Matt Krantz -- USA TODAY
USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at email@example.com.
Q: How can investors profit from the video-game console wars?
A: Video games are best known for the high-resolution graphics battles between the joystick-wielding opponents. But for investors, the biggest wars take place every five years or so with the release of new consoles.
Since 1972, the year of the first video game console designed for the home, there's been a series of skirmishes between technology companies to dominate the digital living room. Every time a new generation of video game consoles is released, it creates a new set of risks and opportunities for investors.
When it comes to the makers of the hardware, the impact is somewhat muted. For the current video game console winner, Microsoft, for instance, the Xbox itself is a somewhat small part of its business. The value of the Xbox business contributes less than 3% of the value of Microsoft's stock and less than 15% of revenue, says stock-analysis service Trefis.
Historically, the biggest stock winners from video game consoles have been the software makers, including Electronic Arts and Activision Blizzard. But these stocks, while they can be huge winners when they have the top titles, can be a big bust when things go wrong. THQ, which was a big winner with the popularity of Nintendo's handheld consoles, filed for bankruptcy protection in December 2012.
Activision Blizzard has been one of more successful companies in managing the fickle tastes of gamers. The company gets 56% of revenue from consoles, but also 27% from PC games and 11% from online subscriptions. All the game makers, though, are fighting to stay relevant as casual gamers turn to inexpensive apps to download to their phones, so this console cycle might be a bit different for investors.
This time around, the biggest stakes are which company will create the console that not only will be a game machine, but also an e-commerce portal for video content ranging from movies to music. If the game, indeed, changes, the businesses could become more significant for the hardware makers during the generation.