Gaming in Transition and Revolution: Part 1

By Matt Ployhar

In my last blog [1], I talked about a spring-cleaning I did on my contacts database and observed the number of companies that have either gone defunct or underwent massive layoffs since the downturn in the economy.

This got me thinking about how or why some ISVs seem to have weathered the storm better than others.

The most interesting transitions occurring are the ones that are completely disrupting multiple platforms and business models simultaneously. However, while I’ve heard some ISVs complain about the big shifts and transitions, I’ve also heard others discussing how to embrace these shifts as an opportunity. Some platforms seem to be better positioned than others in order to address these changes. When all is said and done, it will likely end up being a survival-of-the-fittest exercise.

Here’s how I view and summarize the biggest macro-shifts impacting the games industries. There are four big standouts for me: mobile, format and business model evolutions, globalization, and innovation game-changers. We’ll start with the largest macro-shifts occurring on devices, and in subsequent blogs I’ll cover the rest of the list.

Mobile

It doesn’t matter if we’re talking about a smartphone, an iPad, thin and light laptops, or even gaming handhelds. The key point here is that consumers -- and even biz/enterprise customers -- seem to love mobile form factors.

Can you blame them? It’s fun to be able to game on the go, when and where you want. Mobile form factors and technology advances that allow for more capabilities, with fewer tradeoffs, have permanently transformed the gaming industry on the hardware side and can significantly impact the software used to power those devices.

Convergence Factor

When you think back on devices such as Sony Walkmans, small point-and-shoot cameras, netbooks and possibly slates/iPads in the near future, there is a pattern to be seen. Overly niche devices may be lucrative and last for a little while in the market, but most seem to peter out after three to five years. Especially when a device comes out that combines as-good-as or better functionality than two to three devices you might currently be lugging around.

My current iPhone is a combination of a cell phone, mini PC, mini camera, portable hard drive, handheld gaming device, GPS device and more. My laptop -- which gets thinner and thinner over the years -- is a combination of my old desktop PC, a portable TV, an e-reader, a console and a workstation.

So how do we tie all this back to gaming?

Mobile phones are not a new phenomenon. Featured phones have been around for over a decade. The iPhone definitely reinvigorated the space and now there’s a global arms race going on in the smartphone space. It’s difficult to discern where it all ends.

What I do know is that, from a gaming perspective, there is a massive, barely tapped oil-field-like TAM beginning to emerge. Out of the 6.9 billion people on the planet, there are approximately 4 to 4.4 billion cell phone users (a little over a billion cell phone users in just the industrialized nations). Smartphones seem to be replacing the traditional cell and featured phones, selling somewhere around 300 million units a year.

Even if half of those are replacements of existing smartphones, it’s a quickly growing TAM indeed. Eventually, all the existing 4-billion-plus cell phone users will someday likely be on a smartphone. This is not an opportunity that I’d want to miss out on if I were a games ISV. If anyone truly wants to reach a billion users, it stands to reason that one would at least consider shipping a stripped-down version of their game to help bolster sales or their portfolio.

Now let’s look at it from a mobile PC -- as in laptops and slates -- perspective. Laptops are increasingly outpacing desktop sales and, from what I can tell, are by and large replacing them. Something like 100 to 130 million consumer portable laptops sold last year, as compared with something like 55 to 60 million consumer desktops. Roughly one-quarter to one-third of these ship with a discrete GPU used for gaming.

Our PCGA [2]  Horizon’s data forecast would have placed the number somewhere around 70 million desktop and laptop unit sales capable of most gaming. Starting with Intel’s Sandy Bridge, and AMD’s Fusion APUs, the notion of a gaming-capable PC would now accelerate into practically any PC being able to handle all but the most graphically intense games. The next bright shiny object emerging in this category will of course be slates and tablets, which will likely push these numbers up even faster.

Again, we have a massive, barely tapped TAM for gaming -- but just because the TAM exists, it doesn’t equate to games ISVs actually shipping games. Instead, most of the Western Hemisphere’s ISVs persist in targeting an overly saturated console TAM -- which, even if you added all of the seventh-generation consoles together, still doesn’t exceed 180 million unit total sales to date.

In closing: Mobile form factors appear to be quickly becoming the de-facto standard. Wouldn’t it be better to figure out ways to tap in to all devices that are capable of gaming with the same game? I for one think that has amazing potential.

Matt Ployhar focuses on graphics, multimedia and gaming in Intel’s visual computing software division. Prior to that, he worked at Microsoft for more than 12 years. His passions are graphics and gaming. And when he can get away from his computer, he also enjoys the great outdoors and reading.