Dispatches From CES: Cloud Gaming Takes Aim at Consoles

Judging from the gaming news coming out of this year's Consumer Electronics Show -- and fans' reaction to it -- console gaming, like PC computing, is a relic of a sunset era. Or at least that's what NVIDIA (NVDA) appears to be aiming for.
At CES, the company introduced its GRID Cloud Gaming Platform. Think of it as a Netflix (NFLX) for gaming in which the system, when plugged into a broadband network, renders and delivers games to any screen.
"We can serve [games] to any display in the world," said Rob Csongor, NVIDIA's vice president of investor relations. (Here's a demonstration on YouTube of GRID serving a high-action title to an Android smartphone, with video provided courtesy of Android Central.)
Most breakthroughs on display at CES introduced new ways to bring high-end games to mobile devices or TVs. For NVIDIA's Project Shield -- an all-in-one portable gaming platform that'll feel familiar to anyone who's played an Xbox -- that means playing Android games on a built-in display, streaming PC games from a connected computer on a Wi-Fi network, or navigating to online game distributor Valve and its Steam platform for downloading and playing titles purchased there.

Project Shield combines NVIDIA's chips and the Android OS. Pricing has yet to be determined, but at least one CNET reviewer said he's "champing at the bit" to see the final product, which is due in the second quarter.

And that's a problem for console makers Microsoft (MSFT) and Nintendo (NTDOY), neither of which showed meaningful improvements to their various systems. Instead, they left the stage to the upstarts. Here's a closer look at the lucky few who made headlines:
  • Valve teased the idea of a "Steam Box," a console substitute based on the Xi3 modular computer that brings your online library straight to your big screen. Investors might remember Xi3 for a near-miss funding campaign launched last year via Kickstarter.
  • Sony (SNE) didn't say much about its PlayStation console, choosing instead to tout 3D gaming and Ultra HD television. Don't know Ultra HD? Get a bottle of Windex. Scrub the window looking out to your backyard. Admire the crystal-clear picture and then imagine replicating that -- bright colors and all -- on your big screen. Mix in 3D and you've got Sony's Personal 3D Viewer. Think of it as the classic red Fisher-Price View-Master updated for the 21st century.
  • Startup Agawi, which has its own cloud gaming service aimed at smartphones, announced a partnership with chip maker Marvell Technology (MRVL) to bring games to smart TVs based on the Android OS. Between this deal and NVIDIA's Project Shield, CES has proven particularly fruitful for Google (GOOG), which had no formal presence at the event.
  • But Microsoft had wins too, none bigger than the Razer's Edge tablet gaming platform. CNET named the new Windows 8 tablet its Best of Show for how it rapidly transforms from a handheld into a lightweight laptop and ultimately a mobile gaming console.
Couch potato console gaming has been a huge market for years. "Angry Birds" and "Words With Friends" helped expand the business by turning our smartphones into gaming devices. Now tablets and the cloud are taking the experience even further.
Whether or not you're entertained by flinging onscreen birds at pigs or rigging digital explosives in a campaign to rout the online enemy, there's no mistaking the profit potential this industry offers to investors. So go ahead, get your game on.
Motley Fool contributor Tim Beyers owned shares of Google and Netflix, and had a long-term call options position in Netflix, at the time of publication. The Motley Fool has sold shares of Sony short. Motley Fool newsletter services have recommended buying shares of Netflix, Google, and NVIDIA. Motley Fool newsletter services have recommended creating a bear put ladder position in Netflix, writing puts on NVIDIA and creating a synthetic covered call position in Microsoft.
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