Market Overview

Is Apple Making a PlayStation 4 Killer?


Apple wants to beat Sony, Microsoft and Nintendo at their own game.

According to MCV (via The Next Web) the iPhone maker has hired a man who spent seven years leading the marketing efforts for Xbox Live: Robin Burrowes.

This is not the first game-related appointment made by Apple (NASDAQ: AAPL). The company previously hired Nick Grange, a PR exec from Activision (NASDAQ: ATVI) and Electronic Arts (NASDAQ: EA). But Burrowes might be the most significant hire yet.

While Apple has yet to comment on the matter, Burrowes will reportedly be in charge of marketing the App Store in Europe.

On paper, this sounds minor. As an experienced marketing professional, Burrowes can provide the iPod creator with a level of expertise the company might currently lack. Why wouldn't Apple want someone like that, regardless of its future plans?

But the timing of his appointment indicates that something more is going on. Right now, Apple is presumably developing a TV that it will one be marketed as the definitive entertainment device. It will almost certainly play apps. However, the current App Store is just that; a store. Thus far, Apple's attempt at adding other features (such as multiplayer gaming) has been weak at best. When people game on their iPhones, they are often playing solo. And when they game with others, the experience is far from that of Xbox Live.

To become the center of the living room – and prevent consumers from buying whatever Microsoft (NASDAQ: MSFT) is selling – Apple is going to need to produce a TV or an external device (such as an Apple TV-style set-top box) that can compete head-on with the next Xbox. Currently, Apple does not make any such product. Currently, most Apple loyalists will argue that the company does not need to design a product like that. But it will need one if it intends to command and transform the living room as significantly as it has commanded and transformed the tablet, smartphone, and MP3 player markets.

When analysts talk about content for Apple's television, they always look to non-interactive features, such as TV networks. But we already have those. Aside from an a la carte cable package, Apple can't do much in this realm. It can offer superior service, improved picture quality, and (potentially) a lower monthly fee. But unless Apple plans to get into the business of producing its own content, the stuff people watch will not change. And without a change in content, how can Apple disrupt, transform, and ultimately revolutionize the TV manufacturing industry? TVs are big and expensive items that people already own. It's going to be a lot harder to persuade consumers to buy a new TV than it will be to convince them to buy another tablet, which are in far fewer homes.

What, besides a new way of charging for content, could Apple do to make its TV the must-have electronic of the year?

The App Store alone won't be enough, and I'm willing to bet that Apple knows this as well. If consumers are going to spend $2,000+ on a new TV, they will need to feel like they have taken home a device that eliminates the need for everything else. And that is one of the reasons why game content is so important.

But it's more than repeating what Xbox Live has already accomplished. Not even Sony (NYSE: SNE), which has a very similar service, has been able to take the lead. And Sony's service, PlayStation Network, is free – Microsoft charges $60 a year for Xbox Live. This has created an impeccable revenue stream for the Windows maker. Surely Apple would love to tap into that.

Now let's suppose that Apple is developing an Xbox Live-style service that will be rolled out with the launch of its first television. That's great, but will consumers really be interested in playing Angry Birds-style games online in a more traditional gaming environment? Aren't most App Store games better suited for on-the-go gaming?

That is precisely why Apple will almost certainly use its television to make a bigger push into video games with a high-end offering. It will “disrupt” and “transform” the market by releasing a TV set that could potentially eliminate the need to own a PlayStation 4 (assuming PS4 actually exists). It could hurt sales of the next Xbox as well.

Right now, Sony has no plans to release a new console this fall. After PlayStation Vita, the Japanese game maker might not release another machine until 2016. If Apple released its TV this year, that would give the company a four-year head start on the market. Xbox 720 (the unofficial name of the next Xbox) will not come out until at least 2013, giving Apple a full 12 months to steal some of Microsoft's market share. Nintendo (NTDOY) will release its next console, the Wii U, worldwide by Christmas. But unless the company announces a stellar lineup of launch games (something its last system, Nintendo 3DS, lacked), Wii U will flop.

Now I know what you're thinking: how can one first argue that consumers are not eager to rush out and buy a new TV, and then claim that Apple could hurt console manufacturers by releasing a TV with high-end gaming capabilities?

First, consumers go where the games are. Apple wouldn't have to work that hard to gain premium support from the likes of EA and Activision. And since Sony and Microsoft are waiting to release their next game machines, all of the awesome next-gen content could go straight to Apple's TV.

Second, gamers are more likely to invest in new TVs than most other consumers. Whereas the average viewer may be content watching DVDs and streaming Netflix (NASDAQ: NFLX) on whatever crappy flat screen or CRT they have in their home, the average gamer wants the most beautiful viewing experience possible. He or she may not be able to afford it right away. But in marketing, desire is everything.

Apple's TV won't be an easy sell for the company. It will never push as many units as the iPhone or the iPad. It won't be able to keep up with the iPod Touch either. But if powerful game technology is a part of the experience – including Xbox and PlayStation-quality games and a true online gaming service – Apple could slowly transform the industry into something that inspires developers and consumers alike to “think different.”

Follow me @LouisBedigian


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