Mobile Kills the Console But Advances the Gaming Industry

On mobile devices, there are games ... and then there's everything else.

It's not just that games are moving to mobile, but that gaming has slowly and inexorably become central to the mobile device industry. Based on statistics involving how mobile users spend their time and money, I’d argue that mobile games have reached the point where they are now the single most important activity on mobile devices.

So what does this disruption of gaming mean? For starters, it suggests a cloudy future for gaming consoles as a separate hardware platform. And it represents the first time in computing history where games have played so central a role on a general computing platform. The gaming industry can’t afford to stick to its traditional business model.

Down with the Console

Consoles aren't going to disappear overnight. But it's becoming increasingly apparent to many in the industry that the new crop of consoles now hitting the market -- from Nintendo’s Wii U and Sony’s PlayStation to Microsoft’s Xbox slated for later this year -- will be the first generation of consoles that won't outsell their predecessors.

All of these consoles represent the gaming industry’s desire to compete with the rise of mobile, Facebook, and free-to-play games disrupting their business. Yet Nintendo just cut its projected sales outlook for its new Wii U game console by 17 percent.

I actually predict that this new generation of consoles will sell 32 percent less than the last. This isn’t only because of mobile devices such as smartphones; tablets are also contributing significantly to the decline of consoles in the gaming ecosystem.

Because general computing hardware like tablets are cheaper, more powerful, and more mobile, specifically dedicated hardware like consoles will continue to lose out to them. The current generation of tablets has as much graphic richness and computing power as consoles. New, more powerful tablets also come out every year -- as compared with every seven years in consoles.

Plus, you can carry a tablet anywhere in your bag, as opposed to a console that’s permanently parked by your TV. And that mobility matters ... a lot.

Up with the Mobile

There have always been games for PCs, Macs, and notebooks.

But in the history of these computers’ existence, gaming never came close to the usage behavior demonstrated on mobile today. Gaming is leading in the three most important consumer usage behaviors on mobile devices; what I’ve referred to before as the “Triple Crown” of mobile usage: reach, engagement, and monetization.

Reach is the percentage of people who own a mobile device that would engage in an activity such as playing games, checking email, or shopping -- and gaming’s reach is 60 percent of all tablet owners. That’s almost tied with seemingly universal activities such as checking email or reading news.

Engagement is the percent of time spent (out of all usage) on the device -- and 67 percent of all time spent on tablets is spent playing games. That’s striking, especially when compared with engagement in social networking: just 10 percent of total time spent (partly due to shorter sessions). Even more tellingly, time spent playing games has overtaken the total time spent watching videos, listening to music, and reading magazines or books!

__*Monetization *__involves capturing consumer share of wallet, and no matter how you look at the data, gaming wins. For example, more than 80 percent of all revenue generated last year by mobile applications -- a $10 billion software industry -- was from games (according to Flurry Analytics). Compared with other apps on the top-grossing charts, 76 of the top 100 grossing iOS apps are games.

Similar conclusions can be reached from other research, too. The ratings company Nielsen reports the number of people playing online games increased by 94 percent between 2010 and 2011 -- the biggest jump in any mobile-related activity (including watching videos or listening to music). And investment banking firm Jefferies shared that in 2012, the installed based for iPhones (450 million) far exceeded that of consoles (240 million); but perhaps more interestingly, consoles grew by only 20 million from 2011 compared to the double growth in mobile (and that didn’t even include tablets).

Indeed, for much of the world, mobile devices have essentially become gaming platforms ... which also happen to make telephone calls or enable video watching. While no one doubts we will continue to use mobile devices for things other than games, it’s clear that gaming has become, and will remain, in the top tier for the three key mobile usage behaviors. So the big shift in 2013 and beyond isn’t just mobile growth; it’s how mobile and gaming together are disrupting the digital entertainment industry.

Wired Opinion Editor: Sonal Chokshi @smc90