The Zacks Analyst Blog Highlights: Sony, Microsoft, Nintendo, Advanced Micro
Devices and IBM
CHICAGO, March 18, 2013
CHICAGO, March 18, 2013 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Sony Corporation (NYSE:SNE),
Microsoft Corporation (Nasdaq:MSFT), Nintendo Co. Ltd. (OTC:NTDOY), Advanced
Micro Devices, Inc. (NYSE:AMD) and IBM (NYSE:IBM).
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Here are highlights from Friday's Analyst Blog:
Is the Game Console Market Shrinking?
A new report from market research firm NPD shows that only 29% of "core
gamers" will purchase the next generation of gaming consoles right after they
are released. The report, named "Core Gaming 2013," defines "core gamers" as
those who spend more than five hours a week playing games and who play most
genres of games.
The report follows data from NPD which showed that 2012 was the end of the
sole dominance of the physical video game. Stock keeping units (SKUs) had
begun to give way to digital transfers and download. But what was more
disturbing was that video games sales had declined by 9% from the previous
year. And of the $14.8 billion worth of sales, excluding hardware, $5.92
billion came from digitally distributed content.
The alarming detail about the second figure is that even though it represents
a 16% increase over digital sales in 2011, growth was at 14% in 2011. This
implies that though growth is happening, it's sluggish in nature and may not
be enough to compensate overall decline.
These numbers clearly show a developing trend which is bringing about sweeping
changes in the gaming business. The next generation of gaming platforms has to
change the game radically in favor of the industry. These sentiments were
echoed by Andrew House who heads Sony Computer Entertainment's (SCEA)
PlayStation Division recently.
At an event held to introduce the new PlayStation 4 console from Sony
Corporation (NYSE:SNE), House admitted that the company was betting big on the
product. The stakes are probably equally high for Microsoft Corporation
(Nasdaq:MSFT) and Nintendo Co. Ltd. (OTC:NTDOY) as the next generation of
gaming consoles is launched. Both the PS4 and the successor to the Xbox 360
are now expected to launch towards the end of the year and to be priced
between $350 and $400.
In fact, price and underlying costs have become a key factor behind the
success of gaming consoles going forward. And this is closely linked to the
price and availability of gaming titles.
Publishers have disagreed over the development costs of the next generation
PS4 and Xbox games, leading to concerns that the cost of these titles will
rise. An analyst from Wedbush Securities Research has predicted that these
games will cost around $70. SCEA CEO Jack Tretton says PS4 titles will not
cost more than $60. But that has done little to allay these concerns.
This may directly affect sales of the new consoles because many of the new
titles can be played on both current as well as next generation consoles. This
means that only staunch loyalists will buy these consoles when they are first
introduced. Instead, they are likely to wait for prices to drop. This is far
from good news for console makers.
Console-makers have already made key decisions to drive down costs. Unlike,
the past where consoles ran on custom made chips, both Sony and Microsoft will
use off-the-shelf chips produced by chip maker Advanced Micro Devices, Inc.
(NYSE:AMD). AMD's chips are able to deliver the required visual horsepower
using accelerated processing units or APUs. The risk here is that the success
of these platforms is now closely tied to the fortunes of AMD.
This negates the need to set up dedicated chip manufacturing facilities or
ordering custom made chips as was done in the past from the likes of IBM
(NYSE:IBM). Besides, focus has shifted from raw processing power to the
versatility of these chips. Consoles are increasingly being used to play audio
and video content as well, morphing into a central entertainment hub for the
This fits into the trend where tablets and smartphones are changing the face
of gaming, at least of mobile gaming at any rate. They are also being viewed
as versatile entertainment devices. They have also popularized casual gaming
which is growing as a category, giving traditional console makers much food
Of course, the serious gamer will stick to the gaming console. But the future
success and growth of console gaming will closely depend on whether the
industry can successfully match up to these emerging trends.
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