US Smartphone Market Share

Here's a look at the latest US smartphone market share numbers... You can see it better at the link, but the important part is this: Android 29%, Apple and RIM at 27%, and then there's everybody else. Hey RIM's not doing to bad, you think... except when you realize last quarter their share was 35%. As Blackberry users run out their contracts, they are finding their way to Android or iOS.

I expect Android will continue to grow their lead over Apple, unless Apple makes a significant move on the lower end of the price range. Sure, Apple needs an iPhone 5 to keep up with the Android Joneses, but the real place to pick up market share is in getting a $99 smartphone out there with no contract commitment.

Apple has already revolutionized the mobile phone business once. I don't think they're finished revolutionizing, yet. I expect a full range of price points, and maybe ways to cut the carriers out completely. One thing's for sure: They'll be selling a lot of phones.

iPhone 5 Vs. iPhone Nano

What the iPhone Nano might look like.

While we've all been speculating about the iPhone 5, it looks like Apple has another idea gestating: a smaller, less expensive iPhone, at least according to the Wall Street Journal, which has been very accurate in the past. This sounds like a deliberate rumor float to counter all the various new Android and Windows Phone 7/Nokia news out there... the Big Dog lets out a low growl to keep its presence known.

Here's how the plans shape up: The iPhone 5 will have a 4" screen, but keep the overall form factor the same, and the new A5 dual core processor with about 4x the graphics power of the current A4/PowerVR combo. They might bump the RAM up, too, and maybe the storage space, but I'm inclined to doubt that because of what they plan for MobileMe: Making the $99 service free, and encouraging people to store stuff there instead of locally on their phone. (Though given how difficult bandwidth can be to find and maintain, I don't know about this idea.)

The iPhone Nano will be about half the size, with an edge-to-edge screen, and a significantly lower price point. The current iPhone 4 will probably get a lower price point, and maybe push the 3GS off into the old products graveyard. I expect the iPhone Nano will probably have similar specs to the iPhone 4.

The main idea here is that Apple needs to get a sexy lower-cost iPhone out there to counter the hordes of less expensive smartphones on the way (as I discussed earlier, the $99 smartphone sans contract will happen this year sometime; you can already get a $149 model).

What does all this mean? It means Apple is serious about not just maintaining its iPhone sales, but growing them even in the face of enhanced competition. The time is certainly right for Apple to move to the lower end. This mirrors their successful strategy with the iPod, which once was a single model... now it covers a range of form factors and prices and capabilities. Expect the iPhone line to grow the same way, especially when you consider it's about 40% of Apple's total sales. They're not going to stop pushing on that any time soon.

Expect Apple to continue selling a lot of iPhones... I expect they will move close to 100 million this year. Whoosh.

For developers, though, it's yet one more form factor to worry about, and something else to test on. And  you'll have to think about continuing to support the A4, as well as the A5 going forward. Here's the opportunity ahead, game developers" Be the first on your block to support the A5 with an awesome A5-only title, and garner enhanced press and some good cross-marketing for other titles.

Playstation Phone Vs. iPhone vs. NGP

The Playstation Phone looks cool, but will it sell?

The Playstation Phone is finally on its way, and the specs have been revealed. Here are the details, taken from Ars Technica's article:

The system features a four-inch capacitive multi-touch screen running at 480 by 854 resolution, and you'll be able to play 3D games for an estimated five and a half hours. There will be both black and white hardware at launch. Here are the rest of the specifications:

• Size: 119 x 62 x 16 mm
• Weight: 175 grams
• Phone memory: 400 MB
• Memory card support: microSD™, up to 32 GB
• Memory card included: 8GB microSD™
• Operating system: Google™ Android 2.3 (Gingerbread)
• Processor: 1 GHz Scorpion ARMv7

There will be a number of games included with the phone, such as The Sims 3, Asphalt Adrenaline 6, Bruce Lee, Star Battalion, and Tetris. Games will be delivered through the Android Marketplace, but there's no word yet on pricing. The phone itself should be available from Verizon this spring.

How does this stack up against the iPhone? Pretty well, I'd have to say, at least against the iPhone 4. The nod probably goes to the Playstation Phone for its processor power and dedicated gaming controls, but the iPhone 4 has a better screen resolution and a huge library to start with, as well as a vast array of free and low-cost games.

