Tablet Wars Continue

Real Racing 2 HD lets you race on your iPad 2 with the visuals piped to your TV.

One of the few bits of bad news in Apple's Q2 earnings report was that they sold fewer iPads than they expected, due to the transition to iPad 2. Sales of the original iPad slowed in anticipation of the new device, and then Apple had problems building enough iPad 2's to meet demand. Apple is struggling to overcome the backlog, and it may take months to resolve all the problems.

So when you see a Gartner Group report predicting market share for 2015, it is wise to be skeptical. Really? Apple will get 47.1% market share in 2015? I wonder if they ever include error bars on those predictions... maybe it might really be 47.0% market share. Really, these predictions should be seen as a general look at what the future might hold if trends continue in the current directions without major bumps. But major bumps do occur on a regular basis, and thus predictions will vary wildly from reality at times. What if Apple introduces a new iPad plagued with defects? Market share will drop. What if an Android tablet comes out (say, from Amazon) with a terrific price point and an awesome feature set? Maybe it will steal a big chunk of market share from Apple.

The wise marketer prepares a strategy with some contingency planning in mind to take care of just such events. It's why you should try to diversify your revenue sources among platforms and product lines, as a hedge against the unexpected. If all of your revenue comes from one product on one platform, and then that platform suddenly goes dark for a while, your cash flow dries up. Not a good situation, so plan on how you can avoid it.

Meanwhile, games are the number 1 application for tablets, and we're starting to see some very interesting innovation. Take Real Racing 2 HD from Firemint, for example. This is a slick racing game with some interesting options... like shooting the visuals to your 1080p HDTV (through an AV adapter, or through an Apple TV). YOu get to see your racing on the big screen, and still get useful data on your iPad 2... which you use as a steering wheel, taking advantage of the sensors in the iPad 2. Check out the video:



This sort of title will be hard for a 3DS to compete with. Maybe Sony's NGP will be able to handle this sort of thing, or perhaps Nintendo's new console with the spiffy controller that's rumored can take it on. Meanwhile, we're getting a glimpse of where gaming is headed. Convergence between handheld devices and the family room is happening, leading to some very interesting combinations.

Hey, Microsoft, what do you have? Where's those Windows Phone 7/ Kinect connections you demo'ed? I hope you're planning to bring those to market... and maybe you should think about a tablet operating system someday. Just a thought. I wonder if HP is planning on making gaming important to the future of WebOS as they try to make that a major player in smartphones and tablets. Certainly they haven't shown a presence at GDC... someone should clue them in that gaming is the leading category of applications on smartphones and tablets. It would seem hard to gain traction in either market unless you make some kind of showing in the major application category... better still, have some killer apps in that category. This is one of those cases where marketing is supposed to help inform the product development guys... someone should be writing memos. Or carving the memos into the cubicle walls around the engineers, or sending up signal flares, or something.

Ah, marketing... you have to use those marketing skills in your own organization if you really want to have an impact.

The Power of iPad

Some fascinating facts and figures about the iPad.

The iPad 2 has gotten good reviews, and it's easy to see why: Thinner, lighter, faster, with cameras, and at the same price as the old one. What's not to like? Still, we saw a flood of Android tablets being shown at CES... why haven't we seen them yet? Wait, the Xoom is finally hitting the stores... but it seems to be more expensive than the equivalent iPad. What's up with that?

Apple is being clever, that's why. Apple's sneaky strategy is using its $60 billion in cash to buy up displays, forcing other tablet makers to delay release or pay a lot more, thus raising the competition's prices. Apple has reportedly bought up over 60% of all factory capacity for touchscreen displays... and laid out wads of cash (over $4 billion) to do so.

Talk about a win-win... Apple secures production capacity for their projected needs for years ahead, and at the same time forcing competitors to either build new factories, pay significantly higher prices, or accept inferior quality. No wonder the competition doesn't look so good yet.

I expect that Apple will maintain their market share pretty well; they're likely to be constrained more by how many they can build, than by the competition. Android tablets will be here by summer in droves, more than likely (and HP's WebOS tablet, too), just in time for a rumored iPad 3 launch in September or October so Apple can regain the high ground... it's going to be an interesting year.

Apple Subscriptions, Finally?

The future of magazines and newspapers may finally be arriving.

Here's some late-breaking news: Apple has finally agreed to allow subscriptions through iTunes. It looks like it's not everything publishers were looking for (they want complete info on subscribers), and the news is so new reactions haven't come in yet. But it looks promising. This has been the biggest hangup in getting magazines onto the iPad... each issue had to be purchased individually. Which also meant you couldn't connect the iPad editions to the print editions, nor offer a combination subscription.

This should open up a new era of magazine development. How long until Google gets something like this? I hope not long... it's going to be a huge reason to get a tablet, I'm thinking. And the gold rush commences...

