Tablets Eat Into Console Usage

See a larger version of Nintendo's nightmare here.

The nightmare that's been plaguing Nintendo and traditional game publishers turns out to have a basis in reality: Tablets are cutting into handheldh game console usage, and not just handheld consoles: The family room console is affected, too. The data comes from a new study by Nielsen, conducted this spring, of tablet owners. Of course 82% of those surveyed have iPads, which makes sense since that's about Apple's market share in the tablet space right now.

About 25% of tablet owners reported using their handheld gaming device less or not all since getting their tablet, and 20% of gaming console owners reported the same. (It is important to note that only 2% of console owners said they didn't use their console at all since getting their tablet.) So now we have some data to show what Nintendo has been worried about: Tablets and smartphones are eating into their market share. I don't think it's a coincidence that Nintendo's sales have fallen 29% over the last year.

Game developers have to look to smartphones and tablet markets as the new growth areas for portable gaming. The 3DS is clearly not taking the world by storm, and I think that Sony's NGP is also going to have a problem. At least Sony seems to be aware of the issues, and is starting a program to get PlayStation games on Android phones, putting out their PlayStation phone, and generally acting like they are adapting their business model to the new reality. We'll know how much they're doing, and how well it's working, once the NGP ships and then in the six months after it ships.

Nintendo, though, has (at least initially with the 3DS) shown that they intend to ignore the market shifts and hope that everyone flocks to their new handheld device. And their new console (the Wii 2, the Stream, or the Wii Wii, or whatever they plan to call it). While Nintendo has admitted the launch isn't all they had hoped for, so far their response has been to say they'll market it harder. I wish them well with that effort, and certainly more marketing will help somewhat. But marketing alone can't sell things that people fundamentally don't like, or things that just aren't a good deal compared to alternatives that are well known.

Marketing can help a product reach its potential, but generally marketing can't take a poor product and make it sell like a great one... well, not for long, anyway, or only as long as the marketers stay ahead of the law for the crime of fraudulent advertising. Nintendo, you've got to really address the wave of free and low cost games on smartphones, and the sheer utility of smartphones with an array of uses like playing music, video, and thousands of other apps. Sony, you should be taking notes, too, but you're probably too busy worrying about hackers sneaking in to your systems.

E3 will be an interesting show... it may be more educational to listen to what's not being said there.