The handheld gaming market segment has long been monopolistic in nature. Nintendo was joined durably and effectively by Sony with its PSP in 2004, but nevertheless maintained its leadership by offering an innovative machine the same year, the DS, and then the DSi at the end of 2008. Faced with increasingly fierce competition from smartphones, Nintendo wanted to stay one step ahead in terms of the video game experience on mobile platforms. In March 2011, the commercial company released the Nintendo 3DS, a handheld console with a passive 3D screen that allows a 3D effect to be displayed without using an active pair of glasses.

The effect is stunning and the audience is initially at the rendezvous. No one yet knows whether the console will be as successful as the DS (157 million units sold worldwide since 2004), opinions are divided. In any case, at the end of 2011, Nintendo’s new console will have a new competitor, Sony’s Playstation Vita, whose objective is to replace the PSP (63 million units sold since 2004) and to outperform it in terms of sales volume. Sony, after the failure of the PSP Go, shunned by gamers and retailers, is betting on a platform inspired by the functionalities of high-end smartphones and in particular Apple’s iPhone 4: touch screen and touchpad, three-axis gyroscope, three-axis accelerometer, compass, GPS, 3G option, organic light-emitting diode (OLED) screen.

The platform is compatible with Playstation Network. It is also interoperable with the PS3. The interconnection with the home console is mainly intended to make certain games and games ubiquitous, i.e. accessible on both PS3 and Playstation Vita. The condition of ubiquity is to purchase both the game for the fixed platform and the game dedicated to the mobile platform. This model of ubiquity is more widespread on smartphones, some titles of which are also accessible on the publisher’s website and/or on Facebook, or even on the connected TV. On the other hand, the player buys the game only once, usually on a smartphone or touch tablet, at a very affordable price (on average between 0.79 and 5 EUR). He then opens a single account that allows him to access the game regardless of the platform.

This business model is generally complemented by the purchase of in-game virtual goods that handheld consoles have not yet adopted. The interoperability between the Playstation Vita and the PS3 does not seem to concern cooperative multiplayer gaming, and the handheld console does not seem to be able to serve as a controller for the PS3. In addition, phone manufacturer Sony-Ericsson is marketing the Xperia Play smartphone, which is Playstation certified. This cell phone host pre-embedded games but is also connectable via the mobile telecommunications network to Android Market to download games and applications.

Confrontation with smartphones is always in the spotlight. Beyond the catalogs, some of which are common to portable consoles and certain smartphones, we can see that consoles have been quick to integrate into their new-generation machines the technological features that have made iPhones so successful (accelerometer, multi-touch screen, etc.). They go further in the perspective of differentiating themselves thanks to functionalities that are still rare on cell phones, 3D. Immersive gadget, which enriches the gaming experience. It is present both on the Nintendo 3DS (without glasses), on the Sony PS Vita (with glasses), and on the Sony Ericsson Xperia Play smartphone (with glasses). The third element of the strategy of the consoles is to integrate into their platforms Wifi or 3G connection capacities capable of making it possible to download applications in nomadic situations or at home.

Equipment: waiting for PS Vita

Annual sales of handheld consoles

Several phenomena combine to explain why the volume of sales of handheld consoles will contract in 2010 and 2011: DS/DS Lite/DSi and PSP/PSP Lite consoles are reaching the end of their lifecycle. Gamers, although recently informed, have been waiting for the arrival of the Nintendo 3DS system. They are now waiting for the arrival of the PSP’s replacement, the Playstation Vita, at the end of the year. The fearsome competition from smartphones, starting with the Apple iPhone. This competition should no doubt extend to other phone manufacturers, who are also deploying terminals backed by a home app store. The marketing of Nintendo’s 3DS marks the start of a new upward cycle for this market segment. Sony and Sony-Ericsson are accompanying this new cycle, which should reach its zenith in terms of machine sales volume in 2014, with 48.2 million machines sold in one year.

Installed base of portable consoles

Without taking into account Nintendo’s GameBoy Advance range, the installed base of handheld consoles is expected to be around 235 million units by the end of 2011. With the marketing of new machines, this base should reach 405 million units by 2015, again without taking into account the GameBoy Advance console. According to IDATE, the Nintendo 3DS system in its various versions over a period of approximately 7 years could be as successful as the DSi/DSi XL. In fact, more than 150 million machines could eventually find buyers. Competition from the PS Vita could jeopardize these forecasts.

Market and prices

The average price of handheld consoles is experiencing deflation in 2011 compared to 2010. The trend will be reversed the following year when the average price of handheld consoles will be around EUR 192.8. In 2011, the equipment market will have generated worldwide revenues of EUR 3.8 billion, down from 2010 but at the level of 2009. The release of new Nintendo and Sony consoles will obviously have a remarkable effect on the revenues of this segment until 2013, when a peak is observed around EUR 8.5 billion. In 2014, the market will amount to EUR 8.1 billion, down 5.3% compared to the previous year, despite higher sales volumes. The growth in console volumes sold does not finally make up for the drop in the average price of the machine four years after its launch.

Software: new platforms, new games

Volume of games sold

The marketing of 3DS and Playstation Vita will take the market for game software for handheld consoles out of the rut. This new cycle of consoles is expected to drive game sales volumes on the growth track until 2015. Over this period, 1.3 billion games should be sold worldwide.

Market and prices

Logically, the prices of games for handheld consoles are expected to soar from 2012, rising from an average of 23.5 EUR in 2011 to 29.7 EUR in 2012. They will stabilize until 2014 and start to fall the following year. In market terms, this segment is expected to pick up again in 2011, after recording mixed results since 2008, despite the commercialization of the DSi. The year 2014 will see worldwide revenues in this segment reach 9.1 billion EUR.

Dematerialized distribution via the consoles’ appstores

Distribution on handheld consoles is irremediably on the road to dematerialization. Sony’s new generation console, PS Vita, will be available in Wi-Fi or 3G versions. There is no doubt that its competitor Nintendo’s machine will be the last one not to integrate such an alternative. Revenues from the sale of dematerialized games are still marginal in 2011 on nomadic platforms. They represent only 3.6% of the overall revenues of these machines. The take-off is expected in 2013, when 13% of revenues from game sales will come from online commerce.

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