In-App Purchasing Boosts Profits, Burns Parents

I think Gargamel must have designed this scheme to have kids rob their parents.

The in-app purchasing boom that has taken the App Store by storm continues to cause problems with parents. Apple's default 15-minute window for the iTunes password means that if you hand your iPhone or iPad to a child, they can make in-app purchases without entering the password if they do it within 15 minutes after you entered it. And if they keep doing it, or if they happen to know the password (or get an older sibling to use the password)... you can end up with $1400 in smurfberry charges on your credit card, like this mother of a second-grader.

It does bring to mind the ringtone boom, when so many unscrupulous vendors were getting people to buy subscriptions services when they just wanted a little ringtone. It eventually led to the downfall of the ringtone business.

The game industry should be concerned about what children's games with in-app purchases could be doing to the industry's image. And to the image of in-app purchasing, and the perception of game companies. Yes, perhaps Apple should be making the parental controls more obvious or even the default. Perhaps there should be more oversight by Apple on children's games, and requiring them to make in-app purchasing more difficult or more under the control of parents by default. And perhaps Google should be taking notes before in-app purchasing enters the Android market.

Saying that "Oh, it's just a few games that have a problem" or "It's only some kids games, not MY games" is like thinking having a No Peeing section in a swimming pool means that the whole pool will be kept clean no matter what somebody does in some corner. All game developers are in the pool together, and we should make sure nobody's smurfing things up.

TouchPad Vs. iPad: Real Competition?

The HP TouchPad.

HP has introduced new WebOS devices, including an interesting tablet, the TouchPad. It looks a lot like an iPad, but with snappier specs: 1.2 GHz dual-core processor, 1 GB of RAM, a front-facing camera... it's supposed to be shipping sometime this summer. No doubt the price will be announced around then, too, giving HP ample time to figure out what Apple's doing and decide on their price in response.

Unlike Motorola, who just went ahead and slapped an $800 price tag on the Xoom, thereby consigning it to market irrelevance.

Apple's probably going to release the iPad 2 well before the TouchPad arrives, and it will probably be reasonably comparable with TouchPad's hardware specs. I'd expect it to be introduced at the current iPad price points, so that's really the price points that HP should be trying to hit. We're going to have to wait for HP to announce its price, no doubt until after they have more information about what Apple's doing.

The real key feature, though, is the software. The iPad already has thousands of titles written specifically for it, and hundreds of thousands when you count iPhone apps that can run on it. HP has lined up some of the usual suspects for WebOS, such as Skype. But they're going to have to work hard to get developers to support yet another platform.

Which is why, no doubt, they hired former Apple developer relations VP Richard Kerris to run their developer relations program. Kerris was most recently CTO at Lucasfilm, so he knows his way around technology. He's got his work cut out for him. Which makes it surprising that I don't see HP on the list of exhibitors at the upcoming GDC; Google's there, and Blackberry, but no HP. (Apple? They know they're the big dog everyone has to support if you're in the mobile space, so why waste their $60 billion cash hoard?) Seems like someone should tell HP that games are the number one application on smartphones. If you can attract game developers, other developers should follow.

Interestingly, HP did score one big victory: They inked a deal with Time to get Time, Sports Illustrated, People and other magazines to the TouchPad, enabling subscriptions. Which is something Apple has been unwilling to do, and it's a missed opportunity for them. Perhaps they'll be more inclined to make concessions to magazine publishers before they get completely left behind. One other interesting feature: A subscription to the regular magazine will get you access to the TouchPad edition as well. Now there's a useful feature, especially when you look at paying $3.99 for each edition of a magazine on the iPad.

For now, it's too early to say whether the TouchPad has a shot in the marketplace. Let's see what the price is, and how big a push HP intends to make. The other WebOS products they introduced today were the Pre 3 and the Veer, two smartphones that look quite interesting and useful (the Veer is the fisrt small form factor smartphone, which may well be appealing to the right market segment). HP's going to have to spend some serious money on marketing if they want to get people's attention. Good luck! More competition means better products at better prices, and consumers win.

Motorola's Xoom Falls Flat

I guess Xoom refers to the price.

Talk about disappointment... Motorola's Xoom tablet seemed like the first iPad competitor that would provide a worthy challenge to the market leader. The Xoom will have Android 3.0, the first version actually designed for tablets, plus some really powerful hardware: a dual-core processor, 1 GB of RAM, a front- and rear-facing camera, a good quality 10.1" screen and Nvidia graphics. The only thing left out of the CES announcement was the price, and now we see that in a Best Buy ad: $799.99.

Which might be reasonable, if the iPad didn't start at $499.

But, wait, it gets better. Apparently the Wi-Fi connectivity on the Xoom isn't enabled unless you buy at least 1 month of a data plan with Verizon. Now, this model is a 3G beast, so apparently Motorola and Verizon don't want you to shun the 3G feature until you've tried it out... for $25. Perhaps there will be a WiFi only version at some point, but it's yet to be seen.

