Topic: The "war" between handheld gaming and smartphones

Can't they coexist?

Why does everyone (media analysts) think there is no place for handheld game systems anymore? I don't think of iOS/Android devices as direct competitors to handhelds, since they target different markets. That's like saying there is no market for motorcycles or bicycles since cars can fit more people and have 4 wheels.

This whole perception of a "war" between smartphones and handhelds is ridiculous. Look at all the different forms of transportation that are available: cars, boats, bicycles, motorcycles, etc. There is a huge overlap since everyone has different preferences. Smartphones won't "kill" handhelds, they can share the same market.

It's not a question that there is a niche for both products in the market. The question is "can a company make enough money out of handheld gaming, when smartphones are taking a large piece of the pie, for that company to be successful?"

Smartphones have taken a significant chunk out of the potential customer base for the 3DS and the Vita. That makes it hard for both Sony and Nintendo to hit their targets.

im sorry but I dont see smartphones doing much damage for long

Handhelds > Smartphones

Really? The signs are there that there is a market for full priced smartphone/ tablet games, actually. That suggests the market is there for good.

What do you base your analysis on?

I don't know anyone who has replaced their portable device(s) with a smartphone. The majority of customers that this actually effects are in the casual market and this generally does not account for a large profit from software sales, just hardware. Seeing as how Sony is in the red on their hardware, casual players who buy maybe 2 games a year will not make a huge difference. Until a touch screen interface becomes the preferable interface, gamers will still go with the Vita or 3DS. I know of a couple people who love gaming on their iPad, but that doesn't mean they don't wish for buttons or don't realize some games just don't translate well to a touch interface.

If anyone wishes to prove me wrong; go ahead. I couldn't be arsed to actually go searching for any such consumer studies even if they have been done and are readily available to the public.

what Ravage said casuals didnt buy much anyway so its not a huge loose, I see Nintendo having a bright future.

The casual market is important to Sony and Nintendo for a different reason: licensing revenue and third party support. It's not about who plays what game, or if casuals play many games at all.

Consider the following numbers (all hypothetical, but serve the point I'm making):

Pre-iPhone a Nintendo handheld shifts say, 50 million units. A Sony handheld shifts 10 million units. Some of those 50 million units are casual players that only buy one or two games, but that's irrelevant. Nintendo can still claim it has sold 50 million units.

Nintendo charges X in licensing. Sony charges Y, and Y by necessity is less than X - Sony hasn't got the install base.
Nintendo attracts A third party developers and publishers to its console. Sony attracts B - B is less than A because there's less potential customers for the product, and therefore a third party developer's potential revenues is smaller. Indies, however, flock to both, but for different reasons - Nintendo has the market presence, Sony has (in theory) a more dedicated audience, and more room for a niche to play.

Then incomes the iPhone:

Suddenly Nintendo shifts just 20 million units of a console. Sony has a lower install base to lose and roughly drops down to about 7.5 million - bigger install bases tend to mean bigger falls.

So Nintendo can no longer charge X for licensing. The new model looks more like 2Y. Fewer Nintendo consoles also means fewer developers show interest in the console, and the developer base starts to look more like B or possibly 2B if Nintendo works hard to keep third parties. And, as the 100 million iPhone install base and non-existent licensing fees is very attractive to indie developers; Nintendo loses those completely.

Sony's licensing model probably doesn't change much. It remains at roughly Y because Sony realises it's a niche product. It's also less likely to lose developer support, as those Sony partners were already operating in niche markets, and comfortable with that.

In short - smartphones have had a massive disruptive effect on Nintendo. It's not about selling consoles and games to casuals, it's about removing the raw numbers from Nintendo's side, which is something that with the Game Boy and DS brands it has come to rely on.

^Applauds

Very nicely explained, but how are you able to make certain that these losses in Nintendo handheld sales are directly translated to a surge in smart phone sales?

