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Summary:

iPhone and iPod Touch games are a booming business in the App Store, but how do they stand up against the big daddies of the handheld game market? The Nintendo DS and Sony PSP boast huge install bases of about 70 million and 35 million, respectively, […]

topple

iPhone and iPod Touch games are a booming business in the App Store, but how do they stand up against the big daddies of the handheld game market?

The Nintendo DS and Sony PSP boast huge install bases of about 70 million and 35 million, respectively, and a robust game library featuring well-known, high-quality franchises; will they ever feel the competitive heat from Apple? According to Michael Pachter, managing director at Wedbush Morgan Securities and a top game industry analyst, that’s actually a fait accompli.

“iPod Touch game sales are already cutting into the handheld market, particularly at the low end,” Pachter told me by email. “The iPod Touch’s market share will continue to grow, I suppose to around 10 percent to 15 percent of all handheld game sales.” Pachter sees the Touch as a more direct competitor to the DS and PSP lines, “as prices come down and parents begin to view it as a substitute” for those handhelds. The iPhone, by contrast, is less of a threat, he argued, “as it requires a relatively expensive data service plan, which most parents are reluctant to fund for children under 18.”

For Pachter, the crucial challenge for the iPod Touch as a game platform is pricing. “The sticking point is whether we’ll see these games offered at $9.99 or at $29.99. If at the lower price, the developers/publishers would take a profit hit; if at the higher price, the popularity of the iPod Touch as a gaming device will suffer.” (Currently most of the top-selling App Store titles, even from major game publishers, sell for well under $10.)

At the moment, Pachter noted, Sony and Nintendo have access to better games, including exclusive first-party titles that will never show up in the App Store; this gives both companies a distinct competitive advantage over Apple: “Everyone who owns a DS or PSP is a potential game customer,” as he puts it, “while only a fraction of iPod Touch owners will buy expensive games.”

That said, Pachter still believes the iPod Touch’s expanding market and lower prices “will ultimately make a dent in the PSP and DS software markets.” The question is whether it’s supplementing the existing handheld market, or cannibalizing it.

“[M]y guess,” Pachter told me, “is that it’s a bit of both.”

Image: Topple, from ngmoco

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  1. annonymous_man Thursday, August 13, 2009

    Nuff said iPhone & iPod Touch sales and game sales may eat into device and software sales of games for Nintendo DS and Sony PSP. My question though is what about mobile games on cellular phones. Speaking for myself I have a Motorola RAZR phone with Verizon VCast Music and VCast Games. I have at least 8 games from VCast. I also happen to have 2 iPods. A click wheel based 5th generation video iPod (80GB)with at least 15-20 iPod Games bought from iTunes Store and an 8GB iPod Touch with a bunch of games from Apple’s App Store (some of which I had for the 5th gen video iPod but repurchased from App Store) as well as some internet radio streaming apps.

    I have ports of the original Sonic The Hedgehog game for the SEGA Genesis across four platforms I own (3 of which are mobile); Nintendo Wii (home video game console thanks to SEGA and Nintendo Wii Virtual Console), 5th gen video iPod (iPod Games section of iTunes Store thanks Apple and SEGA), iPhone App Store version on iPod Touch again thanks Apple and SEGA; and fourth for my Motorola RAZR VCast enabled phone thanks Verizon VCast Games service and SEGA. All games by the way on my phone I bought them as unlimited so there is no monthly subscription fee to play those games.

    I heard from a few articles Sonic has sold very well on mobile phones especially those with Verizon VCast, and the top VCast games other than Sonic are Bejeweled, Tetris, and a couple others which I can’t remember right now but Bejeweled and Tetris are in the top 5.

    I wonder if Nintendo has any plan or will have a plan in the long run to counteract mobile phone game sales ever whether they make their own phone, or make some of their earlier mobile games available also on carrier owned mobile game download storefronts etc.

    I would like to see the sales figures, market share and profitability of Verizon VCast games, Sprint games etc if they have any for Sprint Nextel phones, AT&T Wireless games etc compared to the other to know which carrier really is delivering better game sales, and compare/contrast that then to games from iPod Games section of iTunes Store and App Store game sales from Apple to Nintendo DS, and Sony PSP based games (including hardware sales and/or software sales of Nintendo DS, DS Lite, and DSi) to get an overview of the entire market share and profits in the mobile video game market for both cellular phones, portable media players and dedicated portable gaming systems.

  2. I must be getting too old for games. I have about a dozen on my iPhone that I never play. Only thing game related I do on the iPhone is check capsuleer for EVE online.

  3. annonymous_man:

    I can’t give you details for the cellphones games market although it’s safe to say that this market has been around for several years (especially in Nintendo’s home market, Japan), most big developers are catering to it, and it obviously hasn’t detracted Nintendo from focusing on their own products.

    For the Nintendo DS, PSP and the AppStore, figures are available:

    Nintendo DS: Nintendo is forecasting 180 million DS games sold this business year (including both 1st and 3rd party titles). That’s a market size of about $8 billion. The DS market trended down slightly over the last 2 years, as the platform matures. However, it still dwarfs just about any other competitor, past or present.

    Sony PSP: Sony does not have a forecast for PSP game sales in fiscal 2009 individually. Their forecast is 240 million games sold across their 3 platforms PS2, PS3, PSP. Over the last 12 months, 47 million PSP games were sold which puts the market size at roughly $2 billion or a quarter of Nintendo’s. PSP game sales have been seen as weak for several years.

