Apple’s Latest Move Could Be Nintendo’s Undoing

I'm not the first person to suggest it: For years, people have predicted that mobile gaming would, one day, replace traditional handheld gaming consoles. This is particularly problematic for Nintendo (NASDAQOTH: NTDOY  ) , a company that relies on the market for video game handhelds.

So far, that hasn't happened. Nintendo's 3DS has sold quite well, and Nintendo -- as it has since the 1990s -- continues to dominate the market for handheld gaming. But things could soon change dramatically.

iOS gaming has been held back
While mobile games have exploded in popularity in just the last few years, they have been unable to capture the dedicated gaming market. Most of the games that have found success on mobile platforms have been simplistic -- games like Angry Birds and Candy Crush Saga are fun and addicting, but they don't offer the sort of immersive gaming experiences players have come to expect.

In large part, this may be due to a limitation of inputs: As any true gamer knows, a touch screen just doesn't cut it. Almost all gaming controllers and handheld consoles feature a plethora of buttons and joysticks. But on Wednesday, Apple (NASDAQ: AAPL  ) approved the first iOS game with controller support. The timing wasn't arbitrary -- iOS 7, the latest update to Apple's mobile operating system, includes support for third-party controllers.

Accessory-maker Logitech reportedly has one in the works, as do indie companies with financing from Kickstarter. Other companies, such as Zagg and Belkin, probably have similar devices planned. Perhaps Apple itself has one in the pipeline; the company's willingness to make its own cases suggests a focus on first-party accessories.

Nintendo relies on handheld gaming
The last five years have been terrible for Nintendo's shareholders -- the stock has collapsed more than 74% as the company failed to live up to the success of the Wii. Nintendo's latest console, the Wii U, has been a total failure; the 7-year old Wii has continued to outsell its successor.

But despite the Wii U's failure, Nintendo is far from dead. The company returned to profitability this year largely on the strength of the 3DS. Sales of the 3DS have picked up, and the handheld has been the top-selling video game console for much of this past summer.

Thus, Apple's decision to add controller support to its iOS devices is particularly problematic for Nintendo. With buttons and joysticks, mobile game developers can increase the complexity of their games, and should there come a day when iTunes offers titles just as complex and engrossing as Nintendo's handhelds, the market for dedicated handheld consoles could dry up. As with point-and-click cameras and mp3 players, modern smartphones and tablets could render dedicated gaming handhelds superfluous.

Android has had controllers for a while
But wait a minute, Google's (NASDAQ: GOOGL  ) Android has had controllers for quite some time, and its actually more popular than iOS worldwide. Why haven't Android-powered handhelds overrun Nintendo's empire?

Android, as a gaming platform, has numerous problems. The June edition of the gaming magazine Game Informer listed the 15 greatest mobile games of 2013. Of those 15 games, 11 were exclusive to iOS. Electronic Arts' new big mobile title, Plants vs Zombies 2, remains (for the time being) an Apple exclusive.

Android games are difficult to monetize and difficult to code. The mobile game creators I've spoken to have told me that having to support so many different hardware configurations and screen sizes is simply not worth it. Moreover, piracy is rampant on Android, as are emulators. If your fancy new Android phone can run all the PlayStation, DS, and Super Nintendo games you want, why bother spending money on a new title?

Of course, that isn't to say that Android will never be a force in gaming. Playing games is one of the most popular activities on mobile devices, and Google appears to recognize the importance of gaming. At the company's developer conference earlier in the year, it showed off a number of gaming-centric Android updates.

Nintendo in decline
It's been a rough ride for Nintendo shareholders, and I don't expect the situation to improve anytime soon. Apple's decision to introduce controller support for iOS could lead to more immersive games, which would put immense pressure on the market for dedicated handheld gaming devices. Google, too, is emphasizing gaming on Android, though its platform continues to be challenged.

Despite many predictions to the contrary, the market for handheld gaming devices has survived. Still, its days could be numbered.