Nintendo President Satoru Iwata reiterated Thursday that his company is not interested in making software for iPads or iPhones. He told Japanese news site Nikkei (via The Loop) that in fact, such a plan “is absolutely not under consideration,” because in doing so, “Nintendo would cease to be Nintendo.”

Yet preserving what it means to be Nintendo may be giving up a key position in the future of gaming. “Collectively, iPad gamers are showing slightly decreased involvement with gaming on home consoles, mobile phones, and Nintendo handheld consoles,” said Interpret analyst Jason Preston in a press release. “These facts imply that iPad game developers and publishers can definitely reach a new audience on the iPad.”

The iPad’s appeal extends not only to traditional console gamers, but also to a growing portion of people new to digital gaming, says Interpret. People who use their iPads for gaming are increasingly older, with 40 percent falling into the 35-to-65 age group category during its second quarter 2011 survey vs. just 31 percent from its first survey period last year. Many more women are playing, too. Interpret found that the share of female iPad gamers was up to 48 percent during its most recent poll, vs. just 40 percent in 2010.

iPad gamers who are also console gamers also represents a shrinking percentage of the overall group.

It’s understandable sentiment that Iwata would want to preserve Nintendo as-is, as he’s been Nintendo’s president since 2002 and saw it through the flush years of the Wii and DS, both of which were massive successes for the Japanese-based game-maker. Nintendo has also been in the gaming hardware business since 1977, so it has a long history of making both systems and games.

But there are a number of sound business reasons why Nintendo should consider making software for Apple, including flagging sales of its own hardware, a shaky future for new and upcoming devices like the 3DS and Wii U, and the successful example of other companies who’ve followed the same path in the past, like one-time rival Sega.

Nintendo wants a comeback, and I’d like to see it get one, but with the release of 3DS peripherals that correct obvious oversights in the original design, and reports that the Wii U is facing serious technical problems, Iwata’s outright refusal to even consider iOS development seems like yet another backwards step.

Photo courtesy of Flickr user Vincent Diamante

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Where Nintendo is right now

The past few years haven’t been overly kind to Nintendo. Even leaving aside the disastrous launch of the 3DS, which led the company to institute an emergency price cut of nearly a third in the U.S. for the handheld gaming device within six months of its introduction, Nintendo has seen its stock prices steadily decline as the early successes of the Wii and DS gradually wore off between about 2007 and 2008. Share prices are now sitting at a six-year low.

The 3DS has not succeeded in jump-starting Nintendo's flagging mobile efforts.

In its quarterly earnings report in late July, Nintendo also posted its first quarterly operating loss ever. It reported a net loss of around $328 million U.S., and an operating loss of $485 million, down from operating profit of $299 million measured year over year.

Nintendo game sales are down, but that’s just reflective of a general trend. Video game sales in general seem to be slumping lately, and fell for the second straight month in June. Nintendo still has some franchises that are doing well (the 3DS re-release Legend of Zelda: Ocarina of Time saw 283,000 sales in June, despite being an old game that most fans bought during its first g0-around), but milking legacy brands isn’t exactly the best way to attract new customers.

According to Wedbush Securities (via the Los Angeles Times), the DS is bleeding market share, and the 3DS isn’t picking up the slack; that’s where the iPhone, iPad and iPod touch come in.

The state of iPhone, iPad and iPod touch gaming

Claiming that smartphone gaming isn’t having an impact on Nintendo’s business, as Iwata maintains, is just plain burying your head in the sand. While traditional gaining sales see steady declines, tablet gaming is up, as is smartphone gaming, led by the iPhone. Nielsen found  that iPhone gamers spend twice as much time gaming on their devices compared to other platforms in a study last month, and app research firm Distimo found that on average, iOS users download 5.1 million games per day. While only 600,000 of those are paid, that’s still an amazing volume for a single day’s worth of business, and lots of those remaining 4.5 million are still taking in other revenues from advertising and in-app purchases.

Analysts estimate that smartphones are currently taking one out of every three dollars spent by consumers on portable gaming, and the problem for gaming-specific platforms is only expected to get worse. The iPhone and the iPad iterate much faster than do gaming consoles and handhelds, with a new model coming out approximately every year. Better hardware and software means more for developers to work with, and more potential for unique game design that catches consumer imagination, as did Angry Birds, for example.

Not uncharted territory

A screen from a recent EA iPhone release, Shift 2 Unleashed.

