Journalist & editorial consultant

Is Mario standing on a burning platform?

In Consumer technology, Gadgets, Gaming, Uncategorised on August 11, 2011 at 5:46 am

In the latest sign of the Applecalypse, Japanese investors and analysts are urging Nintendo to do the unthinkable: make games starring its famous characters for mobile platforms and social media services rather than keeping them exclusive to its own hardware.

This comes as Nintendo struggles to create interest in its 3DS console in a market that appears to be doing a lot of its mobile gaming on tablets and smartphones. Apple in particular is turning the gaming industry inside-out the same way it did the smartphone and music markets, without this even being a major goal for the company.

3DS device sales have been so slow that Nintendo has been forced to apply price cuts of as much as 40% in some markets to move the hardware. Perhaps for the first time ever, Nintendo is swallowing a loss on each hardware unit it sells to get a new console into the market.

There are many reasons for the 3DS’s disappointing performance – a lack of interest in its 3D gimmick, a dearth of good games, a high launch price – but the competition from tablets and smartphones looms largest among them.

The biggest challenge for Nintendo lies in the way that iOS games are changing the economics of the gaming industry. In much the same way as the 20 cent arcade games of the past, iOS games are quick and dirty distractions that often cost a US dollar or less. iOS games also cost very little to make.

Should Nintendo take a leap of faith?

With the 3DS, retail games sell for $40 up and cost developers millions of dollars to make. Many casual consumers are happy enough to play Angry Birds or Cut The Rope in a waiting room or on a train rather than buying $40 for the latest Mario platformer and a couple of hundred dollars for the machine to play it on.

The market for a Mario or Zelda game made at great expense is a sliver of the size of the market for Angry Birds, which has been downloaded some 200 million times. Today, the next hit is as likely to come from three guys in Finland as it is from one of the major publishers with its marketing muscle and army of developers.

Nintendo’s reluctance to create software for other platforms is understandable. Uniquely among the current console makers, it was the only one that made a profit on each unit of hardware it sold from launch day. It probably doesn’t want to sell its games for $1 or even $5 a pop, either.

And Nintendo probably isn’t blind to the fact that Sonic creator Sega is a shadow of itself since it quit the hardware market to focus on making games. It faces a major challenge navigating this changing market, but it has reinvented itself more than once in its 120-year history. It may a find a way out.

But this is a battle that has ramifications for the gaming industry way beyond Nintendo’s stock price. As Tom Bissell puts it, we are seeing a contest between the gamey-game so popular on iOS devices and the big-budget game as cinematic experience or multiplayer sport.

At the moment, the game-as-game is winning out. The other console-makers and big games publishers will need to think about how they will respond. Many gaming industry veterans believe that the rise of tablets and smartphones spell doom not only for handheld consoles but for home consoles as well.

Phil Harrison, a former high-ranking Sony executive, goes as far as to say that Apple will completely dominate the games industry in 10 years’ time if present trends hold. Already publisher Electronic Arts (EA) reports that the iPad is its fastest growing platform.

Consoles once accounted for 80% of EA’s revenues – today they account for only 40%. And with the iPad, EA is able to knock out games every 90 days compared to the multi-year development cycle for big console game like Dead Space or Mass Effect.

Little wonder that EA is betting big on the casual market with moves like its acquisition of digital crack factory PopCap for more than $1.2 billion. Does this mean that the blockbuster game is doomed? Perhaps not, but its market will be smaller and more homogenous.

Casual games compete with the big-budget Triple AAA games like Call of Duty or Halo in the same way as YouTube videos compete with Hollywood blockbusters. They’re jostling for the consumer’s limited time and money, but both will find a market. The yearly dose of Halo or Call of Duty will probably be safe for a while, but expect to see far fewer riskier mid-tier titles such as Enslaved or Shadows of the Damned or even Bulletstorm, which have long been under threat from rising development costs.

The other possibility is that quality and cost of smartphone and tablet games will ramp up as competition becomes fiercer and mobile processing power grows. Something similar happened on the Xbox Live Arcade, which started out with cheap and nasty ports of games like Frogger and today hosts games with expensive production values. Examples are Shadow Complex and Lara Craft: Guardian of Light.

Perhaps we’re already seeing this happen with iOS titles like Epic’s Infinity Blade and Id Software’s Rage HD. After all, the market for $1 marble rolling games and physics puzzlers can’t be infinite, can it?

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