Category Killer: Will iPhone Be Death of Gaming Devices?

The iPhone has been called a category killer. Standalone devices such as gaming devices, the thinking goes, don't stand a chance against the all-in-one iPhone. Or do they?

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Fri, January 29, 2010

CIO — With its 130,000 available apps, built-in camera and GPS capabilities, the iPhone sits squarely at the center of convergence. There's little question that the iPhone has taken a bite out of sales of some standalone devices, notably navigation units and cheap cameras.

But Sony Computer Entertainment claims it has turned the tables on the iPhone in the iPhone's core gaming market: People purchase the iPhone, enjoy certain games, and then get a Sony PSP to play it more fully. The iPhone has become an on-ramp to Sony PSP sales, a Sony executive says.

[ iPhone apps have put five markets under siege, reports CIO.com. | Check out the gaming death match between the iPhone and the Sony PSP. ]

"We've seen a significant number of co-iPhone and PSP owners," says John Koller, director of hardware marketing at Sony Computer Entertainment. "We don't view the iPhone negatively in our sector. There's been more positive impact, in terms of attention turned to the handheld sector and the ability for consumers to graduate to PSP after playing iPhone games."

Just look at Electronic Arts (ERTS) Madden NFL 10, the popular football game named after the legendary coach and television commentator, Koller says. The 110 MB Madden NFL 10 was one of the top games on the iPhone deck when it came out on the iPhone for the first time last fall for $10 (now selling for $7), whereas the 1.3 GB Madden NFL 10 for the Sony PSP costs around $40.

Madden's iPhone release was followed by strong sales for both Madden on the Sony PSP and Sony PSP units themselves. "It's a lag effect," Koller says. As more and more big-name game developers target the iPhone platform with sophisticated games, Koller looks forward to new gamers seeking a richer gaming experience with the Sony PSP.

This wasn't always the case. Last year Neil Young, co-founder of iPhone app game developer ngmoco and an Electronic Arts alum, said at the Game Developers Conference in San Francisco: "Don't let the haters tell you [the iPhone] sucks compared to the DS or the PSP. It doesn't. It's good."

Sony, which still views the iPhone as a competitor, was also concerned about Apple's penchant for pouring buckets of marketing dollars into the iPhone, says Koller. Indeed, the iPhone did become a strong gaming platform. Last year, game apps, particularly role-playing ones, dominated the App Store.

For newer markets such as navigational devices, the iPhone threatened to gobble up first-time customers who would have bought the standalone device. "Portable navigation devices are definitely under attack from smartphones with GPS," Gartner (IT) analyst Van Baker told CIO.com in the article iPhone Apps: Five Markets Under Siege. "The devices will have to get cheaper to remain viable, and that is not an attractive segment going forward."

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