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.
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.
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.”
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.
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):
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
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.