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Pachter: Ubiquitous iPod Touch Cutting Into Handheld Market While PSP2 'DOA'
Pachter: Ubiquitous iPod Touch Cutting Into Handheld Market While PSP2 'DOA'
December 6, 2010 | By Simon Parkin

December 6, 2010 | By Simon Parkin
More: Console/PC

Wedbush Morgan Securities analyst Michael Pachter believes the handheld market has reached saturation point, with Sony's PSP2 set to be "dead on arrival", while Nintendo's 3DS will only delay an inevitable losing of ground to Apple's iPod Touch.

Speaking on the latest episode of his Gametrailers show, Pach Attack, the analyst said: "[While] we're not even close to saturation on the video game consoles, we’re way approaching saturation on the handheld market."

“We’re starting to see DS hardware sales crack," he continued. "I think the ubiquity of the iPod Touch is cutting into the handheld market, I think the PSP was dead on arrival and I think the PSP2 is going to be dead on arrival.”

Pachter argued that Apple's iPod Touch device is undermining the video game hardware manufacturers through convergence and dramatically cheaper software.

“It looks to me like young kids are just as happy playing with an iPod Touch or a Nano. The Touch is cool, it plays games, plays music, they’re going to put a camera in it and you’re going to get all kinds of cool stuff.”

“What’s the difference if you play Tetris on an iPod Touch or on a DS?," he asked. "Well, you pay a buck on the iPod Touch, you pay $20 on the DS. Parents prefer $1 or free software."

"I think the iPod Touch is going to sell really, really well," he added. "I really think as the iPod Touch gets more and more powerful, you’re going to see a lot of free games over there."

Pachter went on the claim that Nintendo's forthcoming 3DS will buoy the handheld market, but that its successes will likely only be temporary. “The 3DS will prolong the handheld market for the game manufacturers, but ultimately, I think handhelds are in trouble. After the 3DS has had its little rush I think the handhelds will continue to decline.”

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Tim Tavernier
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Remember, Michael Pachter only has a 25% succes rate on his predictions and explanations. His observations are right, but the reasons behind them are truly short-sighted (and he knows this).

The DS has actually been very resilient towards the i-Devices. The drops you're seeing with the DS has always happened when a handheld has been a) receiving far less attention from first party developers and b) is reaching the end of it's natural product life cycle. These are the actual causes of the DS decline and none have the i-Devices as cause.

the i-Devices are gaming platforms in the same fashion that PC's are gaming platforms: things that have multiple uses with gaming just being one of the secondary. The growth you see on the i-Devices is the seem as the so-called growth in PC-gaming in the 90's. The 90's really high-kicked the electronic penetration of PC's and naturally came with that the growth of the PC-market, but it wasn't really growing as in reaching out to new people, it was growing at the same rate as the PC-market (it's relative portion being the same). Actual growth should be seen as growing faster then your potential market (trough population growth or growing number sof PC's in homes in this case), saturation is the point where this growth is indeed replaced by the growth of your market + replacement purchases.

His conclusion about the 3DS could also be right, but not because of the i-Devices, but more because Nintendo is overshooting the handheld market aka, it's Nintendo's own fault.

Remember that Pachter says things to attract customers for his firm and these customers like to hear stuff they want to hear. That's why Pachter is all for the increased exploitation of the hardcore gamers (because third parties like EA and Activision like to hear that) and jumps on the i-Devices train.

Jamie Mann
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... flame on!

On a purely anecdotal front, I've recently shifted to a job where I spend around 2 hours a day on the train, travelling between two major UK cities; as a result, there's a fair mix of business people, students and people travelling for personal reasons (vacation, family visits, etc). And in the ~six weeks I've been doing this, I've seen hundreds of people clutching an MP3 player. I've seen dozens of people tinkering with their phone (generally an iDevice, but with a smattering of androids). I've seen the odd iPad and even one or two Kindles - I even saw a girl reading a Wheel of Time book on her iPhone. But I've only seen a single DS in all that time.

Conversely, the high sales figures being reported by Nintendo over Thanksgiving seem to indicate that the DS is still healthy - but it also begs the question: will people be willing to buy yet another (and far more expensive) device just three months later, when the 3DS is released?

Finally, before people bring the question of revenue, sales figures and profit into it: yes, the iDevice market is bringing in significantly less money than Nintendo does. However, this doesn't take into account the "value" of the free/ad-supported content on the App Store. Personally, my iPod Touch has around 40 games on it, of which less than half a dozen were pay-for titles.

