The PSVita has been a somewhat divisive issue since its announcement back in June where some people believe, with reason, that the age of handhelds with the primary focus being video games has come to an end. I on the other hand have a more favorable opinion on the ability of Sony to navigate these ever-changing waters. What will be discussed in this first entry of this three-parter is the potential size of the handheld market place and how the PSVita is in a comfortable position to acquire a share large enough to become a profitable venture for Sony in the long run.
With the merciless rise of multitasking devices like smartphones and tablets have created a very different market than the one Sony’s first handheld, the PSP, entered in 2004. The PSVita is being released in a new age of consumer electronics, and not only will they have to fight for market share with Nintendo, but both gaming giants will have to figure out a way to make their $40 retail games more appealing than the $1 and often times, free software found on both the Android and Apples marketplace.
Lyle Hall of Heavy Iron Studios is one of a sizable and vocal group of people who believe there is simply no room for a gaming device:
"If people aren't willing to pay $249 for a Nintendo 3DS why would they pay $299 for Vita? People don't want to carry more than one thing in their pocket, that’s why Android and iPhone have done so well, they are the devices of choice, they offers multiple functions outside of gaming," Hall told GamesIndustry.biz.
Disregarding a rather poor comparison between the 3DS and the Vita, where both their perceived value and the actual components are far in the Vita’s favor, I find it faulty to conclude that just because a market is going to be possibly smaller than in years past does not necessitate that there is no longer a viable market where profits can be gained. I think a good method to predict the potential hardware sales of the PSVita is to first look at how the PSP has fared since its launch in terms of sales, and then guess the relative size of the market that the Vita will now face.
According to vgchartz.com, the PSP has sold a total of 69.25 million units to date. This ranks it 7th all-time in total sales for all video game hardware with 8 million more units sold than the NES which is currently ranked 8th. These are more than solid numbers for any consumer electronic there need to be some estimation of the impact the market change on the sales of the Vita.
By all accounts, the 3DS and the Vita are after different markets. The casual games that you can find on any phone these days is in a far more direct competition with the similarly casual games that you can find on the 3DS. A lot of consumers perceive Nintendo as a casual game company at this point and a lot of this can be attributed to Nintendo’s marketing of their products for the better part of the decade and the type of software you can find on their systems. While the 3DS games are more immersive and generally have more content than software in the app marketplace, they are not $40 better. This is a problem that Nintendo has to face long-term if they continue to pursue this market and continue to limit their attention to core title.
On the other hand, I think most would agree that the games found on Sony’s handhelds and the Vita itself are more focused on the core user, bringing core franchises like God of War, Killzone, Resistance and announced heavy hitters like Call of Duty, Assassin’s Creed and an original entry in the Bioshock series seem to bring an big name games to a please a variety of gamers. These are core games that will not be found on Nintendo’s handheld and are using core controlling schemes that are not found in the smartphone and tablet market. So, Sony’s bet is that core gamers understand this and will want to play these outside of their home and the Vita is the only platform with which to play them to their best effect. Along with this bet they feel that the consumers whom they are targeting are less likely to settle for casual titles that other handhelds offer and thus the impact on their sales is likely to be less noticeable than what Nintendo is now facing with the 3DS.
Recently, Micheal Pachter of Wedbush Securities has predicated a 30% decline for the video game handheld market due to tablets and smartphones and I think that is a fair assessment for 3DS but would cut that estimate in half for the Vita due to key differences in their respective consumer base. So if you subtract 15% (the 15% of people who own a PSP, but are happy enough with the of the PSP hardware sales, you are still left with over 58.9 million units sold. This is still several million more than the Xbox 360 or the PS3 have yet to sale and these are numbers that have been profitable to both Sony and Microsoft for several years now. This is a very attractive figure that few consumer electronics could ever hope to reach and if these are the same numbers Sony’s market research team is finding I imagine they also find these types of numbers a compelling enough reason to stay in with their handheld games business.
Now I am admittedly using rough estimates to come up with rough numbers but I would not doubt that they do end up somewhere in the ballpark of where the Vita ultimately lands. I also wouldn’t be surprised to find them achieving even stronger numbers over its lifetime. I have yet to find any compelling evidence or reasoning to guess they can’t achieve these types of numbers.
In part two of this opinion piece, I will be touching on some things that Sony is or should be doing to make this device as competitive as possible in the handheld market. This will include various pricing models, marketing strategy, social/multimedia capabilities and the hardware itself. So be sure to check back for more on the topic and voice your opinion below about how successful you think the PSVita will be when it’s all said and done.