Friday Slide: A Three-Way Fight? Not Without More Apple-Published Games

Although it is technically a mobile games platform, Apple’s iPhone is more often compared to portable games consoles like the Nintendo DS and the Sony PSP in terms of compute power, game quality, and consumer preference. Marketers would say that it’s horning into the ‘mindspace’ of the DS and PSP, meaning that although they aren’t exactly substitute goods, the iDevices are increasingly viewed as portable gaming machines that are capable of offering a similar gaming experience. I was not the first to look at the iDevices from this direction when I brought it up in STP’s inaugural editorial, and there’s been a steady drumbeat of analysis since then speculating on whether the portable console game is now a three-way fight between Nintendo, Sony and Apple.

Is it? It’s been more than six months since the App Store launched’”plenty of time to render a basic judgement on whether iPhone gaming counts as serious competition for Sony and Nintendo. On the profits side, things have gone very well indeed; the business has proven quite lucrative for Apple, as well as for certain lucky developers and publishers. The App Store’s pure digital distribution model probably cost a lot to set up, but maintenance costs seem minimal. Apple has been content to let the system run itself, for good or ill, and that kind of laissez-faire policy certainly boosts profits in the short run.

By contrast, Nintendo and Sony play a much more active platform management role, and although they have started to experiment with digital distribution (particularly Sony), both depend on traditional retail channels to sell games. Managing those logistics is difficult, and although most of the cost is assumed by publishers, it must still bleed a significant amount of profit out of the system. It also makes platforms susceptible to the used games resale problem, which many publishers believe harms a platform’s overall vitality.

On the other hand, Sony and Nintendo have a huge vested interest in maintaining and improving these distribution channels, as they are huge first-party games publishers themselves’”especially Nintendo, which relies heavily on its own games to sell systems. Apple has published exactly one iDevice game so far, the Texas Hold ‘Em launch title, and I am absolutely flabbergasted that it’s professed no interest in publishing more. In fact, this is probably the biggest surprise of the App Store era thus far.

In a recent interview with Edge Online, Greg Joswiak, Apple’s VP of Marketing for the iPhone, explained that Apple is basically content to sit back and let others lead the platform. ‘We haven’t felt the need to come in and be a firstparty developer that has to develop a third of the games, like you have on some of the other platforms…I have no lack of confidence in our third party community to do some really amazing things.’ he told Edge.

There are good reasons for this perspective. Games publishing is an exceptionally tough business, especially for companies that have little to no experience in the field, like Apple. Picking winning concepts is so hard that it sometimes feels like locating buried treasure on the Moon; throw in the rigors of development and marketing, and all of a sudden you’re looking at Neptune. It takes very specific knowledge of video games and lots of discipline to succeed, and even huge corporations with lots of hardware and media experience can screw it up horribly’”even when they’re running the platform too! Exhibit A: Nokia’s publishing efforts on the N-Gage platform. The mobile supercorporation has gotten better at it over time, but it’s lost tens and hundreds of millions of dollars trying to get up to speed.

Being a well-managed company, Apple is aware that it doesn’t have gaming in its corporate DNA. Other knowledgeable observers agree. But then, it didn’t really have music in its DNA either, until it created the iPod. Nor did it know much about selling movies and TV shows… and it’s now one of the largest media companies in the world. Does anyone really believe that Apple couldn’t figure out how to make games as well, if it set out to do so?

I am convinced that Apple will have to make this investment sooner or later if it really wants to take on Nintendo and Sony in the portable console game, Joswiak’s cavalier attitude towards platform stewardship and first-party publishing notwithstanding. Does this guy even play the games on his own platform? Sure, the sales numbers look great, but nine out of ten third-party iPhone games are complete garbage, and publishers are trapped in an endless price war that threatens to further damage game quality. The App Store is turning into Shovelware Central.

Now imagine if Apple were to publish one Triple-A title a month’”maybe not quite a Rolando, but at least a Texas Hold ‘Em–and sell it for six to ten bucks. Odds are that several of those games would end up in the Top 10 for extended periods of time, irregardless of price; after all, these games would have Apple branding all over them, and they’d be very high quality as well. I think that this would reset consumer expectations for iPhone gaming, jumpstart price points, and catalyze competition at the high end of the development spectrum. A growing cadre of gamers would eagerly await the next Apple-published title, just like they do the next Zelda, or the next Halo. More importantly, those third-party publishers that have the skill and resources to produce similar games would suddenly have a market to sell to.

If the iPhone is to be the portable console of the future, as I think it can and should be, Apple must lead by example, instead of doling out platitudes about how the App Store is a perfect meritocracy, and how developers can make any kinds of buttons they want to using multitouch. First, nobody who’s paying attention believes that kind of lazy, myopic crap. Second, Apple’s missing its golden opportunity to aggressively invade the portable console market. Nintendo looks as strong as ever, but Sony’s game division is bleeding red ink, and the non-touch PSP is more vulnerable to encroachment from the iDevices than the DS is.

Is anyone in Cupertino paying attention?