Follow-up--- Who Will Reign Supreme in the Console Wars?
by Chris Connor
Senior Technology Analyst, WallStreetCity.com
Featured Stocks Apr 20 2001 2:31PM CST
Newest Casualty
Before discussing what console makers have what advantages, lets take a quick look at the latest casualty in the console wars (the Dreamcast being the first casualty). Just when it looked like Microsoft {MSFT} might have to face Linux again but in a different arena this time, the plug has been pulled on a Linux console called Indrema because of lack of funding. Although Indrema was no match for the Xbox, Nintendo's {NTDOY} Game Cube, and Sony's {SNE} PlayStation, the Linux console could have shook things up by allowing consumers to develop their own games, download MP3s, and stream videos. In other words, Indrema was intended to be what Microsoft is vehemently against letting the Xbox turn into, a PC console. Despite the fact that the idea sounded good and the Linux-style console was intended to come out months before the Game Cube and the Xbox, there was simply not enough financial muscle and major game developer support behind it to make it fly.
The Weapons of War
In order to come out on top in the console wars, one company will have to exploit at least one sizable competitive advantage. That said, let's take a look at the combatants and see which ones hold the upper hand in such key competitive factors as performance, backward compatibility, proprietary games, compatibility with other systems, and game developer support.
Performance- Winner: Xbox
With a 733 MHz processor and 250 MHz video card, the Xbox's performance capability easily thumps those of both the Game Cube (405 MHz and 203 MHz) and the PlayStation2 (300 MHz and 147 MHZ). Using a more detailed and technical comparison, the Xbox is able to generate up to 125 million polygons per second, while Nintendo can only generate about 12 million polygons per second and the PlayStation2 can generate around 25 million per second.
Backward Compatibility- Winner: PlayStation2
While the Xbox, has a major advantage in performance, the PlayStation2 offers gamers the choice of continuing to play games from the best-selling console of all time, the original PlayStation. This backward compatibility is especially important now as gamers have to wait for higher quality games than are currently out now for the PlayStation2.
Proprietary Games- Winner: Game Cube
Without question, Nintendo has a dominant position in exclusive games because it has been around substantially longer than the other two and has established such popular franchises as Pokemon, Mario, Zelda, and Donkey Kong. Look for this factor to become increasingly important as most 3rd party game developers (i.e. Electronic Arts {ERTS}) appear to be providing games on more of an equal basis to the major console makers than they ever have before.
Compatibility with Other Systems- Winner: Game Cube
The Xbox had a chance to win in this category if had allowed gamers to play PC games on its system, but that will not happen. Instead, the Game Cube wins in this category because it is will be compatible with the future leader of handheld game systems, the Game Boy Advance. While there is a battle raging on the console front, there is a dominant leader in handheld gaming and the Game Boy and its sequels are it. With that in mind, the Game Cube will wisely look to cash in on this cross compability.
Game Developer Support- Winner: PlayStation2
This was the toughest category to judge because the Xbox is gathering an amazing amount of support, but the nod goes to the PlayStation2 for its experience with developers due to the first PlayStation and its early lead over the other two consoles. Although this is a key factor, look for game developer support to be less important going forward as most developers will supply games for all three consoles and Nintendo will be more open to outside game developers than it has in the past.
Bottom Line
If the console war comes down to which console has the best games, the Game Cube could sneak in the back door and steal the leadership position from the Xbox and the PlayStation; however, if the console war is decided by which console offers the most total entertainment value (DVD capabilities and hard drives), the Xbox and the PlayStation2 will have to battle for the top spot. If that one-on-one battle for supremacy happens, the PlayStation2 will likely have the advantage because the Xbox will have an incredibly hard time trying to break into one of the most important game markets in the world, Japan.
Comprehensive List of Stocks involved with Video Games
Company Ticker Video Game Exposure (excluding PC)
Electronic Arts ERTS Leads publicly-traded game makers in exposure for both the PlayStation2 and the Xbox
Nvidia NVDA Will power the graphics of the Xbox
Activision ATVI Should benefit the most from the expected success of the Game Boy Advance
Microsoft MSFT The maker of the Xbox and several key Xbox titles such as Halo
Intel INTC Will supply the processor for the Xbox
IBM IBM Will supply the processor for the Game Cube
Rambus RMBS Supplies memory for the PlayStation2
ATI Technologies ATYT Will power the graphics of the Game Cube
Conextant CNXT Will make the phone modem and broadband adapter for the Game Cube
Sony SNE Maker of the PlayStation2 and high profile games like the Gran Turismo and the Gameday series
SONICBlue SBLU Will add compression technology to the Game Cube's graphics
Applied Microsystems APMC Makes the developer kits for the Game Cube
THQ THQI Planning two high quality titles for the Xbox and one potential blockbuster for the PlayStation2
Take Two TTWO A formidable lineup for the PlayStation2
Interplay IPLY Making a large bet on the eventual success of the PlayStation2
Eidos PLC EIDSY Most of its lineup is geared toward the PlayStation2
Acclaim AKLM No longer a major player
3DO THDO Bringing its franchises en masse to the PlayStation2
Midway MWY Average lineup set for the PlayStation2
Infogrames IFGM Ditto Midway's exposure at this point
Nintendo NTDOY The maker of two next generation video game systems, the Game Cube and the Game Boy Advance, and the home of such all-time hits as Mario, Donkey Kong, Zelda, and Pokemon.
The Big Three Potential Winning Stocks
Of all the stocks listed above, three should benefit the most: Electronic Arts, Activision, and Nvidia. Of course, the selection of Electronic Arts should come as no surprise given that it is the top 3rd game developer by a wide margin and also the largest pure-play game stock in terms of market value. Look for Electronic Arts to soar to its greatest point ever as it acts as a hired gun for the big three consoles. Activision deserves attention from investors because it has expended the lion's share of its focus and resources on the closest thing to a sure thing in the video game industry, the Game Boy Advance. While Electronic Arts appears to be sitting on the sidelines for the Game Boy Advance, Activision has jumped in head first with a very impressive line up of games. Finally, although it is much riskier than Electronic Arts and Activision, Nvidia is definitely a stock to watch because it is one of the reasons the Xbox enjoys a sizable lead in terms of performance over the other consoles. If the Xbox is a huge success, Nvidia could turn out to be the Intel of consoles with a stock price that could soar into the stratosphere. |