Yes, the specs are beefier than the iPad. Of course, the iPad 2 seems likely to be introduced soon, and when that happens it'll probably be at the current iPad price points (while the old iPad gets even cheaper). Which will make the Xoom look really lame, at least pricewise. Which is something Apple loves to do.

Motorola, I know you've got bills to pay and all, but you could at least have introduced a WiFi only version of the Xoom at something approximating a low-end iPad price.All you've done with this is make the iPad look even more attractive; before its Android tablet competition was generally lower priced, and the iPad was more expensive.

Sigh. Well, sooner or later someone will introduce an Android tablet to compete with the iPad. I guess it's later. Not that I hate iPads, mind you, but when there's serious competition Apple will get more aggressive with pricing and features, and that benefits everyone.

Gaming addons for tablets

Here's an interesting idea: a joystick you can add on to your iPad for better game controls. It's $25, so you have to be willing to spend more than the cost of several games to buy one... but it is interesting, if it works as well as they describe. I don't think it will catch on in a big way, but it does show that gaming on tablets is enough of a market to encourage add-ons.

If only you could download it...

E-book Market Predictions 2011

The e-book market is finally arriving in a big way. Amazon hasn't released sales figures for the Kindle, but they have admitted that it's their best-selling product ever. Even beating out Harry Potter... and Kindles are a tad more expensive. Barnes & Noble reports the Nook is their bestselling product ever. Meanwhile, Borders edges closer to bankruptcy. Here's some relevant info:

Forrester Research expects U.S. e-book sales to total $2.8 billion in 2015, up from nearly $1 billion in 2010. The research firm projects the number of e-readers and tablets in the U.S. will soar from more than 15 million in 2010 to nearly 60 million in 2015.

And I think those numbers are conservative.

• Regular book sales drop, e-books continue explosive growth. There's an easy prediction for you. I might as well start off with a no-brainer. B&N is selling more digital books online than physical books. With physical bookstores going out of business, it's clear which way the trends are going. Physical books will tend to be more for certain types of books (like coffee-table books), and popular fiction will inevitably for the e-book.
• E-book readers hit $99 or less. This is already happening, but expect it from the market leaders (I'm looking at you, Kindle) with a resulting jump in sales. When the e-reader is less than 3 or 4 hardback books, it's harder to resist. When publishers finally get smarter and lower e-book prices more, sales will jump even further. If they don't, authors will step in. Lower prices are inevitable in a friction-free distribution network; publishers should get ahead of the trend instead of being rolled over by it. Sadly, very few if any will.
• Explosive growth in the tablet market contributes to e-book sales growth. Tablets are eating into dedicated e-reader market share, too. The Kindle has a 47% share, down 15 points, while the iPad has a 32% share, up 16 points. The Nook and Sony's E-reader are hanging in around 5%, though I expect the Nook's numbers to improve. It looks like the iPad sold about 13 million units in 2010; Apple is expected to at least double, and maybe triple that number in 2011.
• More companies spring up offering a la carte services to authors; big publishers lose some big names to self-publishing. These two things are related, of course. The easier it gets for authors to publish their e-books themselves, the more authors will do it.
• Magazines finally crack the e-reader market in a big way as Apple makes it easy to buy subs. This one is dependent on Apple and magazine publishers reaching some sort of agreement on revenue splits. Publishers don't want to give up 30% of their sub fees to Apple, and Apple doesn't really want to go to the extra effort of negotiating with everybody. I'm hopeful Apple will do something to really help magazines out, but I fear they won't. Eventually magazines will be viewed on tablets, but getting to that point will be difficult for the businesses. Current iPad versions of magazines are individually priced and difficult for the magazines to produce well, since they take different skill sets. I foresee many magazines having trouble until subscriptions to tablet versions become easy, and magazines get more adept at crafting them. Maybe Google will add this capability to Android before Apple gets around to it; if so, a big win for Android. Hey, Google, if you really want to make an inroad on the iPad's market share, cut a deal with textbook publishers before Apple does.
• Android tablet version finally appears; Android tablets boom; e-book sales zoom faster. It may happen late in 2011, but it will happen. The opportunity is huge and Google won't pass it up. Prices will drop as competition roars. Maybe we'll even see a two-page tablet at a reasonable price.
• Apple introduces iPad 2, drops iPad prices, sales zoom. Yeah, it's inevitable. People are so focused on the new iPad that they forget what Apple does with old technology... they drop the price. So even more iBookstores will open up.

All in all, it will be a great year for e-book authors. The only downside is that marketing e-books will get tougher due to the increased numbers of titles. Authors will need to make sure they've done their marketing properly. Persistence is a key virtue; if you don't do something correctly at first, figure it out, fix it and continue.

Tablet Wars 2011

It's gonna get ugly for the hardware manufacturers. It'll be a bonanza for software developers. The tablet boom is coming to 2011.

