Mobile Sands

March 20, 2009

With iPhone OS 3.0, Apple Takes Aim at Game Consoles

Filed under: App Store, games, iPhone — Tags: , , , , , — AJ @ 12:44 am

Apple may have single-handedly revived the mobile games market.  Within 8 months of iPhone 3G’s launch, more than 6200 games are available on Apple’s App Store and 74% of them require payment.  And iPhone users are downloading them, voting with their dollars for the games they like.  At the end of January reported that 32.4% of iPhone 3G users download games, compared to 3.8% of all mobile subscribers.  

With iPhone OS 3.0, Apple is going after gaming consoles popular with casual gamers – Nintendo DS (NDS), Playstation Portable (PSP) and Nintendo Wii, by providing:

  • Peer-to-peer gaming over Bluetooth. P2P gaming (over WiFi) is a very popular feature of NDS and PSP. Apple claims that its “Bonjour” application will discover other users who are playing the same game, and customers will not have to do manual Bluetooth pairing
  •  Accessories controlled via iPhone. Accessories are a big part of Wii’s value proposition, enabling products like Wii Fitness and EA Active. Now similar applications can be created for iPhone devices

Further, iPhone OS 3.0 will offer “In-App” purchases. This enables developers to use business models similar to those used for PC games. Developers can

  • Offer subscription based pricing, popular with PC-based MMOGs
  • Start users on free version, then convince them to upgrade to a premium version
  • Sell a wide range of virtual goods

By offering developers 70% of the selling price, Apple has attracted a wide range of developers – small and large. Several experienced independent game developers have hit the jackpot and some small development teams like Smule are turning their hits into venture-funded game studios.   At least two large publishers, EA and Gameloft, are making a significant investment in iPhone games and seeing real revenue.  Gameloft has 20 games available on iPhone and, by early March, had seen 2 million downloads. With In-App purchases, Apple is further sweetening the deal.

Apple’s installed base is still a fraction of NDS, Wii and PSP. According to Nintendo’s Q4’2008 results, they had sold 96 million NDS and 44 million Wii devices worldwide.  Sony PSP has an installed base of 50 million units. In contrast Apple announced on March 17th that it had sold 30 million iPhone 3G and iPod Touch. Probably, just 30% (i.e. 9 million) of these are used for gaming. Still, Apple is growing its base at a rapid clip and I will not be surprised if the number of iPhone 3G and iPod Touch devices crosses 100M by the end of the year – a respectable market share compared to the console biggies.

Update (03/25/09)

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