Apple TVBy now you probably know that the surprise hit of Apple's (AAPL) latest earnings call was the hockey-puck-size AppleTV device. But a stealth upside for Apple from the new AppleTV could be a backdoor entry into the video-game console market.

Steve Jobs & Co. sold a quarter-million of the $99 video-management and TV program and movie download devices in roughly two months. These numbers simply blew the doors off previous sales numbers for earlier generations of the stylish but slow-selling and far more costly AppleTV. While some analysts panned the new version as not offering enough selection, the early adopters I've spoken to just love it.

They love the new 99-cent rental price on TV shows -- a pittance for an hour's worth of entertainment. They love the device's size and its extreme portability and ease-of-use. The price is nice, too. One hundred dollars is about what it costs to take a family of four to the movies and a fast-food dinner.

The Key Is AirPlay

But what these folks really dug was a little feature that essentially turns the AppleTV into a gaming console that can compete with the Sony (SNE) PS3, the Microsoft (MSFT) XBox and the Nintendo (NTDOY) Wii, among others.

That feature is called AirPlay. It's around for a while as a mechanism for Apple owners to stream music from iPods or computers to stereos and TVs. AirPlay has recently been a popular topic on Apple discussion boards primarily because it allows iPads to stream Netflix (NFLX) videos.

AirPlay is an Apple-centric standard that allows devices (iPhones, iPads) that use Apple's iOS mobile operating system to easily broadcast Web content to a high-definition TV. In fact, AirPlay and the insatiable demand for iPads are likely a good part of the reason why the stock market has sent Netflix shares soaring. The bet is that tablet devices playing videos will significantly increase demand for video-on-demand services.

No Longer Trapped on the Phone

So what's the difference between streaming videos and video-game content? Essentially zero at this point, due to the graphical richness of video-game apps. Naturally, any iOS device can also stream a video game to an AppleTV. So a game being played on an iPhone 4 is no longer trapped on the phone. With a single click, a gamer can push content from an iPhone or iPad to an AppleTV device, which then beams it directly onto any connected HDTV. This also works, from what I understand, for multiplayer games on iOS devices.

The upshot? AppleTV provides the essential link that allows game-sharing and multiplayer play, a critical component of the experience for many gamers.

And the console? Well, it's all on the handset. Users can download games from the iTunes store. The iPhone has all the critical things required for a handset, namely, powerful silicon, an accurate accelerometer and the capability to support other input devices (think joysticks or peripherals). The combination of AppleTV plus iPhone/iPad plus HDTV equals all the key pieces of a full-on rich, multiplayer game system, minus the actual console.

A Model That May Be Dying

This is interesting because, to date, Apple has had a fairly minimal impact on the game business. Yes, lots of games sell through the iTunes store, and all the big game companies make titles for iOS systems. But even the iPhone game best-sellers, like TapTapRevenge, have tallied sales in the scant millions or tens of millions of dollars. Those numbers are dwarfed by the first weekend's sales for fresh releases of massive blockbuster console hits like Call of Duty.

That said, video-game console makers have struggled lately due to the down economy and increased competition from social-network game-makers like Zynga and from mobile games. In fact, the whole model of releasing a new console every four or five years and forcing users to buy it may be dying as more and more game functionality moves to the Internet and away from the hardware in your living room. In that world, it's all about adding incremental functionality.

Witness Sony's impressive reports of selling 2.5 million Move controllers in less than 30 days. So, in a sense, Apple is taking a stealth, bottoms-up approach to attacking a massive market that's in a state of enormous flux. With video games moving to the cloud, Apple is also beautifully positioned with its enormous download distribution capabilities courtesy of the iTunes store and spanking new data centers designed to handle a deluge of requests.

Game on, video-game giants. Apple is taking aim at your stronghold.


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bam

I don't really understand yr rationale. A good TV show is worth about $.009. The best TV show ever might be worth about $.09. Since you've obviously been on the AppleJuice diet for some time now, all that's left is for you to sing the high praises of the lesser achievements of Jobs. Sounds like what we have here is little more than an appliance. An Apple centric one at that. Good for the Applephiles, of which there are many for sure, but there are and will be many more boxes to play with that will render any Apple TV device an also ran. In my opinion that is.

October 26 2010 at 1:00 PM Report abuse rate up rate down Reply
pks29733steel

I can see it now, The Crapple Game Store. Games that all start with the letter 'I', featuring a balding guy wearing a turtleneck and glasses trying to sell 'crapple' items to the fleeing victims. He'll try to kill them by selling them a overprice phone or application. And once you win a level, you have to go back to the 'crapple store' and buy it before advancing!! No thanks Crapple!

October 26 2010 at 12:39 PM Report abuse +1 rate up rate down Reply
jasignificant16

Ok, right, with people still waiting on line at 12am to buy madden and call of duty. What is this fool talking about, and in what world. These guys crack me up, even if videos games went online completely, we are still talking the advencement of console systems. People are still playing PS2, LOL!!! These guys crack me up

October 26 2010 at 8:15 AM Report abuse +1 rate up rate down Reply
hbvitela

One hundred dollars to take a family of four to the movies and fast food? Where in the world do you live? Most of the US doesn't live in NYC or LA. I def don't have prices like that where I am.

October 26 2010 at 7:21 AM Report abuse +1 rate up rate down Reply
jharleybiker1

The guy who wrote this article is obviously an Apphole who has stock in Apple! Trying to justify buying Apple's overated and overpriced products is sad or hilarious, depending on your mood. $100 for 4 people and fast food?? People can only go to the movies in bunches of 4?? Thats some expensive fast food!! Do you really have to have fast food before going to the theaters?? Paying a dollar per show to make commandant Steve Jobs richer for delivering programming already paid for by commercials that aired for free for viewers??? Is he sniffing glue?? This is a new low for Steve Jobs, and yet the Apple cultists continue to wave their pom poms and cheer without question anything Apple dumps on the market.

October 25 2010 at 3:20 PM Report abuse +5 rate up rate down Reply
jharleybiker1

The guy who wrote this article is obviously an Apphole who has stock in Apple! Trying to justify buying Apple's overated and overpriced products is sad or hilarious, depending on your mood. $100 for 4 people and fast food?? People can only go to the movies in bunches of 4?? Thats some expensive fast food!! Do you really have to have fast food before going to the theaters?? Paying a dollar per show to make commandant Steve Jobs richer for delivering programming already paid for by commercials that aired for free for viewers??? Is he sniffing glue?? This is a new low for Steve Jobs, and yet the Apple cultists continue to wave their pom poms and cheer without question anything Apple dumps on the market.

October 25 2010 at 3:20 PM Report abuse +3 rate up rate down Reply
Pam Miller

Thx but I'll take my MMRPG on a big screen any day. Phones should be for saying hello and goodbye period. The rest is high school bs.

October 25 2010 at 3:07 PM Report abuse +6 rate up rate down Reply
Holy Crap Batman

Apple iTunes games = Yawn....

October 25 2010 at 11:24 AM Report abuse +7 rate up rate down Reply