Sunday, November 27, 2011

Find: Is it Game Over for Nintendo DS and Sony PSP?

Portable players shrinking as percent market. Hmm, what about absolute terms?

Is it Game Over for Nintendo DS and Sony PSP?


Digital content distribution has disrupted several notable industries.  With the original iPod media player and iTunes Store, Apple changed the face of the music industry.  And the Internet, in particular, has played a role in commoditizing news.  All told, digital distribution of media has starkly impacted news, magazines, books, television, music, film and more.


Recently, no industry has been more impacted by digital distribution than video games.  Leading the disruption are iOS and Android devices, whose free and inexpensive games, distributed across a massive installed base of powerful and networked tablet and mobile phone form factors, have already disrupted billions of dollars of game revenue.  In this blog post, Flurry focuses on how mobile devices have severely altered the shape and flow of revenue in the multi-billion dollar portable game category.


Portable gaming, played primarily on Nintendo DS and Sony PSP devices, has been dominated by these two companies for over two decades.  In this model, at retail, consumers pay around $200 for the gaming device and up to $40 for popular game cartridges.  Because of the similar form factor, overlap in consumer base (especially younger players on iPod touch) and the casual nature of game content, Flurry combines iOS and Android devices with traditional portable devices to form the category.  With the inclusion of smartphone game revenue into the category, shifts taking place in market share become clearer.


iOS, Android, Nintendo DS, Sony PSP, Game Revenue


The chart displays the share of U.S. revenue generated for portable games from 2009 to 2011.  Note that we project November and December for 2011, based on their ratio to the first 10 months of the year, as observed in 2009 and 2010.  Starting on the left, for 2009, we calculate $2.7 billion in total U.S. portable game revenue.  For 2010 and 2011, we estimate $2.5 billion and $3.3 billion, respectively.


The most striking trend is that iOS and Android games have tripled their market share from roughly 20% in 2009 to nearly 60% in just two years.  Simultaneously, Nintendo, the once dominant player, has been crushed down to owning about one-third of market in 2011, from having controlled more than two-thirds in 2009.  Combined, iOS and Android game revenue delivered $500 million, $800 million and $1.9 billion over 2009, 2010 and 2011, respectively.


As reported by Flurry earlier this year, the freemium game model is revolutionizing and expanding revenue on mobile devices.   And just as smartphone game revenue has climbed aggressively, Nintendo DS and Sony PSP revenue has dropped precipitously.  Over the last three years, Nintendo and...

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