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A Fool Looks Back

By Rick Munarriz – Updated Nov 16, 2016 at 1:15PM

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Videos in demand and demanding video games were fit to be featured this past week.

Videos in demand and demanding video games were fit to be featured this past week. Let's take a closer look.

Video thrilled the radio star
Ask someone who they thought moved a million videos over the past three weeks, and a likely response might be a major movie studio or a video rental chain like Blockbuster (NYSE:BBI) or Netflix (NASDAQ:NFLX). The right answer? Apple Computer (NASDAQ:AAPL)! It took the iPod and PC titan just 20 days to sell a million video downloads at $1.99 a pop.

The new video-enabled iPods clearly helped lead the charge, but I'm guessing more than a few of those downloads were just from folks curious to see how last week's episode of Desperate Housewives or one of Pixar's (NASDAQ:PIXR) Oscar-worthy animated shorts would play on their monitors.

Not that there's anything wrong with appealing to the inquisitive early adopters. Remember when Apple had moved its first million music downloads? Some were quick to dismiss that as a novelty, too. Today, Apple is at 500 million songs served and counting. And Apple had rolled out its iTunes digital music store when free peer-to-peer file-sharing networks were commonplace. Many of those same sites have since gone dark.

But since video files are chunkier than 5-meg music tracks, movie studios may hold back from releasing a wider catalog of movie titles. For now, even speedy broadband connections are better suited for shorter television shows, music videos, and cartoons. The small Apple iPod screen also makes longer viewing sessions a bit tedious -- even though a cable is available to broadcast the video on a television set.

Still, let's not sell Apple's chances short. It revolutionized the digital music market when doing so seemed like an insurmountable task. You have to like its chances of working that magic one more time as it moves to richer, visual media. If Apple doesn't slow down, one day -- maybe sooner than you think -- it will rule the world.

Video games killed the consistency bar
Some sectors offer steady results across the board. Where the bellwether goes, the smaller peers follow. That's exactly the kind of industrywide stability that one should not expect from the video game business. Case in point: In the same week that Electronic Arts (NASDAQ:ERTS) soared after posting better-than-expected quarterly results, Take-Two Interactive (NASDAQ:TTWO) stumbled when it lowered its earnings outlook for fiscal years 2005 and 2006.

Gaming software is a hit-driven business. Sure, there are cyclical peaks and valleys as consumers take to new consoles and handheld systems. But if you're not making the titles that the masses want, you'll be left licking your wounds in the closeout bin even during what are supposed to be the good times.

It's a good thing, then, that EA has so many popular franchises. It has been recommended to Motley Fool Stock Advisor subscribers three times over the years and is beating the market. As far as games go, that's what you might call playing to win.

The headlines behind this week's stories:

Until next week, I remain,

Rick Munarriz

Netflix and Pixar are also Stock Advisor recommendations. Click here if you'd like to take Tom and David Gardner's newsletter for a free, no-risk test drive.

The Motley Fool has kicked off its ninth annual Foolanthropy campaign! Nominate your favorite charities on our Foolanthropy discussion board through Nov. 6. For guidelines on what makes a charity Foolish, visit www.foolanthropy.com.

Longtime Fool contributor Rick Munarriz thinks that an Apple a day may not keep the doctor away, but it certainly has to make short sellers nervous. He does own shares in Pixar. The Foo l has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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Stocks Mentioned

Electronic Arts Inc. Stock Quote
Electronic Arts Inc.
EA
$114.82 (-0.71%) $0.82
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$224.07 (-1.03%) $-2.34
Apple Inc. Stock Quote
Apple Inc.
AAPL
$150.77 (0.23%) $0.34
Take-Two Interactive Software, Inc. Stock Quote
Take-Two Interactive Software, Inc.
TTWO
$109.57 (-0.72%) $0.79

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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