Interview

Flurry on handhelds, part 1: Menacing mix of shift from DS to 3DS and the rise of the free game hitting Nintendo hard

Smartphones having savage impact on software sales

Flurry on handhelds, part 1: Menacing mix of shift from DS to 3DS and the rise of the free game hitting Nintendo hard
Analytics specialist Flurry recently detailed a sharp decline in Nintendo DS's share of software sales in the US portable market.

In this two part interview, we probe Peter Farago – VP of marketing at the firm – for his take on Flurry's figures, which suggest Nintendo handhelds now account for just 36 percent of software sales, down from 70 percent in 2009.

Part one sees Farago spell out the reasons behind the apparent slump, plus the importance of the rise of the free app to 'gatekeeper' consumers.


Pocket Gamer: Do you think the drop in Nintendo's share is solely down to the rise of smartphone games, or is the age of the handheld a factor too?

Peter Farago: Both are affecting Nintendo.

First, Nintendo's year-over-year portable game software sales are declining, now for the third year in a row. One factor affecting this is their ageing hardware platform. Next, 3DS - its next generation portable hardware platform - is not fully deployed. We are in between hardware platforms, which is referred to as 'transition' in the industry.

However, the 3DS is also not selling as expected. Despite Nintendo putting out a recent press release that early 3DS sales are exceeding that of early DS sales, we should expect this for several reasons.

Firstly, they're selling in a holiday season. Secondly they cut its price faster. Thirdly, gaming, on the whole, is more popular now, which means there is a larger addressable market.

Additionally, it's probably worth checking the relative marketing spends for each launch. I suspect Nintendo is beginning to push harder with 3DS now.

Regardless of differences between 'then and now', 3DS hardware success leading up to, and over the holiday season will be critical. It needs to gain a strong enough installed base of hardware onto which they'll sell new software. Of course, Nintendo's secret weapon is that they have great games, and are starting to push them. Great software will pull the hardware sale, which is what they are relying on - it's a bit of a chicken-and-egg problem.

At the same time, there is no denying that iOS and Android offer a real substitute to portable gaming.

Nearly 40 percent of all sessions Flurry tracks - among 20 billion per month - occur on games, and we know that revenue on iOS and Android games is already much larger than on portable. One can argue that smartphone games appeal to a more mass-market and casual audience, but this can't be the case entirely.

While we don't know the exact percent of share being taken by smartphone games, it would be naive to believe there is no effect. There has to be a large impact.

Consider that portable targets 9 - 13 year old as a key segment. Parents, called 'gatekeepers' because they purchase for someone else who actually consumes, would certainly prefer to pay less for hardware - like the iPod touch - that does more than just gaming, has software that is mostly free, and does not require a trip to the store.

3DS is missing from the chart. Does Flurry have any idea what portion it would make up if it was included in 2011's total?

3DS sales are in fact included in the total calculations.

Given the relative installed base of DS to 3DS, 3DS software sales are negligible however. Again, the holiday season will be critical for 3DS and Nintendo.

How do you see PS Vita software performing in this environment post launch?

Vita looks to deliver first-class a portable gaming experience, but it will be expensive to buy the device and additional memory.

It looks like Sony may be pricing themselves out of the market upon launch. Additionally, it's size is too big to fit in your back pocket, and basically asks the consumer to buy a second device, beyond a phone.

While the line-up up of titles is solid, this device will likely be too expensive to appeal to anyone beyond more hardcore gamers.
Thanks to Peter for his time.

You can read part two, where Peter spells out the three areas where Nintendo and Sony alike can fight back against the smartphone onslaught, by clicking here.

With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.