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Smartphones stealing gaming business from traditional handhelds

by Phil Hornshaw

Smartphones and tablets (specifically, the iPhone and the iPad) are tearing into the portable gaming market traditionally reserved for console-making companies like Nintendo and Sony, according to analytics firm Flurry’s latest findings.

Reported in a story from GigaOM, the analysis states that one in every three dollars spent in the U.S. on handheld gaming is now going to a game on a smartphone or a tablet -- more than $800 million in 2010 between Apple’s iOS platform and Google’s Android operating system.

Mobile games even surpassed PC games in revenue for the first time ever, according to Flurry. PC games in 2010 drew $700 million.

The amount of gaming being done on smartphones and tablets is kind of stunning. Flurry says that 40 percent of all app sessions everywhere are games. It also analyzed its own numbers from 2009, when Flurry said that iOS was bringing in $500 million and accounted for 5 percent of the total video game industry. The increase to $800 million is partially because of a greatly increased interest in Android gaming, as well as more gaming on the iPad, which dominates the tablet market. A Google survey recently found that 84 percent of tablet users (from a pool of 1,400 or so) primarily use their tablets for gaming.

Meanwhile, all that money going to mobile gaming has to come from somewhere, it seems, and that somewhere is from the coffers of Nintendo and Sony. The two companies are big players in the handheld gaming market: Nintendo just released its brand new handheld console, the Nintendo 3DS, which features a glasses-free 3D experience and riffs on the company’s previous handheld, the Nintendo DS. Sony is also working on a new handheld, currently titled the NGP, that includes a great deal of technology made popular by mobile gaming.

Flurry says that mobile gaming made up 34 percent of all the portable gaming revenue (everything generated by mobile gaming and handheld gaming consoles) in 2010, nearly double its 19 percent revenue share from the previous year. Meanwhile, Nintendo and Sony both lost revenue in the portable gaming market from 2009 to 2010. Nintendo’s share dropped from 70 percent to 57 percent, while Sony’s dropped from 11 percent to 9 percent.

And portable gaming itself is bringing in less money in general. In 2009, the sector was a $2.7 billion industry just on its own, but that’s down to $2.4 billion in 2010. Flurry points to the cheaper price of mobile games as being responsible for the shrinkage.

There’s greater analysis here, but you’ve probably already heard it: Mobile is the future, and the traditional gaming companies are running to catch up. That doesn’t mean that portable gaming is on the way out though, and Nintendo and Sony aren’t sitting back. The 3DS has already moved 400,000 units in its first week of U.S. sales, and the NGP looks like it could successfully bridge mobile, casual gaming and traditional portable gaming with things like the PlayStation Suite, touch panels on the front and back of the device and a lot of other cool features.

But there’s definitely something to this bite-size, low-price, innovative game model that mobile developers are working with. The more traditional game companies take notice, the more the whole industry evolves for the better.