Is Apple Outplaying Microsoft?

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Diehard gamers wouldn't dare mention Microsoft's (Nasdaq: MSFT  ) iconic Xbox Live experience and Apple's (Nasdaq: AAPL  ) nascent Game Center platform in the same breath, but that didn't stop Apple from doing just that during yesterday's WWDC powwow.

"In just nine months, we have 50 million Game Center users," Apple iOS chief Scott Forstall announced during yesterday's conference, as relayed by Engadget's live blog of the event. "To put that into perspective, Xbox Live has been around for about eight years and they have around 30 million users."

Forstall went on to add that there are 100,000 games and entertainment titles available in its signature App Store, and that iOS is "the most popular gaming platform on the planet."

Gamers will cringe to hear that. They'll say there's nothing in Game Center that can get the adrenaline flowing the way a group of battle-tested players firing up multiplayer combat on Activision Blizzard's (Nasdaq: ATVI  ) Call of Duty: Black Ops on Xbox Live can.

However, Forstall has a point.

When it comes to game developers or advertisers, does it matter if it's a grandmother tending to her virtual crops in FarmVille or a teen blasting his way through Halo 3?

Sure, there's a pricing disparity. Xbox gamers are paying $40 to $60 for the latest blockbusters, while the most popular Game Center downloads are either free or fetch a mere $0.99. A gamer is likely to be less committed to a particular title if there are tens of thousands of free -- or nearly free -- alternatives just an App Store tap away. However, Apple will continue to command eyeballs, and this is demographic group is likely to be far broader than the teenagers and twentysomething males that make up a large swath of Xbox Live.

The gaming industry has publicly dismissed Apple in the past.

"It doesn't look like their platform is a viable profit platform for game development," Nintendo of America president Reggie Fils-Aime said last April.

Nintendo went on to have a dreadful year, while Apple consistently busted through analyst estimates.

When Apple introduced the iPhone 4 last year, two months after Fils-Aime's comments, Steve Jobs indicated that there were 100 million iOS devices out there in the form of iPhones, iPads, and iPod touch devices that lean on the iTunes App Store for fresh downloads. Yesterday, Apple upped that sum to 200 million iOS devices.

Microsoft's in a sweet spot with Xbox Live. And it helps Mr. Softy that Sony's (NYSE: SNE  ) PlayStation network has been victimized by security breaches. However, we can't dismiss Apple's stronghold on the growing number of casual gamers who like to play word games with their Facebook friends during commercial breaks or to pass the time on long commutes. Mobile gaming matters, and Apple is right where everybody else wishes it could be.

Can casual games eat into the realm of the diehards in the console-gaming market? Share your thoughts in the comments box below.

The Motley Fool owns shares of Apple, Activision Blizzard, and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Nintendo, and Activision Blizzard and have also recommended creating a synthetic long position in Activision Blizzard, a bull call spread position in Apple, and a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarrizis always up for good iOS or console gaming. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy, and it's illuminating in any level of lighting.

Read/Post Comments (10) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 07, 2011, at 8:08 PM, dileepkrp wrote:

    The comparison is baseless since it is free vs $50 per game. This is like saying McDonalds burger (99 cents) is eaten by millions a year where as Filet Mignon from Daniel's Broiler is eaten by only few thousands.. go figure.

    XBox live gaming is an experience of a life time - even for non hard core gamers. I am one and I play kinect sports with my nephew half-way across the globe which is incredible. Apple will not be able to match this in iPad with their crappy 99cent burger apps, sorry!

    PS3 had a chance, but they blew it away big time with their security fiasco.

    Bottomline eyeballs does not a profit make, if the pocket behind the eyeballs are looking for freeo r 99 cent burgers. XBox Live is Ritz Carlton, where as Apple Game Center is Super 8 Motel!

  • Report this Comment On June 07, 2011, at 8:13 PM, MallanBoy wrote:

    Its more like comparing the number of kids attending kindergarten and those graduate schools…apple fan boys just need some figures to scream around…..silly

  • Report this Comment On June 07, 2011, at 8:22 PM, marv08 wrote:

    I honestly believe the iPhone (and later the touch and the iPad) have got people interested in casual games that never bought them before. The only computer game that I have bought in my entire pre-iPhone life was the "Deep Green" chess game on the Newton... Since Apple launched the App Store, I have accumulated over 50 games, some as expensive as $10.

    Did MS lose an Xbox customer, or Sony a PSP customer, or Nintendo? Not at all. I would never have purchased one of their devices in my life. Neither would I allow that noisy and ugly Xbox travesty in my living room, nor would I schlep around a single purpose device (other than a pacemaker if needed) nowadays.

    But then (I believe), there are addicted gamers who demand manual controls, big screens, big speakers etc. to have a certain experience. Apple does not even try to cater to them. So, several systems should be able to co-exist.

    Apple cares about these numbers, because they motivate game developers. And more apps mean more hardware sales. And at App Store prices, big numbers are important.

