The PC is dead, long live the netbook

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The New York Times reports today on the phenomenon of netbooks, and how it risks destroying the established IT order.

Netbooks are ultra-low-cost laptops with small screens, open source software and limited processors. As a result, they make substantial use of cloud computing, with much of the processing power happening on web servers like those belonging to Google. An example would be remote word-processing on Google docs.

The New York Times quotes Joseph Schumpeter, the Austrian economist who championed the idea of “creative destruction”, the capitalist cycle whereby companies innovate, rise and then are in turn challenged by new innovative companies that change the status quo – often tied in with an economic recession.

Netbooks may be the harbingers of a period of creative destruction. They threaten Microsoft’s two-decade monopoly of operating systems and business tools such as word processors and spreadsheets as consumers choose price (which necessitates free open source software) over familiarity. They threaten chip manufacturers (both Intel and AMD have announced layoffs so far this year). And they offer great opportunities to new companies who seek to put processing power in “the cloud”, meaning on their own Internet servers rather than in the homes and offices of their customers.

The impact for the games industry could be substantial:

• Netbooks reduce the lowest common denominator for PC games. Expect games companies to see PC titles as low-end rather than high-end products in terms of graphics and performance over time.
• “Cloud-gaming” businesses like Jagex, Bigpoint and SPIL Group will be flavour of the month with investors, as their potential audience is growing much faster than the audience for core PC titles.
• Chip manufacturers dependent on high-end GPUs and CPUs will be in trouble. (As Intel and AMD have already shown)
• The future of premium brands such as Alienware and Voodoo must be in some jeopardy.

Whereas historically, the PC has often been the high-end platform since it is not lumbered with the fixed hardware specs of a console, the rise of the netbook may well mark the beginning of a reversal as the PC ceases to be the hotshot kit and becomes the laggard. One logical implication of this is for publishers to strengthen their focus on casual games on the PC and leave high-end gaming entertainment to the consoles.

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