The NGP is clearly a major step up in processing power and gaming utility, with its full array of sensors and dual analog joysticks (which look to be better than the Playstation Phone's flat versions). The bigger screen of the NGP, its backside touchscreen, shoulder buttons, and raw horsepower will give it a clear differentiation. Of course, the NGP lacks straightup phone capability, too, and is a larger form factor.

I see this as a good strategy for Sony. I'm not sure how many of the Playstation Phones they will sell (much depends on the pricing, and how good it is as a phone... though it seems like it will be a reasonable mid-to upper range Android phone). But this plan means it shouldn't impact the NGP, and along with Sony's stated intent to keep the PSP around, means they'll have a range of products to cover different price points and user profiles.

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.

3DS vs. iPhone 4

It's kind of sad really. The King is dead; long live the King. Nintendo has announced more details about the 3DS, the most important being the price: $249 in the U.S. It's cheaper than the price in Japan (which is equivalent to $300), but it's still an eye-opener for this market. Software prices have not yet been announced, but Nintendo has signaled that they will be higher than DS software prices; expect prices to range from $40 to $50, or possibly even higher.

This is coming at a time when Nintendo has just lost the title of best-selling handheld gaming device to Apple. Apple now has over 160 million iOS devices sold, compared to 145 million DS series handhelds sold worldwide. Worse, in 2011 Apple is probably going to sell around 100 million iPhones and iPod Touches, along with perhaps 40 million iPads. Nintendo in their wildest dreams may sell about 30 million DS devices of all flavors... a fraction of what Apple will sell.

Yes, but the 3DS has 3D without glasses. True, and it may look pretty neat. But it's also probably not good for long play sessions due to eyestrain and headaches. Nintendo's got the answer, though; the battery life of the 3DS is only good for about 3 or 4 hours of 3D game play anyway (compared to 12 to 15 hours on a DSi).

Let's compare tech specs: Screen resolutions... the iPhone 4 is 960 x 640 on a 3.5 inch screen, while the 3DS has a 400 x 240 3.53 inch screen (800 x 240 in non-3D mode). Processors? The iPhone 4 has a Cortex A8  running somewhere around 800 MHz along with a PowerVR graphics chip at some unknown clock speed; the 3DS is running at 200 MHz. Cameras? The 3DS can take 3D pictures... at VGA resolution (0.3 MP), which can only be displayed on the 3DS. The iPhone 4 can take 5 MP pictures, along with 720P video. The iPhone 4 has a raft of other sensors like GPS, compass, gyros, motion... the 3DS can sense motion.

You can get an 8GB iPod Touch for $229, or a 32 GB for $299. Same as an iPhone, but without the phone contract... the phone prices are subsidized, of course, but you can get one for $199.

This is all leaving out the (rumored) iPhone 5 that will probably be arriving this summer. No one knows what features it will have, but the likeliest is a new processor: the A5, which supposedly is a dual-core monster which delivers 4x or 5x the current performance with graphics. If Apple follows its usual practice, the current iPhone 4 will be moved down in price while the iPhone 5 will occupy the current price slots.

When you look at software like Infinity Blade for the iPhone 4, it's pretty damn impressive. We'll see more of this as the iPhone audience expands, and developers realize the potential of the devices. The platform is getting yearly upgrades, and it's just going to zoom past Nintendo. The disparity in 2 or 3 years will be shocking.

I'm sorry to see Nintendo go. It's a wrenching change for the game industry, with a whole different series of development and marketing challenges ahead. Oh, Nintendo won't just vanish right away. The 3DS will have a lot of sales, lots of laudatory reviews and game industry execs touting its virtues so they can sell software. But ultimately I think consumers will continue to flock to smartphones and tablets at an order of magnitude higher rate than the 3DS (I didn't bother to add in the Android market to the above discussion). Any publisher is going to want to direct its resources to the biggest market. Yes, having an early title for the 3DS will be a moneymaker... but there's even better potential in smartphones. 2011 will be the year mobile game revenues (smartphones and tablets) pass up handheld game revenues (3DS, PSP2, DS, and PSP). And the gap will just grow wider.

7 Smartphone Gaming Predictions For 2011

Smartphones 2011... Produced by Photoshop.

