Console vendors Nintendo, Sony Corp. and Microsoft Corp.face an uphill slog to get consumers to pay hundreds of dollars for hardware they never knew they'd missed, said Shanghai-based Spicy Horse Games founder American McGee. With the U.S. industry mired in a two-year slump, console makers are looking to China's $10 billion market for a boost that may never come.

“You are basically trying to take an elephant to a Ferrari race,” said McGee, who set up Spicy Horse in 2006 to make games for PlayStation and Xbox before moving to online and mobile in 2011. “This is a market where free-to-play online and mobile has already won. These guys will be coming to the fight when the fight is already over.”

Not only that: piracy, censorship and regulatory costs will add to their challenges. Consoles like Nintendo's Wii U, released in November, and the upcoming Sony PlayStation 4 and Microsoft Xbox One, were banned by China in 2000. That let online titles dominate, like market-leader Tencent's “League of Legends,” featuring Vilemaw.

Eoin Treacy's view The world of gaming, which generates more revenue than Hollywood annually, is going through a major transformation where online and app-based games are rapidly competing for market share with consoles. The relative performance of various shares tells the story of the winners and losers better than any news story.

Hong Kong listed Tencent Holdings generated 52% of its revenue from online gaming in 2012. The share has accelerated higher over the last few weeks and the first clear downward dynamic is likely to signal the beginning of a process of mean reversion towards its 200-day MA?

In local currency terms, Nintendo broke out of an almost two-year base in July and will need to find support in the region of the 200-day MA during the current pullback to lend credence to the medium-term bullish outlook. One might reasonably argue that since Nintendo has a negligible presence in online and app-based gaming, that it is not appropriate to compare it to Tencent.

Gungho Online Entertainment is one of a new breed of Japanese game producers. The share broke out of a more than three-year base last September and surged to a May peak near ¥160000. It has since given up more than half the advance and completely unwound the overextension relative to the 200-day MA. A clear upward dynamic will be required to check the current downward bias. (Also see Comment of the Day on May 15th).

Activision Blizzard dominates the global console game market and this represented 45% of revenue in 2012. PC sales jumped from 7 to 25% of revenue in 2012 while online and apps accounted for 23%. The share formed a first step above the three base between February and July. It surged higher on news of management's purchase of Vivendi's holding but is now susceptible to some consolidation of that gain.

Mobility and Online represented approximately 14% of EA's revenue last year. Following a steep decline, the share posted an upside weekly key reversal a year ago and has held a progression of higher reaction lows since. While somewhat overextended at present, a sustained move below the 200-day MA would be required to question medium-term upside potential.