The War at Hand

The mainstream media continues to argue about a coming console war between Playstation 3 and Xbox 360. I can only shrug. What makes them think Sony has a chance?

Sony has just now produced its third console, while Microsoft is already on its 360th. That’s an order of magnitude more experience. It’s called the learning curve, people. You can’t beat that sort of expertise. It’s the same reason US cars are better than Japanese cars: We’ve been doing it longer.

But enough about that. Max Steele is not interested in next year’s battles. He is interested in the here and now. The war at hand. And that’s the handheld war.

Sun Tzu teaches us that the outcome of a war is governed by the strategy of the combatants. (Well, actually, Sun Tzu teaches there are five factors that determine victory in war, but five factors would take up too much of my allotted word count, so we’ll discuss only the strategy factor. If you have a problem with this, email [email protected] to demand more word count for me. Thanks.)

Whose handheld strategy will lead to victory? It’s not a rhetorical question. The last thing anyone wants to do is buy in to an unpopular console system. It’s the network effect: You need a broad platform base to get the publishers to support the hardware with great games. Lose sales momentum and the platform can wither and die. And you don’t want a dead handheld, do you? (Max Steele is still bitter about his Atari Lynx.)

So that’s the question, then. Which will be the killer platform for the handheld market, and which are going to get killed?

On the One Hand
Let’s start with the DS. Nintendo’s DS strategy can be boiled down to one word: innovation. “Nintendo DS revolutionizes the way games are played,” the company propaganda preaches.

That sounds promising. Except in last week’s issue of The Escapist, our resident contrarian, John Tynes, made a great case that Nintendo is doomed because it’s innovative. Of course, he is a contrarian. It’s John Tynes’ job to be gloomy. So before we start short-selling Nintendo stock, we are going to take our own look at the situation, Steele style.

The traditional argument against innovation in the entertainment industry – and this is true across film, music, TV, and games – is that entertainment is hit-driven, and given the high cost of production, it’s foolish to try something without a proven formula. Sticking to the tried and true, whether that means formulaic plots or standardized game components, keeps cost and risk down.

That’s a strong argument and, by and large, it’s true. I admit to playing Half-Life 2 and waiting in line for Star Wars III. But it’s also true that cost, risk, and innovation sit on a spectrum. It’s not black and white. In the case of the handheld segment, there might still be room for innovation. Maybe.

First off, handheld games cost less to develop than games for the PC or living-room consoles. True, the cost is rising, but it’s not rising as fast as the cost is rising for AAA next-generation consoles. A developer can make a great handheld game for as little as 10-33% of what it costs to make a AAA console game.

That lower cost means more freedom to take risks and make bold gambles. Just as films like PI and Memento can take risks no feature film would dare, a handheld game can try new things in ways that Halo 2 can not.

There’s a second point weighing in favor of innovation: The audience that plays on handhelds is younger than for consoles and PCs. Why does that matter? Well, to be blunt, old gamers get set in their ways. Max Steele expects the old farts to one day grumble about the direct-cognitive interface of Quake X, and wonder why this newfangled stuff is getting in the way of real gaming, using a mouse-and-keyboard.

The point is: A gamer in his mid-thirties has been conditioned to view gaming a particular way, through the lens of a set of platforms, genres, and interface options. He thinks touching is stupid and boggles at Nintendogs. (Max Steele does too, but not because he is old.) Younger gamers haven’t had their expectations set, one way or another, and are more open to new ways of playing. There’s a reason trends so often start with the young. They like innovation.

With a less costly development cycle and an audience more open to innovation, Nintendo’s strategy for the DS does make some sense. They’ve engineered the system to provide new interface options (the touchpad), new display options (the dual screen), and new play options (wireless multiplay and PictoChat), and they’re saying, “Developers, use our platform to innovate. Take risks, try new things, and reach new audiences in new ways!” And to gamers they are saying, “Play games on the DS because you can’t get this experience anywhere else!”

This strategy might just work.

And On the Other Hand
Yet it might not. Sony sees the market differently. And there are countervailing forces at work.

First, the forward march of technology has created substantially more powerful handheld systems than ever before. The power of what’s in your pocket is probably in the same order of magnitude as last generation’s console. As always, more powerful hardware means increasing costs to develop games for the hardware.