The tech industry basically shuts down between December 25th and January 2, and so the usual spate of news becomes a trickle. What's a blogger to do except make predictions? That's how I intend to fill things out this week, with a series of prognostications for 2011. If nothing else, this will set me up for a retrospective one year hence where I can laugh at the foolishness of my younger self. Until then, here's my take on what's going to happen in the Mobile Gaming Market in 2011.

• Smartphone games continue double-digit growth. Not a hard prediction to make, but let's go a little further: Smartphone games will pass handheld games sales numbers. There was about $1.6 billion in US sales for mobile games in 2010, and about $2.1 billion for handheld console games in 2010; with the trend lines smartphones can pass them up, if the 3DS and the PSP2 don't spawn massive software sales (which I don't think will happen). The battle is over, and smartphones have won. Handhelds just haven't figured out they're dead yet.
• Smartphone games become a bigger market than PC games at retail. PC games were about $2.1 billion in US sales in 2010, and that was down about 19% from 2009. I expect space at retail for PC games will shrink, not expand, so smartphone games have a good shot at passing them up. Not only that, smartphones will become a bigger market than PCs this year, worldwide. We're looking at over 500 million smartphones sold in 2011, if predictions are correct. Now that's a market worth being part of.
• Verizon adds iPhone. The rumors have reached a fever pitch, but I really start to believe when I hear from suppliers. Apple is now looking at selling around 20 million iPhones or more in 1Q, which looks like a truly astounding number for the entire year. Throw in some iPod Touches to that mix and Apple will likely more than double its iDevice installed base in one year. Whoosh.
• A new iPhone model arrives. Have I heard rumors? Nope, just educated guessing. Apple has generally introduced a new model every year or so. Sure, they'd love to slow down and bank more profits, but the fevered pace of the smartphone business means if you're only running, someone is sprinting past you. I think Apple has to keep pushing new phone tech out there in order to keep sales up. Probably this year will see less technical innovation than the iPhone 4. I expect a faster processor, maybe more memory for the money, and reduce the price on the older technology. Oh, and a redesign to fix the antenna problem (though that seems to have been mostly forgotten). The new iPhone model probably won't arrive until summer, just in time to push the old model price down and boost sales going into the last part of the year.
• Android outstrips Apple in units sold; Apple continues to make more money for developers. This will happen despite Apple vastly increasing its sales due to the addition of Verizon (see above). There are just more and more Android phones out there, and the competition will continue. Another release or two on the operating system will help. And I sure hope Google gets around to making in-app purchasing work, because that will be the best thing they can do for developers. But there's more than that going on: New chipsets will make smartphones even more affordable, with retail prices under $100 without a carrier subsidy. That's for a smartphone looking a lot like a Droid, and you'll be able to find them by next summer for around $75.... without a carrier subsidy. Oh, yeah, there will be a lot of those sold... and the buyers will be looking for apps.
• Blackberry and Nokia will continue to lose smartphone market share, only faster this year. These poor companies will continue to flounder around, denying that there's a problem. Their new widgets will fix the problem... and then they come out and no one cares. The Blackberry Playbook? Will anyone even remember the name by next summer? Nokia will continue to try to get their online store moving, but will seem to forget that it won't matter unless they can sell a lot of hardware. Meanwhile developers will keep busy with their iOS and Android projects, and only if they have time on their hands worry about other markets. Which they won't.  Meanwhile, we see Windows Phone 7 and Palm making inroads in the market; they will likely eat up share from Nokia and Blackberry.
• Data plans get cheaper. Virgin's offering a $25/month plan off contract. T-mobile has $10 a month plan. AT&T has a $15 a month plan. As the networks get built out, and carriers compete, prices will continue to drop. Tablets will only accelerate this. Cheaper data plans will be good for apps, and good for developers.

2011 looks to be a huge year if you're an app developers. But the extreme growth will probably mean little attention being paid to details like helping developers market their apps. It will be even harder to find apps in 2011, not easier, and marketing will be even more important.

Mobile Game Revenues Doubling, In-Game Purchases Skyrocketing

Anyone who's been paying attention to the gaming industry has been aware that in-game purchases have become a big business. This report from Juniper (reported by TechCrunch) predicts the mobile game market revenues to pass $11 billion by 2015... which is more than double 2009 revenues. Not amazingly aggressive by some standards; I think growth may accelerate even more than they are claiming (especially if you think of tablets as "mobile game" platforms).