Elimination and Angry Birds

Let me explain: There's not much else happening in the world that could explain a drop in Nintendo hardware sales. The global economy hasn't worsened to any significant degree since the days of the Wii and DS, there hasn't been any new rival dedicated handheld consoles released, etc etc. So the market itself, having not crashed, can't be to blame.

So let's consider the popularity of Angry Birds. Clearly there's an appetite amongst smart phone owners for video games (call them casuals if you like, they're still people playing games). Assuming Angry Birds (and Flight Control, and Fruit Ninja etc) are sufficient, then they no longer need that Nintendo DS/ 3DS and Brain Training.

Then there's where the investments of major publishers are going. EA has invested heavily in mobile phone gaming. Namco Bandai has development teams dedicated to phones. 2K games has teams working on bringing its properties across, and the CEO has mused that full prices iOS games are a future liklihood. Zynga is the world's most valuable publisher now entirely on the back of Facebook and its mobile phone games.

Everything points in the direction of smart phone/ tablet gaming being a dominant investment opportunity moving forwards. Whether you consider the iPhone/ iPad a direct competitor to Nintendo or not is irrelevant. Publishers are throwing money at iPad and iPhone games, dedicating teams to making games for the platform, and otherwise relocating resources that might have once gone to Nintendo's consoles. That's the problem, from Nintendo's perspective. Publishers don't have unlimited resources, and right now they're not that interested in dedicated handheld consoles.

This would change if consumers started buying Nintendo consoles again (hense the price cut), but indications are that the majority of consumers are actually content with the iPhone. For every one who likes buttons and such there are 5 that are happy with Angry Birds. So Nintendo goes from selling 50 million consoles, to 10 million.

I would argue that some sales (or a majority) are lost in translation. Perhaps consumers aren't buying Nintendo handhelds for other reasons, may it be lack of games, high price point, etc. This has yet to be seen, but it is certainly the approach Nintendo itself is taking, what with the recent price cut announcement. Although I agree some won't see the need for a Nintendo handheld when they have their Angry Birds and what have you, but I believe that to an extent, smartphones have almost reached full market saturation in that nearly everyone has one. The consumer potential and previous scale of sales numbers may still be present; maybe potential buyers have resorted to their smartphone for games until Nintendo provides true incentive (games.) A dive in sales of Nintendo handhelds could just as well be a result of Nintendo's mistakes and lack of incentive as it could be smartphones directly stealing sales. For example, I am not purchasing smartphones or smartphone games nor am I purchasing a 3DS or its games at the moment. I cannot currently afford a 3DS, but I am not buying and playing on a smartphone instead.

As far as Nintendo's concerned, I think it would benefit them to target the same smartphone users as a different market, and try to convince them (and everyone else) that if you truly want a great gaming experience, you will need to shell out for a 3DS and its expensive games. Of course, that is a very difficult job, and these so-called "casual" gamers won't be in need of a deeper or more complete experience.. unless Nintendo is able to convince them that they are.

smartphones have almost reached full market saturation in that nearly everyone has one.

Not in the slightest. There's still emerging economies to consider (Brazil and Africa and the like has a huge smartphone demand), and the smartphone industry is one based on aggressive product refreshes that people do buy into. There are still more people to sell smart phones to and with that, more numbers to entice developers and publishers with.

As far as Nintendo's concerned, I think it would benefit them to target the same smartphone users as a different market, and try to convince them (and everyone else) that if you truly want a great gaming experience, you will need to shell out for a 3DS and its expensive games.

That's the exact line they're taking, and it's not really working.

As for the rest, it's all possible, yes. But as I said before, none of this dismisses the disruptive effect the smart phones are having on the market. The iPhone has created a massive sink of money that Nintendo and Sony and Microsoft are all going without now; the third party publishers love it, but there's nothing the incumbent vendors can do about it, really. The iOS App Store is, simply, a more attractive business opportunity.

Yes, I suppose I was subconsciously thinking about the US, and perhaps even more specifically at my immediate city and my observations.

