What Happens if Gamers Don't Show Up?

The buzz is building for Microsoft's (NASDAQ: MSFT  ) recently unveiled Xbox One and Sony's (NYSE: SNE  ) PlayStation 4, which was announced earlier this year. A major selling point is the new core architecture, which in both cases will be anchored by Advanced Micro Devices (NYSE: AMD  ) processors.

Investors have cheered on the news, and AMD shares have more than doubled since bottoming out six months ago. Even game retailer GameStop (NYSE: GME  ) has raced to fresh 52-week highs on the hopes that Microsoft and Sony can breathe new life into the fading video game industry.

What if things don't go according to plan? One problem with moving to AMD chips is that older games on disc will no longer be playable. This is going to have some important ramifications in defining the value proposition of the new consoles. GameStop's high-margin business of buying and reselling used games and gear will also be challenged by the clean slate for both platforms.

In this video, longtime Fool contributor Rick Munarriz explains why this may be a deal breaker for gamers and why all four companies may feel the pain.

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  • Report this Comment On May 24, 2013, at 9:27 PM, SuntanIronMan wrote:

    Not too surprising. The PS3 had PS2 native backwards compatibility by shoehorning actual PS2 hardware into casing. Which made the PS3 incredibly expensive (that among other things that didn't allow it to be affordable). Didn't take them too long to realize this and remove native backwards PS2 compatibility. Though they have software emulation for PS1 games.

    And the Xbox 360 never had native backwards compatibility, instead going for emulation of certain individual titles released every now and then; which they eventually stopped doing altogether I think 6 or so years ago.

    I think Microsoft and Sony eventually came to the conclusion that people who actually care about playing old games on their new systems are a small percentage of people. If you want a new system, you want to play new games. And if you want to play old games, you'll just keep your old system connected to your TV or stored in a plastic container in the garage and bring it out every now and then to play those old games.

    Modern games aren't so much like movies, where you can get enjoyment out of them years and years after they were released. Classic, old-school games, maybe. But not so much modern games. Modern games are play until you are bored (which could be a good long time) and rarely come back to them again (with a small handful of exceptions, of course).

  • Report this Comment On May 25, 2013, at 12:30 AM, Nomadder wrote:

    Lack of backwards-compatibility is probably the least gamers' concerns with the new Xbox.

    As it stands now, Microsoft will be shooting itself in the foot if it moves forward on:

    1. Mandatory internet connection. It doesn't always have to be on, but according to Phil Harrison, you will need to connect about once every 24 hours in order to play.

    2. Used, or borrowed games will incur a fee, possibly as great as the charge for a new game according to some at MS (there's a lot of confusion over there though).

    3. Always-on, mandatory Kinect connection. As in, your games will not play unless you have this camera on that is always watching and always listening. If that sounds creepy, it's because it is.

    4. Lack of backwards-compatibility. Systems have survived this before. It's definitely not something anybody is really happy with, but gamers understand that this feature doesn't always make the cut when you're trying to keep a console affordable.

    5. Of the 8gb ram touted, 3 is devoted to the 3-in-1 OS, which is something gamers really don't give a rat's over.

    Add all that up and you have a lot of upset gamers complaining about Microsoft's new controls and restrictions on users. One might even call them consumer-hostile.

    So, yes, I agree with the concern. I just think it needs to be fully stated why gamers are unhappy at this point...and they are unhappy. Just look around the gaming news sites.

    That all being said, Microsoft can still back off on it's more restrictive "features" at this point. Not all is lost. I still have hope, anyway.

  • Report this Comment On May 25, 2013, at 12:34 AM, Nomadder wrote:

    I'm sorry, I should amend number 3. It's more far reaching than just games. Your system won't work at all without the Kinect attached.

  • Report this Comment On May 25, 2013, at 4:14 PM, bluegill88 wrote:

    My old cassette tapes weren't compatible with my CD player. Eventually I repurchased most of my tape library in CD form, and even more after that.