    Apple AppStore: Apple reported about 500 million apps downloaded in each of the last 2 quarters. Download growth is not explosive anymore (as it was in 2008), but trending upwards, in line with Apple’s hardware sales. For the full year they may reach 2.5 or 3.0 billion downloads. That’s my estimate, based on what they’ve reported in the first half of the year, because Apple does not provide forecasts.

    Now the question is: How many of these downloaded apps are games and what’s the average price point, given that many apps are free?

    Games are generally said to be half of the AppStore’s downloads, or 1.25 to 1.5 billion for 2009 according to my estimate.

    The average price point of iPhone apps has been revealed by Apple only once AFAIK: In August 2008 Steve Jobs told the WSJ that the first 60 million downloads in July/August 2008 brought in $30 million in gross revenue, or $0.50 per download on average. Since then, a large number of price drops have been reported across Apple’s store, with literally only a handful of games being able to stay at the $9.99 price point for any amount of time, so it’s probably realistic to say that the average price point now is at $0.30 or lower.

    At 1.25 to 1.5 billion downloads for $0.30 or less each, the AppStore gaming market may reach a size of roughly $400 million this year—5 % of the Nintendo DS’ market or 20 % of the Sony PSP’s market.

    1. Thanks for the interesting statistics Tom Ross. While it is unfortunate there are no exact numbers to compare game sales for DS, iPhone/iPod Touch, PSP to cellular phone game sales the statistics comparing DS/iPhone/iPod Touch/PSP are good.

      The other question then would be what is the differences in market share and profits for iPod Games (for the click wheel 5th gen video iPod, the iPod Classic and iPod Nano with video to App Store games on Apple’s iPhone devices and iPod Touches) and how many iPod Touches have actually been sold?

      I bought my 5th gen video iPod back in 2006 and about 20 games for it back then before even the iPhone was introduced. When iPhone and iPod Touch came out I know I re-purchased some games from App Store (wonder how many people re-purchased iPod Games for click wheel for iPhone/iPod Touch from Apple’s App Store, or bought games for the first time on App Store — some games were never released for the click wheels others that were click wheel iPod Games were ported for iPhone/iPod Touch that is part of my question.

      Second part of question is as follows: Unlike my 5th gen video iPod my 8 GB iPod Touch I got for free with the purchase of a MacBook Pro at an education discount. How many people have actually bought iPod Touches versus getting them free? Even then my iTouch came with iPhone OS 2.2 software and I paid the $10.00 fee to upgrade to iPhone OS 3.0. I know most iPhone owners from stats in articles I read early on updated for free to iPhone OS 3.0 after the software update was released but iPod Touch owners not wanting to pay the $10.00 upgrade fee held off on the upgrade. I however, did upgrade to iPhone OS 3.0 and wonder now how many others would be running iPhone OS 3.0 software?

      How many have jailbroken iPhones or iPod Touches running jailbroken apps versus the legit apps on Apple’s App Store?

  4. All of these devices are competing for user’s time. There are only so many leisure hours in a day. Sure, hardcore gamers will make time for their preferred platform but for the rest of us, the convenience of an iPhone or Touch that is always in our pocket blows away dedicated game machines. Nintendo and Sony should be very worried.

  5. Partners in Grime Thursday, August 13, 2009

    An iPod touch is great for casual gaming when one only has a few minutes to play.

  6. Zune HD — конкурент iPod touch? Или нет? | alexmak.net Friday, August 14, 2009

    [...] Оригинал AKPC_IDS += "1835,"; [...]

  7. Apple accidentally hit the sweet spot of the problem that N-gage tried to solve: people already have a phone, and don’t want to lug around a DS too. But on other phone platforms the games were expensive and not very good; and even if you did find a diamond in the rough, you probably can’t keep playing ti if you upgrade your phone or switch carriers.

    The lack of instant game downloads for the DS and the huge and varied catalog on the iPhone doesn’t help Nintendo either.

  8. Hello

    I agree with you. I still have my DS and PSP. Just the source mainly talked about younger people.
    Although many of the people that play games are kids, there are still a really large amount of adults that play hand held games, simply because of portability.

  9. I’ve got a DS lite and enjoyed playing it for the old school Final Fantasy titles. It was also fun for some of the other varied games that Nintendo had to offer.

    I just purchased an ipod touch a couple of months ago and have purchased about 30 games thus far. For the price of 0.99 to 9.99.

    You know what? I may never buy a DS title again. While not all of the games are ‘up to snuff’, a majority of them are very well done. If you are a game developer writing a game and there is no ‘packaging’ costs except for a 30% fee (apple tax) and a Developer’s kit, you’d be all over it. If even one million people purchase your game, then you’ve made a cool $700K on a .99 cent title. Multiply that by 10 for a game such as Real racing and that’s 7 million bucks. There’s a reason why so many developers and big shops are jumping all over this.

    No packaging costs, small marketing costs and no fighting for shelf space. I get a quality game for 1/4 the price and free updated features as the game evolves. This is a win-win solution for everyone. Plus, the new DS and PSP have ‘app stores’ now. It seems like they smell the demise of their business model.

    Time will tell, but I believe Apple as struck gold and will nibble at the DSi and PSP for years to come. Sony should be very scared at this moment.

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