Nintendo wouldn’t be the first major game publisher to make the jump to iOS. It has the distinction of also being a hardware maker, but it shouldn’t let that detail become a noose around its neck. The company would do better to focus on leveraging its success on the software side in the new and thriving iOS ecosystem, the way companies like EA have managed to do.

EA Mobile’s revenue has been climbing steadily since the introduction of the iOS App Store. Revenue was up 12 percent in 2010 compared to 2009, and jumped again 10 percent during its first quarter of 2011, versus the same period a year ago. An increasing chunk of that growth can be attributed to iOS, as revenue from PSP and the DS fell by 42 percent and 27 percent respectively during the same time frame. iOS revenue for EA Mobile, by contrast, increased an impressive 100 percent during the quarter ending in May, as compared to a year ago.

The key takeaway is this: Mobile game publishers are hedging their losses with traditional handhelds and consoles by investing heavily in smartphone platforms, and iOS is delivering the highest return.

Follow the example of other gaming hardware icons

Will the 3DS or the Wii U be Nintendo's Dreamcast?

Nintendo wouldn’t be the first gaming company to stop making hardware and turn its attention entirely to software if it did change its focus to developing for Apple. Sega made the same move back in 2001, based in part on the same kind of mistake that’s causing Nintendo’s headaches today. Sega created the Dreamcast, an ambitious console that necessitated high sales targets that ended up being unreachable. The 3DS is similar to the Dreamcast in that regard, with one key difference: People loved (and still love) the Dreamcast.

Nintendo also has more reasons to embrace software development for other platforms than Sega did at the time. For one, its characters and franchises are stronger and more widely recognized, with far fewer disappointing titles to dilute the brand. And second, the question of whether or not Nintendo properties can survive and succeed on iOS isn’t really a question; it’s almost a given, considering how well even brands tangentially associated with Nintendo, like EA and Square Enix, have done on the platform.

I’ve loved Nintendo’s hardware since I got my first NES back in 1991. And I’ve owned every Nintendo console or handheld released since, with the exception of the Virtual Boy. But the only way the things I love most about Nintendo, which are its games, will survive and thrive, is by embracing the shift in gaming that the rise of mobile smart devices represents. Let’s hope Iwata, or whoever succeeds him if it comes to that, can come to grips with that.

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The OnLive Player app can be used with OnLive’s streaming gaming service, which handles all the heavy lifting for graphics-intensive games on remote servers, and beams the action over an active broadband connection to your device. OnLive has already released a Viewer app to preview its iPad service, but the fully interactive playable version arrives this fall, the company announced at E3.

The key to the OnLive Player app’s appeal lies in its versatility. It allows you to use the tablet as both screen and touch / motion controller, just like you do for most native iPad games, or as a standalone controller for games displayed on an external source, or as a screen for use with a new wireless universal gamepad.

Thanks to the iPad 2′s ability to output its display via the Apple Digital AV Adapter, and even over AirPlay when iOS 5 arrives this fall, it could act as both portable and home gaming console all in one convenient device with the Player app arrives. Not to mention the app will be available for the iPhone and iPod touch, as well as Android handsets and tablets, too. If OnLive or another partner built a case/controller combo for those device and targeted top-tier mobile games developers, an iPhone running OnLive could compete with the likes of Sony’s new PlayStation Vita  (formerly known as the NGP), especially if we get updated hardware in the fall.

Nintendo and Sony are both addressing the threat posed by versatile tablet and smartphone devices by integrating hallmarks of that hardware into its next-gen devices: touchscreens, cellular data connections and two-screen media viewing are all on the docket. But unlike traditional gaming companies, OnLive is free to make use of the tech consumers are already using, instead of trying to reinvent the wheel and sell them a brand new device that looks and feels a lot like the ones they already have. Of course, OnLive has to deal with the rising costs of bandwidth, so we’ll have to see how that drama continues to play out before declaring it a winner.

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Two-screen gaming has a history that predates Apple’s iPad, and Nintendo proved that it works for portable gaming with the DS, which launched in 2004 and has been successful ever since, but the iPad is the one that made it make sense for TV gaming. Ever since Big Bucket Software used the iPad and the iPhone to create a working beta of The Incident running on one and controlled by the other, the potential for Apple to become a force in living room gaming seemed limited only by developer creativity. More recently, Real Racing HD 2 expanded on that concept with a true two-screen gaming experience for the iPad.

