Choose Your Region

January 22 2015 | By: Bradon
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It’s often tossed around that “video games are now bigger than Hollywood,” but even that fails to capture how prominent the gaming industry has become in recent years. When Grand Theft Auto V was released on PlayStation 3 and Xbox 360 in late 2013, sales reached $800 million in just the first 24 hours. In comparison, Avatar (the highest grossing film of all time) made $77 million in its entire opening weekend.

In computer gaming, “e-sports” are gaining legitimacy as a competitive sport, and 32 million people tuned in to watch the 2013 League of Legends Championship battle (more viewers than the season 5 premiere of The Walking Dead). Yes, more people watched other people playing video games than the most popular show in the history of cable television.

Yet, despite record-breaking sales and surging popularity, a shift is occurring. Sales for this generation of dedicated gaming consoles is expected to be lower than last generation’s, for the first time ever. The reason? Some would argue that smartphone gaming is at least partially to blame, chipping away at console sales and stealing market share. In 2014 alone, mobile gaming revenue surpassed a staggering $21 billion globally, and some very important players are taking notice.

Worldwide Console Sales

Nintendo’s Response

It’s nothing new; way back in 2010, Nintendo of America President Reggie Fils-Aime cited smartphones as one of Nintendo’s biggest competitors, and mobile gaming has gained a whole lot of popularity since then. With a large portion of Nintendo’s revenues coming from dedicated portable gaming platforms, it’s no surprise that smartphone gaming makes Nintendo execs worried. 

Nintendo
 

Recently, a user on Neogaf stumbled across a US patent filed by Nintendo concerning the emulation of older Nintendo video games on various platforms (including smartphones). For now, Nintendo’s intentions with this patent filing are unclear at best. Various third-party emulators are already available on Google Play, most notably My Boy! (Game Boy Advance emulator) and SuperLegacy16 (Super Nintendo emulator).  But, Nintendo has been pretty upfront with the fact that they really, really don’t like the smartphone emulator trend:

“The introduction of emulators created to play illegally copied Nintendo software represents the greatest threat to date to the intellectual property rights of video game developers. As is the case with any business or industry, when its products become available for free, the revenue stream supporting that industry is threatened. Such emulators have the potential to significantly damage a worldwide entertainment software industry which generates over $15 billion annually, and tens of thousands of jobs.”

 reggieshrug

Nintendo of America President Reggie Fils-Aime

With this new patent, it’s possible that Nintendo is planning on releasing a legitimate platform to distribute Nintendo classics on the app stores, grabbing their own little piece of the Android/iOS gaming pie. This seems at least somewhat unlikely, however, as Nintendo is notorious for keeping their software tightly tied to their own hardware (an ideology that has served them well, selling over 100 million Wii consoles over the past decade). On the other hand, Nintendo could be fighting for patent rights in an attempt to stamp out third-party emulators on smartphones all together. 

Only time will tell exactly what Nintendo is doing here, but one thing is clear: the smartphone gaming market is significant enough to drag a console-gaming juggernaut right out of their comfort zone with a very uncharacteristic, aggressive response. So, what does this mean for the dedicated gaming console market?

Console Vs. Smartphone

A quick google search will reveal just how divided the smartphone gaming debate has become. Mobile games like Angry Birds and Fruit Ninja have become household names and launched entire brands of products and toys. But, for every fan, there’s a hater (which I have long argued should be the official slogan for the internet). The arguments go something like this: 

Critics hold that mobile gaming has been downright awful for the gaming industry. Smartphone games are too casual and only exist to sell in-app purchases, and mobile developers care far more about encouraging purchases than creating a great gaming experience. On the other hand, many gamers aren’t quite so critical. Many legitimate arguments hold that mobile gaming is directly responsible for growing the gaming audience, helping the industry as a whole.

Mobile games
 

Personally, I think the framing of the argument is broken. Console/PC gaming and mobile gaming aren’t two industries fighting for the other’s destruction. Mobile gaming won’t be the end console gaming, just like YouTube won’t be the end of Hollywood movies. For the foreseeable future, anyway, there’s a cozy place for both.

