Will Apple Crash the mobile gaming party?

Following an in-depth look at the launch of the latest iteration of Nokia's N-Gage platform, Andy Robertson examines the sort of impact that a games service for the Apple iPhone is likely to make - what will it look like, and can it succeed where others have failed?

Having tamed the music industry, and just surpassed Wallmart's music sales, Apple is turning its attention to videogames. After successfully dabbling with games on the iPod, it is looking to extrapolate the iTunes-centric music distribution model to fully featured gaming experiences on the iPhone and iPod Touch. Now that the SDK has had a few months in the wild, it's a good time to consider how the gaming strategy stacks up. How much of a threat is Apple becoming to both other carriers and the handheld markets traditionally dominated by Nintendo and Sony?

The past few years have seen Apple testing the water for games on its portable devices. These iPod games were an educational exercise for Apple, with the game purchases used to build a detailed understanding of what Apple's audience will pay for these experiences. Not only that, but these statistics also paint a picture of the types of games that work well on the device.

Looking ahead, iPod games have also enabled Apple to build up relationships with the major players in the games industry. It has not been by chance that we have seen delivery from the likes of Sega, EA, Namco, Popcap and Harmonix. This has been a developer outreach programme, and one that seems to have been highly effective. The results are twofold: Apple understands the tools a developer needs to produce games; developers understand how Apple wants to bring its considerable presence to bear on the games market.

Comments from these industry big hitters are certainly on message from Apple's perspective. "The animation technology in the iPhone OS enables us to build awesome games," said John Riccitiello, CEO of Electronic Arts.

Simon Jeffery from Sega of America added "I think iPhone consumers are going to be blown away by the games we create for this platform. The iPhone OS is a robust development platform that will allow Sega to deliver mobile gaming experiences that are truly compelling, using the iPhone's accelerometer to power a tilt control feature adds a whole new dimension to Super Monkey Ball, and we can’t wait for gamers to try it."

In addition to this groundwork, Apple's approach of giving away its SDK should extend its reach to smaller and independent developers. This will undoubtedly result in a large number of games ready for accreditation. Since its release the SDK has received four substantial updates, again showing Apple's commitment to establishing a thriving developer community. As Steve Jobs recently highlighted:

"We're excited about creating a vibrant third party developer community with potentially thousands of native applications for iPhone and iPod touch, iPhone's enterprise features combined with its revolutionary Multi-Touch user interface and advanced software architecture provide the best user experience and the most advanced software platform ever for a mobile device."

For a mere USD 99 developers get to tout their games on one of the busiest online outlets. Once there, they are able to set the price of their games, and get to take home an impressive 70 per cent of proceeds. Apple takes the remaining 30 per cent of revenues, as they say "to cover the costs of running the Apple Store"...and make a tidy profit to boot no doubt. With the iPhone and SDK taking centre stage at the upcoming Apple Worldwide Developers Conference in June, many expect this to be the date when they open the iTunes distribution floodgates.

As was true for Apple's move into the music business, this is going to be perceived as a threat to brick-and-mortar game retailers. Time will tell if they are able to respond more effectively (and crucially, quicker) than the monolithic high street CD sellers that so badly lost out when music sales moved online without them. Gaming retail is a different market with its own unique challenges and opportunities but there is no reason to suggest that Apple will be any less successful here.

The only addendum is the pre-existing direct sales networks such as Steam on the PC, Xbox Live, the Playstation Network and the N-Gage platform. Even with this in mind though, Apple looks likely to have the most fully-featured service for delivery of handheld gaming experiences, not to mention an impressive installed base of devices (aiming at 10 million worldwide by the end of the year).

This service is expected to become a reality in June when the iPod touch and iPhone receive their firmware update. If that is the case it is understood this will add a games icon to the home screen - clearly positioning the iPod touch and iPhone as gaming devices. Tapping this icon will take you directly to a games section on the device that hooks into the iTunes store and enables you to purchase and download games. The ability to buy and play games on the same mobile device is a trick that even Nintendo hasn't yet cracked - the DS is limited to temporarily downloading demos that don't persist once the device is switched off.

This approach enables Apple to lower the barrier to entry for its games in a number of ways. Firstly, many of the company's target audience either already owns an iPhone or intends to purchase a device once 3G connectivity is available. Secondly, the addition of games will further drive sales of the handheld devices which finally offer the sort of divergence users have been crying out for (iPod, Browser, Video, Phone, Email and now Games). Thirdly, accessibility and familiarity of the route to select, pay, download and start playing the games makes the whole experience much less daunting to new users. This is the same process as purchasing music and ensures users don't have to set up any new billing or invoicing details. Finally, iTunes' dominance as an online marketplace on both the PC and Mac places these games directly in front of millions of potential customers in an unobtrusive and familiar environment.

Add this impressive marketing model to the great form factor and gaming functionality of the phone and it's a package that is hard to resist. Not only is there no cap to the size of the games but they can also take advantage of the phone's accelerometer (read: Wii-mote like) and multi-touch features. The appeal of these less imposing game controls (as has been proven with the Wii) are another reason for their appeal to the casual gaming market. But not only this, the higher horsepower of the device and flexible inputs have the potential of delivering games that should appeal to the hard-core gamer - Monkey Ball from Sega is already at a playable stage, and looking pretty impressive.

It will be interesting to see how Nintendo, Sony and Nokia (the other handheld gaming companies) respond to these developments. Sony seems closest to providing content directly to its PlayStation Portable device. The Playstation Network enables you to download games for use on the PSP, although currently you have to go via a PC to achieve this. They are also first to make moves towards the 'talk and text' mobile business with their integration of Skype. However, similar to complications with the game service, setting up Skype on a PSP is no mean feat and requires far too many wires.

Nintendo is starting to offer a download to DS channel on the Wii. Here, you can download demos of upcoming games - but, as mentioned previously, these don't persist after switching off and if you want the game you still need to walk into a shop. They have mooted the concept of selling a memory card for the DS that would enable game downloads, but late additions of this sort are unlikely to offer the sort of installed base that would make a viable download business.

Meanwhile Nokia has just re-launched its N-Gage service, a part of which offers the ability to download games direct to your mobile. This is closest to what Apple is intending to offer. However, the fidelity and quality of the N-Gage games means that the experience is nowhere near that of the iPhone. The Nokia gaming phones, such as the N81, simply don't offer the horsepower or control mechanisms required by modern games - meaning that you're still very aware that you are using a phone.

All this is obviously speculation until the iPhone games are available in iTunes and start to generate some real numbers. But even from the pieces of the puzzle already in play, it is clear that Apple's intention is to become as synonymous with buying games as it has with purchasing music. The multi-touch screen and accelerometers, the third party support and the large installed base should all pave the way for Apple's success.

The company is certainly telling the right story here, and now it just needs to back it up with some substantial and compelling game experiences. This, perhaps, is the only major difference between Apple on the cusp of the iPhone games launch and Nintendo before the DS release. Both have unusual control schemes and designs on the casual gaming market. But only Nintendo was able to back up its hardware with first party games and franchises. If third parties were important for Nintendo they are literally crucial for Apple. It will be interesting to see the reception of these new iPhone games over the coming months, particularly in light of the lacklustre initial press reviews for the DS.