The interesting part is going to be played by in-game purchases. Juniper says that in-game purchases will be the primary source of revenue, overtaking pay-per-download, by 2013. That's two years away, baby. That freight train is moving fast.

Juniper also notes that discoverability is the big problem. Well, yeah, it's all about the marketing once you have a good game put together. There must be hundreds or thousands of good games languishing in obscurity in the App Store because you've never heard of them. As TechCrunch notes, "This is obviously an excellent opportunity for fledgling app discovery platforms such as Appsfire, Chomp, Mplayit, AppAware, Appolocious and, increasingly, StumbleUpon."

Just to back up Juniper's numbers, here's a report on GigaOm about the flourishing of the freemium model. If you look at the top-grossing 100 apps, 34 of them are free to download and make their money through in-app purchases. Analysts think in-app purchases account for 30% of the total App Store revenue. Which is pretty impressive when you consider that freemium apps are less than 2% of all apps in the app store.

Yeah, you read that right. Less than 2% of the apps generate 30% of the revenue. If you're planning on building a game app, and you're not seriously considering a freemium model, you need to reconsider.

Which all highlights how much more work Google has to do with Android. As this article mentions, while Android sales have passed up the iPhone in sheer units, and new Android apps appear at about the same rate as new iPhone apps, in-app purchases on the iPhone are 7 times the amount on Android. Google's got some serious work to do on their tools and the Android Market to close that gap.

Meanwhile, getting your app found is still the basic problem facing developers. More on that in another post.

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.

Hasbro Brings 3D to iPhone/iPod Touch

Viewmaster 2010?

Yeah, you read that right. Hasbro. Not exactly a cutting edge technology company, but you have to give them credit for thinking big. They must have looked at the iPhone market, and the excitement over Nintendo's upcoming 3DS with the 3D display, and said "What if we could combine the two?"

This is their answer. My3D, a device that lets you slide in an iPod Touch or an iPhone, and it sells for $30. Of course, you'll need 3D content, which they're hoping will be games (some free), TV and movies, and perhaps even virtual excursions into aquariums and the like.

Gee, maybe they can redo some old Viewmaster collections and put them up as apps.

OK, perhaps you're sensing some skepticism on my part. Good catch... I think that putting something up to your face like that for more than a few moments will get real old, real fast. And how exactly would you control a game when the iPod is inside the case? Throwing your head around? What do you do when the phone rings? No amount of marketing will save a bad idea, and this is one of those cases. How bad it is depends on how much money Hasbro throws at it, which I hope for their sake isn't a lot.

I don't think this will take over the world. Remember, you heard that prediction here first.

The AppDroid Apocalypse

Apple TV and Google TV: Threat or Menace?

The Appdroid Apocalypse is coming, and it poses a threat to the survival of the console business as we know it. Surviving, or better still, thriving, will require understanding the coming changes and changing business models in response. It won't be easy, and for some companies it may prove impossible. For others it's a huge opportunity. Either way, the Appdroid Apocalypse is arriving soon, and we'd all better be ready.

What is the Appdroid Apocalypse? The same App Store/Android Market that's busily eating up market share from the Nintendo DS and the Sony PSP is coming to a family room near you. The Apple TV and the Google TV will eventually offer the same gaming apps that you find on iPhone/iPad/iPod Touch and Android, but they'll be played in your family room. Yeah, the same place your console is plugged in. These apps, numbering in the tens of thousands, cost an average of less than $1.50. Thousands of them are free, or free-to-play. The most expensive ones are still under $10. The Apocalypse part is where this new console business turns the existing console business into a scorched wasteland... or at least, a market where sales are declining from year to year rather than growing.

Whoa, wait a minute, you say. That's not what Apple TV does... Apple hasn't said anything about offering Apps on Apple TV. Sure, and they didn't do that for the first year of the iPhone, either. Everything is there to make it happen; the new Apple TV runs on iOS, after all. You think maybe Apple hasn't noticed they've made a billion dollars selling Apps? Or the potential of selling a few billion more in family rooms? Apple can flip a switch and turn on an App Store for Apple TV at any time. They probably just want to get everything ready for the launch, so they can hit the ground running. It could happen soon, or they could wait a year. But it's going to happen.

