For a team of writers that have been around as long as we have, there are very few ‘epiphany’ moments for us at Faultline even though the world changes so rapidly as digital ideas take off. Our first was in 2002 watching US originated online video through a UK ISP connection, from a German web site and video has dominated a lot of what we have written as we have worked through what is possible over the past 7 years. IPTV and Mobile TV were less of epiphanies and more like the gradual winning of hearts and minds. But the idea of how fundamentally touch changes the gaming world, brings us back to the sudden ‘conversion on the road to Damascus’ moment.
Watching a 14 year old boy playing with the iPod Touch and remaining engaged as the device slipped from a video player to a gaming device and a music player and back, just showed how old games had a new life in the new touch format.
But that lead in touchscreens will not be long lived in the handset industry, so with the App Store Apple kept up the pressure with the bulk of App Store downloads coming as games. So now it has touch and a big bunch of developers who are making money from investing in Apple devices by writing games.
But at Apple that success of the Touch may well have acted as the background to a gaming strategy that we all know Apple needs. How would you go about it? Would you build a gaming console that fits next to the TV set? Would you just allow casual gaming on the existing platforms. Would you put accelerator chips into the Mac that make cool, real time gaming?
Most of these approaches are not the Apple way. It wants to re-invent genres with some form of breakthrough ‘ not a technological breakthrough but a business model shift. Consoles require a huge investment, and pre-define the entire gaming eco-system. They involve device subsidies which rely on taking a big chunk of the money from committed games designers, and squirreling away $ billions to pay for the next monster gaming console. That’s definitely not the Apple way.
Apple would like to make the gaming appeal of its devices, just that, something which makes its devices appeal to game designers, and customers to pay full price for the device. When the Sony PSP came out the device was thought to have $850 worth of components inside it, but sold for $250. Apple would prefer that any device it makes ‘ be it Mac, iPod Touch or iPhone ‘ has $X worth of components and sells for $2X or $3X. It wants cash generating businesses with a premium in them, not subsidies.
If it tried to enter the gaming market that way, it would fall on its face, upsetting its new App Store developers which have the potential grow into serious partners for Apple, in the same way that early Microsoft developers made Windows happen.
It already has casual gaming on its platforms and Apple has already moved to support developers here, so what about the idea of some form of accelerator chips in any of its platforms, which make cool, real time gaming?
We like this idea, so that when we heard this week that everyone was getting hot under the collar about a gaming defection from Xbox to Apple, even though it was only a European based marketing guru, it tweaked our curiosity.
If you add to that (see separate piece) that it is now recruiting chip engineers around its PA Semiconductor team (according to The Wall Street Journal), having already recruited top chip designers from AMD and IBM, you get might reach the conclusion that it was rethinking the gaming world on its devices.
In fact there two ideas forming, both which point at games; one that Apple is making go faster chips built around ARM cores which accelerate low power processing on its portable devices, including virtual reality class graphics on iPods and iPhones. And separately, from statements made in the past that Apple is trying to embrace an entirely new graphics architecture called OpenCL (Open Computing Language) which Apple says will embrace parallelism at both the operating systems and MAC hardware level, means it can create superfast low power graphics which will also drive a video quality rendering virtual reality engine with integrated parallelised graphics, and that could underpin all graphical applications, but especially shoot ’em up class video quality game rendering on a Mac.
If we combine the two ideas, and look at the App Store shifting from casual gaming only to front line, hard core, graphics based gaming, and sliding across genres, portable devices and Mac based, you can glimpse the beginning of a strategy that might turn the gaming world on its head. Apple would have an online store like the Xbox and PS3 networks, but no retailers and no investment in the games themselves.
Which leads us to the final piece to the jigsaw, which is that Apple is rumoured to have approached Electronic Arts about either acquisition or a major partnership. This really IS at rumour stage, but you have to remember that when Steve Jobs launched the iPod it was with a company that was barely profitable and had a market capital of under $10 billion.
Today Apple has $29 billion in the bank and is generating more every quarter. It is in a position to radically change the gaming industry on its existing platforms if it can have a new low power virtual reality engine, and especially if that engine has a raft of games from the world’s best known independent games supplier.
EA and Apple already have quite a good relationship and quite frankly we don’t see why Apple would need to spend that kind of money (currently EA is valued at $6 billion, so with a premium to shareholders it might cost Apple $9 billion) to become a games designer. We suspect that Apple will get involved in a number of acquisitions, otherwise it will have to consider giving a lot of that money back to shareholders, and while we’re not holding our breath for EA, it is in the right territory ‘ gaming.
Apple has chased the gaming market before and not made a dent in it, but conversely EA comes with a lot of baggage on other platforms which may not suit Apple.
In the end we think that the route into gaming is to continue to produce compelling hardware platforms and software services which attract games developers. And its strategy rest on the fact that Apple does not need to make too much from the gaming developer, but instead makes a profit out its devices. That will mean that it continues to sit nicely underneath the games subsidized consoles of Sony, Nintendo and Microsoft.
It has plenty of time to develop its gaming strategy because its average gamer is using casual games on the iPod Touch and is 14 years old. By the time that person is 25 and bringing in a decent salary, he needs to be an Apple brand lover for life who would buy into whatever gaming strategy Apple can bring to both portable and fixed devices, which by then could be considerable.