CES 2015: What Is the Future of the Gaming Industry?

By Daniel B. KlineFool.com

The gaming world has undergone a massive upheaval in the last few years.

Phones and tablets have emerged as low-end gaming platforms, while next-generation consoles fromSony,Microsoft, andNintendohave carried the banner at the top of the market. Game players have more options than ever before, resulting in significant changes for the industry.

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These developments were discussed at apanel discussion, entitled"Emerging Trends In Gaming," at last week's 2015 ConsumerElectronics Show.Moderated byOphir Lupu, who manages the gaming division at United Talent Agency, the panel featured Advanced Micro Devices Chief Gaming Scientist Richard Huddy,Wedbush Securities analyst Michael Pachter, and Jason Rubin, head of worldwide studios for Oculus (aFacebookcompany).

Topics included the future of the industry and major changes expected in the gaming market.

The panel sees big changes ahead for the gaming industry. Source: Author

Is the console market too crowded?Lupu opened the discussion, noting that Razer had introduced a new $100 gaming mini-console at the show and thatValve had announced its Steam Machines project in late 2013."Do we need another console?" he asked the panel. "Can the living room take a fourth entrant into that space?"

Huddy thought it could, and that more competition would be good for both the industry and consumers.

"People love playing games in all sorts of different ways. I think the opportunity to choose a new place to play games, whether it be a $100 device from Razer or something more expensive, absolutely, anywhere we have a place to play games, we'll be happy to play them," he said.

Pachter disagreed, arguing that consoles would soon not be needed at all.

"Within the next five years, you're going to see the content makers embrace playing their high-quality, fast microprocessor games on any device anywhere," he said. Pachter added that he expects phones and tablets to be viable devices for high-end game play within that time period.

Content is kingHowever games are played going forward, Pachter believes content creators -- not hardware companies -- will be in the driver's seat.He sees game play becoming less device-specific, opening up larger audiences to the market.

"I am very confident, as I am with television and film, that content guys win for games," Pachter said.

Rubin agreed, asserting that the top-tier game-creation teams, which are hard to establish, would have increasing power moving forward.

"Those teams that are left have greater and greater value," he said.

Blockbuster games are here to stayAs phone and tablet games have become massive hits without the high expenses associated with developing top-tier console titles, people have been predicting the demise of the blockbuster high-end game.

"Every time a new game that's less expensive than the cutting-edge blockbuster games comes out, someone says 'that's the end of the blockbuster games,' and it simply hasn't happened," Rubin said.

"And it never will," Pachter added.

Rubin believes the audience for top-tier games will actually grow as the processing power available on alternate devices, including phones and tablets, improves enough to make them viable platforms for high-end titles.

"At the top, everything that comes out and is supposed to change how people spend money on blockbusters never happens and the audience is always there," he said.

Mergers and acquisitions will continueLast year was filled with major acquisitions in the gaming space, including Microsoft buying Minecraft maker Mojang and Amazonpurchasing gaming video site, Twitch (not to mention Facebook and its Oculus acquisition). Pachter expects that to continue.

"It's sort of a feeding frenzy," he said, noting both completed deals from major players and rumors of other bidson gaming companies. "As long as there are these businesses that are different and giant, somebody is going to want them."

Games will be everywhereWhile video game consoles' long-term future is debatable, panel members made it clear they believeimproving device technology will make more games available in more places. That could include new consoles, tablets and phones, and even not-yet-viable platforms such as virtual reality headsets.

"I can see people streaming games. There's an opportunity to put a tremendous amount of horsepower in the cloud and stream a game onto my phone,"Huddy said.

The model is not proprietary software for proprietary hardware, Pachter said. "The consumer wins if everything is open architecture, everything is uniform, you can play on any device, more people will access."

The article CES 2015: What Is the Future of the Gaming Industry? originally appeared on Fool.com.

Daniel Kline owns shares of Facebook and Microsoft. He plays some games on an Xbox One at home and an Xbox 360 at work, while also occasionally playing on his iPhone.The Motley Fool recommends Amazon.com and Facebook. The Motley Fool owns shares of Amazon.com, Facebook, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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