Google is in a similar place. They see how much action they've gotten from the Android market, and how Apple has done with the App Store. Does Google want to lose the family room to Apple? No way.

One thing Apple and Google have in common is that neither one particularly cares what happens to the traditional console business. Gee, Microsoft might lose a lot of money? A happy side effect of Apple and Google's plans.

Where's the evidence for this Apocalypse? Let's look at the numbers. Android phones are now being activated at the rate of 200,000 per day, according to Eric Schmidt. Combined, Android (8.5 million through 2009) and Apple smartphones (according to this report) will be in excess of 150 million by 2012, and with iPod Touches and iPads, along with Android tablets, it may be well over 250 million units (Gartner Group projects over 100 million tablets sold in 2012). Compare this to an installed base of 132 million DS units as of June 2010; that's likely to grow by another 15-20 million units by 2012, but that still leaves it about half the size of the iOS/Android installed base.

Nintendo's DS business is faltering; both hardware and software sales are down (43% and 23% over the last six months). The 3DS is coming next year, but it will likely be $250 to $300, and it still won't have a business model akin to Android or Apple's relatively open markets. There are over 300,000 Apps in the App Store, and the Android app market has hit 100,000. By comparison the DS has in the low thousands of titles, and many are no longer available because you just can't find a cartridge. All of the apps are always available, since there is no physical inventory.

At least 25% of those apps for iOS are games, and the average price is around $1.50. Thousands of them are free, and many are free-to-play. Apple and Google are integrating advertising into their platforms, which promises to keep game prices low as publishers can make money from ads. Freemium business models, such as used in social games like Farmville, are wildly successful (to the point where Zynga is looking at $1 billion in annual revenue by 2012); this is not a model planned for consoles. Nintendo has some 241 downloadable titles available for the DSi, but they are mostly $5 or $8 (and the DSi is a small part of the overall DS base). Nintendo is careful to preserve its retail business by keeping retail titles out of its download store. They saw what happened when Sony introduced the PSPGo, which offered no way for retailers to take a cut from software sales since it was all downloads.

The handheld videogame business is rapidly being outsold by Apple and Google, and the trend will accelerate. Sony has done pretty well with the PSP (over 50 million sold) but it has paled in comparison to the DS and the iPod; their attempt to get into the future of the business with the PSPGo (which used digital distribution) failed miserably as a high price and massive retailer pushback doomed the device. They may try again with the PSP2, but they'll have to innovate with their business model to find a way to get retailers to support digital distribution (Sony also needs to get their internal music and movie units onboard, which also promises to be a fight). Nintendo has come out squarely against the idea of digitally distributing core titles. The even more fundamental problem is that Sony and Nintendo offer devices that are only game machines, while Apple and Google offer devices with a wide range of functions. The greater efficiencies of scale mean that Apple and Google can put more and more power into their handheld devices at lower and lower cost, and they release new hardware on a yearly schedule instead of the 3 year or more schedule of Sony and Nintendo.

Now Apple and Google are poised to bring this business model innovation into the family room (here's an overview of their current offerings). You'll see an App store for the Apple TV and the Google TV, offering many different titles. Developers can easily release software without elaborate bureaucracy. There will be thousands of titles available at average prices an order of magnitude below standard console games.

These Google TV and Apple TV boxes will not be close to the power of current consoles; at least, not at first. But they'll be plenty powerful enough to run, say, Farmville. Or any of the thousands of games on iPhone or Android. Advertising will be built in, and free-to-play business models will be welcomed.

And this is how the classic console industry starts to decline. Does anyone think the last two years of declining sales have just been a fluke?

Do these things mean AAA console titles are obsolete? No, there will still be demand for them. But development costs have to be kept in check to make these titles consistently profitable. Mid-range titles are getting squeezed by lower sales and higher budgets, and there's only so many AAA titles the market can absorb.

Surviving the Appdroid Apocalypse means investing in new types of games and new business models. We're already seeing EA buying mobile and social game companies; Activision is talking about a subscription model for Call of Duty. It's a difficult task, though, to take a company mostly based around a 2-3 year development cycle for its games and completely change the way it approaches business. There will be wrenching readjustments along the way. Creating a steady flow of profits on free or 99 cent software is a huge challenge, and it will mean different development models.

