Amazon Is Getting Serious About Video Games -- and That's Terrible for Google and GameStop

Amazon.com (NASDAQ: AMZN  ) has acquired Double Helix Games, according to Tech Crunch. Double Helix isn't the most well-regarded game studio, but it isn't just some random mobile developer, either. Its most recent title, Killer Instinct, was met with broadly favorable reviews.

Amazon has been dabbling in mobile gaming for some time, but the purchase of Double Helix strongly suggests that the long-rumored Amazon video game console is an inevitability. As Amazon prepares its assault on the living room, Google (NASDAQ: GOOGL  ) and GameStop (NYSE: GME  ) should be greatly concerned.

Amazon's set-top box could be more Xbox One than Roku Player
Reports of a forthcoming Amazon box have been around for months. Last fall,The Wall Street Journal said Amazon was preparing to release a set-top box that would deliver Internet video content to owners' TVs. Such a device seemed like a simple "me-too!" product, yet another alternative to the Roku Player or Apple TV.

But it seems Amazon has much bigger plans than a cheap media streaming device. Double Helix's recent work has been aimed at high-powered video game consoles. Killer Instinct was an Xbox One launch title, and its current project, Strider, is set to debut later this year on both the PlayStation 4 and Xbox One.

While it's possible that Amazon could ask Double Helix to tone its games down for far weaker hardware, the prospect seems highly unlikely. If Amazon was planning to target the casual market with cheap mobile games, they could've acquired any number of mobile-focused game studios. By buying Double Helix, it seems Amazon plans to compete with the industry leaders.

Another Kindle?
Could Amazon's video game console do to GameStop what its Kindle e-reader did to Borders Books? Potentially. Given that Amazon is itself a major retailer, I doubt GameStop will play any part in Amazon's video game ambitions.

More than likely, Amazon's console will be wholly digital -- I would be shocked if there was any disk drive whatsoever. Like its Kindle Fire tablets, Amazon's video game console will likely run a modified version of Android with games downloaded directly from Amazon's digital storefront.

Early last year, GameStop shares dropped on fears that Sony and Microsoft were planning to ship next-generation consoles without disc drives -- those fears proved to be unfounded. But a much bigger threat would be an entirely digital video game console from Amazon entering the market and displacing Sony and Microsoft entirely.

Cutting Google out of Android
Amazon's dabbling in mobile has been something of a problem for Google. The operating system running Amazon's Kindle Fire tablets -- Fire OS -- is based on Google's Android, but has been heavily modified to the point where Google's services have been removed entirely.

Rather than download apps, books, or movies from Google Play, Kindle Fire owners purchase their digital goods from Amazon's app store. The same will more than likely be true for Amazon's video game console.

The risk for Google is that Amazon's video game console could ensnare buyers into Amazon's ecosystem, making them more likely to choose Kindle Fire tablets over standard Android tablets that rely on Google's services. Eventually, that could even extend to handsets if Amazon's long-rumored smartphone ever comes to fruition. Even if customers don't buy Amazon's devices, they could still use its app store, which can be downloaded to any Android handset.

There have been reports that Google, too, is working on a video game console. Hopefully, Google is taking it just as seriously as Amazon.

Amazon continues its focus on digital media
Video games are big business. Research firm Gartner believes that by 2015, revenue from video game sales will total $111 billion worldwide. As games go digital, the retailers poised to benefit the most are the ones in control of the platforms.

Obviously, Amazon wants a cut. But if Amazon is successful, GameStop and Google will be under pressure.

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Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On February 06, 2014, at 7:51 PM, Njancek wrote:

    No I'm sorry, but these articles about Gamestop being overthrown, beaten, etc are just plain wrong. Especially if it's about digital content. There are more gamers out there that want physical copies than anything. And this idea that as the gaming media changes so will the gamer, that is by far not true when it comes to digital-only gaming. The day gamers go 100% digital is the day we have universal fiber optic internet at the cost of dial up or less :I

  • Report this Comment On February 06, 2014, at 8:54 PM, Mattenth wrote:

    The above comment is just plain wrong...

    The gaming landscape will NOT become fully digital any time soon. BUT, GameStop will still see declines

    GameStop's business is solely dependent on physical game sales. Even if 10% of gamers switch to digital-only, that's 10% less sales for GameStop on both new games and used games.

    I'm sure GameStop will experience a long, slow, painful death.

    But the point is NOT "GameStop is giong to die" - the point is that GameStop is going to stop growing.

  • Report this Comment On February 06, 2014, at 8:59 PM, speculawyer wrote:

    Pfft. This Amazon console is gonna bomb so hard that you'll be able to see the crater from orbit.

  • Report this Comment On February 06, 2014, at 9:02 PM, Njancek wrote:

    And sadly your comment is also wrong.

    Never said this specific article is talking about the death of Gamestop, but there have been many basically saying that digital media will become the new standard and that Gamestop will soon be nothing.

    A loss is a loss, that does not mean the company is going to go belly up because of it. That's no better than saying Nintendo is going to eventually go away because of Sony and Microsoft and that PC and Console gaming will go awa because of Mobile gaming.

    But bonus points for trying!

  • Report this Comment On February 06, 2014, at 11:12 PM, crymsonkyng wrote:

    Every "analyst" is all "digital is the future! Disks will die!".....and every SINGLE one of them is wrong. In order to go all digital the average speeds in america alone will need to at least triple...in fact the entire country will need to be wired with fiber and NO DATA CAPS. Our pathetic infrastructure and increasing costs due to little or no competition(and the continuous shady deals made by providers with state legislatures) will ensure physical disks will remain the standard for a LONG time to come...

  • Report this Comment On February 07, 2014, at 4:59 AM, deputyspade wrote:

    Maybe in 10 years we will be ready for all digital consoles, but as of right now, no. See the PSPgo for a recent example of an all digital console that failed miserably. Amazon also needs many more traditional game studios and they aren't readily available. Amazon may try and buy an already established gaming division, like Playstation, but I doubt Sony would sell one of their profitable divisions.

  • Report this Comment On February 08, 2014, at 4:59 AM, Efernal wrote:

    Even if Amazon builds a full blown console it would make business sense to have that console on sale at every major retail outlet along with games to play on it. Why would Amazon not want to get maximum profit out of it by limiting where it is sold or by limiting the hardware?

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