Some analysts are estimating up to 75 million tablets will be sold in 2011, and Apple may sell half of those. Let's look at each segment of the market.

Apple: Expect a new iPad 2 this year, probably announced by April. Rumors suggest a higher resolution screen, thinner and lighter, and including front and rear cameras. My guess is that Apple will reduce the price of current iPads to make room for this new model, and boost sales even further (while fighting against the massive competition heading their way). I still expect Apple to cut some kind of deal with textbook publishers; the market possibility is huge (student signs up for classes, downloads all textbooks into his iPad... goodbye heavy backpack!). The gaming possibilities will expand as AirPlay allows iPad games to be viewed on an Apple TV-connected TV screen... with iPhones as controllers... we're gonna see some amazing games, especially if the new iPads have even faster processing than the current ones.

Android: The number of Android tablets heading to market is huge; we'll see a slew of them at CES soon. The big deal, though, will be the release of a version of Android crafted with tablets in mind. Google hasn't made any official announcements on this point, but there's plenty of speculation. Some point to the Chrome OS as Google's  reason for holding off on Android for tablets, being afraid that Android make make Chrome OS dead on arrival. I think Google will ultimately go with whatever sells, and right now the demand all seems to be lining up for Android. In any case, Google has to sort out the situation before Android tablets really take off. Even so, there is a wave of Android tablets headed to market soon.

Microsoft: Don't count them out of the tablet race. CES will see the introduction of a new variant of Windows designed for ARM processors as Microsoft aims to grab a slice of this fast-growing market. Still, they've failed miserably in the past to make Windows-based tablets sell; adapting Windows toa finger-based interface has been awkward and slow at best. Can Microsoft reinvent itself sufficiently to succeed? Certainly they've managed to do so with Windows Phone 7, so maybe they can pull it off after all. I think they have a very tough race ahead of them, though.

HP: Here's the real dark horse, with their PalmOS slated to become the basis for a new line of tablets. Certainly HP has the size and manufacturing capability to handle this task; can they be innovative enough? No announcements so far, but the rumors are pointing to a product introduction or several in 2011.

Developers will have multiple targets for tablet products. Gaming will be a major part of all of these platforms, if not the biggest part. It's going to be a wild year.

Tablets Rising, PCs Shrinking

The Gartner Group has revised its estimates of PC shipments downwards for this year and into the future, saying that tablets are increasingly replacing PCs as purchases. They estimate tablets will replace 10% of PC sales by 2014. Other analysts are predicting even bigger growth in tablets; estimates for tablet sales in 2011 now range from 35 million to 70 million, depending on who you listen to. The latter figure includes an estimate that Apple will sell 40 million tablets in 2011. That's a mess of iPads.

What's driving all of this? Several factors. Price, of course, is one of them, though if you want you can certainly get a notebook computer (not even a netbook) for less than an iPad will run you ($499 at minimum). What's interesting is the growth in business users of iPads; just look at Apple's site, where you'll now find a section devoted to iPads in business. That wasn't there when they launched; it was only after business users began grabbing iPads in big numbers that Apple added that. I hear reports of increasing numbers of iPads turning up in meetings, where you need to reference an agenda, perhaps take notes, and maybe look up something on a web site or access a file. These are all things the iPad does very well, being speedy and light weight. No clickety-click either, a plus for meetings. (The big issue my wife identifies is the instant-on capability, where booting up her notebook takes several minutes.)

Around the household, tablets are handy when you feel the urge to hit the Internet, read a book or watch a movie. Or play a game, and that's going to be a bigger and bigger area. The iPad has some pretty good horsepower, though it's lacking in the control interfaces (no joysticks, d-pads or buttons here, except virtual ones). Yet developers are finding their way around those limitations.

Which makes sense, if you look at the size of the market. Anywhere from 20 to 40 million iPads selling next year dwarfs any videogame console (the hottest potential for 2011 is the 3DS, and that would be lucky to hit 10 million). Add in the iPhone/iPod Touch markets (which for most games would be a fairly easy variant) and you have serious potential sales, if you can get around the marketing problem. (Getting all those users to find you is only going to get tougher.)

The flip side of this news is the reduction in new PC sales. Much of that will come in developing countries, where they may shift to tablets or smartphones because they are cheaper than PCs. So it may not be as much of a loss as far as game developers are concerned. Still, it's a fair bet that many of the PC users most likely to buy computer games will also get a tablet, and be spending more time with that. Zynga probably doesn't care so much whether a user plays Farmville on a PC or an iPad, but this may matter to some developers. Particularly if your monetization plans depend on selling a $20 computer game by download rather than a $5 iPad game. Yet another reason the freemium model is gaining ground... it doesn't care what the platform is as long as you can make in-game purchases easily (Google, are you listening?).

It's a brave new future... happening fast.