But, there is some truth to both arguments. First, “freemium games”—games that are seemingly free but require real-money purchases to not be terrible—can be incredibly annoying. Kim Kardashian’s “free” app was projected to rake in over $200 million by the end of 2014, in what is probably the best (and most soul-crushing) example of the money that can be made in the freemium world. It’s become so commonplace that Google recently began offering upwards of $19 million in refunds for in-app purchases accidentally made by children, as part of a settlement with the FTC. Juniper Research estimates that only 6% of mobile games will be paid for at the time of download by 2019—the rest will be freemium games or supported by ads. The trend is real (enough to get the ol’ South Park treatment):

freemium-not-really
 

Because it’s so lucrative, the freemium model has been spilling back over into console gaming. A Nintendo investor recently tried to encourage the company to take a “freemium” route and was quoted as saying: “just think of paying 99 cents just to get Mario to jump a little higher.” With that, millions of 80’s and 90’s kids died a little bit inside. 

However, I don’t believe that mobile gaming is directly responsible for the “freemium” model. The model is simply effective at generating revenue in an industry where advanced technology is skyrocketing development costs. Games now often take massive teams and several years to develop, and recouping those costs is an art in and of itself. Grand Theft Auto V may have broken sales records, but it also took a staggering $265 million to develop and market. Gaming was heading down this unfortunate “freemium” or “DLC” path with or without the surge of mobile gaming popularity.

I also don’t buy into the argument that mobile games are inherently “casual” or “lazy.” Many innovative, artistic, and downright impressive smartphone games can be found by those who care to find them. Mobile gaming has also created an amazing platform for indie developers who have a very hard (if not impossible) time breaking into the console market. One glance at the past Android Humble Bundles makes it pretty apparent that fascinating things are happening on the Android gaming platform, though they aren’t always found at the top of Googles Play’s charts. 

Finally, smartphone games have indeed made overall gaming more mainstream, statistically speaking. For example, the number of female gamers aged 50 and older—probably the least common demographic in gaming—increased by 32% from 2012 to 2013 alone, no doubt due to the approachability of mobile gaming. Some would argue that this is just another result of the “casualization” of gaming, but bringing new audiences to the market is likely a positive shift for the industry as a whole.

Let’s Be Friends

OnePlusGaming
 

Are smartphones taking a portion of the gaming market share away from consoles? Yes, to some extent. Are smartphones directly responsible for expanding the gaming market (and increasing gaming revenues as a whole)? Yes, definitely. So, rather than blaming mobile gaming for lost market share, console makers should be focusing on how to capture all of these new gamers that smartphones have created. And, hopefully, that’s exactly what Nintendo is doing by filing this patent.  If they’re simply attempting a ban on emulators without a legitimate, official, and legal replacement, it would represent console manufacturers once again missing the entire point (and the entire boat).

While I doubt I’ll squash the “console vs. smartphone” beef here, both sides of the argument should be paying eager attention to what Nintendo is doing with this patent filing. The consequences will likely be very far-reaching, affecting both the console and mobile gaming industries.

Regardless of where you stand on the issue, I think we can all agree on one thing: being able to play Super Mario Kart in the bathroom is probably man’s single greatest achievement.

Don’t take that away from us.

  • Kyriacos Sakkas

    Something that is creeping up on everybody from behind are the android TV boxes. Might be something for one plus to look into too. You get your simple mobile gaming on the big screen, you have the emulators getting better all the time, and it is not impossible to envision some of the less graphicaly intensive of the current games being ported over.

  • *Looks for second meanings in

    “Regardless of where you stand on the issue, I think we can all agree on one thing: being able to play Super Mario Kart in the bathroom is probably man’s single greatest achievement. Don’t take that away from us.” Don’t worry Nintendo solved that problem, it is called the Wii U game pad, or 3DS if your bathroom is out of range.

  • TeeShark

    I think the mobile gaming industry employs shady business tactics to increase in-app purchases. Such as gambling, where you buy stars or whatever and use those to spin a wheel or hit a lucky box for better equipment. I have also seen where people lose their equipment due to confusing upgrades, combinations, power-ups. Com2Us GolfStars, a great mobile game but when players are spending anywhere from $500-$3000 (yes I have a online friend who spent $2800 on this game) to get the best stuff… Something needs to be done! US Feds shut down access to the online casinos cash tables for US players. How is this any different? For $500 you can buy console and 2 games. For that much money you should have everything the game offers and a lifetime subscription to any updates.
    PS. Would also like to see console controllers integrated more with mobile gaming. Lol, what?

  • CaibreGreyblade

    As a great fan of handhelds i have to say this my 3ds and vita are staying mostly at home now while my smartphone is with me all day. And with pocket bt controller I can perfectly emulate everything up too ps2 level. In Full HD. With HDMI output as an option. Convenience is operative word here. I, as a gamer, will buy handheld consoles, their bigger sisters or gaming computers but casual, mass user will not. No when alternative is already in his or hers pocket.
    Now, were is my current gen Xperia play phone..

