"Mobile devices will compete with dedicated handheld gaming devices, but select consumer segments like core gamers and those individuals who do not want or have a smartphone or tablet will still provide some demand," ABI Research senior analyst Michael Inouye said today in a statement on handheld gaming.
ABI Research believes Sony and Nintendo will ship about 38 million gaming handhelds in 2013. In 2008, the handheld business hit a peak of 47 million units shipped. What's worse, in the coming years, ABI Research believes shipments will continue to decline slightly over the next five years.
That handhelds are having trouble is nothing new. After launching the 3DS last year, Nintendo was hit by extremely sluggish demand for its then-$249 handheld. After cutting the price to $170, the device started to pick up some steam. And as ABI Research points out, the PlayStation Vita got off to a strong start earlier this year, but overall, its sales have been "decent," at best.
The issue for handhelds is that they're competing against increasingly sophisticated smartphones and tablets that combine a host of functions into one. Users playing a simple game, like Angry Birds, or even more sophisticated titles from major developers, can use the same device to take a call, send an e-mail, or check their Facebook status. And although the PlayStation Vita and 3DS offer additional functionality beyond gaming, they're by no means as capable as smartphones.
As ABI Research points out, price is also a consideration. Consumers are generally doling out a few hundred dollars just to get their hands on a gaming handheld, and the games can cost as much as $40 apiece. Compare that to the iPhone, which costs $199 to start, and games that are both offered for free or available for 99 cents and up, and it's clear why many folks are choosing the latter option.
"The mobile and tablet markets have increased consumers' price sensitivity," Inouye said. "First-party developers and key game franchises will be vital cogs for the industry in the future, since hardware alone is not going to cut it given the shorter upgrade cycles for mobile devices."
Luckily for gaming handhelds, however, Inouye doesn't think they'll go away, and should be able to coexist with smartphones and tablets. However, they can't expect to succeed to the same level they have in the past.
"The addition of mobile gaming is not necessarily a zero sum situation," Inouye said. "In fact, many feel there is plenty of room in the gaming market for both portable and mobile gaming."