The Wanting

If you're looking for another reason to be pessimistic about the holiday sales picture for videogames, here's one: Nielsen's got a survey of kids about what they're looking for for Christmas. Number 1 for kids age 6-12: The iPad. Followed by a computer, and an iPod Touch. At least when you get to the number 4 slot it's a Nintendo DS, and then number 5 is a PS3. But it's kind of interesting how far down the Wii, and the Move, and Kinect are... and the Xbox 360.

The picture for kids age 13+ is also interesting:

A computer is number 1, followed by a TV (high-def, no doubt, not 3D); and then we get into smartphones and the iPad.

You can understand by looking at this survey why handheld videogames are lagging, and why publishers should be concerned about sales of them in the future. If kids are all going to be getting smartphones, it's harder to convince them to carry yet another portable device around to play games. If they have a spiffy smartphone that can play games (and games that are cheap), why have another device? Juggling two pocket devices gets tricky. And you have to have your phone... otherwise, how will you get and send text messages? (Gee, you'd think handheld consoles might be able to do that... what if you added a 3G chipset? The rumored PSP phone might be what you get.)

If you extrapolate this to see what can happen in the family room when you have mobile device app markets available, you can see where the whole industry is headed. The high growth rates are going to continue to be in the non-traditional areas. The old school industry, currently showing negative growth rates for the past two years, isn't likely to jump into high growth rates any time soon. Or ever.

http://www.gamasutra.com/view/news/31673/Nielsen_iPod_Touch_iPad_Outpace_Game_Systems_On_Kids_Want_Lists.php

Size Isn't Everything, But It Is Impressive

I understand this comparison is not meaningful on many levels, but counting up the number of games on different platforms is an interesting metric. The total number of iOS games in a few short years has exceeded the total number of console games, and made a fair bid to exceed the number of Flash games.

Of course, it's far easier to create a game for iOS than for a console, and requires orders of magnitude less money and time. And without a doubt Sturgeon's Law applies, as it usually does. Still, it's an amazing example of creativity in a short amount of time, and certainly some real winners have appeared. Better still, some new game companies have emerged that otherwise would not have found financing, and some older developers have found a new source of income in repurposing old titles for the new platform.

It's also worth noting that the Android numbers would be similarly impressive, even if not quite as large as iOS numbers.

Of course, the size of the market only underscores the marketing challenge you face in trying to stand out amidst so many titles. It's hard to find gold when everybody is panning the same stream.

Kinect the Dots

Kinect allows you to feed Wiimotes to virtual children?

Will the Kinect sales surge fade before I run out of puns? You can but hope...

While there have been some weird (Kinect is racist because it doesn't see dark-skinned people) and disturbing (Kinect is eavesdropping on you and broadcasting your private conversations!) news reports about the Kinect, generally the early buzz is positive. Early reports had Kinects selling out at Gamestop.com and Target.com, while even some brick-and-mortar locations sold out in the first morning of availability.

Of course, the cynical marketer in me wonders how much of that is Microsoft manipulating things by not shipping a whole lot of Kinects right away. You can always say you haven't ramped up manufacturing as rapidly as you had hoped... and it sure is nice to have reports of product shortages popping up in the media, creating more demand. Besides, Christmas shopping hasn't begun in earnest yet... plenty of time to stock the stores before Black Friday hits.

Still, interest in Kinect is high, as a survey by Black Friday.com found that interest in Kinect as a holiday gift was exceeded only by the iPad. Microsoft has upped its forecast for Kinect sales, expecting to move 5 million of them over the holidays.

A British survey had somewhat different results for Kinect. While the iPad was still the number one item on holiday shoppers' minds, the Kinect only hit 5%. Apparently it's because the Kinect requires 6 clear feet of space for full functionality, and perhaps many places in the UK don't have that kind of space around where the console lives.

I'm glad to see Kinect demand high, though I wonder how much of that is being eaten from Wii sales rather than just reaching the current Xbox audience. The real test will be in 2011, once the initial "cool new device" enthusiasm dims. Will Kinect become an important part of the Xbox experience, penetrating the installed base? Will Kinect become a big enough sub-market that developers will spend extra time and money supporting it? Will Kinect drive more Xbox 360 sales at a time in its life cycle when it could sure use a boost? Numbers coming in next spring will tell us a lot more.

Microsoft needs to evangelize the Kinect hard among developers if it expects these kinds of things to happen. Developers will only support it if it's relatively easy to do, and they believe that supporting Kinect will provide an ample return on their investment. Microsoft needs to sell a lot of Kinects to make that happen. I think one of the key factors is whether or not Microsoft can get Kinect adopted for uses other than games. Can Kinect become a cool high-tech home feature by controlling more than just an Xbox game? Microsoft, get busy and answer that one.

Will Tablets Be Bigger Than Consoles?