All told, I think it's very likely that quantity (App Store) will prove to be a bigger attractor than quality (DS/PSP). Admittedly, I'll be happy to be proved wrong: the prospect of the mainstream game market devolving into a single global "App Store" environment is a scary one, on pretty much all fronts.

On a separate note, (as per Slashdot) the latest rumours on the PSP2 is that it's going to be an Android-powered device. If true, it'll be interesting to see how this pans out: Sony's "premium" content will be going head-to-head with the free and cheap content on the Android marketplace: will anyone be a winner?

Jonathan Jou
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Patcher isn't really so much wrong as he is stirring up a commotion about very little. Reggie has been heard on record saying that the iPad and iTouch are indeed biting into their market share, but consumer interest in the 3DS and DS continue to support the fact that iDevices aren't quite breaking into the original "hardcore gamer" market, who shells out $30+ for a handheld game, and for good reason. When Apple comes out with some way to have physical buttons on an iDevice, or Nintendo reveals its own OS and app store, we can talk direct competition.

For now, at least, traditional handhelds will sell to the same people who buy consoles and console games, and iDevices will win over the crowds who don't think one $30 game could be worth more than 30 $.99 games.

Eric Geer
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I think its funny that Patcher comes up with these outlandish forecasts when he is talking about 5 and 6 year old hardware losing sales--We are on the border of a new generation for gaming hardware--obviously older systems have sold and they have sold well for being on the market for 5 and 6 years...they sales are obviously going to decrease--and I believe that when the 3DS his the market--Patcher is going to eat his words(yet once again)--I know there a lot of people holding off on getting a new ds because the 3ds will be here within 4 months. And with rumor of a PSP2--there people probably holding off on doing anything with the PSP--though Monster Hunder Portable 3rd seems to be a system seller in Japan--I'm sure Sony saw a large spike in sales for that one--if they bring the custom MH psp to the US I'll probably buy a new psp--

Still I think patcher is biting off more than he can chew---as he usually does--his analysis of the market is often skewed--and generally wrong. Gamer's go crazy for new hardware--its been seen many times over--and especially for Ninty hardware--

We'll see Patcher--we'll see.

Eric Geer
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"newest installment in the series sold 2 million units in Japan."

"Demand for the monster-action game also bolstered sales of Sony’s PSP last month, helping the handheld outsell rival Nintendo Co.’s DS for the first time in half a year, according to researcher Enterbrain Inc. "

Not bad since it was only 6 days ago...Games like this will never make it to the iPod/iPad.--unless of course they add buttons.

Benjamin Quintero
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As long as smart phones keep dieing after an hour of intense gaming, I will have my DS. Someone solve the battery problem and Only then will I agree that dedicated gaming devices are dead. Until then, I make calls with my phone and game on my DS. Remember when phones used to make calls? Future generations will be laughing at all of us for saying that.

Sean Kiley
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If the itouch takes over, wouldn't you still have square enix making a $20 game for the app store? Most of the $1 games on the touch are no where near the in depth games I have on my DS.

Eric Geer
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Tis true, I'm not sure what the app store policy is, but it would seem likely that the cost or price of a game would be up to the publisher/developer. Though I think much of the reason for the cheaper cost for i___ games is the lack of physical packaging required--

raigan burns
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I would be more worried for DS/PSP if any of the iPlatform deviced had buttons -- until then, they're good for a small niche of games and not much else.

The Tetris example is really stupid -- has this guy even tried playing Tetris on iPhone? It's terrible, sloppy, and overall a frustrating experience compared to e.g Tetris DS.

You NEED buttons for precise fast input.

Or, you need a game so stupidly easy/boring that horribly mushy sloppy controls (and your thumbs/hands obscuring much of the action) don't render the game impossible.

Thankfully for Nintendo and Sony, Steve Jobs hates buttons.

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Eh... whatever you say Patcher...whatever you say...

Brad Borne
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Not sure how the casuals are really relevant. We have only just now started talking about them as a business strategy, if Nintendo got them to buy a DS this gen, well that's just great. Looking at the 3DS lineup, the system will be far more core oriented, not to mention, glassesless 3D is far more eye catching nowadays than 'hey look, a sort of real game running on my phone!' is.

David Hughes
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He also said the exact same thing two plus weeks ago. There's no "news" in this article.

Cody Scott
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im getting an ipod touch to listen to music, maybe watch a movie, the fact that it plays games is a bonus but i dont plan on having more than 2 games on it.

Leon T
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Pachter has shown to not have a clue when it comes to most things in the gaming space. Remember when the DS was suppose to fail?