Taking Back the Market

How Apple Will Beat Sony and Nintendo in Handheld Gaming

Tim Nash - 2009.10.16

When Apple reports its financials on October 19, the numbers will include over 10 million iPhone OS devices (iPhones and iPod touches). The total installed base will be over 60 million - more units sold in 27 months than Sony's Playstation Portable (PSP) has since its launch at the end of 2004.

Over the next 12 months (Apple's Fiscal Year 2010), Apple should sell at least another 50 million, bringing the total much closer to that of the Nintendo DS and DSi (already over 100 million), and within 24 months, Apple's numbers will have overtaken the DS.

The billionth game will be downloaded from the App Store before the New Year, if Toni Sacconaghi's (Bernstein Research) upper estimate of 38% of all App Store downloads is correct and sales continue to increase as they have been. Even if the lower estimate of one third is correct, the billionth game download will be before the end of February 2010. Sony, as of February 2009, had 200 million software sales.

Sony's Respons: PSPGo

Sony's response, the PSPGo, was finally launched on October 1. It goes for $250, the same price as the first PSP. There will be the usual flurry of early sales, but what happens over the Christmas period will decide how fast the price drops. As the PSPGo lacks the proprietary UMD disc drive, it should be cheaper to manufacture than the PSP 3000, but with Apple rewriting the rules for games, Sony has to make sure it makes a profit from each PSP.

The PSPGo has already been successful in one way - it has made the 8 GB iTouch look inexpensive at $199. The PSP screen resolution is only 480 x 272 (the iTouch is 480 x 320), and games are sold online at full retail price - but there is no right to resell and there is no way for current users to transfer UMD games they already have to the new hardware.

Sony has also built in the older 802.11b standard for downloading, so it's slower than the iTouch and typically takes an hour for a good sized game. You can't do anything else while downloading, and if the signal is lost or cut off, you need to start over again. When the costly proprietary cables (not USB, like for the older PSPs) are added in, questions like why is Sony bothering come to mind. Sony is bundling one game and giving three game credits to ease the pain and try to jump-start the platform, but outside of Japan, where Sony still enjoys a good reputation, how many will buy?

Comparing Costs

Many PSP users prefer to push the buttons, to control the games that way. At least some of this is familiarity. They know this works for them and are good at it, so why change? Let's look at the button premium (App Store first).

Game           iTouch   Sony 
Madden          $9.99  $39.99
Scrabble        $4.99  $19.99
The Sims 3      $6.99  $14.99 (Sims 2)
Hero of Sparta  $1.99   $6.99
Fieldrunners    $2.99   $6.99
Sudoku          $4.99   $4.99

Sony's problem is that the PSPGo, even with four free premium games like Madden, costs more than the $199 iTouch plus buying four premium games, and the average PSP user only buys four titles, not all of them games.

Developer Costs

It costs more for developers, too. Sony and Nintendo charge for their Software Development Kits, whereas Apple's is free. $1,000 for the PSPGo version means that a small developer needs to be sure there is a market.

A game also has to be rated by the ESRB before Sony or Nintendo (or Microsoft for the Xbox 360) is willing to sell it in the US. There are similar rating programs in Europe and Japan. For a low cost game, the ESRB fee is $800; for a premium game, $2,500- and games in the App Store are rated by Apple and the developers.

For developers, it is cheaper to try out any new game on the iPhone and iPod Touch. If it is really successful, then they can port it to the other platforms.

Hard-core Gamers

For hard-core gamers, handhelds like the PSP and DSi are to fill in travel time. Real game time is on the Xbox 360, Playstation 3, or a PC.

As soon as iTouch first becomes the usual game developer strategy, will gamers wait for ports that are more expensive when the best they can usually hope for is that the controls are mapped across correctly and bonus material, such as extra levels, is rare? Especially when the ports sometimes aren't as good as the original games.

Kotaku on Hero of Sparta: "Simplistic controls, muddled graphics and abysmal sounds turn what was a fantastic iPhone game into a oddly disjointed Playstation Portable experience."

The Sega Solution

Sony and Nintendo have one large advantage over Apple: They make some great games themselves, and naturally these are kept as exclusives for their platforms. While these continue to sell in big enough numbers, the PSP and DSi platforms can keep going.

The time will come, though, as it did for Sega, when Sony and Nintendo can make more from selling games on other platforms than in keeping their platforms going.

Apple has been after a major slice of the games pie since the launch of the App Store featured Sega's Super Monkey Ball. It is now ready to take over the handheld games market. LEM

Further Reading

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Tim Nash is a Director of WattWenn which has a new approach to scheduling the production of TV and movies to make the most of budgets. The views in this article are his own and are prejudiced from spending more years working for computer companies than he cares to remember.

Tim lives with his wife, her website on the area ariege.com, two daughters, a cat, and a dog in the French Pyrenees. He lapsed for a while after the Apple II, but became a Mac fan when his wife introduced him to the Macintosh IIsi. If you find his articles helpful, please consider making a donation to his tip jar.

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