Endeavour Partners - Blog

One of the key trends that we’ve been tracking closely is the emergence of the smartphone as a handheld gaming platform:

• the threat it poses to specialized handheld gaming platforms, such as the PSP and Ninetendo DS, which it rivals or surpasses in performance
• how significant an opportunity this may become

Gameloft announced today that it has sold over 6 million paid games:

Gameloft(R), a leading publisher and developer of downloadable video games, today announced that it
has sold over 6 million [paid] games on the App Store.
From the distribution model to the types of games available, the App Store has completely revolutionized the way handheld games are played, perceived and received
The iPhone OS continues to be Gameloft’s number one platform

Clearly, as competition amongst smartphone platforms and smartphone vendors intensifies, one of the key factors that determines the outcome will be how good they are as gaming platforms, how attractive they are to games developers and the strength of their business ecosystem.

Fans of the PSP have long been speculating as to the development of a PSP phone, but with Engadget Mobile reporting that Sony plans to assemble a team charged with creating a PSP and Sony Ericsson handset hybrid, speculation suddenly seems more like reality.  The potential for a PSP phone is clear when we compare the iPhone & iPod Touch’s growth with early sales of the PSP.

Global growth of the iPhone, iPod Touch and PSP

Calling the iPod Touch a comparable, if less gaming centric, match to the PSP we see that their early growth is quite similar.  What is interesting though, is the gap between iPod Touch and iPhone + iPod Touch sales, which represents sales of iPhones.  Since the iPhone is essentially a Touch with phone capabilities, this gap is the oppotunity that Sony may be missing out by having a PSP, without having a PSP phone.

But has Sony missed the boat on a gaming/phone hybrid?

As I see it, this is most likely the case due to three severe short comings of the PSP.

1. No touch screen
2. No accelerometer
3. No App Store

Hardcore gamers may spit out statistics on the PSP’s superior graphics and the iPhones lack of “real” buttons for a gaming platform, but as recent developments show, this means less and less.  Just look at the Nintendo Wii, which has crushed the PS3 in terms of sales using a graphics card that looks like a Vespa compared to the PS3’s Ducati-like hardware.

Everything is about user experience now, not refresh rates and polygon counts.  That’s where the touch screen and accelerometer differentiate the iPhone.  And the 3GS’s beefed up processor and graphics are starting to level the technical playing field.

Plus, the PSP is still based on the distribution model of customers buying hard copies of games, whereas the iPhone has moved on to the App Store model.  Who wants to take the time to go to a store to purchase a game when it can simply download to your device and never be lost?  (Though the PSP Go could change this).

While Sony may not have seen the omens until now, its traditional software developers have.  Namco entered the iPhone market back in 2007, and even gaming gaint Blizzard is stepping into the arena.

So Sony, that development team may be a stopgap to bleeding customers to the iPhone as a game platform, but it is not a long term solution.  You’ll need a major overhaul of both hardware and software distribution systems to remain relevant in a converged mobile gaming world.

Two items this morning caught my attention, both reflecting on the potential of smartphones as ‘controllers:

• NetworkWorld has a piece of commentary on why the iPhone can’t be killed
• there are now pictures available of the new controller from Sonos

Carolina Milani of Gartner manages to both get it completely right, and completely wrong in NetworkWorld. First, what she got right:

Gartner analyst Carolina Milanesi says that the iPhone’s continued success in the smartphone market has as much to do with its relationship to other Apple devices and software as it does with its own capabilities.

“From technological perspective, there are devices out there that might have higher specs than iPhone,” she says. “But there’s nothing on the market today that pulls everything together to give the superior user experience that you get with the iPhone.” (our emphasis added)

Then I believe that she gets it completely wrong when it comes to the potential appeal of smartphones as a gaming platform:

“I think a lot of gamers would rather go for a full PlayStation [Portable] than a phone-based as a video game system,” she says. “At the end of day you have enough phones that do voice and they are small enough for you to carry a second device that does only video games. I’m not sure that a video game phone would bring much to Sony, to be honest.“

Completely missing the point. If your phone is a smartphone, with a responsive and powerful user interface, and motion sensing and haptics, then it’s an insanely great gaming controller. Two games on the iPhone illustrate this incredibly well:

• X-Plane -the amazing flight simulator
• Flight Control – the completely addictive casual game

X-Plane exploits the graphics capability and the motion sensors as a controller. Flight Control exploits the touch screen and the peer-to-peer networking. Both of them rock, and illustrate just how good a smartphone can be as a games controller.

In fact I was thinking of a post called the ‘Flight Control’ test; for other smartphones, can you imagine playing the game on them. In particular, it’s where the Nokia N97 currently falls short (I’ll update after the update); there’s just no way that it’d work for Flight Control.

On the other hand, the growing importance of interfaces like Facebook may mean that it’s home screen is a better answer than either iPhone or WebOS.

I’m even dubious about the Pre; sometimes it just lags in its responses to touch input, and that’d cause a major (virtual) mid-air collision.

We are already seeing a lot of investment in games for smartphones, and the iPhone in particular. If games developers like id Software are in love with it, as John Carmack said in an interview with VentureBeat:

Carmack’s endorsement means Apple has one of the leading game developers in the whole industry on its side.

“I love the iPhone,” Carmack said in an interview. “It’s a real game platform, not a tiny little toy.”

It would make a lot of sense for Sony [Ericsson?] to launch a great gaming smartphone that leverages the PSP franchise, and unsurprisingly there are recent rumours to this effect again.

The Sonos news is interesting; as any of you with both an iPhone and a Sonos music system will already know, the Sonos app for the iPhone is in many ways a better controller than the dedicated controller. In response, they’re launching a new touchscreen controller:

Sonos CR200 controller

This is important, because it represents another big application area for smartphones: home control.

Apple has its great Remote application which now has gesture control, and now almost all of the major home automation companies already have apps for the iPhone: AMX and Crestron, for example.

What’s more, the value and competitive importance means that other platform players are also targeting this; even Nokia through its home control technology and There venture.

Perhaps one of the interesting ways to think about smartphones that deliver great user experience is as ‘life controllers’.