    MSFT can't worry about the percentage of customers who won't upgrade and buy new games. Those aren't high profit generating consumers.

    MSFT is focused on the the high profit consumers who will buy all the new games. Backwards compatibility makes for a nice story. But it doesn't sell new games.

    Surely MSFT has done the math and understands that larger profits overall will come by not having backwards compatibility.

    Those consumers who don't adopt are like those who still listen to 8 track tapes. MSFT isn't worried about appealing to that target group. That's not where the profits come from.

  • Report this Comment On May 25, 2013, at 5:25 PM, f23ghost wrote:

    They will show up for both consoles. but what all the articles that I’ve read fail to mention is that Sony and MS. are not the only kids on the block any more. there is the new OUYA. possible steam box, nvidia is entering the game with a portable and even apple is thinking about making a gaming console. although personally I don't think an apple gaming console will fly unless they can get backed by all the major game makers.

  • Report this Comment On May 25, 2013, at 5:32 PM, M1k3G wrote:

    Many companies have changed processors in the past without disrupting their consumers or forcing them to discard older programs they may have invested in. Apple changed from PowerPC to intel, but provided emulators to smoother the transition. Emulators exist for every gaming console, current or outdated, to allow its games to play on a PC. So it's not a question of not being technically feasible, it's just that Sony would like to see people spend more money on their new system.

  • Report this Comment On May 25, 2013, at 9:40 PM, bcweir wrote:

    Hey Rick, do your homework on AMD. AMD has had a 64-bit processor compatible with 32-bit code since 2003, unlike Intel who thought (erroneously) that business users had no use for 64 bit computing with Intel's Itanium processor. Stop making us AMD fans look bad with this kind of misinformation - your Intel prejudice is showing.

    Just because it's an AMD processor doesn't mean it can't run Microsoft code!

  • Report this Comment On May 26, 2013, at 12:32 AM, BigUncleHeavy wrote:

    Nomadder has most of it right. I think MS and Sony are becoming consumer hostile by implementing these DRM measures and standing linked arm-in-arm to push them. I think sales will be dissapointing on the consoles because they basically removed everything unique about console gaming (no Internet connection required, no DRM validation, limited DLC, less "bugs" etc...), vs. PC gaming, yet added all the hassles of PC gaming without any of the benefits. At least with PC gaming you have access to a mind-boggling array of free games to play, and Steam (the best implemented online software distributer, despite bad customer support and Draconian DRM) offers some games free and useful benefits with no monthly fee.

    PC gamers often have consoles in addition to their Gaming Rigs (PCs), but because of this, I forsee them passing over this generation of consoles, many console gamers migrating to PC, and only less tech savvy gamers will stick with the Xbox or PS4.

    Something that I have have wondered is, "Will decreased sales of the Xbox and PS4 help boost sales of Nintendo?" Nintendo offers a more "casual" flavor of games, but after seeing the Xbox and PS4, I plan to upgrade my PC and buy the Wi-U.

  • Report this Comment On May 26, 2013, at 2:38 AM, Jigabyte wrote:

    It certainly will affect GameStop for a while.

    But assuming gamers won't show up for these consoles after having waiting so long is ridiculous.

    And what about households?

    Are we not looking into the potential that the XboxOne and the Playstation4 will have as media center?? They ll probably best any other device in the market for a while. And even after the Apple TV release, families might opt for one device that will allow games to be played on.

    Yeah, people will show up big time.

    And in the long run Microsoft and Sony might want to stick to AMD to avoid game incompatibility.

  • Report this Comment On May 26, 2013, at 10:44 AM, rav55 wrote:

    Microsoft over the years has released new versions of windows which was NOT compatible with legacy software. This is not new. Yet the gamers still come back to Windows.

    Both Microsoft and Sony have said they would continue to support XBOX 360 and PS3 with software to keep the platform going. New titles can be easily poted and compiled on PowerPC RISC instruction set.

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