It's not all bad news, though. The changes favor smaller developers who can more easily adjust to a new market of smaller budgets and shorter development times. The indie developer has many more possibilities opening up than seemed possible a few years ago.

It's also true that marketing becomes a huge issue when you're trying to stand out among tens of thousands of titles all competing for attention, and that will be a big problem for smaller developers. Developers of all sizes will have to be able to make a profit on a game that may be given away. Big publishers will have many advantages going into this market due to their size, audience awareness, and the amount of dollars they can throw at things. Small developers will have more of a chance to break through into a big market than they've had before, but it won't be easy.

We're all going to have to figure out out how to first survive, and then thrive, after the Appdroid Apocalypse. Because it's coming soon to a family room near you.

PSP2 Rumor Roundup & Analysis

One possible PSP2 configuration

The rumor mill has been grinding out factoids like crazy lately about the PSP2, so I thought I'd round up all the rumors and season it with some analysis and some inductive reasoning.

This article is a an interesting roundup of one analyst's thinking. He makes a lot of good points about the PSP's history, though he fails to mention they have sold over 55 million units. Not bad at all, just not anywhere near the DS line's 125 million units. The PSP has also been plagued with piracy, which has kept developers away, and the launch of the PSPGo didn't help matters either. (Retailers hated it because they couldn't sell software for it.)

Based on various reports (here, here, and here) we are likely to see the PSP2 shipping next fall. The usual pattern is to show the machine publicly at E3, where you announce the ship date and the price. If you're aggressive about the release, you start showing the machine even earlier, like at the Game Developer's Conference (though you probably hold off mentioning exact specs or pricing). If you want to hit the ground running, you've been seeding key developers with advance hardware units and early dev kits for at least a year ahead of time. Which is just what the rumor mill has been saying; developers have had it in their hot little hands for months.

What also seems to be clear is that the hardware design isn't yet locked down. There are still battery and heat issues to take care of, so the final spec is not yet complete. Here's what seems to be pretty sure, though:

• Higher resolution screen (at least 1" bigger also), so that they can say HD (which leaves them some wiggle room, as there are several resolutions that qualify for that title)
• Dual analog controls
• Physical media (yes, it won't be download-only)
• Backside touch controls
• More powerful graphics/CPU than a 3DS or even an iPhone 4

 It would be a big break with the past if Sony decided to court small developers and independent developers, but given how the iOS market has progressed it would certainly be a smart move on Sony's part. Sony would be really smart if they opened the device up to other applications besides games, and made it a music player and video player, with a slick online store that sold all sorts of media. Don't hold your breath, though.

Price? I'd guess somewhere between $249 and $349 depending on many factors, such as the 3DS price and how it's selling, and exactly what hardware is in the PSP2 and how much Sony wants to profit on the hardware.

I think that Sony has a good shot at a reasonable chunk of market share, IF they really push the downloadable content angle and create something that resembles the iTunes store in its ease of use and breadth of content. Both Sony and Nintendo have to realize the reason Apple is grabbing their market share is not the hardware, it's the business model. I fear neither Sony nor Nintendo will be able to deal with the forces that prevent them from adopting the Apple model, even in part. I hope that they will be able to.

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...

Strategies For Marketing iPhone Games

How do you overcome the obstacles to successful iPhone game marketing? The brief answer is persistence; don't expect overnight success, and keep trying. Try what? Here are some suggestions.

• Have a plan. If you want to increase the chances for success, start by thinking about what you're going to do before you do it. Create a marketing plan; it will certainly change as it encounters reality, but this is better than no plan. This should also give you a budget and a way of measuring your marketing's success or failure. You can find information on marketing plans bouncing around on the Internet, or you can stay tuned; I'm working on a definitive marketing plan guide for iPhone products.

• Analyze the competition. Spend some quality time looking for competitors to your product and analyzing them and their marketing efforts. How did you find them? How are they marketing their products? How successful is their marketing? What can you do better? Don't neglect their game design, either. How is your design better than theirs? How is it different? What marketing hooks are inherent in your design and artwork and title that your competition doesn't have? Sometimes you can leverage directly off of your competition's strengths: "We're #2, so we try harder." A thorough knowledge of your competition's game design and marketing makes a great guide for your game design and marketing decisions.

