Has the game console finally been killed off?
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Has the game console finally been killed off?

If you grew up in the last four decades, then the game console will probably feature as a constant in your life. The first generation appeared in the 70s, but it wasn’t until the third generation, which dropped two iconic consoles in the mid-80s (the Nintendo Entertainment System [NES] and the Sega Master System) that they began their ascent to ubiquity. With these consoles, two of video games’ most legendary characters, Mario Mario (a heroic Italian plumber from Queens, New York) and Sonic the Hedgehog (an anthropomorphic hedgehog with super speed) were born. On their backs, the first true gaming empires were built: Nintendo and Sega. Forty years later, it’s Sony and Microsoft that are heading up the eighth generation of game consoles with the Playstation 4 and Xbox One… but streaming video game services might be about to make them obsolete.

Will Dominion holdings Alphabet and Amazon be amongst the next generation’s market leaders?

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Source: Yahoo Finance

In March, Silicon Valley titan Google announced Stadia – a streaming platform for gamers that leverages cloud-powered tech to deliver the latest video games to any player with a device that features Google’s Chrome browser. These games are fast; these games are crystal clear; these games are accessible instantly through nothing more complex than a browser window. Why would anyone shell out hundreds of dollars on a black box to put under the TV when a better experience is available online that doesn’t require any extra hardware? That’s the question facing the console industry right now.

Consoles have been under threat from personal computers for a few years now. Advancements in technology proceed at such a pace that dedicated gaming computers have outperformed even the best console for years – a console is not upgradeable, and might stay at gaming’s forefront for five years or so. A personal computer can be much more powerful and continue being upgraded – while a console falls behind. The catch? Gaming “rigs” (as serious players call them) require the highest specs on the market to keep their edge – and that comes at a price. Consoles are cheaper, and when the biggest games come out, you can guarantee your console (if it’s current generation) will be able to play it – if your computer has become obsolete, developers likely won’t have bothered to cater for it.

Despite this threat, the game console is alive and kicking in 2019. Sony’s Playstation 4, the undoubted winner of the “console wars” in their eighth generation, has a 62% market share, having sold 64 million units worldwide. With the rise of Big Tech’s streaming services, however, that could change. Now, the cloud does the heavy lifting that used to be hardware’s job. That means you can get smoother gameplay and better visuals through Stadia than you could get on a console even if your computer isn’t a costly gaming rig. And that’s a major threat to Sony and others.

Google isn’t the only Big Tech company that’s moving into streaming games. Apple also announced a platform this month; Microsoft and Amazon have similar projects in the works. With the kind of money and expertise these companies have access to, it’s hard to imagine console-makers surviving past the next few years in anything like the fashion they have to date.

But here’s the thing: as hard as it is for a kid of the 80s to admit, this might be the best thing to ever happen to gaming. Consoles are nostalgic for a lot of us, depending on when we were born – but they don’t have a whole lot more to offer the future of gaming than fond memories. Streaming services are almost certainly going to be faster, better looking, more accessible, and open the wonderful world of video gaming to a whole new audience of people. All you need to use Stadia is a device with Chrome – it doesn’t even need to be a full computer, because the cloud powers it, not your device’s in-built processor – and over half the world is online.

This is the ultimate democratisation of gaming: it takes something that once required a relatively serious investment of time and money, and makes it more accessible than it’s ever been before. Because pretty much everyone can get their hands on Chrome; and Stadia and its peers will probably have some kind of free trial, or budget subscription, or free-to-play games from yesteryear, or something.

Suddenly, gaming has massive room to grow – just look at what happened when casual gaming (the kind of mobile games you could play on Facebook, like Farmville) appeared a few years ago. Now, there’s a very real possibility that “serious” gaming could take off in the same way. And the companies best positioned to reap the rewards of that growth are those that own the cloud.

Disclosure

Dominion holds Alphabet, the parent company of Google, and Amazon, in its Global Trends Ecommerce Fund. Additionally, the Fund holds a number of other video game stocks which could be positively impacted by the events described in this article, such as Take-Two Interactive.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.