Nintendo Wii U extracts the two-screen experience from the model used by Real Racing HD 2 and discards most of the rest. The Wii U controller can’t act independent of the Wii U console, but it can handle gaming visuals entirely on its own screen, and it appears to support stylus input for functions beyond gaming, like drawing.

Making two-screen gaming the entire focus of Nintendo’s next-gen console is a very smart move at this point, since it’s happening before the concept takes off in a big way with iOS devices. It should work out well for Nintendo, but it could be even better for Apple device owners in the long run, if the Wii U concept inspires iOS developers to take two-screen gaming further.

Of course, gaming isn’t the only thing iPad users do in front of their TV. Television viewers have been distracting themselves with laptops and mobile phones for years, and the iPad was lends itself to be the ideal second screen device. Nielsen said in May that 70 percent of all tablet owners use their devices while watching TV. And last year, a study found that 86 percent of all mobile users access the Internet while watching TV.

Nintendo also added some media sharing features that were clearly inspired by efforts to use the iPad as a second-screen device. Wii U users will be able to flick photos and videos that they find online towards the TV to watch them on the big screen, something Yahoo demonstrated at this year’s CES, and a key feature of Apple’s AirPlay technology. And the handheld controller will feature a front-facing camera to give users a chance to video chat while watching TV — a feature that will sound familiar to any iPad user as well.

Nintendo obviously concentrated on gaming during the introduction of the Wii U, but we shouldn’t be too surprised if the new controller was being utilized for other kinds of second-screen activity like Twitter and Facebook that has so far been the domain of the iPad as well.

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The reason? As game developer Olly Farshi so aptly put it when we were discussing the 3DS’ merits, iOS is a platform, and the 3DS is a toy. Toys are something we’re more likely to get bored with, but that doesn’t mean they don’t have their place. It may seem like a dismissive way to characterize a technically impressive new device that successfully brings a 3-D experience to the palm of your hand, but it’s exactly how prospective customers will think about the two when weighing a purchase decision.

That doesn’t mean Nintendo will lose out in every case. Some users are genuinely looking for a toy, not a platform. A parent, for example, might not want her children to have access (even restricted access) to a robust app ecosystem limited only by the decisions of the developers who program for it (and the policies guiding Apple’s app review process). That parent may also be reluctant to hand over an expensive and still quite fragile piece of electronic equipment to a child, which is what the iPhone and iPad are, despite offering competitive price points for their respective markets. Even the iPod touch, while more affordable than the 3DS depending on your storage option, can’t really be described as a “toy” with regard to its construction or design.

Nintendo promises apps, Netflix support and other additional features for the 3DS that could make it more like a platform in the future, but that doesn’t mean it’ll really become one. Nintendo of America President Reggie Fils-Aime made that clear when he recently went on record saying his company isn’t interested in working with amateur developers. It’s these devs that made iOS the market-changing platform that it has become, and inspired a legion of copycats.

Does that mean Nintendo isn’t “getting it?” Maybe, but even if it was, it wouldn’t change the fact that iOS has profoundly altered the gaming market, and Nintendo will benefit most from respecting those changes instead of trying to struggle against them. The introduction of 3D to a handheld console was a good start, as it clearly positions the 3DS in the realm of “fun.” No one’s going to want to run project reporting or invoicing apps on a screen that lets figures leap out at them.

The iPad 2 brings a lot of exciting new potential as an Apple gaming machine, thanks to its ability to output to a connected display in full 1080p HD. One title at least is already working to make this happen. But the iPad (and other iOS devices) are everything to everyone. They represent an evolution of the computing model that may replace a gaming device (among other things) for some users, but not for all, just like home computers never occluded the console gaming market. Nintendo may ultimately have to accept that Apple is better at reaching non-traditional gamers than it could ever be, but that doesn’t mean it’s curtains for the gaming company.

Is the 3DS an iPhone or iPad competitor? No, and Nintendo is generally doing a good job of not treating it as such (although promises of apps tend to confuse things). Categories are merely shifting, and there’s bound to be some jockeying for position, but in the end, both platforms and toys will be able to comfortably coexist.

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In 2008, Apple’s iPhone OS accounted for only one percent of the overall gaming market, compared to 20 percent for other portable games, and 79 percent for console. 2009 saw a definite swing towards portable gaming overall, with Apple alone reaping about half of the benefit of that shift.

