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Will Smartphones Eventually Kill Gaming Consoles?

By Joseph Gacinga – Mar 6, 2014 at 3:00AM

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Gaming consoles are unlikely to be fully substituted by smartphones no matter how advanced mobile hardware gets. Consoles appeal to a certain niche market and have several hardware advantages over smartphones.

Gaming consoles such as Microsoft's (MSFT 0.88%) Xbox series, Sony's PlayStation, and even Nintendo have been around much longer than mobile gaming. Smartphone gaming began its evolution only within the past several years, but has made serious inroads and entered a new stage of creativity and overall viability.

The huge development has been orchestrated by mobile hardware coming of age, thus allowing for higher-intensity graphics and smooth game play that appeals to the heightened expectations of the modern tech savvy consumer. The mass adoption of mobile devices has also made gaming more attractive from a financial point of view, leading developers to produce higher-quality titles. Will gaming consoles survive the smartphone onslaught?

On the surface, it looks like the console apocalypse is well-nigh. High-end smartphones such as Apple's (AAPL 1.00%) iPhone and Google's (GOOGL 1.81%) plethora of Android phones have all but completely overwhelmed mobile gaming consoles such as Nintendo DS and Sony PlayStation Portable. The anticipated successor to Sony's Play Station Portable, the PlayStation Vita, has been a marketing disaster and barely racked up 10 million sales since its debut two years ago.

For comparison, the iPhone managed to sell over 5 million in 2007, its maiden year. In 2013, Apple sold 150.2 million iPhones. Since the release of the HTC Dream in 2008, Android activations have exploded, crossing the 900-million-mark last year. While older console gaming platforms are hardly dead, their popularity seems to have an inverse correlation with smartphone gaming.

The smartphone has its limitations
Smartphones do not pack the same hardware power as gaming consoles. They have lower raw processing power and limited battery life. In terms of sheer logic, consoles will always have an upper hand on smartphones. Consoles are not constrained by small physical size, short battery life, or storage limitations that haunt mobile devices.

Modern consoles such as Sony's PS4 or Microsoft's Xbox One are expected to be around for 5-10 years, based on the companies' previous product cycles. Future iterations might support highly advanced facial and body recognition systems via Ultra HD/4K high-definition displays, which would not be practical on smartphones.

But, mobile gaming has its pros, too. A smartphone screen can be used to augment console games, or utilize onboard sensors to create new genres such as location-based social activities. Simple games such as the (in)famous Angry Birds lend themselves easily to mobile gaming. Likewise, turn-based games such as Draw Something would be strange bedfellows with consoles, yet are phenomenally popular on smartphones.

Consoles don't have to lose for mobile to win
No matter how advanced smartphones become, they are unlikely to replace gaming consoles. As long as consoles continue expanding their capabilities, they will probably remain around for many years. Actually, a marriage between mobile gaming and consoles is a plausible reality since you can play more streamlined experiences that easily transition between a smartphone and a console. It's also possible to create a mobile sub-game that utilize smartphone sensors like Bluetooth, GPS, NFC, and cameras.

The future of consoles
The two most popular gaming consoles in the world are Sony's PS4 and Microsoft's Xbox One. In January, Microsoft revealed that it had sold 3.2 million Xbox Ones in 2013, while Sony fared much better with 4.2 million. Those sales hardly signal a dying platform. Although many investors were surprised by Sony's huge lead over Microsoft, the price disparity between Xbox One and PS4 is, perhaps, the biggest factor for the skewed sales figures. This has not been lost on Microsoft, and the giant software maker recently cut the price of the Xbox One in the U.K. from £429 to £399 (about $716 to $666), which is more in line with the average retail price of the PS4, which is £349 (about $583).

Consoles can do some things much better than smartphones ever could. It's, therefore, fair to say that console gaming is a niche that is not likely to be replaced by mobile gaming.

The future of mobile gaming
The rise of iPhone and Android ecosystems have led to about 500 million iOS devices, and close to 1 billion Android devices sold around the world, making the smartphone a mass commodity. The wide adoption across a large cross-section of demographics and geographical locations forms an enticing market for big gaming houses. Mobile gaming will no longer cater to a niche market, but rather a large and rapidly expanding mainstream.

The transition is expected to pick up steam and accelerate through 2016, especially in emerging markets, and we are likely to witness many gaming developers shift their attention to mobile. This trend, combined with faster LTE networking, more powerful hardware, on-board sensors, and increased battery efficiency will result in a renaissance in mobile gaming.

Joseph Gacinga has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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