For years Microsoft and Sony, and in some form Amazon battled it out for the living room. Over the years different companies have come and gone, and each company had their time at the top of the sales charts. It seems like nobody really could ever control the living room. Consumers jump to the next thing at a drop of a hat depending on which console someone tells them is ‘better’.
But quietly on the sidelines Apple have been working on their attempt at the living room with the Apple TV. Rife speculation abound about the reveal of a full TV set by the laughing stock of the business world – Gene Munster analysts made things up to grab headlines. But nothing came from it. Apple continued to iterate the Apple TV set top box. When they revealed the latest generation of the Apple TV, one thing came to mind when I saw it. Casual gaming platforms are dead.
It’s no secret that Apple is the darling of developers, with the relatively small install base of the Apple TV they already have 2600 apps on the platform, and this includes games. EA and Activision will most certainly bring games to the platform. But you must think that the Apple TV isn’t powerful enough to take on the latest generation in consoles, but you’ll be wrong. With the latest A9X chip found in the iPad Pro, it already outperforms desktop class processors and given time (3 years), those processors and graphics chips will outperform anything you can find on the next generation consoles. So power isn’t an issue.
But Apple is smart, they want to ensure that the Apple TV is perfect when they launch a full on attack on the living room. Because when it comes to the living room, once you’re labeled ‘less than capable’, it’s over. Apple isn’t about to struggle to fight negative sentiment for years. So they slowly iterate over years until, like Steve Jobs said, they ‘get TV right’.
But will Microsoft, Sony and Nintendo survive an onslaught by the behemoth called Apple? Of course they will, but it will be a different picture all together.
Microsoft is currently worth over $450 Billion, with an annual revenue run rate of $90 Billion. 90% of the Revenue comes from Office, Server and Azure, and an additional 5% comes from Windows. Xbox, Surface, Bing and Lumia are all squeezed together in the leftover 5%. If Apple were to expand their reach and conquer the living room as they most definitely will in the future, Microsoft wouldn’t even feel the effects of this.
The Xbox division is already preparing for this multiplatform world with their reach into the PC gaming space. It’s no reach of the imagination to think that Microsoft wouldn’t think twice porting experiences to the Apple TV if push comes to shove.
Microsoft’s hardware division is fan service currently. They barely make a profit on any of their hardware products, the only reason they are doing it is for their most dedicated fans who wants hardware from Microsoft, and to showcase their services on homegrown hardware. Microsoft isn’t going to set the world on fire with Surface, Lumia or Xbox. Even if they sell millions, it won’t dent the behemoth they already have with Office and Azure.
Xbox One and the Gaming Division is a distraction, a way to stay relevant in the consumer world without really pushing hard. If Apple takes the living room, Microsoft will do what they always do, build an Xbox that the fans want.
It’s no secret that Sony have been having a tough time against Apple and Samsung. Their Mobile division have been consistently made a loss, they spinned off their PC and TV business. Currently the only division that they have that is consistently making decent profits are the Camera business. As it stands, Sony manufactures camera sensors for every mobile device, including the iPhone. They recently purchased the Toshiba sensor business for $150 Million and Sony isn’t going to stop there.
In the previous quarter Sony made a profit of $100 Million in their Gaming Division. If Apple happened to conquer the living room, Sony wouldn’t feel the brunt of the loss, as they will just port their PlayStation Now service to the Apple TV and be done with it. Sony currently makes the majority of their profits from camera sensors, insurance and gaming. And Gaming is the smallest of them all.
However Sony probably won’t stop manufacturing PlayStation consoles if they failed against Apple again. Just look at their mobile efforts, they’re willing to make a loss to remain relevant in the consumer market. It remains to be seen how big of a loss they are willing to make to continue to serve the console market.
Well Nintendo is currently making more money on mobile than they are on home consoles. Amiibo sales have reached astronomical levels, and in their home country the 3DS is outselling even the PlayStation 4. Even if the Nintendo NX fails to make a dent in the world of console hardware, Nintendo will continue to push mobile.
It’s no secret that the Video console market is currently the biggest revenue generator. It’s three times the size of the PC and Mobile market in Video game sales. But if Apple gets their way and signs up all third party developers to build games on the next Apple TV, Nintendo would do fine.
Console Wars is Dead
When it comes to third party relations, Apple is the king. Microsoft, Sony and Amazon stand no chance against Apple when it comes to signing content for any device. The App Store for Apple is currently their biggest revenue generator after the iPhone. The only area they need is to conquer the living room. If Apple manages to shift tens of millions of the next Apple TV, then console gaming developers will push all their software to the new platform. Third Party developers will have an easy way to push software and to ensure that gamers can’t resell software, making their revenues higher. Only Apple can do this, because we all know what happened when Microsoft tried to push Digital on Gamers. But when it comes to Apple, it’s take it or leave it. And consumers will take it, in droves.
The traditional console war will be turned on its head if Apple manages to conquer this hotly contested area. Other companies will continue to make hardware as long as they make a drop of profit, but in the future, we’ll all play games on the next Apple TV.