Apple Is Destroying the Gaming Industry

There's one thing that Apple (Nasdaq: AAPL  ) CEO Tim Cook said on Wednesday that's unbelievable.

I'm not doubting that the new iPad will deliver blazing-fast 4G LTE speeds. I'm not refuting the claim that Apple TV will use iCloud to beam HD video. And Apple did sell more iPads this past quarter than any individual computer company did PCs.

It was actually what may have seemed like a throwaway comment on Cook's part -- working his way up to the highly anticipated iPad unveiling -- that left me shaking my head.

"Users with a gaming console and portable console said the iPad was their favorite for gaming," he said.

Really? So if someone is playing Call of Duty on an Xbox 360 or heaving the Madden pigskin in a Wii football game, they would prefer to be flinging angry birds at militant pigs on an iPad?

I'm a cynic when it comes to the video game industry, but even I wouldn't go as far as Cook did to proclaim that gamers actually prefer the iPad.

The downward trend remains undeniable. Retail sales tracker NPD Group has been reporting diminishing sales for three years, including a whopping 34% plunge in sales of hardware, software, and accessories back in January. Things didn't get better last month, as NPD is now reporting a 20% slide in hardware and boxed software. Even last month's debut of new hardware -- Sony's (NYSE: SNE  ) PS Vita -- wasn't enough to stem the streak of year-over-year industry declines.

I guess we're all playing on iPads, now. Right?

We live in "good enough" times. If a $0.99 app -- or a free ad-supported download -- will entertain someone, that's good enough. If a temporary escape into one of Zynga's (Nasdaq: ZNGA  ) virtual realms or online word games is enough to kill time in the dentist's waiting room, that's good enough.

Then again, it's not as if Zynga is at its best. It may be growing its overall user base, but dedicated daily gamers are getting hard to come by. The social gaming giant has seen its number of average daily active users fall sequentially for three consecutive quarters.

Maybe there is something to what Cook is saying. More to the point, if he's right about how at least casual gamers feel about the iPad 2, then they're going to love the new iPad.

Apple's shiny new tablet beefs up its guts with a quad-core processor and retina display. There are now 3.1 million pixels on the new iPad. Games are going to look and move great.

The lack of an analog controller is an obvious shortcoming, but that has also forced iOS developers into coming up with games that capitalize on the iPad's strengths instead of its shortcomings.

What if Cook wasn't lying?

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The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (14) | Recommend This Article (5)

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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 March 09, 2012, at 9:55 AM, GrandSlammer wrote:

    If you want to benefit from the mobile gaming hype, check out G5 Entertainment which is focused on games for iphone, iPad and Android. more info on www.nordicinvestor.net

  • Report this Comment On March 09, 2012, at 9:57 AM, rhealth wrote:

    I've wasted an embarrassing amount of time playing playstation and xbox games, but have not for years now since I've had an iphone. You're right, the games do not approach the level of the gaming systems (even the old ps2 and xbox 1, I never upgraded) but are "good enough", let's face it most of us here are adults and have limited time and energy to spend on games. This is the primary reason I sold my activision stock. It was the industry, not the company I had problems with.

  • Report this Comment On March 09, 2012, at 10:03 AM, bugnuts wrote:

    Apple is not perfect, but over the years I've learned that senior management is very careful about what it says in public. The "under-promise-over-deliver" ethic is extremely strong, in sharp contrast to the boastful (hopeful?) rhetoric from people like Ballmer and Lazaridis.

    Apple is bleeding a lot of people, and I'm sure the gaming industry is no exception.

  • Report this Comment On March 09, 2012, at 10:03 AM, Nomadder wrote:

    Mass Effect 3 sold 890,000 copies in one day in North America.

    Maybe the industry isn't quite dead yet, huh?

    Look, it's not only a cyclical industry, it's also a hit-based one. In that way it's like the film industry. Sometimes you have bad years.

    Sometimes, you go a couple years before companies realize they need to start making better games because the same old trash isn't working anymore (much like the film industry).

    *sigh*

    Television didn't kill movies.

    VHS didn't kill movies.

    iPads aren't going to kill console/PC gaming either.

    Relax people.

  • Report this Comment On March 09, 2012, at 10:25 AM, var99 wrote:

    I consider myself a 'gamer', and there is no way I would choose an iPad as my primiary device for gaming. I have used the iPad, and they are fun for time-killer games like angry birds and the like, but the hardcore call of duty type gamers aren't gonna bypass playing on their 50" flat screen to play it on a 9.7" tablet. Also, there's the controller issue. Most advanced games simply have too many control inputs for a touch screen interface to handle which neccssitates having a hand-held controller.

    I think Tim Cook's statement probably would be accurate if you are talking about the casual gamer, however.

  • Report this Comment On March 09, 2012, at 11:11 AM, dlchase24 wrote:

    I have a hard time believing that if you are sitting at home with the same game available on iPad or a console, you'd pick the iPad.

    What I do believe, and I'm sure is the point that Apple skewed to their advantage, is that the more portable device with games at a lower price point provide more options at more times which can lead to greater use when not sitting at home in front of the console.

    I'm sure there is some "marketing" in that statement.

