Thursday, November 16, 2006
Don’t play games
Don’t play games
Microsoft, Nintendo and Sony will all release a crucial gaming system in 2006. Microsoft has its xbox 360, Nintendo is attempting something new with the Wii and Sony will release the Playstation 3.
I know for a fact that both the xbox 360 and the playstation 3 will be selling for less than the cost to Microsoft and Sony to produce the consoles. Some investors expect record sales to push up the stocks of these companies. Both Sony and Microsoft are gambling that the amount of games sold after the consoles are released will account for enough to cover the loss each company is taking to sell the consoles.
I believe the Wii will be the overall best performer because it is also the cheapest at a price of $299. Pricing will always play the most important piece in a decision because money is what limits us from getting whatever we want. The Playstation 3 should run a close second, although the highest in price, because it has a built in Blu-Ray disc player. Blu-Ray is a new high definition format of today’s DVDs. I expect many consumers to purchase a Playstation 3 because it allows them to get a cheaper Blu-Ray player than normally. Even though some people will only buy it for the Blu-Ray player, many more will decide to pass out even more money for the games to the console.
The gaming industry is high risk due to children driving the market. For the most part, video games cater to people under the age of 18 who for all intents and purposes usually do not have incomes outside the home. Parents are often the ultimate decision maker on their children’s purchases. We all know how trendy things such as gaming can be. Sega, a former console maker, created a revolution with its game system Genesis but failed miserably in the years to follow.
I do not under and circumstances, recommend investing in a gaming company. The volatility involved is just too high to be considered investment grade in my opinion.