Is it too late for Sony and Nintendo?

First the Kindle Fire brought the prospect of Android-based tablet gaming for under $200, and then Apple busts out a new A5-powered iPhone that can comfortably run Unreal-powered games with more and more fancy effects turned on. Traditional handheld gaming platforms are under threat like never before, and from unexpected adversaries. Who would have thought a few years ago that the next big challengers would come from Apple, Google, and Amazon? These guys pose a considerable threat to the handheld gaming establishment, and currently they're not even trying terribly hard. Imagine how different the landscape would be right now if Apple actually put some real effort behind the iPhone, or more significantly the iPod Touch, as a serious game-playing device? I don't mean putting up some more posters in the Apple store or including a couple of games in the next moody TV campaign; I mean really going after big names and properly partnering with studios to push the technology to gamers the way Sony, Nintendo, and Microsoft have been doing for years.

According to a recent survey conducted by Forrester, almost a quarter of all tablet owners say that time spent playing handheld games on the DS or PSP has fallen. In addition, survey results from the GameSpot Trax team (a group within our organization here at GameSpot that analyzes the market and produces an industry-facing tool for tracking buzz and audience appetite based on how you look for information about games) indicate that games are second only to news apps as the most frequently used software on those devices. On smartphones like the iPhone or Android, games rank as the seventh most used apps.

That doesn't sound particularly impressive until your realize that's behind day-to-day boring-but-useful stuff like weather and GPS, but ahead of social networking and video. The installed base of Android and iOS devices combined is somewhere in the region of 400 million units right now--Apple claimed that there are 250 million iOS units out there during its press conference on October 4. Games are regularly played by a smidge over 50 percent of owners, according to the same report.

"The installed base of Android and iOS devices combined is somewhere in the region of 400 million units right now…"

That's more than double that of the DS, and six times the size of the PSP audience. There are 67 million people signed up for Apple's lackluster, green baize-covered Gamecenter social network thing; that's almost the exact same size as the worldwide PSP installed base. Again, imagine what Apple could do if it actually started trying.

So, in real terms, more people are already playing games on smartphones than they are on the DS. Granted that's lots of Angry Birds and Words With Friends, but remember that not all DS players are playing Ocarina of Time or New Super Mario Bros.; a lot of them are playing Sudoku and Tetris.

While many gamers decry iPhones and iPads for not being purpose-built for the job of playing games, there's no denying the effect that they're having on the way studios think about user experience and how gamers spend their time with portable devices. No, they don't have sticks or buttons, and no they don't sport a name on the box that we're all comfortable and familiar with, but they do play games, and do so very well. Particularly if the experiences are designed specifically for the touch-screen devices themselves rather than being crude facsimiles of more traditional games. The beauty of a smartphone is that it's always on, it's always connected, always (well, usually) charged, and always with you in your pocket. Because it augments your life in so many ways, it has become a ubiquitous life companion.

Handheld game systems are struggling to compete with this. You don't need to have one with you at all times. They're specialized devices designed for very specific tasks. At best, anything less than perfection for these tasks is a liability--but when they're also up against ubiquitous tech that's more than good enough for games, they're left at a serious disadvantage.

Of late, both Nintendo and Sony have failed to read the real desires of their audiences, and consequently their latest devices are far from perfect. Nintendo, for example, steadfastly refuses to embrace the fact that its audience is tired of physical media and is pretty much done with the whole 3D thing. The 3DS was a big step in the wrong direction, and by embracing 3D technology and trying to blaze its own trail, the company has shifted its handheld brand out of the mainstream and into a niche market. Sales for the 3DS fell significantly short of expectations in the first half of this year, prompting Nintendo to mark down the price of the console from $249 to $169. This is the fastest it has ever marked hardware down due to slow demand. Thanks to an unusually weak software lineup, software sales for the 3DS have been abysmal at best, with year-to-date sales at only 11 percent of regular DS software sales.

Meanwhile, Sony seems so confused about what its audience is demanding that it has decided to go with a kitchen-sink approach and throw everything it possibly can at the upcoming PlayStation Vita. It's certainly buzzword compliant; it's connected, it's social, it features every conceivable flavor of waggle control, it has a touch screen, and it even has that funky reach-around touch thing, but is it what people really want? At least it sports the fundamental control needs that we all begged Sony for nearly seven years ago: two analog sticks. It may have taken Sony a bit longer than it should have, but at least they finally listened.

According to GameSpot Trax, buzz surrounding the Vita is tepid at best, with little traction for either the device itself or the games. Given the performance of the 3DS so far, expectations aren't terribly high right now. That could change between now and early next year, but every day that Sony waits to release the thing is a day ceded to a smartphone or tablet.

"According to GameSpot Trax, buzz surrounding the Vita is tepid at best…"

The launch lineup of games like Little Big Planet, Uncharted: Golden Abyss, and Killzone is tailor-made for hardcore gamers, so it's likely that the device will generate some headlines in its first couple of months on sale. That said, Vita games (like 3DS games) are $39.99 a pop. In a culture where beautiful smartphone and tablet games like Shadowgun, Infinity Blade (and presumably its sequel), Pocket RPG, and World of Goo sell for under $10, you have to wonder how long Nintendo and Sony's model is sustainable. Our concept of value has been fundamentally changed.

So can Sony and Nintendo fight back against the growing threat, or are they just totally screwed? What do they need to do to stay in the game? Stay focused, and take a long, hard look at software pricing. Rather than drifting into other types of media and halfheartedly positioning their devices as alternatives to a tablet for video and music consumption, they need to lean as hard as they can into games. The Vita, particularly, has a shot at delivering on something that core gamers have been aching for since the beginning of the PlayStation generation 15 years ago: a truly portable, no-compromise console experience. Forget casual games, forget chasing the smartphone market--go all in on rich experiences and win back passionate gamers. Open it up, let the machine flex its muscles, empower the indie developers, and tear down the wall around the Nintendo and Sony proprietary gardens. Adapt or die.