Apple Inc. (AAPL) TV and the Coming Death of Video Game Consoles

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“It’s a market we have intense interest in,” Apple Inc. (NASDAQ:AAPL)’s CEO Tim Cook told NBC’s Brian Williams back in December. “And it’s a market that we see as having been left behind.” What market was Tim Cook talking about? None other than the TV.

Many analysts have been quick to point out how an Apple TV could challenge the standard cable paradigm — like the iPod did to the music business more than a decade ago. But cable isn’t the only business an Apple TV could shake up. Its potential ramifications for the estimated $65 billion video game industry are enormous.

Apple Inc. (NASDAQ:AAPL)

For years, pundits have speculated that an Apple TV is in the works. Noted Apple Inc. (NASDAQ:AAPL) analyst Gene Munster has been proclaiming that an Apple TV was “just a couple of years away” since 2009.

Now, four years later, consumers are still stuck with just the $99 Apple TV set top box — nothing but a glorified way to get iTunes onto a big screen. Apple Inc. (NASDAQ:AAPL) has characterized the device as more of “hobby” than a real product.

But at any rate, given Cook’s statements, and the fact that Munster predicted the iPad before it was unveiled, it seems likely that consumers won’t have to wait long for a bona fide actual Apple TV.

An Apple TV will likely run some form of iOS
At this point, it’s all speculation, but it seems likely that any TV from Apple Inc. (NASDAQ:AAPL) would run some form of the iOS operating system. The success of Apple’s other iDevices — the iPhone and iPad — has been, in large part, built on the vast and growing library of available apps.

Why would Apple not leverage those apps? Simply put, they would be crazy not to.

Besides the obvious like Netflix, Inc. (NASDAQ:NFLX) and Hulu, among the list of available apps would no doubt be the popular games Angry Birds, Fruit Ninja, and any of the dozen or so made by Zynga Inc (NASDAQ:ZNGA) like Draw Something or the iconic Farmville.

Apple clearly has an interest in the video game market

When Apple unveiled the new iPad (commonly referred to as the iPad 3) nearly a year ago, the company emphasized the device’s ability to play games. During its introduction, Apple demonstrated the iPad’s video game playing abilities right on stage, playing a version of the graphics-intensive action game Infinity Blade.

Perhaps Apple was only interested in showing off the game-playing abilities as a way to demonstrate the iPad 3’s high-definition retina display. Or perhaps the company has its sights set on the video game market.

Activision Blizzard, Inc. (NASDAQ:ATVI)’s Bobby Kotick is concerned
Activision-Blizzard, the second largest video game company on the planet, reported earnings after the bell Thursday. The quarter was solid, and shares had a nice rally in the after-hours session.

But more interesting was a comment the company’s CEO, Bobby Kotick, made on the earnings call.

“I would say, another thing that we are concerned about is, as you start to see Internet-enabled televisions and the App Store reach the television with more — with a much larger base, it’s very hard for us to compete against free. I think there are challenges even at the $0.99. And so to the extent that you see a lot more Internet-enabled televisions, we’re going to have the start thinking differently about the content that we would deliver to those Internet-enabled televisions.”

Kotick runs one of the most powerful video game companies on the planet. Activison makes mega hits like Call of Duty and World of Warcraft. If he is concerned by the coming threat of smart TVs, perhaps investors should be as well.

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