Blog #7

by carre107

This week I’m going to talk about the video game industry as a whole. The article I found this week, (http://www.businessweek.com/articles/2013-03-13/the-great-dumbing-down-of-video-gaming-consoles) is about how Sony and Microsoft are going to follow in Nintendo’s footsteps and use off-the -shelf AMD chips in their consoles. This is great for AMD who has now “locked up the gaming market”. In the past these companies made their own chips for a combination of computing power and graphics, but now that AMD does this so well, there isn’t a point for them to try to make their own chips in their eyes. This is good for gaming companies because they are keeping their manufacturing costs low by getting their chips already made from a third party. This can be good and bad for gamers. The good news is that since the costs to produce the consoles will be less, the price will also probably be less. “The downside here is that the consoles do not seem as special as they did in years past”. The article argues that with consoles life span being so long, the chips will be outdated compared to those in gaming computers. Not that this matters, but I think gaming computers are way to expensive and way to difficult to maintain. All consoles have to do is play video games and if they can do that with these chips, why does it matter? Nintendo, Microsoft and Sony would rather spend their resources on differentiation, like the articles example of the Xbox’s Kinect, rather than a chip functionality issue. Since AMD has been struggling financially, the author of this article is worried that AMD might not survive and that it would have a horrible effect on the video game industry. I think providing chips to every single video game console over the next 5 years at the least will keep them going. If they start to go under after that, I believe the video game companies could switch to Intel in their next wave of video games, make their own chips again, or maybe by that time there will be new technology where the games are virtual or something and you stream the games rather than run them through a console. Regardless of how it happens, the gaming industry will survive because there is a high demand for games.

Relating to last class, it seems that AMD has won the format war, at least in the video game industry. Of course having a standard chip throughout all video game consoles doesn’t mean that there is a compatibility between all consoles, but it will reduce production costs. I would say this chip standard in all consoles is a product of cooperation among the firms rather than from the government or market demand. It would be through market demand, but I don’t think gamers really care if Intel or AMD makes the processors in their consoles, as long as the consoles do what the have to do. Therefore I believe that since all companies want to use AMD, regardless of what the consumers think, they have attained standardization through cooperation. In the end, I would say that this agreement is great news for AMD, the console makers, and the gamers whether they realize it or not yet. Gamers have to remember that technology is constantly changing and even if the chips are outdated in a few years, the next wave of consoles will already be on the rise.

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