Apple’s overall share of video game software sales climbed to five percent in 2009, which represents an impressive 500 percent growth rate for the year. The general portable market, which seems to include not only the Nintendo DS and PSP, but also other mobile gaming platforms like cellular devices, grew by five percentage points as well, taking 24 percent of the market in 2009. The home console market, by comparison, dropped to just 71 percent. The numbers seem to indicate a growing portable market, of which Apple is currently taking the lion’s share.

According to Flurry Analytics’ estimates, using information from the NPD group, which details gaming revenue, the market overall took in $11 billion in 2008, and had a lightly less lucrative 2009, taking in only $9.9 billion. That means Apple’s take grew from $115 million in 2008 to somewhere around $500 million in 2009. With the introduction of the iPad in 2010, that number stands grow at an even faster rate as a whole new market segment is opened up to App Store gaming.

Zooming in on how the iPhone is doing relative to its two strongest competitors in portable gaming, the Nintendo DS and the PlayStation Portable, we see an even more dramatic picture of tremendous growth. Where the iPhone accounted for only five percent of the revenue share of the three platforms in 2008, in 2009 it took 19 percent. That means that it surpassed the PSP, which fell from 20 percent to 11 percent market share year over year. The DS stayed strong at 70 percent in 2009, but that still represents a fall of 5 percentage points from 2008.

The PSP is in big trouble, but it also looks like Nintendo may only be doing better because it had such a hefty head start to begin with. Recently, Apple announced that its next generation portable console, the Nintendo 3DS, is set for release in the not-too-distant future, so that could help its prospects. The PSP, on the other hand, had a very disappointing year with the release of the PSP Go, which wasn’t very well received, and no plans have been announced about the device’s next iteration as of yet.

Apple’s iPhone platform, on the other hand, is set to make some major leaps forward this year. There’s the very concrete and tangible benefit the iPad will have when it comes out early next month, compared to Nintendo’s vague plans regarding a new device somewhere on the horizon. Then there’s the near-certainty that Apple will be releasing a new iPhone in late Spring/early Summer, which should bring at the very least better processor power and graphics rendering for more impressive and ambitious games.

Therein lies Apple’s main advantage, besides its appeal to casual gamers: new hardware every 12 months, at least. The iPhone, iPod touch, and presumably the iPad, too, all get annual refreshes at the very least. And those refreshes often mean more muscle under the hood, which translates to more for game developers to work with. Significant performance updates to Sony’s and Nintendo’s platforms are few and far between.

The iPhone platform is still struggling to find purchase with core gamers, but I think the iPad, especially with its support for Bluetooth keyboards, might finally make significant inroads with that crowd. Watch for 2010 to be the year Apple dominates portable gaming.

I didn’t get to it fast enough. Nescaline, as the app was called, not only allowed you to play some built-in homebrew games, which probably would’ve been fine all on its own, but provided a way to download additional ROMs remotely. In effect, you could import any copyright-violating old-school NES ROM that you could find on the web. Such an ability was bound to get the app pulled, and pulled it has been.

While it lasted, it sold for $6.99 and boasted many features like “multitouch” control, full-screen mode, tap-to-shoot light gun emulation, save-state writing and retrieval — even support for Game Genie codes.

While the feature list may sound fairly impressive, user reviews from people who did manage to get their hands on the game were less than stellar, though not entirely negative. Commenter TokyoDisco at Pocket Gamer had this to say:

I spent far too long trying to add my own roms though. I know where to get them and everything, but I’m obviously entering the URL in wrong.

The five included roms are a bit rubbish to tell you the truth. The controls can be pretty unresponsive and the audio is jerky. Portrait and landscape modes are a nice touch.

If you’re still interested in Nescaline, I wouldn’t hold your breath waiting for a reprieve from the App Store reviewers, like the one recently given to a Commodore 64 emulator for the iPhone platform. In fact, it was probably just the fault of someone asleep at the switch that it managed to make it in to begin with at all. Shouldn’t be too hard to get it up and running on a jailbroken device, though, or to use one of the other emulators available for those devices.

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If you go and do something like found Electronic Arts, which then goes on to be one of the dominant forces in video games worldwide, people tend to take notice of things you say. Yesterday in an interview with Venture Beat’s Dean Takahashi, Trip Hawkins, EA founder and current Digital Chocolate executive, said that Nintendo and Sony are probably “freaking out” over the rampant success of the iPhone as a gaming platform.

The threat of the iPhone to Sony and Nintendo, and their PSP and DS(i) respectively, is not the number or quality of games available for the platform, but rather the value proposition it represents from a business standpoint. According to Hawkins:

The iPhone is by far our most effective platform. We make as much money with these games on one device as we do putting a game on 100 different cell phone platforms. Between the iPod touch and the iPhone, I think the platform is freaking out Sony and Nintendo.

