More Bad News for Portable Gaming

I'm sorry, diehard gamers, but your portable-gaming-system days are numbered. According to a new report from the mobile-analytics firm Flurry, revenue from game sales on Apple (NAS: AAPL) iOS and Google (NAS: GOOG) Android is set to surpass the combined sales of Nintendo (OTC: NTDOY.PK) and Sony's (NYS: SNE) portable games.

What a difference two years makes
Back in 2009, Nintendo ruled the portable-gaming market with the DS. Sales of DS game sales accounted for 70% of portable-gaming revenue while the Sony PSP held a respectable 11%. However, Flurry estimates that in 2011 iOS and Android games will generate 58% of gaming revenue. Meanwhile, Nintendo and Sony will drop to 36% and 6%, respectively.

It isn't just that mobile markets growing more quickly, either. Flurry estimates that Nintendo and Sony's combined revenue will decrease from $2.2 billion in 2009 to $1.4 billion in 2011. It's clear that smartphones and tablets are eating into mobile consoles.

But, but buttons
Honestly, this shouldn't be surprising. From the price standpoint alone, separate mobile systems don't make sense. Take the upcoming Sony PlayStation Vita. Because Sony chose to saddle the console with an expensive proprietary memory, gamers will have to shell out nearly $300 before they even begin to think about games.

If you're just looking for something to keep you amused while you wait for the subway, it's hard to justify spending that much money when you can download an addictive time-waster like Fruit Ninja­ from Apple's App Store for $0.99. I'll admit that the top mobile games don't offer the same experience as a portable console, but they don't have to. They just have to be entertaining enough to keep you amused for five minutes.

The ever-evolving tablet
Even if the market for more immersive mobile games turns around, I think gamers will find tablets will suit their needs. If you want proof, just look at GameStop (NYS: GME) and Microsoft's (NAS: MSFT) mobile strategies. GameStop plans to sell branded Android tablets and a Bluetooth controller for on-the-go gaming. Meanwhile, rather than develop a portable Xbox, Microsoft plans to bring Xbox Live to Windows Phone and Windows 8. Granted, having a tablet and a controller is slightly more cumbersome than just a console, but the trade-off is a bigger screen and more functionality.

Foolish takeaway
I expect Sony and Nintendo will fight to keep portable-gaming consoles alive for a few more years, but I suspect it will be a largely losing battle. Smartphones and tablets simply offer too many extras to justify also owning a dedicated portable system.

If you'd like to read about another industry that smartphones will soon disrupt, then check out this free report on how near-field communications may soon make your credit card worthless.

At the time thisarticle was published The Motley Fool owns shares of Apple, GameStop, Microsoft, and Google.Motley Fool newsletter serviceshave recommended buying shares of Apple, Microsoft, Google, and Nintendo, writing covered calls in GameStop, and creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter servicesfree for 30 days.Fool contributor Patrick Martinowns no shares of any of the companies mention here. You can follow him on Twitter, where he goes by @TMFpcmart03. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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