Console Gaming Is Doing Well ... For Now

Between NVIDIA's (NASDAQ: NVDA  ) Tegra K1 chip, expected to bring console-quality gaming to mobile devices, and AMD's (NYSE: AMD  ) progress in the PC arena, dedicated consoles such as Xbox One and PS4 may soon have to defend their territory.

On the scene at this year's Consumer Electronics Show in Las Vegas, Foolish tech and entertainment analyst Tim Beyers joins Rex Moore to share his thoughts on where the K1 and other new developments could lead.

A full transcript follows the video.

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Rex Moore: Another area to watch is right behind us; mobile gaming, or gaming in particular. There's more stuff here at CES than I could look at, but you had a little bit better look than me. What did you think?

Tim Beyers: I really like what NVIDIA is doing.

Moore: NVIDIA.

Beyers: NVIDIA, with the Tegra K1; essentially, its graphics system is unified. It used to be different, where the Tegra mobile processor did have graphics rendering capability -- meaning that you could play a game on your mobile device -- but it was different than what they had in their historical technology.

They're a big player in gaming, especially consoles and PCs [with] the GeoForce platform -- and those two things used to be very distinct. Now, with the K1, it's unified. The idea here, over time, is that on a tablet you will get a console-quality game, and then be able to put that up on a TV, and then maybe connect it, via Bluetooth, to a wireless controller. I think that's coming. I don't think it's coming soon, but NVIDIA is really leading in this area.

We also had a chance, recently, to talk to AMD. They are being very aggressive in what they can put on a PC, so we're going to see a lot more development here.

I think the message for me is, consoles are under threat. They're doing very well right now -- the Xbox One and the Sony's PS4 are both very good consoles -- but I don't think it's an accident that the Xbox One is much more than a gaming device, because you have these other platforms that are starting to crop up and threaten the hegemony of a console.


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  • Report this Comment On February 10, 2014, at 5:34 PM, KenLuskin wrote:

    GAMING is 90% AAA, and 10% cheapo hand held garbage games.

    AMD has total DOMINATION of Consoles, and is NOW transferring that to PC gaming.

    The 1 Billion that have been introduced to video gaming from smart phones and tablets are the functional equivalent of new drug addicts.

    mobile gaming functions as a GATEWAY drug to the more HARDCORE GAMING that is done on Consoles and PCs!!!

    NOBODY wants to play crappy hand held games on a TV!!!

    That is why OUYA and the SHIELD from Nvidia are TOTAL FAILURES!!!

    Typical BS from the FOOLS!!!

  • Report this Comment On February 10, 2014, at 5:44 PM, KenLuskin wrote:

    SEASONALITY

    AMD's guidance for Q1 2014 sales equals appx. $1.33 billion, which is appx. 22% ABOVE the same quarter in 2013.

    Therefore, AMD is NOT seeing a decline in revenues as MISinformed people believe.

    Game Console sales and other consumer electronics are indeed subject to SEASONALITY! What is important is ANNUAL SALES and PROFITS!

    Since the current game consoles are now in their 3rd to 4th iteration, it is instructive to look at past models to see if there are any trends

    .

    TREND #1 : New console sales tend to PEAK in the THIRD YEAR after release!

    TREND #2: In NON launch years, when supply is constrained by manufacturing ability, TOTAL CONSOLE SALES (all models available for purchase) for the first 3 quarters of a calender year add up to what is sold in the Q4.

    So, If sales for the first 3 quarters of 2014 are about 5 million each, then sales in Q4 will be about 15 million. In other words, whatever demand there is during the first 3 quarters of a year, is EQUALED from sales in the SEASONALLY strong Q4. The "base" demand is AMPLIFIED in Q4.

    TREND #3: Consoles sales tend to be LUMPY, and based upon whether something NEW and innovative is introduced. The Wii was innovative back when it was introduced, and Nintendo could not meet demand until year 2. Over a 6 year period from Nov. 2006 to the end of 2012, the Wii sold almost 100 million units. During the same time period, the Xbox360 and PS3 sold a combined 160 million units. So, total TV consoles sold over a 6 year period equaled about 260 million units. 260 million divided by 6= appx 43 million consoles sold per year.

    After a console model has been on the market for 4 years, sales start to decline rapidly. BASED upon PAST sales trends: GameStop and others estimate that there is a base of about 200 MILLION console players. These people will tend to UPGRADE to a new model after there is sufficient content available.

    LOOKING FORWARD to NEW TRENDS in Video gaming

    .

    1) MOBILE GAMERS: Over the past 5 years or so, 1 BILLION people have been introduced to VIDEO gaming through free or extremely cheap games available on their smart phones or Tablets.

    2) CHINA has lifted the BAN on consoles sales! The demand for video gaming can be seen from mobile players, and the 38% growth in PC gaming in China in 2013. People who think that the average Chinese person would risk punishment to buy a banned Console are badly mistaken. In other words there is HUGE pent up demand in China for game consoles.

    3) While PC sales have shrunk, the PC gaming niche has rebounded strongly from the financial crisis levels. 4) The PS4 and Xbox1 are the first NEW consoles models in 8 years, and the pent up demand is much stronger than many expect.

