The New iPhone 4S: Game Changer?Apple introduced its new iPhone 4S today, and the assessment of what this announcement means is still taking place. Some people, expecting an “iPhone 5” with a new case design and a larger screen, were disappointed by the iPhone 4S. The commentary from most observers was positive, noting that Apple provided some compelling new features for the iPhone 4S: A faster processor, a better camera, voice command integration, better battery life and call handling, and all of iOS 5's new capabilities (such as advanced notifications).
Developers were quick to see the possibilities of the faster graphics and the voice recognition. It's quite possible, though, that the largest impact on the game industry won't be from the iPhone 4S, but from other parts of Apple's announcement. First off, Apple has added Sprint as a carrier in the USA, and Sprint has committed to selling over 30 million iPhones over the next few years. Analysts expect Apple to sell more than the 1.7 million iPhone 4s that Apple sold in the first 3 days after its introduction. Sales of the iPhone are expect to hit 26 million this quarter, and in 2012 Apple is projected to sell 107 million iPhones. That's a rate of about 9 million a month. Or, to put it another way, it will take Apple less than 3 weeks to exceed the current installed base of the Nintendo 3DS. The new iPhone 4S will have a larger installed base than the Xbox 360 or the PS3 by the summertime, and the Wii by the fall. The Nintendo DS market size will get passed up by the spring of 2013. And that's not counting the over 250 million iPhones and iPod Touches and iPads already out there, if your game can run on those.
That's not even the whole story. Apple has dropped the price of the iPhone 3GS to free, with a two-year contract, and the iPhone 4 (in a new 8GB configuration) will be $99 with a two-year contract. The 3GS and the iPhone 4 are there to boost Apple's sales in developing markets such as China and India, where low-price Android models have been doing well. Don't expect to see a lot of iPhone 3GS sales here, but sales will probably be high in China, where over 100,000 people showed up at the new Apple store in Shanghai for the opening weekend. By comparison, it took the new Apple store in Los Angeles a whole month to reach that number.
"It will take Apple less than 3 weeks to exceed the current installed base of the Nintendo 3DS."
Additionally, the price of the iPod Touch 8GB model is now $199; it's essentially an iPhone 4 without the phone. The 32 GB model is $299, and the 64 GB model is $399. The iPod Touch is now competing pricewise directly with the Nintendo 3DS and the PS Vita. If you look at the iPod Touch page on Apple's web site, you can see games are featured prominently. There was only one outside developer invited on stage at Apple's press conference, and they were there to show off a game. Could this device have an impact on Nintendo's 3DS sales this Christmas? Certainly. Don't forget that the iPhone 4 will be $99 with a two-year phone contract, which might be a very attractive choice for parents deciding on what to get their teenager. At $99, this smartphone may steal some market share from Android, but the product that could take the biggest hit is the Nintendo 3DS. Apple is significantly undercutting the 3DS price (if buyers don't think too much about the contract), and Nintendo has no more price-cutting room unless they want to start losing money on every unit sold.
Everything's not ideal for Apple, though. While Apple was quick to point out that they have now sold over 250 million iOS devices, that market is fragmented between various iPhone versions. The iPhone 4S will fragment the installed base further, and the new iPhone will be a very small hardware market for a while.
Ted Pollak, Senior Gaming Analyst at Jon Peddie Research, had mixed feelings about the Apple announcement's impact on the gaming industry. “The processing power of the iPhone 4S opens up opportunities for deeper gaming experiences in either a mobile or a streamed situation. The chip is the big news for me today.”
One of the other features that Pollak saw as important for gaming was the voice command feature. “One of the features that Nintendogs players loved was the ability to talk to it. There's no reason why a game like that couldn't be done on the iPhone 4S, and much more sophisticated given the voice control shown. A real-time strategy game (RTS) with voice commands would be really interesting to see.”
Still, Pollak was not convinced that the iPhone 4S will make much a difference to the traditional gaming market. “You can make the images look very nice, but if you want anything beyond tilt and turn and drag for gaming you need an ergonomic multidimensional controller that has triggers and buttons and joysticks. For casual games the smartphones are fine but when it comes to making headway into traditional gaming, smartphones aren't making too much of an impact. I think enthusiasm for using smartphones as a hardcore gaming platform will be limited until there are better control options.”
He sees the real impact on the traditional gaming industry as an indirect one. “People's smartphone expenditure may cut into the handheld market by reducing their money available for buying a dedicated gaming handheld, and it may cut into people's attention span too.”
Pollak sees a good side to the smartphone games, though. “The iPhone and Android are expanding people's exposure to video games, and people who would never buy a PSP or 3DS are getting their first exposure to video games through their smartphone. Now that you have compelling graphics and fun, simple control schemes, it is opening the world of video games to everyone.” And if Apple manages to sell as many iPhones as they plan, “everyone” won't be too far from the truth.