If you believe the Gartner Group's analysts, the overall tablet market is going to grow at an amazing rate -- and it will become bigger than any game console by 2012. Yes, the prices for games are less... but note that iPad games tend to have a higher price than iPhone games (all of $4 or $5 instead of $2 or $3). Still, when you're looking at a total market of 175 million or so by the end of 2012, it should be enough to convince you to enter that market.

The chart from Forester Research, above, shows tablets gaining a quarter of the US market in a few years for all computing devices... that's out of 500 million or so sold. Makes you wonder why other companies are taking so long to challenge the iPad.... but it may be tougher than it looks. Android is not yet tablet-ready, according to Google. And Apple has a number of custom chips, and patents, that may be hard to work around. Still, the lure of the market size will get competitors to figure out ways around these barriers.

Here's what Gartner predicts for tablet sales (iPad and Android and whatever else, though iPad will probably get the biggest share):

	2010 Sales	2011 Sales	2012 Sales	2013 Sales
Media Tablets	19,490	54,781	103,425	154,150

(numbers are in thousands)

Add those up and you can see that by 2012 tablets will be a larger market than any console; the iPad by itself will probably be among the biggest consoles ever. (Expect Apple to sell about 24 million next year, on top of the 16 million or so this year... it'll be comparable to the Xbox 360 base, bigger than the PS3. Note that the iPad is only one of the iOS devices... which currently total about 125 million worldwide installed base.)

"The all-in-one nature of media tablets will result in the cannibalization of other consumer electronics devices such as e-readers, gaming devices, and media players," said Carolina Milanesi, research vice president at Gartner.

Yes, they're talking about tablets demolishing the netbook category (strangled in its crib, essentially), and taking a chunk out of notebooks and accelerating the move away from desktop computers. Manufacturers are already seeing this in their sales numbers.

Some perspective is provided by looking at total worldwide console sales:

Console	(Millions)
Playstation	103
PS2	145
PS3	38
NES	62
SNES	49
N64	33
Gamecube	22
Wii	71
Xbox	24
Xbox 360	42
Game Boy	119
GBA	82
DS	125
PSP	53

So the biggest installed base, worldwide, is the PS2 at 145 million. Not bad, but nothing today is selling in numbers to come close to the PS2. Game consoles are lucky to crack 500,000 sales in a month, and usually it's lower (the Wii is hitting 250,000 per month now). The iPad is looking at getting to 2 million a month by the end of 2011 (it's already over 1.3 million per month), and to keep climbing. Note also that with the new Apple TV you'll be able to wirelessly stream any game you're playing on your iPad right to your TV... or iPhone game, or iPod Touch game. Soon you'll be seeing Apple TV with its own App Store and its own games. Oh, console makers have a lot to worry about.

Still, there are some interesting flaws in the picture. One is that a recent survey showed one third of all iPad owners so far have never downloaded an app; not a single one. Seems odd to me, but that will probably continue to some extent. The iPad is getting some very casual users who aren't computer savvy and may just be content to browse the web, or play their media library. But with a little advertising I bet that percentage will shrink.

Update: Seems like Nielsen was wrong about that statistic; only 9% of iPad owners haven't downloaded an app. They recanted here; no explanation, no apology. Makes you kind of suspect their other numbers...

New Apple Numbers Smashing Records

Apple has announced its numbers for the quarter ending September, and they are eyepopping. They hit a record $20 billion in revenue, with a profit of $4.3 billion. They sold 14.1 million iPhones... and they could have sold more, only they couldn't build them fast enough. Meanwhile, they also sold 9 million iPods and 4.2 million iPads (oh, yes, and Mac sales hit 3.9 million, a 27% increase).

Some very interesting information came along with this. First, the App Store has hit 300,000 Apps (for comparison purposes, the Android Market is over 90,000 Apps). Second, the number of iOS devices out there has hit 125 million, which is getting pretty darn close to the number of Nintendo DS units out there (132 million as of June). Clearly, given the respective sales rates, Apple will easily pass Nintendo's installed base this next quarter, and never look back no matter how well the 3DS does. Third, the iPad has become one of the fastest-selling gadgets ever, if not the fastest. Some analysts were disappointed Apple didn't sell 5 million, but there were supply constraints.

Oh, and Apple managed to sell over 9 million iPods, too, though that number was down 11% over last year. Probably had to do with the transition to the new iPod based on the iPhone 4. The new Apple TV sold 250,000 units, though of course it didn;t have very much of that quarter to work with. Still, it managed to match the Wii in sales for that month. (Wait until Apple puts the App Store on the Apple TV, then the floodgates will open.) Plus, Apple said they had hit a peak of 300,000 iOS product activations per day, handily beating Google's 200,000 per day. Apple also casually mentioned that Blackberry sold 12.1 million units in that period... the iPhone has now blown past the business leader. The iPad is making strong inroads into the business market, which is surprising to some people. Netbooks, notebooks, and consoles are all beginning to feel the impact of the tablet revolution, which is only just beginning. Note that the iPad-specific apps number over 35,000 and climbing.

