How Do Video-Game Makers Survive in the Apple Era?

The past two years have been brutal on the video game industry. Traditional video game powers Activision-Blizzard, Electronic Arts, and Gamestop have all been trounced by the market. It has been even worse for console makers, with Nintendo down 57% and Sony down 53% during that time frame. Console sales are drying up as spending shifts to more casual games. 

In the video below, Motley Fool senior technology analyst Eric Bleeker talks about research from NPD that shows video game software, hardware, and accessory sales were down 28% in May. The natural thought is that video games are dying. However, there's an interesting wrinkle in the study: that May figure is only for traditional sales channels like retail, and doesn't include mobile and digital spending.

Morever, Eric applauds moves by giants EA and Activision to trim their gaming lineups. That's a needed move for an industry undergoing huge shifts. In the end, the old rules of video games will likely not apply in this new age. While Mario was a dominant cultural figure and game seller for decades, its unlikely Angry Birds will still rule the roost in 2032.

That means even if innovations like Internet-enabled televisions from Apple help further spread gaming into the living room and grow the industry, the profits will likely be distributed within a broader group of companies rather than concentrated in large public companies investors can buy. To see Eric's full thoughts on NPD's May results and the video game industry, watch the video below. 

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Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Activision Blizzard, and GameStop. Motley Fool newsletter services recommend Activision Blizzard and 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.

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  • Report this Comment On June 21, 2012, at 2:03 PM, SeekTheFire wrote:

    Nice summary of the world ATVI faces. I am very curious about how this will play out. I do think the market undervalues the digital distribution channel that ATVI has been nurturing and the power of its brands. I don't know if it will be enough to propel earnings growth high enough to overcome the market sentiment. I am currently holding ATVI and looking for a catalyst that could shift the landscape back in its favor. If one doesn't appear in next year, I may move on to greener pastures.

    SeekTheFire (long ATVI)

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