What Does the Internet's Uncertain Future Mean for the Gaming Industry?

The future of the Internet has never looked more uncertain. How will this instability effect Sony, Microsoft, and GameStop?

Mar 15, 2014 at 7:00AM

Screen Shot

Source: playstation.com

The gaming industry has grown substantially in the last decade, and it looks to play a significant role in shaping the future of the Internet. While retailers like GameStop (NYSE:GME) have been dreading a digital-distribution future, Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) are increasingly directing consumers to their online stores. A January appeals court decision dealt a massive blow to net neutrality, however, and that's just one of the year's big Internet happenings that will eventually trickle down to gaming. The potential megamerger between Comcast (NASDAQ:CMCSK) and Time Warner could also have major implications for the future of interactive entertainment. What do shifting power balances and the Internet's uncertain outlook mean for the future of the gaming industry?

Roadblocks to a digital-distribution future
Prior to the announcement of the potential megamerger, Comcast began rolling out data restriction cap trials in select major urban markets like Atlanta and Memphis. Users in the effected areas are subject to 300 gigabyte monthly usage limits and can be charged an additional $10 per each additional 50 GB used in the billing period. Should the company's merger with Time Warner Cable go through, it's likely that such data restrictions would become more commonplace and also have an impact on the gaming industry.

Launch titles for Sony's PlayStation 4 and Microsoft's Xbox One are already pushing up on 50 gigs. As titles for these systems become increasingly advanced, it's likely that such file sizes will become the norm. Although 300 GB is currently more than enough for the average household, the cap could quickly become an annoyance for the demographics at the forefront of digital-distribution advancements.

Rsz

Source: xbox.com

One company that loves slow Internet
GameStop is one of the few companies in the gaming industry that benefits from America's lagging Internet infrastructure. A report from netindex.com has America ranked 33rd in the world when it comes to average download speed. The shoddy state of the country's broadband is part of what made Microsoft's initial vision of an always-connected Xbox One such an awful idea. It's also a good counterpoint to rumors that the company will ship a disc-less version of its console this year.

America's substandard Internet is also an obstacle for Sony's recently announced PlayStation Now streaming service. Anything that slows down the adoption of digital distribution is good news for GameStop. The used-games model is dependent upon physical media, and without it the retailer would crumble.

Playtime will soon be over
With software increasing in size and online gaming taking up more bandwidth than ever before, Microsoft and Sony are headed for some of the same cable-company hurdles that are faced by Google and Netflix. The online ecosystems that are central to the success of the PlayStation 4 and the Xbox One are competitive with the content stores provided by Comcast and Time Warner. The rise of streamed games and cloud computing will only increase the likelihood of tensions. An increase in the power held by ISPs won't only affect the gaming aspects of consoles; the shifting Internet power dynamics also mean big things for video streaming on Sony and Microsoft's respective platforms.

Comcast is already blocking its subscribers from accessing the recently released PlayStation 3 version of the HBO GO app. The company's comments indicate that it will need to be incentivized through partnerships before it will remove the restriction. Xbox 360 users who get their Internet from Comcast can currently access a version of HBO GO, however it was initially blocked upon release. This suggests that, somewhere along the lines, a deal was made allowing access on Microsoft's last-gen system and that similar arrangements will be necessary for the app to be available on new platforms. If gaming is to make the jump to full-on digital distribution and streaming services, these are the types of obstacles that Sony and Microsoft will be up against. 

Throwing GameStop a bone
The Internet's balance of power has arrived at a transformative moment. If companies like Comcast and Verizon start throttling game connection speeds or downloads, the big winner will be GameStop. While Netflix and YouTube have been at the forefront of net-neutrality disputes, the gaming industry looks to become increasingly involved in the debate. The uncertain dynamics make planning future hardware additionally challenging for companies like Sony and Microsoft. Meanwhile, any obstacles to a digital-distribution future are music to the ears of GameStop.

Rsz

Source: gamestop.com 

Where's the internet heading next?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Keith Noonan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers