Ronnie05's Blog

Nintendo DS and Sony PSP loosing relevance and life on Portable Gaming!

Posted in Gaming by Manas Ganguly on November 9, 2011

Digital content distribution has disrupted several notable industries. In that context, no industry has been more impacted by digital distribution than the video games. Leading the disruption are iOS and Android devices, whose free and inexpensive games, distributed across a massive installed base of powerful and networked tablet and mobile phone form factors, have already disrupted billions of dollars of game revenue.

Portable gaming, has been dominated by Nintendo and Sony for over two decades. In this model, at retail, consumers pay around $200 for the gaming device and up to $40 for popular game cartridges. Because of the similar form factor, overlap in consumer base (especially younger players on iPod touch) and the casual nature of game content, iOS and Android devices have redefined the category. With the inclusion of smartphone revenue into the category, shifts taking place in market share become clearer.

The most striking trend is that iOS and Android games have tripled their market share from roughly 20% in 2009 to nearly 60% in just two years. Simultaneously, Nintendo, the once dominant player, has been crushed down to owning about one-third of market in 2011, from having controlled more than two-thirds in 2009. Combined, iOS and Android game revenue delivered $500 million, $800 million and $1.9 billion over 2009, 2010 and 2011, respectively.

Within the portable category, an abundance of digitally distributed free and $0.99 games, available on hardware that is both comparably priced and more powerful than traditional portable game devices, better appeals to many consumers. As a result, the days of paying $25, or more, for a cartridge at a retail store may soon end. Further, the installed base of iOS and Android devices has not only reached critical mass, but also continues to grow at unprecedented rates. In their latest public statements regarding installed base, Apple and Google reported a total of 250 million iOS devices and 190 million Android devices activated, respectively.

Due in part to its demise in the portable game category, Nintendo is facing its first fiscal year loss since the company began reporting profits in 1981. Combined with slumping Wii sales, Nintendo is indeed struggling. Equally concerning for Nintendo is that the battle for video game dominance is entering the living room, with entries by both Apple and Google into the TV category. Ostensibly, this new class of hardware will create a new platform upon which the digital distribution model of apps will be overlaid. Now, in addition to tablet form-factor competition, the console game industry, which currently pits Microsoft, Sony and Nintendo against each other, will additionally face competition from Apple and Google TV initiatives. Beyond 2011, if Nintendo continues to face financial hardship, it may be forced to consider difficult choices such as divesting its hardware business and distributing its content, for the first time, across non-proprietary platforms.

In February this year, Nokia’s CEO Stephen Elop mentioned about the burning platform in a internal memo to Nokia employees. Nintendo has a very similar problem at hand. A burning platform and hard decisions for its future – Innovate or Die!

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