Winners and Losers in Cloud Gaming

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I've always been a console gamer, with my weapon of choice being the Sony (NYS: SNE) PlayStation 3. The landscape for gaming is changing rapidly though, and consoles' dominant role in the industry is being threatened.

Mobile and social gaming is endangering console gaming; Apple's (NAS: AAPL) iPhone has become a veritable gaming platform in its own right, and Zynga's FarmVille continues to make virtual farmers out of so many of us. Electronic Arts (NAS: ERTS) has committed itself to mobile gaming, including its purchase of PopCap Games, maker of the dangerously addictive Plants vs. Zombies.

Instead of purchasing expensive hardware to render, store, and deliver content, players can consider new entrants in the sector, like OnLive, who do all the heavy lifting and only serve up the end result, streamed to the user's machine.

Bricks-and-mortar retailer GameStop (NYS: GME) is so threatened by the service that it recently faced some controversy over opening brand new copies of recent release Deus Ex: Human Revolution and removing a free game code that would allow customers to use OnLive, since the retailer is developing a competing streaming service.

Gaming pioneer Nintendo (OTC: NTDOY) has mostly ignored the trend while it recently posted a catastrophic quarterly revenue decline of more than 50%. Ever notice that Mario has never jumped into iOS? Investors have, too. Nintendo President Satoru Iwata has said that the company will only make games for its own hardware under his watch, which has frustrated investors who have driven the stock down more than 40% this year alone. According to market research company NPD Group, July retail sales of video game systems and software fell 26% from last year.

Amazon.com (NAS: AMZN) may win some sales through its Web Services division, which can offer hosting services with its expansive data center infrastructure as game companies such as THQ (NAS: THQI) consider outsourcing some of the raw processing. THQ CEO Brian Farrell is grappling with how to best address the evolving pattern of gamer preferences. Ultimately, he believes that content is the priority and supports game streamers like OnLive as well as traditional distributors like GameStop.

Fool contributorEvan Niuhas never virtually farmed anything. He owns shares of Apple and Amazon.com, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Apple and GameStop.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Apple, and Nintendo.Motley Fool newsletter serviceshave recommended writing covered calls in GameStop.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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