Wednesday, March 28, 2012

How Tablets and Smartphones are Changing Gaming

The videogame industry is a relatively young entertainment industry compared to other media. Since it originally started with the Magnavox Odyssey, the industry underwent extensive evolutions that fundamentally change it. Development centers have shifted from America to Japan, back to America again. The technology in the hardware have improved exponentially every generation. With the advent of the smartphone and the tablet, the gaming industry is headed to another huge shift that will completely change the environment. There are a variety of changes that is currently happening that will change the gaming environment forever including strong portable technology improvements, changes in the distribution channel and customer ownership, and a changing value of videogames as an entertainment medium. The world of gaming is changing around us and is moving to another shift that will fundamentally change your gaming experience.

With the growth of smartphones and tablet computers, there is strong portable technology improvements that is changing the landscape. In the past, portable hardware did not get much development and each portable console had custom hardware that had to make major sacrifices. The custom hardware and the slow development of hardware meant that portable consoles had a strong graphical edge compared to other portable devices. The arrival of smartphones and tablet computers created a new market which means that there was heavy adoption of the product in the consumer market. There were only a couple of companies who excelled in mobile technology development, so the parts used in smartphones and tablets are pretty standard. By creating a new market with a heavy adoption rate with many standards, these companies were able to reach economies of scale. The popularity of the products introduced heavy competition in the beginning stage, which meant that heavy research and development was spent to keep a technological edge. This perfect storm meant that portable hardware improvements have jumped by leaps and bounds the last couple of years. Videogame consoles have benefitted from this and it has also harmed them. Sony was able to adopt innovative technology for the PS Vita with low costs, but it also meant that it had technology that got obsolete fast. Technology may move to the point in the future that home consoles will also be replaced.

PS Vita is heavily influenced
by smartphone development

With the advent of portable hardware, the companies have shifted the distribution channel to give software to the end user. Companies like Nintendo and Sony have long distributed video games in cartridges. A development company would have to first create the game code, and then go to a publisher that has strong distribution connections with warehouses and retail stores. The publisher would then go to the console company and have them do a print run of the video game. Copies would then be shipped from the distribution center to the retail store. If the videogame sells well, it may get additional print runs. Should the game sell terribly, it would be price reduced and then be part of gaming history. The release of Google’s Android and Apple’s iOS is changing how software is distributed and released. For the end user it adds convenience since a person can just download the game directly to their hardware instead of driving to a store and buying a physical copy. A digital copy does not take space and it can theoretically be online forever. It also changes the distribution channel for the developer since they can publish the game directly onto digital stores. It is already affecting gaming, with the PS Vita being the first gaming console where every single physical gaming release also gets a simultaneous digital release. This form of distribution has a negative effect on two parties, publishers and physical retail stores. Developers can directly publish their product without the need for publishers. Consumers can buy directly without setting foot in a retail store. This means that specialty shops like Gamestop will need to make positioning changes or else they will be obsolete in the future.

With the growth of tablet computers and smartphones the value of games are changed. In the past, it was acceptable for companies to charge $30-40 for portable console games and $60 games for home consoles. On the apple hardware, it is the norm for games to be $0.99, free to play, with $15 being considered a “high-end” price. This pricing structure changes everything. Since smartphones and tablets are being ubiquitous, it means that more people are being exposed to the idea of “cheap games.” It changes customer expectation when it comes to game pricing overall. This changes the gaming world since long-term, people will start to expect cheaper and cheaper games since these low prices devalues how people see a video game. The current low prices are unsustainable, and if gaming developers want to continue they will need to change their development model or start introducing higher prices for games on tablet and smartphones.

A consequence of the changing times,
will other physical retail follow?
When a person bought a product they could also return it, or they could resell it in the future. The advent of the tablet and smartphones changes ownership of video games. Digital software bought on the closed iOS or Android system cannot be resold. This means that a dissatisfied customer’s purchase cannot be returned. In the future, a person cannot sell it to another party. For companies in the video game industry, they actually view this as a huge positive. Currently, retail stores can buy opened copies of games and then sell it used for a profit. A digital future means that they will stop customers from reselling a purchased product. For a video game company, this is ideal since they don’t need to sacrifice profit to a middleman like a warehouse or a physical retail store. They also see it as ideal since they do not need to lower the price and the can also keep it consistently high.

The video game industry is a very fluid industry, constantly changing. The advent of tablets and smartphones are changing the world right now. Huge improvements in portable technology means that your portable hardware can do more things than it could in the past; it also means that your console gets obsolete faster. The distribution channels change, instead of going to a physical store and buying it, a person can buy it in convenience of home. It is also changing the pricing structure and how people perceive the value of games. Growth of this segment is also changing ownership of video games, in that a product cannot be returned or resold. This revolution will be leading to a world of innovation and a world of uncertainty for the current status quo. Console giants such as Sony, Nintendo, and Microsoft are adapting to this brand new world. Nintendo and Microsoft are reportedly adding a tablet interface for their next consoles to integrate the best of both worlds. Sony essentially added iPad internal hardware for the PS Vita and they heavily integrated digital distribution. In the future, this hardware will be strongly affected by developments in smartphones and tablet computers.

Kris Zoleta started working in Anime Expo as a staffer in Manga Library. He worked in Staff Service in Anime Expo 2006 and became the manager of Manga Lounge from Anime Expo 2007-2010. He is currently serving on the Board of Directors for the Society for the Promotion of Japanese Animation, the 501(c)(6) non-profit behind Anime Expo and is one of the most recognized cosplay photographers in the West Coast.

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