Amazon Marches Into the Video Game Console War

Despite crowding in the space, it's a good move for AMZN

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While Amazon is famous for looking at the long term, investing in infrastructure and selling hardware at cost in order to build market share and draw customers into its media-consuming ecosystem, an Android-based video game console could be a money maker.

Even at $99, Apple is making money on its Apple TV box. Ouya, the Kickstarted Android video game console that launched this year also sells at $99 and is presumably priced to make a profit — and that’s without the economies of scale an Amazon could command for hardware. Then there are the game apps, from which Amazon takes a 30% cut.

Microsoft puts the value of the video game industry worldwide at $65 billion, with $27 billion of that going to consoles, $10 billion to tablets and smartphones and $8 billion going to handheld gaming devices like Nintendo’s 3DS.

Hardcore gamers looking for intense multiplayer titles with 1080p graphics are never going to abandon the Xbox and Playstation for app-based gaming. But if a $100 Amazon video game console went up  against a $499 Xbox One and $399 PS4, you can bet there are some parents who would bite, and a system like this would stand a good chance of capturing a chunk of that mobile gaming dough too.

In short, Amazon could be looking at a huge source of revenue that stands to boost its video business and could also help to sell Kindle tablets (which would likely be positioned to perform double duty as a remote, optional game controller and possibly an auxiliary gaming display).

If Amazon, Apple and Google all show up with video game consoles this Christmas, who stands to get fragged? The development would take some of the shine off the Xbox One and PS4, costing some sales when it comes to price-conscious shoppers.

The real losers are bound to be Nintendo — which is already struggling to convince gamers the Wii U is anything more than a casual gaming platform — and upstarts like Ouya and Nvidia who are likely to see their new products buried under a marketing barrage and the promise of established gaming app ecosystems.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/08/why-would-amazon-wade-into-the-video-game-fracas/.

©2014 InvestorPlace Media, LLC

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