How Big Video-Game Studios Might Profit From Smartphones

Falcon Gunner
Falcon Gunner

Early last month, Vertigore Games released video footage of a new iPhone game called Falcon Gunner. The game basically replicates the turret gun experience from the Millennium Falcon, Han Solo's derelict freighter from the Star Wars movies. The trailer is a clever spot showing a gamer playing Falcon Gunner on a subway platform, continuing to play after entering the train and eliciting odd reactions from riders.

The gamer is oblivious due to Falcon Gunner's use of augmented reality, a user-interface parlor trick that allows an application to overlay ongoing images or game play onto the real world. The game itself is quite remarkable, even though it lacks the deeper plot nuances of big-ticket console games or the full-on social aspect of so-called massively multiplayer online games likes World of Warcraft.

More remarkable still was Falcon Gunner's development price tag, which was likely in the seven figures. That's far higher than the standard for so-called casual games that have been among the more popular on iPhones and other smartphones. This is important because it could signal the rise of a new breed of highly sophisticated, deeply interactive and expensive-to-build video games customized for these handsets' capabilities. By definition, these games will cost a bit more than the standard AppStore gaming fare.

Bridging the Gap

But because they're harder to build and design, and rely on complicated "physics engines" that have largely been the province of the big console game companies, the new crop of video games could signal a much-sought and much-needed entry for the game giants of yesteryear to rejuvenate their franchises.

Here's how that logic would work. Casual games, as the name implies, tend to have more two-dimensional graphics and simple, easy-to-follow plot lines. They differ tremendously from the megahits of the console world like Grand Theft Auto or Call of Duty.

Lately, however, the console-focused giants such as Electronic Arts (ERTS) and TakeTwo Interactive (TTWO) have struggled with slowing sales and pushback from users who no longer want to pay premium prices of up to $50 to $70. Console makers Sony (SNE), Nintendo and Microsoft (MSFT) are also seeking ways to bridge the gap between handset games and console or PC games. In fact, Apple (AAPL) has mounted a stealth attack on consoles with its new AppleTV product, which makes it even easier to take handset games and make them more social.

Resetting the Equation

For the big console-gaming companies, this has looked pretty bleak. After all, handset games like the super-popular Angry Birds can be built very cheaply and quickly, and have dominated the top sellers in Apple's AppStore. Likewise, creative but cheap-to-build video games have dominated on Google's (GOOG) fast-growing Android handset game ecosystem. Any kid in a garage can build one of these games over a weekend or two, which called into question the entire reason big-game production studios exist.

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Games like Falcon Gunner, however, could reset that equation by carving out a lucrative market for handset games that are expensive enough to build so that they're beyond the ability of mom-and-pop shops while offering sufficiently attractive graphics and story dynamics to convince people to pay real money.

Granted, no one expects handset games to ever garner $50 apiece, but $10 is quite reasonable and a price point many smartphone users are already accustomed to. Even that small amount, when factored against the enormous and growing numbers of smartphones vs. high-end game consoles means volume could more than make up for the lower price.

The upshot? Watch Falcon Gunner closely -- it could foretell a new day for the struggling video-game giants.

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Originally published