years.

Unfortunately, this could be the beginning of the end for the once iconic video game company. Apple Inc. (NASDAQ:AAPL)‘s coming entrance into the video game market, a fairly likely possibility, could signal the end of Nintendo Co., Ltd (ADR) (OTCBB:NTDOY).

Apple Inc. (NASDAQ:AAPL)

Nintendo’s business model is becoming obsolete

Ironically enough, Apple Inc. (NASDAQ:AAPL) and Nintendo Co., Ltd (ADR) (OTCBB:NTDOY) have similar business philosophies. Both believe in marrying hardware with software, and maintaining strong control over their devices. Consumers buy Apple devices to get access to their operating systems (iOS, Mac OS); likewise, gamers buy Nintendo’s consoles to play Nintendo’s games.

But because Nintendo Co., Ltd (ADR) (OTCBB:NTDOY) is strictly a gaming company, it is increasingly unable to compete with its more diversified rivals. Nintendo’s latest console, the Wii U, is underpowered compared to the upcoming PlayStation 4 and Xbox One. At the same time, Nintendo’s online services — an increasingly important part of the modern video game experience — have been widely criticized.

While Sony pushes into streaming games and Microsoft bets on the power of the cloud, Nintendo Co., Ltd (ADR) (OTCBB:NTDOY)’s latest console looks almost like a relic of a foregone era. Is it any wonder that sales of the Wii U have been so poor? From April through June, Nintendo sold just 160,000 Wii Us — less than the 210,000 the original, 7-year old Wii sold.

Nintendo’s savior has been its handheld, the 3DS. Since May, the 3DS has outsold all other video game consoles in the US, and has been one of the top selling consoles in the world. In addition to the console itself, 3DS game sales have also been strong.

Apple is moving into video games

Nevertheless, Nintendo’s future looks to be dire. While many might be inclined to see Sony and Microsoft as dooming Nintendo, Apple Inc. (NASDAQ:AAPL) stands as a far more menacing threat.

For a while now, Apple Inc. (NASDAQ:AAPL) has been making gaming a more prominent focus of its iOS efforts. Strategically, this makes sense: According to a Business Insider study, 43% of the time people are on mobile devices, they’re playing games. When it introduced the iPad 3, Apple dedicated an entire portion of its presentation to the gaming capabilities of the tablet. But as any gamer knows, touch screens are far from ideal — without buttons and joysticks, games are limited in their complexity.

Enter iOS 7. The next update to Apple Inc. (NASDAQ:AAPL)’s mobile operating system, set to be released this fall, includes support for third-party controllers. An iOS device, combined with a controller, would make a formidable hand-held gaming console. But Apple’s efforts could even extend to the living room. Apple executives, including Steve Jobs and current CEO Tim Cook, have hinted quite strongly that Apple is planning to release a television set. Piper Jaffray analyst Gene Munster believes consumers will be able to buy Apple’s TV sometime in 2014.

A TV with iOS and controller support could wreck havoc on the existing video game industry, at least according to one of the creators of original Xbox, Nat Brown. Apple’s iTunes open model software makes the process of creating and publishing games easy for developers, and bringing that model to the living room could be a tremendous success.

The importance of the casual gamer

While Brown believes that Apple could threaten the entire video game establishment, Nintendo in particular would be exposed. In general, Nintendo’s games tend to appeal to a more casual audience, the sorts of gamers that would be inclined to play on an Apple TV.

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