In Fierce Gaming Wars, Mobile Phones Have Ubiquity Advantage

Consoles and handhelds continue to offer strong revenue but can’t compete in sheer numbers.

In the face of a stagnant and increasingly mature market for gaming consoles and handhelds, game-capable mobile handsets possess the potential to point the space toward new areas of expansion, according to iSuppli Corp.

With their so-called ubiquity factor and ownership by large swathes of an electronics-enamored public, mobile phones equipped to play games and other forms of electronic entertainment vastly outnumber their rival dedicated gaming platforms. For 2010, factory units for game-capable mobile phones are forecasted to reach 1.27 billion, up a solid 11.4 percent from 1.14 billion last year.

In comparison, figures during the same period for consoles and handhelds are expected to be flat or down. Factory units for consoles will reach 52.3 million, up a marginal 0.2 percent from 52.2 million. Handheld devices will fare worse, with factory units down 2.5 percent from 39.9 million to 38.9 million this year.

The formidable lead enjoyed by cell phones capable of gaming will continue in the years to come with no hint of decline, iSuppli data show, and their near-universal presence bestows mobile gaming with the potential to become a viable threat, primarily to handheld gaming devices. And although gamers who prefer a better-quality gaming experience will always opt for either a console or handheld, the aggregate tallies for both platforms will wax and wane, subject to the vagaries of product development, consumer buying patterns and overall economic trends.

The great disparity in numbers between consoles and handheld devices on the one hand, and mobile phones on the other, bodes well for handsets in spurring the overall gaming market.

In the case of consoles and handhelds, growth has slowed in recent years, with products such as the PlayStation PS3 and PSP platforms from Sony Corp., Xbox 360 from Microsoft Corp., and DS or Wii platforms from Nintendo Corp. deemed to have reached a mature phase in their individual life cycles and to have attained market saturation. In addition, consumers have been reluctant to buy or upgrade to newer devices due to a number of factors, including the high price points for current offerings, the imminence of next-generation products in the pipeline for release and the prevailing economic uncertainty of the times.

In comparison, mobile handsets—especially smart phones such as Apple Inc.’s iPhone—continue to thrive and flourish. Handsets also enjoy the advantage of broad penetration: Not everyone owns a gaming console or handset, but cell phones can claim widespread use.

Dedicated Gaming Platforms Remain Strong, However
Despite the increasing hegemony of mobile handsets, consoles and handhelds continue to more than hold their ground in the gaming arena.

For one, instant name recognition exists among consumers of Nintendo, Sony and Microsoft—brands that can boast of strong gaming software revenue to accompany their mostly unassailable hardware sales.

Handhelds, in particular, compete more directly with mobile gaming. When comparing mobile gaming to handheld gaming software revenues, handheld gaming revenue makes up 67.1 percent of the market, while software revenue from mobile handsets accounts for less than half, at only 32.9 percent. These figures, iSuppli believes, prove that revenue remains untouchable from the dedicated gaming platforms.

And like gaming handhelds, consoles are putting up a good fight. The forthcoming release of motion-sensing play from Sony’s Move and Microsoft’s Kinect is anticipated to breathe new life into the console space, helping to cushion the anticipated declines into 2011 of overall current-generation consoles. Come late 2012 to 2013, iSuppli anticipates that the big three gaming OEMs will launch next-generation consoles, raising revenues and unit shipments into 2014, when the console market hits 59.9 million units.

Beyond pure gaming, consoles are also extending their sphere of influence, with the battle royal continuing between Sony’s PlayStation PS3 and Microsoft’s Xbox 360 to gain control of the digital living room. As more multimedia services become available online, consoles will evolve into true entertainment centers, allowing media streaming and other video or picture content to be delivered directly to supported devices like televisions and computers.

Such online functionalities will serve to expand revenue for the old gaming stalwarts—offsetting the advantage in sheer numbers enjoyed by their rivals in the mobile handset space, iSuppli believes. In addition, new revenue streams from paid downloadable content will continue to grow well into the future, helping consoles and handhelds maintain presence in a changing landscape. „