So it comes down to a question of investment vs. return, as does any sound business decision, gaming industry or not. If Apple can tip the scales sufficiently in their favor, the repercussions for the gaming industry could be immense. It could mean smaller dev teams, a quicker turnaround and or/development cycle, and less focus on branding and franchises (casual games succeed based on mechanics, not mascots), all of which could eventually affect not only mobile gaming, but the home console industry as well.

I’m not sure I like where this is going. Yes, I like playing Bejeweled 2 on my iPhone, and I’ve been known to enjoy a number of other games as well, but I just started playing GTA: Chinatown Wars on my DSi, and it reminded just how much catching up the iPhone has to do when it comes to gaming. The iPhone definitely offers a better gaming experience than any phone I’ve ever owned, but for real gaming, nothing beats physical control keys and buttons. I can’t even express the difference in words, but if you’re at all a gamer, you probably know what I’m talking about.

I’m hoping developers and studios don’t lose sight of this with all those dollar signs in their eyes. By all means, continue to develop for the iPhone, and do the most with what the platform offers, but don’t turn to it exclusively. Casual gaming is great, but for it to become the primary focus of the industry would be like all musicians turning their efforts to country because it sells best. I pray neither of these things ever happens.

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It’s a device that originated while most of today’s tech generation were just learning to walk, and it took the world by storm.

Of course I’m talking about Nintendo’s Gameboy. The nice monochromatic display, the flat gray casing, and who would forget the monolithic size of the device… but all this aside, the Gameboy completed us. Today the iPod touch has grown into a device synonymous with personal entertainment, productivity, and practicality. However the iPod touch has a few extra features that set it a bit above the Gameboy competition.

Back in the day it was a child’s dream to have a Gameboy, whether it was being used in the home, on the road for those family trips, or as a means of playing Tetris against your buddies at recess. It was an incredible device for its time.

When I was eight my Gameboy was my pride and joy, there wasn’t much else. It is sad to say but I feel the same about my iPod touch. Some would argue that they are totally different devices and thus incomparable. In retrospect however, the Gameboy changed the portable market just as the iPod touch and iPhone have done.

The Gameboy set the stages for portable gaming, they were among the first mass produced portable gaming consoles in color, later they allowed people to play against their friends wirelessly, now with the DSi releasing next year, you can take photos and browse the Internet. Given the iPod and Gameboy families are fundamentally different, it is still safe to assume that the Gameboy and iPod families have certainly started sharing the same side of the street.

The Gameboy is still highly regarded as a gaming system and this will hinder its sales among older more adult crowds simply because the Gameboy or DS is still regarded as a Gaming device that has a built in Calendar, Browser, and touch screen sensitivity. However when a shopper purchases an iPod touch or iPhone they are thinking that this is a device that can play music, browse the Internet, and it can also play games.

The portable gaming market has long been in need of an overhaul if they are looking to compete with the iPhone. One of the primary reasons for this is the iPhone’s untethered existence. Unlike the leading portable gaming consoles, there is no need for cartridges, a charger, or even money (aside from the cost of the device). In all practicality it wouldn’t be all the difficult to actually own an iPod touch or iPhone without a computer, since you can buy and download directly to the device. This feature is key in developing future technologies for portable gaming, and because of this fact I believe the next generation of portable gaming is going to adopt many similar features as to those of the iPod touch and iPhone

The iPhone has laid the groundwork for the next generation of portable gaming, and as a result the lines between the cell phone market’s “mobile gaming” and true portable gaming are starting to blur.

So in conclusion how do you think the iPod touch and iPhone have changed the portable gaming market, or do you think they are two separate entities that should not be compared?

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First, Nintendo has already sold 73 million units since 2004 (that is an average of 18.25 million per year). They sell about 350,000 per week. The numbers have been pretty solid for the last two years.

Second, Mac gaming. Macs have historically been woefully inadequate for gaming (except for Oregon Trail, that game rocked!). This may all change with the iPhone, and I personally hope that it does. Apple does have some pretty good games for their current iPods, though. Those games are certainly not killer apps.

Let me put it this way, people buy a DS for the games. In order for Apple to be a player in this arena, people need to buy an iPhone or iPod Touch for the games, otherwise, it will not be worth it for developers to create games for this platform.

[Pic via iPhone/DS Band]

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