  • Report this Comment On March 09, 2012, at 11:18 AM, drewdwn wrote:

    No doubt the ipad and mobile gaming is not going to replace consoles like x-box, ps3 or desktop pc-rigs. Your missing the point, this is the beginning and it has started with a huge foundation and ecosystem, it can only get better. The multi-touch gestures is another form of gaming, and with hd reso on retina it is a game changer. People who game and play call of duty need multi screens, keyboards and customized setups to cater to their needs. Ipad invites another type of gaming experience for those who are new to gaming, does not have time to play all the time, does not want to commit to a $50 software title or console and mainly the complex controls of a very detailed game. although there is speculation that a Bluetooth game controller can easily be implemented for other types of games, the options are endless.

    Shift your paradigm, what is itv? Just another bigger ipad? Bluetooth game controller/accessories? download games? Lots of haters out their but technically the technology is all there, just need the gentle touch of Apple to figure out a way to mass produce it for a profit.

    Apple will be a big competitor to the gaming industry like ipods vs walkmans/discmans/mp3 players. It might not be overnight but they are gaining momentum and a huge following...

    Cook quoted Post PC-Era this topic can be called Post-Gaming Console era. Having a OS in a hardware is liek a tv, iphone , ipad is the future. No more will we buy a dedicated console to do one thing. OS operated hardware or technically a computer on different formats like ipad, iphone, mac, pc, tv or what are all the same in the future. I see a huge shift based on current technological advances.

    People are more open to download a $9.99 game based on emotion and impatience than drive to the store and pic up a game. Content + hardware and OS will be the major focus.

    The Cloud revolution has begun. Content will increase 1000 fold as well as downloads, bandwidth, file size will grow due to higher reso and detail of files, networks will be upgraded, 4g, 5g, 10g??? no more need for home wifi,,,mobile cellular will be standard.

    Just my few cents....

  • Report this Comment On March 09, 2012, at 12:00 PM, CluckChicken wrote:

    "People are more open to download a $9.99 game based on emotion and impatience than drive to the store and pic up a game. Content + hardware and OS will be the major focus."

    So given that all 3 of the consoles have networks that allow you to do this does that then become a major hurdle for the iPad? Especially given that you can get 2 consoles for the price of an iPad.

    If content + hardware + OS will be the major factor wont Windows 8 be the major force? Content for Windows 8 will be larger than what is available for iOS or Android at launch, whether it be games or productivity tools. Hardware will come in every possible combination to meet anybody's budget, wants or needs. The OS will have its lovers and its haters but at the end of the day it will be the all purpose workhorse OS.

    One other thing is that tablets, no matter the OS, are a poor gaming platform for anything that isn't simple. Multi-touch seems nice till you are gaming and you realize that you have to pay more attention to what you are touching then to the feel of what you are touching and it becomes extremely difficult to operate your motion sensing controls while both hands are touching the screen. I can't imagine how one would circle strafe a target while switching weapons and jumping over the rock with a touch screen. Also you have all this beautiful action going on but you are missing it because your hands are not translucent.

  • Report this Comment On March 09, 2012, at 12:57 PM, DJDynamicNC wrote:

    5 dollars or less, instant delivery, complete portability, pick up and drop at whim, and all of that is just one of the abilities of the device. There's no question that something like that fits into my lifestyle far better than a console. Do I still have a Nintendo console? Of course - and essentially just for periodic Zelda and Mario Kart sessions with my wife - but I have hardly touched my DS since I got an Android phone.

    The Vita is a strong salvo by Sony, but it may be a last hurrah unless the industry can adapt to the new environment (and maybe it can, they've faced existential threats before).

  • Report this Comment On March 09, 2012, at 1:13 PM, steltek wrote:

    Interesting correlation. Casual gaming like tablet and phone games probably do cut into video game sales. However, I think it's the myriad high quality freemium games out there that are killing the pay per license model. Gamers are notoriously cheap and broke, so they will play a good game for free over a great one that costs money. Video games are by no means less available, despite what the financial reports say. Video game usage continues to go up.

    Just like music and movies, video games are going to have to evolve with consumers and technology to find models that work. Let's hope the industry finds a consistent model and pulls itself out of a tailspin so that it can provide jobs and growth.

  • Report this Comment On March 09, 2012, at 2:39 PM, racchole wrote:

    Believe it or not, video games actually used to develop the brain in a positive way (not without the negatives of course, but everything in moderation...)

    In-depth story telling, problem-solving, exploration, complicated simulations: before games had blow-you-away graphics, that void was filled with things the brain could actually process and use to its advantage.

    Now we get thrusted into a world dominated by graphically-dominated experiences with a gun in our hands, or the infinite mindless repetition of the same 3-step process (never played Angry Birds but I will say that it wasn't the first game to do the point-and-click physics skill test.)

    True, the new wave of gaming is better for adults. It takes up less time and can be played anywhere. But it doesn't change the fact that we, as adults, are better off picking up a book instead of the iPhone.

    And may the man in charge have mercy on our children - this generation will be as dull as the dumb terminal sitting in my attic, thanks to our wonderful progression of video games.

  • Report this Comment On March 09, 2012, at 2:49 PM, TurbulentTime wrote:

    My kids have been saying, can Apple built a big screen TV and use iphone as the movement devices, whatever you call those things. I just keeping on telling them, wait for the iTV, iPad, iPhone "iConnected" package.

  • Report this Comment On March 09, 2012, at 10:51 PM, lowmaple wrote:

    If anyone can build a foldout and rollout screen ala star trek and make it work or create a holographic image immercing you it is apple.just how soon?

  • Report this Comment On March 11, 2012, at 11:43 AM, 48ozhalfgallons wrote:

    I don't have time for all this crap and I'm retired!

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