As far as Nintendo's concerned, I think it would benefit them to target the same smartphone users as a different market, and try to convince them (and everyone else) that if you truly want a great gaming experience, you will need to shell out for a 3DS and its expensive games.

That's the exact line they're taking, and it's not really working.

I think that has yet to be seen accurately.

As for the rest, it's all possible, yes. But as I said before, none of this dismisses the disruptive effect the smart phones are having on the market. The iPhone has created a massive sink of money that Nintendo and Sony and Microsoft are all going without now; the third party publishers love it, but there's nothing the incumbent vendors can do about it, really. The iOS App Store is, simply, a more attractive business opportunity.

I guess the question that needs to be asked is will these third party publishers and developers continue to profit from these small scale, cheap games. I can honestly envision the average smartphone gamer, being "casual" and not very loyal or avid, losing interest in these games, as there is only so much you can do as a developer and sell games so cheaply. Even if there are many more new ideas and games, these "causal" gamers may still very well lose interest. So either the games will be up-scaled and compete more directly with Nintendo or the sales will simply drop steadily.

Of course, this is all made using the assumption that there will not be many more new smartphone gamers, which is probably wrong to a moderate degree, and that the small amount of new gamers are as "casual" and fickle as the proposed existing ones. But my point is clear.

I guess the question that needs to be asked is will these third party publishers and developers continue to profit from these small scale, cheap games. I can honestly envision the average smartphone gamer, being "casual" and not very loyal or avid, losing interest in these games, as there is only so much you can do as a developer and sell games so cheaply. Even if there are many more new ideas and games, these "causal" gamers may still very well lose interest. So either the games will be up-scaled and compete more directly with Nintendo or the sales will simply drop steadily.

Of course, this is all made using the assumption that there will not be many more new smartphone gamers, which is probably wrong to a moderate degree, and that the small amount of new gamers are as "casual" and fickle as the proposed existing ones. But my point is clear.

There's always been an interest in casual phone games - remember Snake and the Nokia? Now, back in the day the big publishers weren't interested because those phones were closed, and extremely limited. The App store has opened the market right up, and the smart phone install base dwarfs the Nintendo DS, let alone the 3DS.

There will always be the "next big thing" for that market. Right now it's Angry Birds. Before that it was Flight Control. Next it will be Appleplooza the Monkey Adventure. Is it profitable? EA thinks so, and I reckon they're a savvy business. Zynga things so and I don't think anyone should try and deny those guys can make money from this stuff.

What will happen in the iPad/ smart phone space is it will grow to accomodate two markets - there will be a place for premium ($20-$30) games. There already is. Final Fantasy III sold bucketloads at $20 Australian. The casual market will also continue to be serviced by the next big thing.

Between the two of them, Sony and Nintendo will lose out to a degree (perhaps lesser, likely greater) because people buy the iPad/ iPhone for functions other than gaming, and keep refreshing them as new and better features are added in. If they can get their gaming fix as an extra, than so much the better.

@WaltzElf

Please stop with your "doom and gloom" logic. The two markets (handheld and smartphone) can co-exist. One will not destroy the other. Smartphones have more practical uses besides playing games, they have just evolved into entertainment devices. Games are not their primary function.

Casual gamers don't care about which game system wins or loses, they buy whatever suits their tastes. The gaming industry was built on gamers, the ones that consistently buy software and hardware year after year. Without us, there would be no gaming industry. There would be no reason for the industry to evolve. Casual gamers are just a small part of it.

You obviously did not read anything Waltz posted.
_{also, omg wall of text}

I object. I was using logic, yes, because that's what I do. The "doom and gloom" bit is entirely of your own making. I never said Nintendo was "doomed" or any such thing. I simply explained why the smartphones are having an impact on Nintendo's hardware sales and support - from both a consumer and third party developer/ publisher point of view.

This is what I got to say about this war
[youtube:2fxVeAVl2I8]

Please, no logic in the forums. We're not equipped to handle it here. We appreciate your cooperation.