Advanced Micro Devices, Inc. (AMD)’s Monopoly Merges PC and Console Gaming

More risk, more reward

The ability to cut down on piracy may help the video game industry achieve greater profitability, as long as the companies can avoid server issues.

EA’s now former CEO John Riccitiello stepped down in March. Although EA ran into a number of issues under his leadership, the most recent was the backlash the company generated over SimCity.

As I mentioned earlier, SimCity requires a constant Internet connection to be played. There are already issues with this requirement on the consumer-side, as a bad Internet connection rends a $60 game unplayable. But the problem compounds when EA’s own servers fail.

At launch, EA ran into severe server issues, which made the game unplayable for many. To compensate buyers for its failings, the company gave away free copies of some of its best games.

Following Riccitiello’s exit and the company’s failure with SimCity, analysts at Needham downgraded EA from Buy to Hold, citing management shakeup and sales uncertainty. Readers of Consumerist recently voted EA the worst company in America.

Investing in PC-Consoles

As consoles become more like PCs, it’s likely that they will take on more of the PC’s characteristics, such as aggressive anti-piracy measures like always online DRM. Ultimately, this is somewhat of a necessity. Embracing PC architecture could make game development cheaper, but it should also increase the prevalence of piracy.

The move is a win for Advanced Micro Devices, Inc. (NYSE:AMD), who will get guaranteed revenue for chips it is struggling to sell. Game makers like EA should see their development costs reduced. But the console makers — Microsoft and Sony in particular — will have to tread carefully; poorly handled DRM can spark consumer backlash.

The article AMD’s Monopoly Merges PC and Console Gaming originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.