With an average consumer age of 37, video games are no longer “child’s play.” The video game industry is about to ramp up with Sony Corporation (ADR) (NYSE:SNE)’s PlayStation 4 and Microsoft Corporation (NASDAQ:MSFT)’s Xbox One set to be released later this year. These will be the first console releases since Nintendo released its Wii U last November. In preparation, video game producers are lining up major franchise names in hopes of capitalizing on the new consoles. In addition, companies are also innovating to make use of the rise of mobile and online gaming popularity. It’s a fierce competition, and everyone wants to be at the top of the leader board.
Clash of the titans
PlayStation 4 and Xbox One have tons of hype, but what’s the difference between the two consoles? First are the controllers. PS4 will have the Dualshock 4 controller, an upgrade from PS3’s Dualshock 3 that will have a touch pad for new game controls, a headphone jack, and can give information based on game actions. The Xbox One’s controller doesn’t have many new features, but does have force feedback to make first-person shooters more immersive.
Both consoles will also come with improved cameras. Xbox One will have the Kinect 2.0, which Microsoft has sold as a mandatory part of the Xbox One experience. It will track motion better than the first Kinect and will allow the gamer to give voice commands to the Xbox. The PS4 will also have a camera, but Sony Corporation (ADR) (NYSE:SNE) has not given many details on it. It will have two lenses for 3D motion capture and will be a major upgrade from the PlayStation Eye.
As far as media capabilities go, the PlayStation 4 and Xbox One are pretty even. They both feature Blu-ray players, Netflix and Hulu capabilities, and their own libraries of music and movies to rent or buy. In addition to this, the Xbox One has the capability to work with your television provider’s cable box, allowing you to watch TV through your Xbox and use its voice command capabilities.
Each new system will have its own platform-specific games. Historically I like PlayStation games such as Uncharted and Infamous more than Xbox games like Halo. Overall the Xbox One appears to have more capabilities, but each system appeals to different users depending on the gamer’s preferences.
When you look at the battle that Sony Corporation (ADR) (NYSE:SNE) and Xbox had with the PlayStation 3 and Xbox 360, the Xbox did not have as many features as the PlayStation. Despite that fact more game players use Xbox. This is because Xbox’s top game, Halo, is an online multiplayer game. People want to play Halo with their friends and have to have an Xbox to do so. Now that the Xbox one appears to have more features than the PlayStation 4, I expect that Microsoft will win the upcoming console war, making it a better investment.
Double take
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is one of the most popular video game companies among gamers today. Specializing in story and sport games, the company produces popular titles such as Bioshock (my favorite), Grand Theft Auto, and NBA 2K13 for all major consoles. Thanks to Bioshock, Take-Two Interactive Software, Inc. (NASDAQ:TTWO)’s most recent quarter showed a 105% increase in net revenue to $303 million that yielded a net income of $26.2 million. While they made a profit this past quarter, Take-Two has taken a loss for the past few years. Despite this fact, there are reasons that the future looks bright for this producer. It plans to release Grand Theft Auto 5, one of the most lucrative franchises in video game history, in September. The game will be available for current and next generation consoles.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) recently purchased the rights to produce WWE (professional wrestling) video games. Spandex aside, 5 million people tune in every week to watch wrestling, and Take-Two believes that they can capitalize on these fans through 2k Productions. WWE 2k14 is set to release in October.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has also devoted resources to developing games for the fast growing mobile gaming market. So far they have mobile versions of their most popular games such as Max Payne Mobile, Grand Theft Auto: Vice City, and NBA 2k13. With many more mobile games coming down the pipeline, it’s obvious that Take-Two will be riding the wave of popularity surrounding mobile gaming.
Focusing on creativity, innovation, and efficiency has lead Take-Two Interactive Software, Inc. (NASDAQ:TTWO) to produce some of the most successful games of 2013. Take-Two is growing sales successfully and is using new video game technology to their advantage. I think Take-Two will increase in value during the next few years.
The big chill
Activision Blizzard, Inc. (NASDAQ:ATVI) is another giant in the video game industry. Known for its competitive online games, Activision Blizzard has connected people across the world. The Blizzard half of the company specializes in role player and strategy games like Starcraft, Diablo, and World of Warcraft, which requires users to pay a subscription fee each month in order to play the game. Current users of the game totals 8.3 million, though surprisingly this is a 1.3 million person decline since last quarter. This is a result of free online RPG games that have taken customers from Blizzard. To remedy this, Activision Blizzard, Inc. (NASDAQ:ATVI) is coming out with a World of Warcraft-themed card game focusing around “hearth stones.” Players can collect cards electronically and play each other in a strategy game, and also have the option to buy cards online if they lack patience.
Looking towards the future, Activision Blizzard, Inc. (NASDAQ:ATVI) will release another installment in their profitable Call of Duty franchise. Call of Duty: Ghosts will be accompanied by an extensive marketing campaign that could lead to record breaking sales. Activision Blizzard can use the new Call of Duty to increase online store sales by offering extra levels and gear to gamers for a price. Activision Blizzard will release Diablo 3, another popular RPG game, for current and next generation gaming systems.
Activision Blizzard, Inc. (NASDAQ:ATVI) also has some of the most dedicated fans in gaming. Hardcore World of Warcraft gamers have been known to take vacation days to play the game uninterrupted and some even get enormous tattoos of their favorite game characters (I dare you to Google it). “Blizzard Con,” the annual game convention, sold out within seconds of tickets going on sales. Customer loyalty like that can’t be ignored.
Activision Blizzard, Inc. (NASDAQ:ATVI) offers a yearly dividend of $0.19 per share, which is more than Take-Two’s annual dividend of nothing. Activision Blizzard also has a large net income of $1.19 billion, proving that it can make a profit.
Conclusion
In the upcoming years, the video game industry plans to see significant revenue growth. But before you go buying up stocks, you should wait a few months. Video game sales are going to be low this summer, but sales will pick up when the weather cools down. Between the two I would personally choose Take-Two Interactive Software, Inc. (NASDAQ:TTWO) because I like stocks with high growth potential. Activision is trying to maintain its earnings while Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is rapidly growing them. Regardless, the video game industry is growing and I expect both stocks to do well at the end of 2013.
Ben Popkin has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Take-Two Interactive . The Motley Fool owns shares of Activision Blizzard and Microsoft.
The article Game Makers Preparing for a High Score originally appeared on Fool.com.
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