It seems that every analyst out there thinks that Apple is poised to enter the video game fray, and that their initial volley (the I-pod touch and I-Phone) will takeover the handheld market (with it’s 3 billion download app store). According to apple’s most recent financial report they have over $20 billion in cash and short term investments with which to play; in addition Apple has made overtures in the past to enter the home console market with the Pippen (recent rumors have Apple dusting off the name and retrying). In reality Apple has 3 basic strategy paths that it can follow: content (which includes video games but also movies and TV), distribution (cellular or cable), or hardware.
Apple has little content and not a lot of experience managing or creating it (very different business models work here) so I would think this would be a slim chance Apple would go this route. Some might mention that Jobs did own Pixar at one time (a very successful movie studio), but in reality he never had a hands on role there and Pixar’s greatest successes came after he left to go back and run Apple. Without content it is hard to be a serious player in the video game market; both 3DO and to a lesser extent Atari tried and failed.
Distribution would be an interesting play; Apple could get some healthy subscription based revenue, which they already supposedly get a piece of from AT&T (for the iPhone). But (again), Apple has no experience in running this type of business and the capital structure of these types of companies make me think this would not happen either; imagine Apple controlling 100,000 employees doing everything from laying fiber to helping you setup your wireless router (does not seem to mesh).
On the other hand, a consumer electronics binge might be just what Apple needs. Apple already makes some of the best computers, mobile phones, and MP3 players on the market and their slick interface (Mac OS X) could do wonders for other devices. Say Apple buys a major flat screen TV maker (like Vizio) and incorporates Apple TV functionality directly into the set; the gap between PC and the living room is smashed and Apple is running the show. This would also allow Apple to further expand iTunes into TV and movies; a move that they are already negotiating with several studios. Also imagine Apple’s designers turned loose on your TV, just imagine all of the upgrades they would bring that we never knew we needed.
Apple’s core competency lies closest to a consumer electronics giant; they even recently shed the computer portion of their name (further evidence they are wandering away from their PC roots). Apple does not have the studio mentality or structure in place to create significant content; even if Apple wanted to there is no guarantee they could do it better than any of the existing players (they have NO track record here). Although video games are not in Apple’s future, a definite foray into hardware could propel Apple into the forefront of the next generation living room; something I for one would enjoy seeing.
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