What can we expect in the next year? Their numbers will only look better. Assuming Apple can get over their supply problems, they should be able to maintain their iPhone sales at least at that level. The long-rumored Verizon iPhone may actually appear next year, and if it does those numbers will climb higher. We should be seeing at least 5 million iPhones every month, maybe more. The iPad will probably hit close to 2 million per month. The iPod Touch will probably be 2 million per month. The Apple TV may even hit 1 million per month once it gets an App Store.

Consider, this, too: Apple is now the second largest company in the world by market capitalization. Their sales make them bigger than Microsoft, and in the upcoming quarter they'll beat Google and Microsoft, too. Cash in the bank is close to $50 billion... which means they can acquire whatever they feel they need to in order to increase their business. If they want to spend a bit more on marketing in any category, they can overwhelm any competitor.

Those numbers put the entire console business in the dust. No wonder sales are down. Will console makers figure out that their business model needs to change? Will Microsoft somehow get it together with Windows Phone 7 and the Xbox 360 and the Kinect to make a solid family room competitor? Can Sony put together a PSP2 and an online media store connected to the PS3 that will offer a compelling alternative? Will Nintendo finally create a successor to the Wii and reinvent their WiiWare and DSIWare stores? Or is Google the only effective competitor left?

Nintendo Slipping, iPad Gaining

Can this really sell at $299?

The handheld game market is changing fast, and Nintendo appears to be losing ground. They just announced the ship date for the 3DS would be March (end of February in Japan) and the price point will be 25,000 yen (which would be $299 at the current exchange rate). Analysts are disappointed, and Nintendo has cut its profit forecast for the fiscal year in half. Though they are still figuring they'll sell 4 million units in that one month of sales... which is probably sell-in, not sell-thru (retailers will order that many, not all may be purchased by consumers in that time frame).

Meanwhile, another analyst is estimating that Apple will sell 21 million iPads in 2011... nearly 2 million a month. Compare that to Nintendo's estimate of 4 million 3DS units sold in the first month... no doubt to drop thereafter. Another interesting thing to consider is that the iPad is at a minimum $500, and the 3DS is $250 at least (retail price has not yet been announced for the US market, but they may try to retreat from the $299 price point). Also of note is the fact that Apple is selling about 3 million iPhones per month, and a million or two of the  iPod Touch... that's a whole lot of iOS devices. Also note that the iPod Touch is $229 for the 8 GB model, and $299 for the 32 GB model. Compared to what you get, the 3DS doesn't look like a great deal... the 3DS plays games; the iPod Touch does that, and also takes high-quality photos, hi-def video, plays music and videos on an amazing screen, and has 250,000 Apps available for it, many of them free.

If Android is more to your liking, then it's good to note that as of August Eric Schmidt said that 200,000 Android devices were being activated each day... which pencils out to about 6 million per month. That's a lot of mobile gaming devices.

Of course, Nintendo doesn't really acknowledge iDevices or Android devices as competition. I guess denial is more than just a river in Egypt...

Apple Gaining On Nintendo

Since Apple doesn't release sales figures very often, it's hard to be sure. But one research firm has done their homework and says that over 40 million Americans use Apple devices (iPhone, iPod Touch, iPad) to play games... compared to Nintendo with 41 million DS installed base in the US. Plus, the latest sales trends are not exactly favoring Nintendo... Apple is selling over 1 million iPads a month, and more than twice that in iPhones and iPod Touches. Meanwhile, handheld sales are down 25% over last year's dismal sales numbers, which no doubt accounts for Nintendo's dropping the DS pricing by $20. (By the way, manufacturers reduce pricing only when they feel they need to because sales would be better. They will never do it out of the kindness of their hearts because their manufacturing cost dropped... they'll cheerfully pocket the additional profit as long as sales stay high.)

Nintendo is hoping the 3DS will revitalize their handheld sales. I think it will, to some extent; but Nintendo's market share will continue to erode as Apple's sales continue to increase with new models of their handhelds coming out every year. Also, the Android platform is growing like crazy, and games are an important part of that market, too. Nintendo may have a 3D display in the 3DS, but in many other ways the hardware is inferior to these other handhelds; processor, display resolution, orientation sensors, network connectivity, size of the software base, average software price an order of magnitude higher on Nintendo. It's hardly a fair fight any more, and it's only going to get worse.

Nintendo is losing the fight for developer mindshare, too. Even big developers are seeing great returns from iPhone software (like EA, for instance). Plus developers, large or small, prefer the unfettered market of Apple or Android to the regimented, bureaucratic, expensive and unpredictable Nintendo regime.

Bottom line: If you're already a Nintendo developer, you can probably make money continuing to do products for their handhelds. If you're not already a Nintendo developer, you should first make your products for Apple or Android, with far lower risk and expense. If you have a hit there, then perhaps think about a Nintendo version. If their handheld devices still matter by that time.