  • Report this Comment On June 07, 2011, at 10:46 PM, reprobate4k wrote:

    theres a big difference between xbox live customers and the apple game center.

    I chuck angry birds on my ipad and im in the game centre. big deal. i never access the thing. hardly know its there.

    They may have the numbers but they dont have the quality.

  • Report this Comment On June 07, 2011, at 11:46 PM, iParadigm2watch wrote:

    I don't get it? Why use this wonderful technology for games? I use my pad2 for research. Stock analysis on the go. Trading. Checking my bank account! Money transfers. YouTube. Email; both typed and photo or cartoon. Short videos messages. That is enough time on the screen!

    Games? Who has time for games....but then, I am 84 and just make, move and invest money. Support many friends and family. Guess that is my form of game! Xbox....waste of I would delete the game center if I could. Never use it. Dead app. On my screen anyway...but then, I am old.

  • Report this Comment On June 08, 2011, at 9:48 AM, podperson wrote:

    "The comparison is baseless since it is free vs $50 per game."

    This would be true if it weren't rubbish. There are plenty of AAA game developers on the iPad, iPhone. As one of the reviewers of "Order & Chaos" (a recently released "World of Warcraft"-like game for iOS) commented, you can buy the game and a year's subscription for about the price on one month of WoW subscription.

    Grand Theft Auto: Chinatown Wars is cheaper on iOS than Nintendo DS or PSP, but because of Apple's business model I imagine Rockstar gets more money per sale that it does from Nintendo or Sony.

    As a game console, iOS is more open, advances faster, offers greater backward and cross compatibility, and is a better deal for both consumers (who aren't paying for a cartridge, store air conditioning, etc.) and game developers (who aren't getting 20% or less of retail price and don't have to worry about the second-hand market).

    As of iOS5 you'll be able to play games on an iPad2 using your HDTV as a display wirelessly. This exceeds what Nintendo will be previewing at E3.

  • Report this Comment On June 08, 2011, at 11:10 AM, ldrhawke wrote:

    Is anyone really surprised that Apple has outdone Microsoft........they have been doing it for nearly 30 years. Gates only got the jump on Apple because everyone buying Microsoft software wrongly believed they were dealing with IBM to start with. Those days are over and the days of Gates collecting coupons for this false impression are long gone. The best software and hardware can no longer be ignored.

  • Report this Comment On June 08, 2011, at 11:50 AM, Superstef wrote:

    It's a mistake to assume the technology base offered to game developers by Apple's iOS/OSX hardware and software is incapable of competing effectively with Xbox. The fact that Xbox has very compelling games is good, the more choices the merrier, but once developers choose to develop competitive games on iOS/OSX, then I think we could see the advantages of Apple's all-embracing eco-system take its toll on Xbox. Apple just moves so fast and does so with consistent quality and attention to the total user experience, that competitors (even the mighty Mr. Softy) are hard pressed to compete.

  • Report this Comment On June 08, 2011, at 1:26 PM, CMFSoloFool wrote:

    I don't see the significance of this comparison. If the comparison is solely based on number of eyeballs, maybe that means something. However, I don't see either one displacing the other.

    The funny thing is that all these articles about mobile devices focus on whether something new is going to kill something older/more established. I think many analysts think that people's budgets and attention span is so limited they can only handle one gadget in their life. This is not the case at all.

    The iPad has not replaced the PC, but that's what the tabloids would have us all believe. None of them seem to fathom that iPad created a new niche, which can thrive and survive by itself, without destroying something else. And now they're trying to tell us iOS games will replace all the other game platforms... yeah, OK!

  • Report this Comment On June 09, 2011, at 10:26 PM, baldheadeddork wrote:

    When Game Center showed up after an iOS update, I signed on looking for some free time killers like solitare, didn't find any before I got fed up with the site, and moved it to the garbage folder along with the other apps Apple won't let you delete.

    Wonder how many other of my fellow 50 million users had the same experience?

    More important, it's really sad how Apple can say something like this and not raise a lot of eyebrows from reporters who cover the company closely. If Apple had 50 million active players buying games, don't you think that would cause a notable bump in iTunes revenues?

    It hasn't. For the first two quarters of this year, all revenues from the Software/Services totaled just over $2 billion dollars. That's less than 5% of Apple's revenues for the period. How much do you think those 50 million Game Center users should be spending? If it's ten bucks in six months, that means Game Center was accountable for a quarter of all software and App Store sales for the first six months of the year.

    Anyone buying that? Do you think they spent an average of $5 each? That would still be a hefty double-digit share of all software revenues.

    How does that stack up against Microsoft? Like this: Microsoft's Entertainment and Devices Division - the Xbox people - had revenues of over $6 billion for the same period. Their game division revenue was three times greater than Apple's entire software and AppStore. Their profits from that division are almost half the size of Apple's total software revenues.

    Is Apple Outplaying Microsoft? Hell. No.

    This may be a small example of Apple's Barnum-esque qualities exceeding their real performance, but it is so breathtakingly blatant.

    I hope the Fool will begin paying a little more attention when Apple whispers in their ear.

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