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Why the iPhone is changing the games market

By on February 26, 2009
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This article originally appeared on

The iPhone is changing the games market. But which one? To some it is the saviour of the mobile gaming business, which is struggled for years against consumer apathy, operators who don’t understand (or like) content and a fragmented device landscape which led to developers having to create hundreds, sometimes even thousands of SKUs.

Why the iPhone is changing the games market

To others, it is a handheld gaming platform that competes squarely with the DS and the PSP, despite having no buttons and less processing power.

So which is it?

The answer is both, and it is the unique combination of mobile and handheld, together with the simple and intuitive AppStore, that heralds the future of portable gaming.

Let’s start with some numbers.

There are only 13 million iPhone users (or were at the end of Q3 08), compared with 1.1 billion users of other handsets. Yet Pelago CEO Jeff Holden argued in BusinessWeek that these 13 million users had downloaded as much software as the other billion-odd users combined. So from a developer’s point of view, there is a single platform out there with a beneficial revenue share (30% Apple, 70% developer), a successful marketplace (the AppStore) and no need for a gazillion SKUs that outsells all the others combined.

“Why would I ever build for anything but the iPhone?” Holden is quoted as saying.

The comparison with the handheld market is also interesting. Apple is on track (again, according to BusinessWeek) to sell 40 million units in its first year. Nintendo sold 42 million units of the DS during the 18 months from January 2007 to June 2008. (I’m not sure if these are US or global figures.)

Bart Decrem, CEO of Tapulous, has further figures: Tapulous  has 5 million users on the iPhone, 100,000 have purchased their most successful game Tap Tap Revenge and he adds that the iPhone has three times more games available than the DS, 5x more than the PSP.

And before people argue that the iPhone is a phone and should not be spoken of in the same breath as the Sony or Nintendo platforms, Apple has just released the iPod Touch, which is essentially an iPhone without a phone.

The iPod Touch is rapidly becoming the portable media player of choice amongst a younger audience, exactly the place that Sony wanted to be with the PSP. But the iPod doesn’t have expensive processors or a unique format disc like the UMD; it is an easy-to-use device that offers consumers their music, podcasts, short-form video and accessible games on the move and in my opinion, will be the final nail in the PSP’s coffin.

There are many reasons put forward why Apple has been able to take hold of and shake up the portable market so quickly (and by portable, I mean both mobile and handheld):

  • Design: the iPhone embodies all of Apple’s characteristic cool, and its rounded corners mean that it is hardly noticeable in your pocket.
  • Innovation: the touch screen and web browser navigation has the genius of simplicity.
  • Brand: It’s Apple, and everything Steve Jobs touches turns to gold. (This one is strictly for the fanboys).

But as Sony clearly understands, it is content that drives hardware sales (Akio Morita bought Columbia Pictures after the failure of Sony’s Betamax to beat VHS to ensure that his hardware formats would never again fail due to a lack of content support).

All games platforms have risen or fallen based on the strength of their software base. Only this time, it is not the content per se, but the ease of getting it that makes a difference.

The AppStore is Apple’s true revolution. Taking the learnings from iTunes and applying them to a mobile, proprietary, always-on device is Apple’s master stroke.

The biggest cloud on the horizon for the iPhone is its very popularity. While some people are very successful as iPhone developers, and the stories of a one-man band making $21,000 a day with iShoot make a fabulous PR message, the reality is that the market is getting crowded.

Tap Tap Revenge’s success began in the middle of last year, when there were only a tenth the number of applications available on the AppStore as there are now, when every developer-and-his-dog is considering jumping on the bandwagon. And having 3x more software than the DS is not a necessarily a great selling point when the market is crying out that there are too many DS titles confusing consumers and under-performing at retail.

The combination of iPhone+iPod Touch+AppStore is revolutionising the market for portable gaming. But it is not an El Dorado of easy money any more. Successful developers will need to create innovative products that consumers want to play and find ways to market them, whether virally within the game, through web 2.0 activities or even just through spending money.

In other words, while the iPhone is a disruptive technology, being a developer is much the same as it was before.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve:
  • Hari, if you think Nicholas didn’t realise the irony of the link, I think YOU kind of missed the point.

    I’m sure we all have better things to do than nitpick blog posts. I realise the irony of stating that while picking at your comments.


  • Hari Seldon

    Nicholas, if your only evidence that “Learnings” is a real word is the Borat movie, I think that you kind of missed the point. Borat is a character from Kazakhstan with deliberately bad/broken English.


  • @ Hari, yes, it is a word:

  • Hari Seldon

    “Taking the learnings from iTunes”

    Is that even a word? don’t you mean lessons?

  • Interestingly, Diane, some devs think of the patching things as a *benefit* because the AppStore resets your launch date if you issue a new version, which moves you back up to the top of the “recent” list. Not sure this will stay though, as unscrupulous devs could just issue a slightly different version every day.

    Couldn’t agree more about lack of virality/contacts. Integration between an iPhone game and Facebook could be very interesting.

  • For me the main issues with iPhone games are :
    -the lack of virality in the way the apps spread (there’s no way in the App Store to see which games your contacts are playing, and you can send suggestions but it’s not widely used)
    -the difficulty of maintaining a community (few available communication channels)
    -the lack of ability to patch a game (you have to release a new version each time)
    -the lack of recurring revenue options.
    All of this makes it hard to use for service-based models, which is a shame as it would be a convenient way to raise the production values while keeping free or cheap access to apps.

    It looks like Sony and Nintendo got the App Store message though, with the DSi and its online store and the download-only games for PSP (there’s also a rumour these days about a UMD-less, download-only new PSP).

  • Spanner Spencer at PocketGamer has some interesting analysis of this article:

    So there are lessons for both Nintendo and Sony to learn from the iPhone – assuming it’s not already too late for them, which it probably is (in this generation, at least) – but Apple has a brief window of opportunity to learn from the mistakes of the DS and PSP if it wants to continue revolutionising the handheld games industry.