5 Reasons iPhone Game Marketing Is Getting Harder

This should come as no surprise, but marketing iPhone games is getting more difficult, not easier. Here's five reasons why.

1. Apple's no help. They've tinkered with the iTunes store a bit, but if your game doesn't happen to be either a top seller already or one of the employee picks, you're lost in the shuffle. It doesn't help when you go to the game categories and they are based on what the publisher says with no enforcement. So, for instance, the Roleplaying category is stuffed with social media games that have nothing to do with actual RPGs the way gamers understand them. We wait in vain for adequate search tools; something that gave you multiple parameters to check off would be nice, so you could find all games that included Nazis that were under $1.99 and had at least a 4-star rating. Their new Game Center holds promise for hooking up players... but that's only after you've already found the game. The only consolation, I guess, is that apps of all types have the same problem.
2. The hardware and software is changing. The consoles stay the same for years... maybe decades. But the iPhone gets a new version every year, at least. The hyper-competitive smartphone market means new features keep getting added to the hardware. It's not just a faster processor or more RAM; it's new sensors, a new screen resolution, new cameras (now in front, too). You have to keep studying the hardware platform to make sure new features don't break your game... or allow the competition to get a jump on you. The iOS software keeps getting revised, too, and has new features as well as the possibility that your software may get broken in the upgrade. You can't just sit back and watch the money roll in; you have to keep programming and testing. And did I mention the iPad, and the iPod Touch?
3. The installed base is fragmented. Because there's constant new hardware and software, the iPhone market isn't one big market; it's a bunch of smaller ones, with older hardware and system software to worry about. So you have to think about which versions you'll support, and make it clear in your marketing what is and is not supported. And inevitably narrow your market, unless your game is so bone-simple it runs on everything.
4. The competition is increasing. The number of games in the App Store is somewhere north of 40,000, and it's going higher. More smaller developers and more larger developers are getting more titles into the App Store. It's harder to have a unique game, or even unique elements. And you're getting lost in the endless stream of new stuff.
5. The competition is getting better. More and more competition is increasing the polish on the titles. And more and more established companies are realizing how important this market is, so they're bringing all of their formidable talent pools to bear on the development task. Plus, they have dollars to spend on marketing, and they can piggy-back marketing efforts onto their other marketing. It's not enough you're drowning in competitive games, they can start trying to drown out your marketing efforts too.

So what can you do about all of these things? Answers tomorrow.

Mobile Games: Threat or Menace?

Mobile games are a viable competitive threat to consoles, according to iSuppli. It's hard not to acknowledge it (unless you're Nintendo) when you look at the numbers; handheld videogame sales actually dropped last year by 2.5%, down to 38.9 million units. While Google recently announced that they are activating 200,000 Android phones every day. And Apple is selling well over a million iPhones a month, and over a million iPads, and over a million iPod Touches... it all adds up to big trouble for the DS. The PSP? No one even thinks of that as a viable competitor any more; major publishers are dropping PSP versions of titles (LucasArts, for one).

Mobile games are even threatening the console market in the family room, as the iPad takes hold (and Android tablets begin arriving). Sales numbers are down for console titles this year (by around 10%); it may be the economy, but it may also be due to the proliferation of low-cost alternatives like social games... and mobile games.

There's no clearer illustration of the threat than the fact that if you look for EA's Madden Football on, say, a Wii, it's $60. On a DS, it's $30 (or $20 used). On an iPad, it's $12.99, and on an iPhone, it's $7.99. The same game... Oh, and your iPad or your iPhone can be used for other things than gaming, and you store the game on the device and never have to worry about finding the cartridge or the disc. And buying it just takes a couple of clicks and a few moments.

And soon we'll see Android and Apple app stores in family room devices... whither the console business then?

Apple's Fixing Things

Apple is trying to clean up its act a little bit, apparently. First off, they've fixed the way they screwed up the App Store for iPads. Now you can actually find all the games for the iPad. Though the fundamental difficulties with the App Store still remain. There are too many products for the interface; unless you already know what you're looking for, you won't find it unless you get lucky. And let's not even talk about the categories and how the games in them don't belong there...

Meanwhile, having come under fire for blocking third-party development tools from being used on items for the App Store, Apple is quietly looking into altering their developer agreements. But this may be too late to stave off an anti-trust investigation. Oh, and questions are being asked about iAds and whether that may be an anti-trust violation because of its restrictions on data sharing.

All of this in the shadow of Apple's announcement that they've already sold 1 million iPads in less than half the time it took them to sell 1 million iPhones.

It's a tough market, but a growing one. Having now played with an iPad for a while (my wife got one for work), I do believe it has a bright future. I guess HP and Microsoft agree, since they've canned their slates that were originally looked at for this year. Back to the drawing board... Apple's changed the battlefield.