Comcast's (NASDAQ:CMCSA) new X1 cable box can access all sorts of content -- not just standard paid-TV programming but also movies purchased through the Xfinity store and music streamed over the Internet.
Soon, it could also offer the latest and greatest video games.
For the last two years, Comcast has been working with Electronic Arts (NASDAQ:EA) in secret on a radical new service that could topple the existing video game establishment, according to Reuters. Executed correctly, Comcast's new service could emerge as a major threat to Microsoft (NASDAQ:MSFT) and Sony's (NYSE:SNE) latest consoles.
Comcast's deal with Electronic Arts
Comcast's paid-TV subscribers, which total more than 20 million, could soon be able to purchase and play many of Electronic Arts' games without a dedicated console. To offset its cable box's relative lack of processing power, Comcast plans to use cloud-based technology -- games purchased would be streamed over Comcast's high-speed broadband network to its subscribers' TVs.
Earlier this year, Sony unveiled a similar service -- PlayStation Now -- that is currently in beta testing. Starting this summer, owners of Sony's PlayStation 3 or PlayStation 4 will be able to stream older PlayStation titles over the Internet. Sony's Worldwide Studios President Shuhei Yoshida has suggested that PlayStation Now could eventually encompass the entirety of the PlayStation business, and that if it succeeds, Sony may not ever release another console.
Microsoft hasn't yet announced anything similar, though it has played up its Azure cloud servers as key differentiator for its latest console, the Xbox One. Developers can, if they so choose, use Microsoft's servers to offload some of their game's processing power to the cloud, allowing the Xbox One's hardware to focus on other tasks.
Removing the console from the equation
But Comcast's service is remarkably different from Sony's and Microsoft's in one major way: It doesn't require a console. The Xbox One and PlayStation 4 have been tremendously successful since their debuts last year, moving a combined total of at least 12 million units worldwide, but the majority of gamers still don't have one -- at $499 and $399, respectively, would-be buyers must cough up a fairly sizable amount of cash.
Comcast's service could completely remove that barrier. Subscribers looking to play Electronic Arts' Madden wouldn't need to go out and purchase an expensive console -- they could just use their cable box.
Moreover, Comcast appears well positioned to execute on a cloud-based gaming service. Other companies have tried (and mostly failed) to launch similar services in the past, partially because such services require robust Internet connections. Comcast owns the pipes -- they're literally the largest provider of high-speed Internet services in the United States. If a solid connection is required, Comcast would be the company best positioned to offer it.
Comcast faces numerous challenges to gaming dominance
Of course, it wouldn't be reasonable to expect Comcast's entrance into the space to immediately devastate Microsoft's and Sony's dedicated consoles. The PlayStation and Xbox are sold worldwide -- Comcast is limited to a portion of the U.S. Electronic Arts' publishes many of the most popular video games, but its catalog is tiny compared to the overall industry. There's also simpler, yet still important questions, like how Comcast plans to handle controller hardware.
Nevertheless, given its millions of paid-TV and Internet subscribers, Comcast's entrance into the video game industry should not be discounted. If Comcast can deliver a solid experience, the X1 could become the preferred "console" of millions of Americans.
Will adding video games to the X1 help Comcast reverse this troubling trend?
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Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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.