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Is Apple TV a game console killer?

September 15, 2015, 11:36 AM UTC
Apple Inc. To Unveil iPhone 6S And Apple TV
Tim Cook, chief executive officer of Apple Inc., speaks during an Apple product announcement in San Francisco, California, U.S., on Wednesday, Sept. 9, 2015. Apple Inc. introduced a larger iPad with a 12.9-inch screen, designed to attract business users and jump-start demand for its tablets. Photographer: David Paul Morris/Bloomberg via Getty Images
Photograph by David Paul Morris — Bloomberg via Getty Images

The home console market is dominated by Microsoft (MSFT), Sony (SNE), and Nintendo (NTDOY). But, now that the new Apple TV promises gaming capabilities, some wonder if the set-top box could become a real contender in the video game market.

At its Sept. 9 event, Apple (AAPL) announced new updates to the Apple TV, a set-top box that supports applications and includes a touch-friendly Siri Remote. While Apple CEO Tim Cook said that the Apple TV represents the “future of television,” his company’s show-and-tell session dedicated a large chunk of its time to the device’s gaming capabilities.

The Apple TV will run games such as Galaxy On Fire, Rayman Adventures, and “even games that [had] only been available on consoles, like the new Disney Star Wars game, called Disney Infinity,” said Eddy Cue, Apple senior vice-president, Internet software and services, during the company’s presentation. In addition, Cue also added that game publisher Activision (ATVI) would also bring its latest Guitar Hero to the Apple TV.

Apple didn’t stop there. The company then invited two game developers on stage to show off the new games that will appear on its set-top box, as well as the system’s new controller, which is designed to enhance the Apple TV’s gaming experience.

The tech giant’s new TV doesn’t look like the standard home game console. In fact, at first blush, it appears to be an entertainment device with gaming tacked on. The small black box is not nearly as powerful as today’s top consoles, the Sony PlayStation 4 and Microsoft’s Xbox One, and its software appears to focus mainly on television and movies.

However, Apple’s new focus on gaming may cause some to question whether it’s gunning for console makers and if those companies should be worried.

“The current console makers don’t and shouldn’t fear Apple,” says Michael Pachter, senior analyst at Wedbush Securities. “Console games are large files that require a disc or a lot of storage, a lot of processing power, and a high resolution graphics card. Apple TV has none of those, and consoles have all of them.”

Still, the market doesn’t have to look too far back to see how Apple can hurt traditional gaming companies. In 2009, Nintendo and Sony dominated the U.S. portable gaming market, and together controlled 70% of the market, according to research firm Flurry Analytics. Since then, Android and iOS have taken over the market, leaving very little to traditional gaming companies. As time went on, gamers found desirable experiences on their smartphones and tablets and saw less value in buying dedicated gaming machines. Responding to that, developers increasingly built games for Apple’s iOS and Android.

“The iPhone was an iPod with a phone attached. It made sense that people would buy it to communicate, and Apple got lucky that it became a big gaming device,” says Pachter, throwing cold water on the possibility of Apple repeating history. “Apple TV isn’t that different or special. [Apple TV is] not making a dent in games.”

James McQuivey, Ph.D., vice president and principal analyst at Forrester Research, agrees with Pachter’s sentiment, saying that the Apple TV is “too little, too late.”

“Sony and Microsoft have both sold more than 30 million of their new consoles and counting,” says McQuivey. “For Apple to hurt them, it would have to sell at least 20 million units in a year, which it won’t do. Even if Apple TV is in 20 million homes by the end of 2016, by that time, both Sony and Microsoft will be in over 50 million homes each.”

“The overwhelmingly positive consumer response to PlayStation 4 demonstrates the healthy demand for gaming on consoles,” a Sony spokesperson told Fortune, seemingly shaking off Apple TV’s inroads. “New devices can bring more gamers into the living room, and we welcome that as an opportunity to showcase the rich, immersive experiences on PlayStation.”

Christine Arrington, senior analyst for games at IHS Technology, says that while Apple TV isn’t worrying the console market just yet, it could eventually establish itself as a real player in that space.

Arrington believes that as more Apple TV devices are purchased and developers increasingly turn their attention to creating more games for the device, the company will “likely become a prominent home gaming distribution channel.” Meanwhile Apple’s success will likely come in the form of casual games, or titles that don’t have the graphical prowess of console-based alternatives and are easier to pick up and play, she says. It’s the “big budget, fully immersive games [that] will be on the traditional console.”

Apple has remained tight-lipped about its roadmap for Apple TV. Still, major game developers have already signed on to the platform and as time goes on, more could join in. Exactly how that may impact the home console market remains to be seen. But at least one developer believes Apple’s “aggressive video game strategy” could make it a force to be reckoned with in the gaming space.

“With its devices, Apple revolutionizes the way hundreds of millions enjoy high-quality games, enabling people to play in an intuitive and accessible way” says Jean-Michel Detoc, head of Ubisoft’s mobile. “At Ubisoft, we are always keen to invest in promising new technology, and this is what we’re doing now with the Apple TV. Apple’s expertise and experience, coupled with an aggressive video game strategy for the device, will create all sorts of interesting new opportunities for us.”

Microsoft and Nintendo declined to comment on the Apple TV.

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