    FACTS:

    1) For many young people video gaming has replaced watching TV

    2) The TOTAL number of people playing video games has increased dramatically over the last decade.

    3) A Billion or so people have been introduced to inexpensive video games over the last 5 years, but the people who were already using the Xbox or PS consoles have NOT downgraded to playing cheap handheld games INSTEAD.

    4) TV and PC based AAA gaming experience are far more immersive and compelling than the low power mobile games, that people pay when they are out and about.

    CONCLUSIONS:

    Some people compare video gaming to a drug addiction, which is not entirely untrue.

    Peopleplay games and take drugs to escape reality.

    1) In comparing video games to drugs, I suggest that mobile video games are a "gateway drug" to more hardcore AAA gaming. Using this scenario, I believe that the 38% increase in PC gaming in China is a sign of the worldwide demand for AAA gaming.

    2) There is a huge pent up demand for the first new AAA game consoles in 8 years, and the PEAK sales year will be the 3rd calender year after release.

    3) There is a pent up demand in China, home to 1.4 Billion people, for game consoles after a 13 year ban. In the developing world AAA gaming demand is very strong and growing.

    4) AMD has total domination over the basic GRAPHIC architecture for AAA gaming! This is because most AAA games are first OPTIMIZED for the game consoles, and then ported over to the PC.

    5) AMD created a new API called MANTLE, so that NEW AAA games will perform substantially better on PCs using AMD's GCN based GRAPHICS.

    6) AMD's VP of sales said on Dec. 10 that Laptop OEM design wins would result in AMD GRAPHICS taking more than 50% market share over the next few quarters.

    7) BOTTOM LINE: GRAPHICS is steadily becoming of increasing importance for "computing" devices.

    8) When any company can license increasingly powerful ARM CPU cores, the KEY DEFINING FACTOR among all these different chip offerings will be their GRAPHICS.

    9) If the CPU "speed" or power of a computing device was of utmost importance, then Tablets would not be replacing PCs. The only reason to buy a super powerful PC (outside of CAD/CAM work) is to play or design video games. AMD's Mantle reduces the need for super fast CPU, and makes the power of the GPU the most important factor.

    AMD is now the BEST positioned of all chip companies to profit from the new era of GRAPHICALLY oriented computing.

  • Report this Comment On February 11, 2014, at 11:25 AM, rustianowski wrote:

    Everytime AMD starts rallying these "Authors" (if you can even call them that for the garbage they mosh together and publish) start tossing out as much negative "doom and gloom" press they can against AMD and in favor of Nvidia and Intel.

    I WAS and Nvidia customer for a long time, but they have been making really poor choices with their products and I can no longer support them.

    AMD however is catering to the gaming community, offering improved performance for a fraction of the price that Nvidia is charging. Not to mention many of the things they are contributing to the gaming community for its well being.

    Mantle, for one is being offered up to improve gaming performance with no additional cost. Mantle is not one way either, down the road Nvidia could support its benefits. Yet, Nvidia releases G-Sync; a benefit to those who only use Nvidia cards and Asus Monitors? Two days later AMd says they are working on the same thing as G-sync and will distribute it to everyone and every cardmaker.

    Besides Products, you have to look at the company's future for stocks. Personally AMD has a lot of room to move up, Nvidia doesn't.... it really is that simple. AMD has an upside.

  • Report this Comment On February 11, 2014, at 5:52 PM, jwtrotter wrote:

    It's incredibly sad and rather pathetic how the AMD fans post OVER and OVER to defend there consoles, their position, their whatever. They don't talk about their upside nearly as much on articles that are actually focused on AMD themselves. I think it's pretty clear no matter how successful Nvidia and/or Intel becomes, there will always be these AMD folks that seem to live for only one thing, to see Intel and Nvidia go down. AMD will never have significant upside as long as their debts continue to out gain their profits. They really can't win. Their 'upside' somewhere between 4 & 5 and that has already passed.

    And btw, these articles aren't timed to be against AMD. They are timed to coincide with the earnings announcement of Nvidia which is really why you see this many articles at this time, as you would notice for AMD when their ERs come up. So guys as you desperately continue to clog these message boards and comment sections realize you are wasting your time just talking to yourselves as those that know better, realize Nvidia is better positioned and yes, making the best choices in the present and for the future than anything AMD has been doing, without sabotaging their own resources.

  • Report this Comment On February 11, 2014, at 6:08 PM, keeperoftheq wrote:

    The K1 chip from Nvidia is only as good as quality as LAST generation game consoles. No threat to AMD at all.

  • Report this Comment On February 12, 2014, at 2:26 PM, Uconfan wrote:

    The above comment states "AMD will never have significant upside as long as their debts continue to out gain their profits" A company in a similar position last year was Rite Aide. Every other day last year articles insisted their debt was too high, they can not compete against their wealthy competitors CVS and Wallgreen. Etc . CVS is a better investment if one wants a dividend and one does not mind watching a stock move sideways forever.The price to sales ratio for AMD is one fifth of Intel and Navidia. AMD is in position to make a Rite Aide like multi bagger move, but they need contracts and good news. I am betting it is coming

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