• Keep up with changes. Yes, Apple is constantly introducing new hardware and software, and your competition is introducing new products and features all the time. Budget time to keep up with all that. Embrace it; some games (like Pocket God) have made it one of their key strengths. Apple introduces the iPad? You introduce an iPad-specific version of your game. Yes, the market is small right now compared to the iPod Touch or the iPhone, but it's growing rapidly. And since the competition is smaller, you may be able to snag a higher market share... and you'll be well-positioned as that market expands and new models are introduced. It's a marathon, not a sprint. Keep running.

• Test and modify. I think Von Moltke said no marketing plan survives contact with the enemy, or something like that. Your marketing plan should be a work in progress, modified as you get information from the battlefield. If you bought a search term and you're getting terrible results, drop it. Try another one. If you get good results, spend more. Your Facebook page isn't dragging in the pageviews to your web site? Post more often, or try buying some banner ads... get a mention on a popular blog by donating a week's revenue to some charity that's important to you.  Keep track of your marketing efforts and how they are working, and revise until you find some that work. You may need to give your efforts sufficient time to produce results, but you should know that from your marketing plan.

•  Embrace digital guerrilla marketing. What's that, you say? It's my term for the new wave of marketing techniques that are perfectly suited to entrepreneurs with time to spend but limited budgets. Use social networking, email, reviews, blog posts, cross-marketing, giveaways, event marketing for PR, and local PR to generate interest for your game. These are all topics I've covered before, and will cover again. These are also covered in various places on the Internet, and you may want to go spelunking in digital caverns to find some interesting advice.

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?

Free Apps! Why?

Many developers are giving away their apps for the iPhone or Android markets, as this article shows in detail. In fact, the Android market is 57% free, while the iPhone market is 28% free. (The average price paid for an app is about $4, though this is skewed by some rather pricey apps at the high end.) Why should developers give away their hard work, and why should you consider it too?

Marketing is the answer. Standing out in a forest of 225,00+ apps (iPhone) or 70,000+ (Android) is difficult; there are almost certainly several apps that do pretty much the same thing as yours, and if there aren't, and yours is a good idea, there soon will be. People are more likely to try your app if it's free. But how do you make money if it's free?

The free version is usually a demo of some kind; there's almost always a paid version with more features available. The hope is that you'll try the free one, like it, and then pay a few bucks to get the better version. A variation of this is free-to-play; you can play the game for free as much as you like, but there are in-game items (such as a better weapon) available for money. Only a small percentage of players pay for those, but it's enough to pay for all the rest of the players.

Some free titles don't have a paid version. What's up with that? Sometimes it's just to be funny (like the vuvuzela apps that showed up). As a marketing tool, such a free app can be a useful way to get your name out there and possibly bring people in to your web site and other ways for you to make money. A popular version of this is the business that has a free app in order to encourage your use of their services; banks, for instance.

Of course, some apps are free because they are supported by advertising. So click on an ad once in a while if you like a game; you'll be helping them out.

Consider how a free app might help out your business model; consider it as another marketing tool.

App Bonanza Expands

As I write this, Steve Jobs is busy telling developers about the new iPhone, and it does sound pretty cool. But the real news that should be getting you excited is not the new hardware, nor even the advent of Farmville for the iPhone. It's the state of the App market. Now there's 225,000 Apps in the App store, and they just crossed 5 billion downloads... and have paid out over $1 billion to developers. Plus, while Apple was showing stats on the growth of the iPhone and its App market, they were showing numbers about Android. They interesting thing is how Windows Mobile, Blackberry and Nokia are shrinking, while Apple and Android are growing at an amazing rate. Why does this matter? Because Apple and Android have easy App markets to get into, and by far the highest volume of App sales... so that's where the money is for developers.

New Android phones are getting pretty amazing, and it's nice to see sharp competition between Apple and other hardware makers. The result is the market for Apps of all flavors is growing fast. Interestingly, there is only a 5% overlap between iPhone Apps and Android Apps, according to Flurry (the leading mobile analytics firm). This surprises me... app developers are missing an easy way to expand their sales. Do an iPhone app, then port it to Android, or vice versa.

