A few years ago, mobile gaming used to be dominated by two companies: Nintendo and Sony. Nintendo had its seemingly unstoppable juggernaut of its Nintendo DS handheld, which in turn built on the company’s Game Boy empire. Sony, as always, aimed at the high end with its PlayStation Portable, and while the platform never ignited the way Nintendo’s did, it still garnered fans for the quality of its game play and (occasionally) for its media capabilities.
The money was good: consumers were accustomed to paying in the neighborhood of $200 every few years for a mobile gaming device, and around $40 retail for individual game titles.
However, these days Nintendo and Sony are finding themselves reduced to also-rans amongst the onslaught of Android and iOS devices: smartphones, portable media players, and tablets. These devices have most of the essential capabilities of portable gaming devices — touch screens, motion sensors, accelerometers, and fast graphics — coupled with messaging, Internet access, and an explosion in widely available games and content. Android and iOS users don’t need to go to a store to browse titles; they can browse and download games anywhere they can get Wi-Fi — or, in some cases, 3G or 4G mobile broadband. They also function as phones, contact managers, video entertainment centers, and even legitimate productivity tools. Just like most people don’t carry around separate cameras and media players anymore, most don’t carry around gaming devices either.
Can Sony and Nintendo survive in a portable gaming world dominated by smartphones and tablets?
How bad is it?
Pretty bad. A new analysis from Flurry Analytics paints a grim revenue picture for Sony and Nintendo compared to the combined market power of Android and iOS. According to Flurry (which bases its analysis on figures from market research firm NPD), in 2009 Sony and Nintendo’s portable gaming platforms reaped 81 percent of the software revenue in the portable gaming market. In 2011, Flurry estimates that will drop to 42 percent, with Android and iOS (combined) accounting for the remaining 58 percent of portable gaming software sales.
Admittedly, the market for portable games has grown in that time, meaning that not all of the gains in iOS and Android came from Nintendo and Sony. Flurry estimates the industry grew from about $2.7 billion in 2009 to $3.3 billion in 2011. But that means the portable gaming software revenue collected by Sony and Nintendo dropped from almost $1.9 billion in 2009 to as low as $1.39 billion this year. That’s a net decline in raw revenue of over 25 percent in the space of two years. It’s also important to remember that money doesn’t all go to Nintendo and Sony — it’s also split amongst third-party game publishers for both platforms.
What about units? The picture is even more frightening. Despite a years-long head start, the raw unit sales of both the Nintendo DS platform and Sony PSP have both been surpassed by Android and iOS devices, and right now the total number of portable gaming devices ever sold by Nintendo and Sony adds up to less than 60 percent of the number of iOS and Android devices sold so far. And if sales figures are any indication, the gap is only going to widen:
** Includes Sony PSP and PSPgo
*** Estimates primarily from data published by Gartner and NPD; no consistent data for Q3 2011 yet
**** Includes iPhone and iPad; omits iPod touch
It should be noted that the figures used here for Android and iOS sales are somewhat fuzzy. There is no authoritative source for overall sales of Android devices. Instead, figures are collated from reported sales by individual manufacturers (like Samsung, HTC, Motorola, LG, and others) and may reflect units shipped rather than sold. The figures for recent quarters attempt to work in estimates for the number of Android tablets sold to consumers worldwide; however, earlier figures primarily reflect Android smartphone sales and likely omit Android-based media players running versions of Android before 3.0 (Honeycomb) and non-smartphone Android devices. Similarly, while iOS sales figures include solid numbers for iPhone and iPad sales, they do not include sales of the iPod Touch. While the iPod Touch accounts for a significant amount of Apple’s overall iPod sales, Apple has never consistently broken out iPod touch sales from overall iPod sales, and I wasn’t able to find any consistent quarterly breakdown of sales.
The upshot: the figures in these charts definitely under-represent iOS unit sales, and potentially under-represent Android unit sales.
Even so, the picture for Sony and Nintendo over the last four quarters is troubling:
This is, of course, an apples-to-oranges comparison. While it’s reasonable to assume nearly everyone who buys a portable gaming device is interested in gaming, the same cannot be said of Android and iOS devices. Android and iOS users may just want a phone, mobile Internet access, a way to stay on Facebook all day every day, or a way to carry around their photo and music libraries. Many users don’t play games at all — not even Angry Birds.
But clearly Sony and Nintendo have their work cut out for them. For Android and iOS users, games are plentiful, easily available, and cheap. It’s not unusual for iOS and Android games to be free (perhaps supported by in-game advertising), but it is unusual for a game to cost more than $9.99. Most are $1.99 or less. Although many of them won’t offer the depth and repeatability of a well-designed portable game, they don’t have to. For the same $39.99 someone might spend for a typical title for a Nintendo or Sony handheld, they can buy perhaps a dozen games for their Android or iOS device.
What are Sony and Nintendo doing?
Neither Sony nor Nintendo are exactly sitting on their hands while mobile operating systems run away with the portable gaming market. However, it’s not clear either company has come up with a strategy that will preserve its existing platform.
Both Sony and Nintendo are famously insular about their gaming businesses — just ask anybody who wanted to run Linux or homebrew on their PS3s. However, Sony has just launched a private beta of a software development kit (SDK) for what it’s terming the PlayStation Suite. Although its geared at the enabling developers to create titles for the upcoming PlayStation Vita, the SDK also aims to support “PlayStation Certified” products. For now, that includes Sony Ericsson’s Xperia Play phone and Sony’s in talks with other Android device makers about offering PlayStation Suite on more devices. However, it’s not yet clear whether PlayStation Suite titles will fill the needs of serious gamers, or even provide good enough performance for everyday titles. Although developers can make their own cames in C# (and host their development on Windows XP or Windows 7), the games run in a virtual machine on Android devices, with the accompanying performance and battery consumption issues. However, PlayStation Suite devices will be able to play some PSOne games — although it’s not clear how will those will adapt to touchscreen devices.
Meanwhile, Nintendo seems to be sticking to its guns, doubling down on its Nintendo 3DS handheld and touting forthcoming titles. Despite an announcement that the company would develop a Pokemon game for iOS and Android (called Pokemon Say Tap?), Nintendo has never tapped into its lucrative franchises like Mario, Zelda, Donkey Kong, and Brain Age for what it views as competing platforms. In Nintendo’s view, the exclusive availability of its game franchises on Nintendo hardware drive sales. Nintendo was recently forced to drop the price of the its 3DS handheld to spur sales, and the tactic seems to have earned some short-term success. Add to that a holiday game lineup including Mario Land 3DS, Mario Kart 7, Zelda: Ocarina of Time, Devil Survivor Overclocked, Kid Icarus, Dead or Alive, and Street Fighter 4 and Nintendo might be able to breathe some life back into its portable gaming business.
The long term
Serious gamers will always point out that, with rare exceptions, smartphone and tablet games aren’t going to compete with well-designed titles developed for gaming-specific devices. Smartphones and tablets are designed to be general purpose tools; portable gaming devices are designed for game play, and they’re almost always going to do it better.
However, it’s clear that a large (and growing) portion of the consumer marketplace is satisfied with general purpose smartphones and tablets—and while they aren’t all using them for gaming, enough of them are that portable gaming platforms are seeing both their unit sales decline and their software revenue drop significantly. If that trend continues, third-party game developers will be forced to follow the money. Unfortunately for portable gaming, that’s towards smartphones and tablets.