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Is Mobile Gaming Ringing the Death Bells for the Console Industry?

As smartphones have been getting "smarter," the games that they can run are becoming more advanced. In only a matter of months, gamers have seen the titles available on the mobile platform evolve from Atari quality to games that visually rival the original PlayStation.

It wasn't long ago that arcades were the single most important force in the gaming industry. As arcades were where the money was at, they were also where gamers would find the latest titles with largest budgets, coolest design, and best looking graphics. But when the era of consoles had begun, and devices like the Super Nintendo or PlayStation began to find a more common place in the everyday home, this changed almost overnight. After all, how can you compete with having the arcade experience in the comfort of your own home?

The popularity of consoles eventually drove blockbuster gaming titles to the home console market, where it currently resides today. However, as the cost of producing a modern game has drastically risen over the past decade, it's harder than ever for major publishers to earn the kind of revenue they want from their games. Combined with the fact that alternatives for publishers, developers, and consumers have begun to emerge in the form of mobile gaming, it may not be long before the death knell sounds for the console industry just as it once did for the arcade.

Major Causes

As smartphones have been getting "smarter," the games that they can run are becoming more advanced. In only a matter of months, gamers have seen the titles available on the mobile platform evolve from Atari quality to games that visually rival the original PlayStation. According to data from Forbes and research firm Garnet, the mobile gaming industry is the fastest-growing segment of the market, with revenue expected to hit $22 billion by 2015. Today titles like Infinity Blade--a video game for iPhone, iPad and iTouch--look at least as good as games that required a dedicated device to play only a few years ago.

Although there are more forces behind this development than it is possible to list here, understanding a few of the important ones can help us develop a sense of as to where the industry as a whole is headed. Apart from how advanced smartphone technology is becoming, tablets, netbooks, and other mobile devices are keeping pace and dropping in cost. As these devices become more affordable by the season, the industry as a whole continues to gain hundreds of millions of gamers annually.

In the future, services like OnLive make it possible to use any device that has an Internet connection to stream game content through the cloud. While the necessary files and computing would be carried out by another device, perhaps even one owned by a third party, it may only be a few years until we're playing the latest AAA releases on tablets that are wirelessly connected to our TVs.

The Future of Consoles

Despite the fact that the function provided by consoles is essential to many people, the necessity of having a device dedicated to that function is rapidly receding. Just like the spread of mobile phones held dire consequences for the devices that they made functionally redundant, like pagers, the need to own a console to play the latest and greatest games may not last more than a decade. This might sound like scary news, but might actually be a good thing for just about everyone involved in the industry. After all, how many people are unwilling to spend $400 on a console just to play games, but would be willing to buy a game if it would play on a device they already own?

This effect may be easiest to see in some of the earliest casualties of the spread of mobile technology--handheld consoles. Until smartphones became so ubiquitous, devices like the GameBoy and PSP had a virtual monopoly on mobile gaming. But why spend $200 for a handheld gaming device when your phone is just as portable, already in your possession, and approximately as powerful? Although handhelds like the Nintendo 3DS continue to perform admirably on the market (perhaps due to its ability to offer something that smartphones currently can't with 3D technology) more powerful handhelds like the PS Vita continue to produce dismal sales internationally.

The Mobile Goldmine

In 2013, the gaming industry was projected to be worth approximately $70 billion dollars; that's growth of about six percent from the previous year. However, just how lucrative is mobile gaming? According to Newzoo's 2013 global games market report, about $12.3 billion of the total industry currently belongs to mobile markets, with almost 35% growth in that sector this year alone. If current trends hold, mobile gaming on smartphones and tablets will be as much as 28% of the entire gaming market by 2016--ground partially made up of the millions of new gamers, and partially from the annual loss of market share that has already begun for consoles.

Console Backlash

When arcades began to lose market share to consoles, they tried to provide something that couldn't be emulated in the home. This usually involved adding a bulky physical control element to their game. For instance, a boat racing game would let the player sit on a plastic ski boat and lean left or right to help control the game. And while there's something to say for that kind of gaming experience, perhaps taking a look at the state of the arcade industry today is sufficient to demonstrate that those kinds of experiences were more gimmick than substance.

The move from the arcade business model to the console business model was a boon for developers, publishers, and gamers. Having to head to an arcade and pump quarters into a machine every time you want to play a game is inconvenient, expensive, and encouraged developers to create brutally difficult games to guarantee their game would eat as many quarters as possible. Ironically, the end of consoles may be the best thing to happen to gamers since its invention. With new models of monetization that work better for everyone, it seems the only clear loser may be the retailer--an unnecessary third party that's already being phased out by digital distribution.

The Future of the Gaming Industry

As consoles continue to bleed market share, the industry as a whole will have a choice. It can either try to embrace the coming changes to the market with open arms, or it can go the way of the arcade and try to offer something that you can only get with a console. While precisely what that would be remains a mystery, it's not clear that resisting this change would be in the best interests of the console industry. It's worth keeping in mind that console gaming is still a billion dollar industry and should continue to be so for at least another decade. While the ultimate transformation of consoles into a more vestigial device may be all but inevitable, with mobile gaming bringing easily-accessible games at a fraction of the price, it isn't bad news for the vast majority of gamers.