iPhone and PSPGo – a textbook case of market disruption

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The iPhone is an increasing competitive threat to portable gaming devices including the Nintendo DS and the PSP, and so when Sony launched the PSPGo yesterday the FT was keen to compare it with the iPhone.  There are some details of the comparison below, but my main point here is to reflect on what Sony sees as the winning difference between the PSPGo and the iPhone.  As you can see from the picture the PSPGo has a slide out control panel, about which Kaz Hirai, head of Sony Computer Entertainment, said:

“For consumers to enjoy these kinds of games, where intricate motion controls are required, you need physical buttons, the games and experiences are fundamentally different,”

It is too early to tell how this market will play out, but if Apple succeeds at the expense of Sony history will look back on this statement as a textbook example of an incumbent under-estimating the threat of a new entrant because they were competing on a different axis.  Sony has long been in the serious games business where prices are high and I’m sure that proper controls are an important part of the story, but what the iPhone is showing us that cheaper games from a touch screen interface also work, particularly when combined with other novel elements like the app store, range of games, and accelerometer (plus of course you can use it for a bunch of other things, including making phone calls….).

In his classic text Innovator’s Dilemma, Clayton Christenson describes how successive generations of disk drive companies defeated their larger incumbents by starting with products that were cheaper and inferior along the classic competitive axes of capacity and speed, but superior in terms of size (i.e. they were much smaller). 

Hopefully the iPhone – PSPGo analogy is clear.

The interesting stats from the FT article are:

  • There are 21,000 games on the iPhone, compared with 600 on the PSP and 3,700 on the Nintendo DS
  • 50m iPod Touches and iPhones have been sold, compared with 56m PSPs and 108m Nintendo DS’s
  • The PSPGo will sell for $250 in the US, compared to $199 for the iPod Touch
  • The PSPGo has 16MB internal memory, iPhones have 16-32MB
  • Sony is opening an equivalent to the App Store
  • iPhone games typically cost $0-10 (with the average at around $1), which compares with $25-40 on the PSP and DS
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  • chrispadfield

    A hardware attachment to the iphone to allow for other control features would hardly be a challenge and much smaller than carrying two devices.

    I think the biggest problem for the PSP will be the migration of game developers to the iphone (and other) platforms. I think we discussed on a previous topic re Apple's App Store revenues what happens when more premium content moves there. Given the pricing structure on App Store at the moment, and unless there is willingess to pay more than $5+ for a game – new high budget games will not be developed for the iphone but I expect that to change (Apple needs to re-jig the app store to push more expensive/premium apps which is clearly in their interest to do so)

    The other issue for the iphone for gaming is non replaceable batteries.

  • chrispadfield

    A hardware attachment to the iphone to allow for other control features would hardly be a challenge and much smaller than carrying two devices.

    I think the biggest problem for the PSP will be the migration of game developers to the iphone (and other) platforms. I think we discussed on a previous topic re Apple's App Store revenues what happens when more premium content moves there. Given the pricing structure on App Store at the moment, and unless there is willingess to pay more than $5+ for a game – new high budget games will not be developed for the iphone but I expect that to change (Apple needs to re-jig the app store to push more expensive/premium apps which is clearly in their interest to do so)

    The other issue for the iphone for gaming is non replaceable batteries.