And all this App frenzy is even without counting the 2 million iPads sold so far (one every 3 seconds now), and the 17 apps per iPad that have been downloaded to this point. Oh, and PDFs are now part of the iBookstore... and the iBookstore is accounting for 22% of ebook sales from major publishers. Plus they are now allowing individuals to put ebooks up for sale. And the iBookstore (complete with PDF support) is coming to the new iPhone OS 4. So individual authors can now make their ebooks available to the 100 million iDevices out there, or will be able to soon.

Rumors have already started to emerge that Apple TV is going to get completely redone... as an iPhone type device, using that operating system and ecosystem. Imagine being able to buy games and play them on your TV... as Apple finally cracks the console market and completely upends that business, while opening up chances for small game developers to finally reach a huge audience. And did I mention Google TV, which has already been announced and is planning essentially the same thing? I wouldn't want to be Sony or Nintendo or Microsoft right now. They're going to be in LA in a week trying to get the world excited about what's coming for consoles, and meanwhile the world is changing in fundamental ways that they don't address.

Marketing is going to be even more key to this future...

App Advice from Flurry, Mobclix, Getjar

Yesterday I attended a panel discussion about marketing mobile apps, which included some interesting data from Flurry and Mobclix. ONe thing all the panelists agreed upon is that there is no one strategy that works for all apps; companies are trying different things, and no one has a magic formula that always works. SOmething that was clear to them, though was that the first month was a very good indicator (usually) of how an app would perform over time. If you didn't become a hit then, your chance of becoming a hit was much less later on. Not impossible, just much less likely. So your marketing should be planned for maximum effect in that time frame, or else it may not have as much impact.

Also interesting were the numbers on Android. The iPhone is still the big dog, but Android seems to be growing well also... both are eating share from Windows and Blackberry. Nokia who? Microsoft is anticipating sales of 11 million units of Windows 7 Mobile by the end of 2011... there must be something in the water in Redmond. Android's problem is the multiple versions, which make it difficult to support with one app. One thing I found most interesting is that most developers seem to be developing for one platform only; there's only a 5% overlap between iPhone and Android apps. Really? Seems like a missed play to me.

Finally, since 87% of app downloads are of free apps, that seems like a powerful marketing tool. You are left with the difficulty of monetizing your app, which needs to be considered from the beginning of the design process to really be effective. Advertising may work well, but for games the freemium model seems to be really popular.

iAds: Apple Throws Down The Gauntlet

As expected, Apple has introduced its own ad service, something that all iPhone/iPad/iPod Touch developers can tap into. What wasn't expected was just how they've implemented it. Clearly, from what they said, they are throwing down the gauntlet with Google. This is clearly a way to take charge of the mobile ad market. If Google was thinking about implementing some version of their text ads on phones, they may want to think again. Apple is doing nothing less than trying to reinvent the whole concept of online advertising. If they succeed, and Google doesn't come up with a good answer, Google may be the Microsoft of the new decade.

Details are still forthcoming, and of course much will depend on exactly how this is implemented. Part of Google's success is due to how easy it is to create and place ads, and how easy it is to control the spending, and how easy it is to get excellent information on the performance of your advertising. Also to be seen is how obtrusive the ads are in use, and how relevant they are to the context, and how customers will respond to them.  Still, I have to give credit to Apple for taking an aggressive move. It may be ambitious, but even if it fails it will probably move the technology forward overall. Google could use some smart competition to help sharpen their game.

App Futures

The App Market looks to keep expanding at a breakneck pace, at least according to this study, and should reach a $17.5 billion dollar market by 2012. That's a lot of Apps... considering 7 billion were downloaded in 2009, this study projects downloads of 50 billion by 2012. I wouldn't be surprised if that ends up being conservative, as I expect the iPad and its competitors to gain considerable market share. Also of note is the "App-ization" of computer software.... Google has started an App Store for online PC Apps. Simplification and ease of installation/ease of use are becoming more of a selling point.

All of which implies an even greater need for maketing solutions, as the universe gets more crowded with titles. We're already seeing recommendation networks arise, in-app advertising, web sites devoted to Apps... but it's still early in the market's development. Marketers will have to stay nimble, as things change in the span of a few weeks. Change is the only constant.