Microsoft (NASDAQ:MSFT) probably thought that the Xbox One would be a slam dunk. Its Xbox 360 has been the top-selling console in this country, every single month, for more than two years. Even last year's debut of Nintendo's (NASDAQOTH:NTDOY) Wii U didn't get in the way of that winning streak. The Japanese gaming giant's dual-screen system got off to a slow start during the critical holiday shopping season, and it's just about toast after clearing just 160,000 units worldwide in Nintendo's latest quarter.
Before June, it was also easy to prematurely call November's Xbox One rollout the winner over Sony's (NYSE:SNE) PS4, but that's changed now that Sony priced its system $100 cheaper. More importantly, Microsoft lost the confidence of a lot of diehard gamers for the restrictive nature of the Xbox One, even if Mr. Softy has backtracked on some of the more controversial features.
However, Microsoft may be battling more than just dwindling industry sales and a re-energized PlayStation platform when the Xbox One becomes available in three months. Game Informer hears that Amazon.com (NASDAQ:AMZN) will throw its hat into the ring with a console of its own in time for this year's holiday shopping showdown between Microsoft and Sony.
Now, this won't be a standalone console with a proprietary format. This is part of the long-rumored set-top box that Amazon is reportedly working on to take on Roku, Apple TV, and other video and audio streaming devices. However, apparently this set-top box will also be the gateway to gaming.
The recent rollouts of Ouya and NVIDIA's (NASDAQ:NVDA) ambitious Shield are carving out a market for Android gaming systems.
Microsoft, Sony, and Nintendo might be laughing off the Android challenge for now. Diehard gamers won't trade in their Halo 4 or The Last of Us experiences for Candy Crush Saga or Temple Run. The $100 Ouya platform is too obscure, and even after a pre-release price cut, the NVIDIA Shield is still too expensive for a handheld. However, let's not dismiss the Android challenge entirely, especially given Amazon's cutthroat ways.
The depth of Android games continues to improve. We can't ignore the value proposition of a free or nearly free Android game when pitted against the $60 console titles. Disposable income isn't unlimited, and a lot of teens and young adults have hefty smartphone bills to pay that didn't exist when the last generation of consoles came out several years ago. There's a reason physical software sales have been on a downward spiral for four years, and it's not the myth that gamers are holding out for new hardware.
Then we get to the power of Amazon. The main appeal of Amazon's set-top box won't be games. It won't even be streaming media, browsing the Web, or whatever features will be available. No, the real problem for everybody else is that Amazon is crazy like a fox when it comes to aggressively pricing its hardware. Amazon has been practically giving away Kindle e-readers and tablets because it gets consumers locked into their ecosystems. It drums up subscriptions to Amazon Prime, through which millions of shoppers pay $79 a year for free shipping and a growing catalog of digital media to consume at no additional cost.
At least one analyst -- Webush Securities analyst Michael Pachter -- opined earlier this year that the online retailer could give away a year of Amazon Prime to help move the set-top platform that may very well cost less than $100. Amazon is just that brazen when it comes to winning market share.
Android games may never catch up to the depth of console releases, but just as "good enough" computing on tablets and smartphones have stalled the PC industry, why can't "good enough" gaming do the same to consoles?
Someone who's zapping away at candy pieces or playing digital Scrabble -- and then using that same platform to stream music and watch video -- isn't going to have as much time to play traditional video games as someone still smitten by the more expensive yet expansive console-gaming experience.
It will eat into the market. How can it not? Amazon's a pretty voracious eater when it gets hungry.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and NVIDIA and owns shares of Amazon.com, Apple, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.