Analyst predicts possible Apple venture into consoles

Prudential analyst points out Apple's technology evolution, which leads to a 'distinct possibility' of gaming

December 6, 2006

Apple might move in on the console market? It's entirely possible, and maybe even a likely move for the technology vendor according to Prudential analyst Jesse Tortora.

The analyst mentions that Apple's own computer technology, as well as the portability of its iPod line, might naturally evolve into a gaming-capable device.

"We think the videogame market represents a distinct possibility for Apple, especially considering that it recently announced the availability of video games for its iPod through its iTunes store," said Tortora. He continued to point out that the technology involved in Apple's MacMini, iTV and iPod products are an excellent match for the hardware required of both handheld and home video game consoles.

The iTunes store, properly modified, also acts as a fitting distribution model, especially for handheld games.

The main hesitation for Apple, according to the analyst, would be the loss that most hardware vendors take in the gaming market. Since the largest amount of profit comes from gaming licenses, most console vendors choose to lower their prices to or below cost in order to encourage adoption of their platforms. Apple, however, usually makes profit from hardware sales alone on both its Mac and iPod product lines.

Nintendo's Canadian boss, however, recently pointed out that they were making a profit on every Wii unit sold, suggesting that a modest hardware offering could be profitable.

Apple has ventured into video gaming before. In 1995 it developed the Apple Pippin which was released by Bandai in the U.S. a year later. That system ultimately failed, but mostly because its technology was behind the competing Nintendo and Sony systems, and because it was marketed as a low-budget PC rather than a game system. With the increased attention on Apple's iPod brand, the company may have a better chance at captivating the gaming market with a more refined approach.

Apple has not given any official word of possible entry into the gaming market, but reports indicate that the company has recently been hiring individuals with experience in that area.