For years, handheld gaming has been popular amongst both casual and die-hard gamers. However, as the as the market for smartphones and tablets continues to rise, sales of handheld games are experiencing a decline. In an interview with Game Informer, Analyst Michael Pachter from Wedbush Securities tells why:
“What really happened was that about half the people who were buying DS were buying it to babysit their kids and have them play casual games, not because all 30 million who bought one every year played Zelda. They played Tetris. You can play Tetris on your Kindle now. Tablets and smartphones have cut into older casual gamers’ ability or desire to play on a dedicated handheld and, to some extent, they’ve cut into younger gamers’ likelihood of playing handhelds….My kids got phones at age nine – as did every single kid in their class. I made my kids wait until their 13th birthday to get smartphones, and I swear to God my kids are the last ones of all their friends to get iPhones. If you look at the domestic demographic of who bought handhelds, say it was about age 7-to-15 kids. Now that’s cut to age 13, because any casual gamers who are that age would rather have a smartphone and play Doodle Jump or Angry Birds because they are just as fun as Tetris on a DS and they are free.”
The decline in handheld gaming is significant enough that Nintendo lowered their sales projections for the 3DS. Pachter doesn’t see this as disconcerting, rather Nintendo is just being realistic.
“No, I think it’s realistic and we’re not talking about massively down – it’s a couple million. If you look at peak Nintendo DS sales, they were north of 25 million for three years in a row. They’ve steadily come down since. I don’t think it’s because the 3DS is an inferior product or priced too high, it’s just that the handheld annual market is now a 15 million annual market – and being split by Vita.”
This isn’t to say that video game fans have no desire for the 3DS. The difference is that now, it has to compete with smartphones, and many kids (and adults) have to choose between the two. But as long as there are devoted gamers, there will still be handhelds.
“The handhelds are going to always appeal to core gamers. Core gamers can be six or seven years old. Go look at Skylanders. It’s far from a casual game. There are tons of 8 and 9-year-old core gamers – look at the kids that play Minecraft. So, those kids are still going to want a 3DS, I believe that. But I promise you will not be able to find a nine-year-old alive in America who says they would rather have a 3DS than a smartphone. Kids who are hardcore gamers want both, but all kids would rather have a smartphone so they can text all their friends.”
With the growing popularity of low-cost games for mobile devices such as Angry Birds, Pachter believes Nintendo would benefit from branching out into the mobile market. A $5 price-tag on a game for a smartphone or tablet, devices that serve multiple functions, looks far more attractive than $40 for a game that is equally fun, and is only playable on a system that is strictly for gaming.
“They should take their old software – and I don’t mean their new software – [to mobile]. Some of the 500 games on the GBA could be easily ported to iOS and Android. Most of them are just run forward and jump controls schemes. Why not sell those games for $5 to $10 on iPhone and Android? When you think about half a billion Android and iOS phones and tablets out there right now and growing, what are the odds that every game Nintendo released would sell 5 million copies at 5 bucks? Pretty good. Let’s say they did 10 games and only did 50 million units at $5 – that’s $250 million more than they have now. And – oh by the way – it wipes out their financial loss. If they put 100 games on phones, and the average is $7 because some are at $5 and some are at $10 and they sell five million each of 100 games, we’re talking billions of dollars. I think they would make more from mobile than the rest of their operations combined.”
So if, according to Pachter, introducing their old software to the iPhone, Android, etc. could only be beneficial, why won’t Nintendo do it?
“I just don’t think they think about it that way. I think that their vision or mission is to sell hardware. They believe that their proprietary software exists solely to support sales of their proprietary hardware. First and foremost, they are a hardware company that makes great software. Apple is that way. They are a hardware company, but the iOS and interface is all software. If you ask anyone why they like the iPhone over a Samsung, they are going to say the interface. Apple thrives because its software supports its hardware. Just like Apple won’t support Adobe or license its operating system to other PC makers or HTC. Nintendo thinks it’s Apple. I get how consumers would think that’s the right strategy. And I have to say, if they were Apple, that would be the case. But I don’t think they are Apple, as their sales have proven.”
As a consumer, I could see where it would be nice to have games such as Dr. Mario or Metroid available on the iPhone. It would be a great way to introduce younger kids to gaming. At the same time, however, if their software doesn’t run as well on certain devices, it could easily varnish Nintendo’s reputation of producing quality games and equipment.