But with the PSP, at least, it seems a tipping point has been reached. The PSP is powerful enough so that it’s possible to port living-room console games to the system. I don’t mean just adapting PC and console games for the handheld (as has often been the case in the past), but true ports, with all that implies. Publishers love ports. They’re the least expensive way to put a game on the shelf to sell to a new audience. (That’s right publishers – Max Steele is on to you.)

The second force at work is the age of the handheld gamer. Handhelds used to be seen as an introductory product to get young people hooked on gaming. Indeed, I personally used to give out Gameboys to kindergarteners so I could later sell them used games at a mark-up. While handheld gaming still has a young audience, today’s hardware makers and game publishers see an audience for handheld gaming that’s a lot more grown up, as well. Instead of abandoning gaming on the go, older gamers simply want it in a more mature form. The advertising for PSP positions it as a product for teens and twenty-somethings.

The existence of this older audience in turn argues for games that will be familiar to that audience. While the youth audience may embrace new ways of play, adult gamers are seeking out first-person shooters, strategy games, familiar brands and formats. Combine that with the cost advantage of porting versus developing innovative handheld games, and the strategy behind the PSP becomes clear: If the DS is about innovation, the PSP is about familiarity. Even the vaunted UMD movie feature of the PSP is just another way of bringing familiar content to an on-the-go platform.

Sony is saying, “Developers, use our platform to port. Keep costs down while reaching your audience on the go wherever they are!” To gamers, they are saying, “Play games on the PSP because you can get the familiar experience you know from your PC and consoles, whenever and wherever you’d like!”

This strategy might just work, too.

And on The… Uh… Third Hand
Conventional media likes to paint this as a two-way war. Max Steele believes that a simplistic Manichean viewpoint of good v. evil is perhaps comforting, but he tells it like it is. As the great spiritual guide, Yoda, once said, “There is another.”

It’s called the N-Gage.

Here in the US, we like to rag on the N-Gage. We write it off as a dead platform. But then we’re not exactly the world’s leading experts on mobile technology.

Not many people in America may have bought one, but N-Gage has still shipped a million and a half units. Compare that to DS and PSP’s numbers and you’ll see N-Gage has done relatively better in this segment than Gamecube did against Playstation 2. And more importantly, even if Nokia never sold another N-Gage, they are pretty shortly going to have the N-Gage platform in more people’s hands than Sony and Nintendo can dream about.

I’m referring, of course, to Nokia’s decision to support N-Gage games across its entire range of Series 60 smartphones. The big boys from Finland expect to sell 25 million Symbian handsets this year. To put that in perspective, Sony expects to sell half that – 12 million PSPs.

So what’s the strategy behind N-Gage gaming on a smartphone? If the DS is about innovation, and the PSP is about familiarity, the smartphone is about convenience. A large percentage of the population is going to carry a smartphone for purposes other than gaming. If that population can enjoy quality handheld gaming on the device they’re already carrying anyway, they will. Nokia is saying, “Developers, use our platform to reach a massive audience that’s already carrying a smartphone, and is conveniently ready for you to entertain them!” And to gamers, Nokia is saying, “Play games on your smartphone because you’re already using it do everything else!”

You know, this strategy might work, as well.

Hand Them Over
That’s the strategy review, then. It’s innovation v. familiarity v. convenience. Which will triumph?

It’s a tough call, even for the discerning judgment of Max Steele. I can see the merit in the innovation that is Advance Wars DS or Kirby: Canvas Curse. I also understand the joy of PS2 gaming and UMD movies on the beautiful 4.3″ screen of the PSP. And I’m certainly savvy to the benefits of good gameplay on my mobile. But I can’t let you read this far and not deliver the goods.

So here’s how it’ll play out. Nintendo’s DS will end up as the #1 platform. They’ll deliver innovative, exclusive content that you can’t get anywhere else, and that will drive sales. PSP will have lots of games, but very few will be exclusive, and ultimately the consumer is going to pass on paying $250 to get what he’s already got, particularly because Sony’s going to get distracted by the coming battle for the living room.

Sony’s stumble will clear the way for Nokia’s N-Gage powered smartphones to be the #2 platform in handheld gaming. I see it developing into a PC-like platform. Think of it like this: Everybody has a PC. Everybody uses their PC for work and web. Some people also use it for gaming – enough people to make the PC, as a platform, the second biggest; it’s the same concept with the smartphone.

That’s all. Max out.