Apple move into home consoles 'a distinct possibility' - analyst

Apple's move into the console hardware market is 'a distinct possibility' according to Prudential analyst Jesse Tortora.

The research company believes that Apple could combine technology from some of its leading products to create a home console, supported by the continued evolution of its market-leading iPod device.

"We think the videogame market represents a distinct possibility for Apple, especially considering that it recently announced the availability of videogames for its iPod through its iTunes store," Tortora said in a note to clients.

"The game console device could be morphed out of some combination of the MacMini and iTV, while the handheld player could be developed as an enhancement for a future version of the widescreen iPod," explained the analyst.

However, the reality that hardware costs in the videogame industry are often taken at a loss, later recouped by software sales, would represent a real change of business for Apple, which has traditionally made profits from hardware sales.

"The videogame console market is notorious for subsidising hardware to sell profitable games. Apple would have to either rely on the sales of its games and downloadable movies to make enough profit to cover losses on hardware or figure out a strategy to make profits on hardware itself," said Tortora.

Tortora believes Apple's move into videogames would be taken to defend its position in the home entertainment sector, a market that rival firm Microsoft has recently made aggressive moves in with the launch of downloadable TV and movie content for the Xbox 360.

"There are no technical limitations to this capability, and Microsoft is already aggressively wooing the movie studios," noted the analyst. "This could adversely impact Apple's iTunes Movie download business longer-term, along with its iTV and video iPod sales."

Apple recently launched a limited videogames download service for the iPod, and has hired games developers specialising in both hardware and software, according to Tortora.