The console business at Microsoft Corporation (NASDAQ:MSFT) has made up 7%-10% of revenues at the company over the past 5 years. While that is only a small chunk of a large business, I don’t think the company nor its shareholders be willing to give it up. While always-on DRM won’t remove this market from under Microsoft, it would certainly alienate a large portion of the customer base.
Back to Games
With the new consoles already on their way, Activision Blizzard, Inc. (NASDAQ:ATVI) is making sure to get their juggernaut console game to the market. “Call of Duty: Ghosts” has been announced for a November release–that means we will be seeing this title on the next-gen consoles.
The lifetime revenues for Call of Duty come in at $6 billion, so obviously Activision Blizzard, Inc. (NASDAQ:ATVI) won’t just let this go.
The Numbers
So, we have a handful of companies that are all in-line to make a whole lot of cash when the end of the year rolls around. Would it be better to hold the game companies? Or perhaps jump on in with Microsoft? Each has their pros and cons, let’s take a deeper look at the numbers.
We’ll start with Microsoft Corporation (NASDAQ:MSFT); the company has a solid 21.5% net profit margin, well above the S&P 500. Of course, console margins are usually slim, if not negative when consoles first hit the market. Consoles tend to make their money over time, and the initial release to market is quite a risky one for investors, at least in my opinion.
Activision Blizzard, Inc. (NASDAQ:ATVI) is showing a slightly higher net profit margin than Microsoft over the last year at 24.38%. The company’s five-year average is a much lower at 12.4%. You shouldn’t let that bother you though; Activision Blizzard, Inc. (NASDAQ:ATVI) comes with a nice big zero in the debt-equity column.
Electronic Arts Inc. (NASDAQ:EA) has the lowest profit margin of the bunch with a 2.58%. That’s scarily low for some people, and well below the market as a whole. Despite that, EA happens to be my favorite of the group because of their growth potential going forward. With all of their brands, the new consoles, and the potential of casual games, I feel that Electronic Arts Inc. (NASDAQ:EA) is well positioned going forward.
Investor Takeaway
This year will likely be big for the console manufacturers as a refresh is long overdue, but we won’t know for sure until after today as to whether the consumer is leaning towards the PS4 or Xbox Infinity.
Microsoft will still see consoles fly off the shelf either way, and they’ll generate quite a bit of additional revenue from the new product.
When it comes to an actual investment, though, Electronic Arts Inc. (NASDAQ:EA) may be the one. The addition of the Star Wars franchise of games, and the analysts’ very positive outlook on the company, may be all we need to make some money from the market.
The article A Market for Video Games originally appeared on Fool.com is written by Ash Anderson.
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