/// From Board Games to Cameras: How Smartphones Are Gutting Other Industries
After toy manufacturers Hasbro and Mattel posted below-expected profits for the second quarter of 2013 this month, many placed blame on the same phenomenon: the rise of smartphones and tablets. The Wall Street Journal attributed Hasbro’s tough times to “the threat of mobile devices that are competing with physical toys and changing how kids play.” The Associated Press said the toy industry as a whole had been hurt by “increased demand for electronic gadgets like smartphones and tablets.”
Hasbro is taking steps to adjust: it recently bought a 70% stake in a Colorado video-game studio and signed an eight-year agreement with Electronic Arts to distribute digital versions of its board games, which has been one of the companies’ more successful endeavors. “Both of these steps ensure consumers can experience our brands anytime and anywhere,” said Debbie Hancock, Hasbro vice president of investor relations, during the company’s Q2 earnings call on July 22.
Toys are far from the only industry being disrupted by the latest digital devices. Canon’s compact-digital-camera sales are slipping because of smartphone sales, while GPS-device manufacturer Garmin’s sales have fallen, according to its latest quarterly report. Blu-ray sales are doing well in the post-DVD era — up nearly 30% in the first quarter of 2013 — but while portable DVD players once thrived, it’s almost impossible to find a portable Blu-ray player on store shelves. And Apple’s newest innovations are even obsolescing their older siblings: sales of its iconic iPod music player were down 32% this past quarter compared with the same period last year, while the iPhone is up 20%.
What’s happening to these industries? Smartphones and tablets are digital jacks-of-all-trades armed with apps that are good enough replacements for a wide range of other devices. Hard-core photography enthusiasts are still willing to spring for DSLRs, but most people don’t feel the need to carry a separate camera when smartphones are capable of producing images of a staggering 41 megapixels. In fact, Nikon, Canon’s main rival, is reportedly looking for a way into the smartphone market to stay competitive. Likewise, stand-alone GPS units and even built-in car navigation — which can add thousands to the cost of a vehicle — are irrelevant to many users, thanks to the potent combo of smartphones and Google Maps. And iPods? Their more connected and better-selling cousin, the iPhone, can hold tens of thousands of songs — and that doesn’t even matter when you can stream almost anything from the vast cloud-based libraries of Pandora and Spotify via 3G or 4G data connections.
“Everything is going in the direction of apps: gaming, navigation, productivity, communication, entertainment, the list goes on,” said Steve Koenig, director of industry analysis at the Consumer Electronics Association (CEA). “And the center of the app universe from the device perspective is clearly smartphones and tablets. And so as a result, a number of hardware categories — or shall I say, categories that have been hardware in the past — these are markets that are under considerable pressure because people are able to leverage the power of these connected devices in so many different ways. With an app, they’re able to get the same functionality and utility as they once did in a dedicated device.”
CEA’s projections for 2013 tell the story. Smartphones and tablets will have $65.2 billion in combined unit sales this year, up from $56.3 billion in 2012. Digital cameras and camcorders will be down to $4.6 billion from $6.5 billion, a drop of $1.9 billion. Portable navigation will slip $155 million to $778 million, down from $933 million. And portable gaming systems will lose $263 million, sliding to $340 million from $603 million.
The latter category might have the best chance of survival out of the three, led by its perennial king, Nintendo. The Game Boy is to Nintendo what the iPod was to Apple: a small, iconic device ubiquitous on holiday wish lists. Sales of today’s 3DS and 3DS XL models, which offer three-dimensional gaming without the need for special glasses, are clobbering those of rival Sony’s PlayStation Vita.
Technology is partially to thank for Nintendo having somewhat escaped the wrath of smartphones and tablets. Games more advanced than Angry Birds or Dots require plenty of processor and graphics power, which smartphones and tablets still can’t deliver on the level of a dedicated device. There’s also an ergonomics issue — phones and tablets aren’t designed with gaming in mind. Some third-party accessory makers have designed game controller add-ons for phones, but they’re typically clumsy to use and silly looking.
Hardware alone doesn’t explain why Nintendo is succeeding while its competitors flounder. Nintendo owns some of the world’s most desired gaming franchises: Mario Bros., Pokemon, Animal Crossing, just to name a few. Lauren Hockenson, who covers the games industry for technology-news site GigaOM and who just purchased a 3DS XL for personal and professional use, credited “blockbuster” sales of popular game Animal Crossing with bolstering Nintendo’s handheld success.
“Software sells hardware,” Satoru Iwata, president and CEO of Nintendo, recently told CNN during the Electronic Entertainment Expo this year: if Nintendo made these titles available on smartphones and tablets, it would cannibalize its own hardware sales.
However, Hockenson told TIME handheld consoles have “become a niche market” despite Nintendo’s successes.
“I definitely don’t think handheld gaming is going to go extinct just because smartphone gaming exists,” said Hockenson. “However, I don’t need to tell you that all console sales look like a joke compared to smartphone sales. Handheld gaming has especially taken a hit over the years because it’s simply easier to carry a smartphone or a tablet.”
While the hard-core handheld gaming crowd may be a nut yet left uncracked — for now — smartphone and tablet manufacturers have plenty to smile about: together, they will represent an astonishing 32.2% of consumer-electronics-industry revenue in 2013, according to the CEA’s forecast. “There are many other product categories that are around and will persist, but it’s true they are under considerable pressure from smartphones and tablets,” said Koenig.
Time – Alex Fitzpatrick