  • Prasad

    One thing this guys can do, Same as Nokia n-gage & n-gage QD, Start manufacturing phones which can be used as phones & handheld gaming devices.

  • wow.. nice informations.. many thanks..

  • naman chaturvedi

    Interesting

  • Daniel

    This articles information seems to be based on some pretty arbitrary categories and doesn’t address the rise of PC gaming due to gaming services like Steam and GOG.

  • suresh

    I think watching games being played online is going big. At least my kids seem to be doing this when they are on their smartphones and not able to play league of legends on their computers or on something else on their console. But they are able to stay in touch with the games going on…The Chinese company YY seems to be capitalising on this type of thing

    So social gaming is the phenomenon, the devices used to do it are very fluid…

  • Teqnix

    Smartphones have already integrated a lot of technology and made other devices unnecessary. I think the console is next.

    • Protoss X

      Remember when they said the internet would replace TV? i still see billions of casual idiot americans watching TV / watch sports on tv / and there is some shit you can’t replace you can only run along side it basically an steal some time from it etc.

      Gamers will always want the big screen tv, and want first person shooter with a controller an big fucking screen tv or monitor and pwning noobs its going nowhere teqnix and you got no clue.

  • This articles information seems to be based on some pretty arbitrary categories and doesn’t address the rise of PC gaming due to gaming services like Steam http://www.senorama.com/

  • wow.. nice informations.. many thanks.. http://www.senorama.com/religion/tidjane/

  • So social gaming is the phenomenon, the devices used to do it are very fluid… http://www.senorama.com

  • This articles information seems to be based on some pretty arbitrary categories and doesn’t address the rise of PC gaming due to gaming services like Steam and GOG. http://www.senorama.com/emploi/offre-demploi-senegal

  • Nadeem Uddin

    I like how the PS4 was not included in the graph to skew the results in favour of the title of this article.

  • Bradley Ryan

    Great article and assessment. I think what we’re seeing is less a competition between console gaming vs. mobile as much as it is about a market landscape with multiple competing forms of entertainment. The commodity in question is not games; rather, it is consumer attention, and multiple forms of entertainment or competing for it.

    Back in the day, when you wanted to see a movie, you either went to the theater or waited for it to come out at Blockbuster (or your video rental retailer of choice). If you wanted to watch a TV show, you had better tune in during the broadcast or use your VCR to record it.

    With Netflix, on-demand, YouTube, etc., an ever-increasing catalog of compelling content is literally available in the palm of your hands. So that movie that you would have gone to see in the theater 10 years ago is now competing with that robust catalog of entertainment that you can watch whenever and wherever you want. It’s not that you don’t want to see the movie that was just released in theaters; rather, it’s just that there are now more alternatives to going to the theater than ever before.

    Same thing with games. Consoles, PCs, and handhelds used to be the only way to consume video games. But now we all carry gaming devices in our pockets whether we intend to or not. And time that people used to spend playing console games might now be split between Netflix, YouTube, and casual gaming–all done from mobile devices. And now, instead of getting their young kids a console like the Wii or Xbox, parents can get them a multi-purpose iPad, which will satisfy much of their gaming desires.

    So, in a sense, all these forms of entertainment are cannibalizing each other, but of course, the brunt of the impact is going to be felt by the oldest, most established industries like movies/theaters and console gaming. But as the article accurately points out, the goal for these industries should be to offer unique, *compelling* experiences beyond what other forms of entertainment can offer. So while console sales might be declining, mobile gaming is exposing an unprecedented number of people to gaming, a large chunk of whom will become enthusiasts and want to graduate to more advanced gaming–so long as the value proposition is high enough.

  • Kurt De Clercq

    It’s all about revenue. Look at what Niantic did recently. Ingress is getting so big that they left the safe Google umbrella and are doing it now on their own. That is a real smartphone game out in the streets of every city or town in the world.

  • Maave

    Portable consoles have to compete for pocket space. In a battle of phone or DS, the phone wins every time because I need it for communication. Before I had a phone, hell yeah carry my GBA, DS, etc 24/7, but now I just don’t have room. The Xperia Play is pretty sweet – it has hardware controls and decent games – but smartphone specs are advancing farrr to fast for a dedicated console+phone to keep pace. I hope somebody takes another shot at smartphone hardware controls, maybe partnering with a big name phone manufacturer and releasing controller cases for that mfg’s flagship phone each year.

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