announced plans for releasing the Xbox One, a successor to the Xbox
360, it was revealed that the new console will not run Xbox 360
games. The reason was that the Xbox 360 is built on an x86
architecture. The Xbox One will rely more heavily on new processors
and the "cloud."
Consumers are not entirely fooled by the explanation, specifically
with the reliance on the cloud architecture. Once the Xbox One is
discontinued, consumers run the risk of losing support for the
games they purchase. Current Xbox 360 owners also have less
incentive to buy the new console, since their game purchases will
no longer work. Even Xbox Live Arcade ("XBLA") games will not be
transferrable to the new console.
The lack of backwards support may not be entirely negative on
future console sales.
made some games backwards
with the Wii U, through a virtual console. Investors are upbeat on
the Xbox One announcement. Shares are up more than 20% in a
one-year period, compared to a loss for shareholders of Nintendo:
Investors who missed the run-up in Microsoft should wait for shares
to pull back. The Xbox One may experience a slow initial uptake in
sales. If the XBLA store supported the Xbox One, current Xbox 360
owners would not be hesitant in upgrading. The move could benefit
) and would help lift sales of the PlayStation 4:
Game makers are also up strong in the last two months.
) are all up this year. Recently, however, the optimism is waning:
Activision dropped around 7% in the last week:
(GLUU) are not getting much attention from investors. These
companies are in transition, looking to produce better game titles
for mobile devices at a profit.
Valuation, Sorted by Price to Sales
Investors should not be buying into the console refresh. Nintendo
moved higher ahead of the console release, only to see its share
This article was written by Chris Lau, Kapitall
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