There have been a number of posts about Nintendo vs Apple, the 3DS vs the iPhone, and "99c games vs $40 games". The summary of these posts revolves around two different issues. They get muddled together, and as a result, cloud the argument. This post is an attempt to distinctly break apart the two arguments, such that we might look at each cogently.
Argument A: "Will Apple's 99 cent games destroy the market for Nintendo's $40 games?"
This is indeed a good question, and one to which the answer seems obvious.
On the 'Yes' side, one have only to look at Apple's recent numbers, the excitement around iPhone, and the challenges some have had in trying to maintain traction around higher price points in the app store on that platform.
but...
On the 'No' side, there's an argument that a large development budget can give a deeper, larger, experience. There's also the fact that Nintendo has continued to have success with some titles on the DS. There's also another version of the No answer along the lines of "if you want Mario, he costs $40", in other words, Nintendo's IP is something to consider.
The answer is probably somewhere in between. Undoubtedly the bar will be raised for what people expect to get for more than $0.99, so it will be a challenging sell.
The second argument is distinctly different than the first though. So let us suspend belief for a second, and imagine a world in which all iPhone games cost $40 (or one in which all DS games cost $1 - your call, as long as argument A goes to equal footing)
Argument B goes as follows: "Will 'portable game console' join the list of devices who have been subsumed by the Smartphone?"
Once again, there are arguments for and against, but in my opinion, the arguments are more one-sided.
On the No side: Nintendo continues to innovate (dual screens, stylus, 3D-stereo screen, etc) to stay ahead of the capabilities of the phones (or at least different, if you want to take issue with 'ahead'). Also, there's value to the quality, curated experience a closed, vertical platform like a console provides. And once again, there's Nintendo's IP. Finally, while Nintendo doesn't appear to do this currently, as a closed platform they could choose to sell their hardware below cost as a path to customer acquisition. (Of course phone vendors do this, and there's nothing saying that the same could hold true for an iPod-touch-like device provided it was sufficiently tethered to an app store or iTunes like service.
On the other hand or 'Yes' side of the question, the evidence pointing to an eventual subsuming of the function-specific portable game console by the general-purpose Smartphone doesn't look good for the portables.
When looking at other function-specific devices competing with the general-purpose device, the pile of bodies is pretty high, and growing.
The first category to go was dedicated PDA's. Never more than niche to begin with, these devices begged for communication to begin with. It could be argued that this was less about phones integrating the functionality, and more about the devices lacking the requisite functionality to begin with.
One category of device people started talking about suffering from this phenomena was the GPS. (See
here,
here, or
here's a graph of a couple top GPS vendors where you can see the precipitous drop - even beyond that of the market due to recession, in green - which lines up with Apple's 3GS launch).
GPS is still alive as an electronics category, but it seems clear that the device manufacturers are suffering here and running for high ground in the way of either added niche-valued functionality and automobile OEM sales. whether these run out of runway as well is TBD.
Another category of device with some compelling evidence is that of digital cameras. The
following post discusses some data posted from the Flickr blog, about usage statistics for posted photos to the site, as marked by what camera type took them.
The first graph shows the increase in iPhone 3 and 4 uptake vs photog staples at the high end like the Canon... The SLRs hold their own, but the increase in iPhone usage is clear.
The chart further down the page shows the decrease in leading point-n-shoot camera usage in the same period. There's a pretty clear correlation here. This is a classic case of the "Christensen Effect" at work.
I don't know how this will play out. It certainly will be interesting to watch from the sidelines. Developers should be interested, certainly if they are thinking about targeting either platform.
In trying to game it out though, its worth distinguishing what I believe are these two key questions at play. When looking at both together, Nintendo certainly has their work cut out for them. I can speculate about what that might lead to... but that's the subject of another post.