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Iwata throws down at GDC, but does Nintendo really need to be worried about the new market?

Over the past few weeks, we’ve seen some words exchanged between Nintendo and mobile developers. It shouldn’t come as much of a surprise; Nintendo is feeling a bit threatened by the new gaming market that has sprung up underneath its feet. Dominating the space since the Gameboy was released over two decades ago, Nintendo has had little or extremely weak competition. With a cell phone in almost everyone’s pocket, the mobile market is growing in popularity and viability with each passing day. Given the extremely low price of games (many are free), Nintendo’s recently released 3DS could be threatened by this competing software – especially after its owners have experienced a $5-$10 price hike from the previous generation. The question is this: does the quickly growing mobile market pose a threat to Nintendo?

As of today, I conjecture that it does not. While the market is expanding at a rapid pace, it is expanding to a completely blue ocean, much like Nintendo’s own Wii system. While Nintendo managed to capture the first place position this generation amongst the big three home consoles, its meteoric rise from last place last generation didn’t manage to affect the second place contender, Microsoft, in the least.

The original Xbox sold around 24 million systems worldwide and as of January of this year, Microsoft reported that the Xbox 360 sold twice that amount. Selling over 50 million systems, the core gaming demographic still reliably bought a system on which to play “AAA” titles. Featuring a similar $10 price increase, the Xbox 360 has enjoyed an attach rate of 9 games compared to its 7 game attach rate from last generation. Additionally, the company has managed a 60% attach rate to its paid Live service, up 50% from last generation’s 10%. This doesn’t even take into account what gamers have spent on the XBLA download service or on DLC components to augment their retail game experiences.

Clearly the Wii has managed to attract a new breed of gamer that normally wouldn't like to play. This is the same type of gamer who will be sated by the more disposable experiences found on the mobile platform. Like the Wii, the mobile platforms can boast all they want about phenomenal sales, but that’s not necessarily going to attract the attention of larger scale games that the 3DS will likely have. If anything, Nintendo should be more concerned about their eShop, as that market will be threatened more directly by this new mobile boom.

While the average core gamer may purchase games on their phone, at least speaking from my experience, these merely augment my normal gaming tendencies. They help fill the gap when I’m out and about and don’t have one of my portable systems on hand. This is not to say that I wouldn’t consider sitting down and investing a reasonable amount of time on a mobile game, but at no point would I desire replacing my handheld gaming system with my phone.

Even if the mobile market were to grow to include major titles of real substance, playing on my phone still limits my experience. I use my phone to manage a lot of my life, including appointments, making calls, corresponding to emails, amongst other things. I wouldn’t even consider sacrificing a large part of my battery to play games during the day because it would impede on my more critical phone activities. Furthermore, though the hardware in my phone far outstrips the hardware available in my 3DS (processer, RAM, and GPU), the 3DS is clearly functionally superior as a gaming machine.

Of course, as the platform expands with many phone applications available at very low prices, the mobile platform may eventually challenge the pricing model of handheld games. I think we can all agree that the $40 standard is beginning to push the boundaries of affordability. More pressure from lower priced Android and iOS games will likely force the hand of Nintendo and Sony to offer their software at the same prices featured last generation. There are many indications that gamers are willing to pay for quality, but at some point the increased prices may result in a lower attach rate due to the perception that handheld experiences are still more disposable than their console counterparts.

In summary, while Iwata is being a good president and concerning himself with the competition, some of this rhetoric at GDC is off base. While mobile platforms are expanding, they are likely to function as their own corner of the gaming market, much like browser-based games do right now. Though the platform has the potential to develop some major experiences, they aren’t likely to affect Nintendo’s 3DS.