Gaming and New Market Disruption, and the Week in Daily Updates

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The fastest growing demographic in gaming is adult females. From the Wall Street Journal:

Female gamers made up about 48% of the game-playing public in the U.S. this year, according to a report recently published by the Entertainment Software Association, a U.S. game industry trade group. That is up sharply from 40% in 2010. What is more, women over 18-years-old now represent a significantly larger portion of the U.S. game-playing population than boys under 18, a demographic that has traditionally been seen as a core target group for game companies. The ESA based its findings on a study of 2,200 U.S. households.

A recent survey from Nielsen Holdings NV, a U.S. consumer research company, concluded that women gamers in the U.S. are most likely to play games on personal computers, mobile devices and Nintendo’s Wii console. In fact, U.S. women are more likely than U.S. men to play on the Nintendo Wii, Nielsen said, while they are equally likely as men to play games on Apple devices…

The growing number of female gamers largely comes down to a surge in so-called casual mobile game, a genre of games boosted by the fast adoption of smartphones, executives from game companies say.

So, to sum it up, mobile and casual gaming, dismissed by traditional gamers, are in fact growing hugely. Ben, you were wrong to change your mind about whether or not consoles would be disrupted!

Not exactly, and I think I should have been more clear on this specific point: I believe that mobile and casual gaming, if it is disruptive, is a case of “new market” disruption, not “low-end” disruption. Clayton Christensen first defined these two terms in The Innovator’s Solution:

There are two different types of disruptions, which can best be visualized by adding a third axis [to performance and time]…The third dimension that extends toward us in the diagram represents new contexts of consumption and competition, which are new value networks. These constitute either new customers who previously lacked the money or skills to buy and use the product, or different situations in which a product can be used – enabled by improvements in simplicity, portability, and product cost…

We will refer to disruptions that create a new value network on the third axis as new-market disruptions. In contrast, low-end disruptions are those that attack the least-profitable and most overserved customers at the low end of the original value network.

In other words, if I made an error in comparing iOS/Android to mobile gaming/consoles, it was in conflating low-end disruption (i.e. cheaper, modular Android theoretically disrupting the iPhone) with new market disruption (i.e. casual mobile gaming theoretically disrupting dedicated gaming devices). Clearly anything mobile-related is a perfect example of a “different situation in which a product can be used.”

Still, though, the point I was trying to make was not that Android won’t take up the majority of the market (obviously false) or that mobile gaming won’t do the same (it probably will); rather, I dispute the assumed end game. Again from the Innovator’s Solution (emphasis mine):

Once the disruptive product gains a foothold in new or low-end markets, the improvement cycle begins. And because the pace of technological progress outstrips customers’ abilities to use it, the previously not-good-enough technology eventually improves enough to intersect with the needs of more demanding customers. When that happens, the disruptors are on a path that will ultimately crush the incumbents.

This is the exact paragraph that underlines the (mercifully-fading) Apple is doomed narrative, and it’s the same paragraph that led so many – again, including myself – to assume that consoles are on their last legs. (And, to be clear, Christensen states that incumbent extinction is the end-game for both “new or low-end” disruptions).

My contention both in the case of Apple and in consoles is that incumbents who are primarily differentiated on the experience of the product, in markets where the buyer is the user, are not in fact doomed. Growth may be limited – as I have consistently said is the case for both Apple and for consoles – but there will always be a market willing to pay for the superior experience delivered by an integrated offering.

The long-term theoretical danger for both Apple and consoles is that some other aspect of the experience outside of their control abandons the smaller high-end market for the booming new (or low-end) market. In the case of both, the danger is losing publishers/developers. That, though, is why I concluded my piece by pointing out that there is still a lot more money in consoles, just as there is in iOS. True, that may change, but it hasn’t yet; when and if it does, I think I’ve demonstrated I’m both capable and willing to change my position.

The full list of topics covered this week in the Daily Update include:

  • The New Structure of Mobile Gaming
  • The Hidden Cost of Microsoft’s Devices
  • Amazon Affiliate Links in the Washington Post
  • Twitter is Great for Unprofitable News
  • Microsoft’s Chromebook Response
  • Google to Offer Account to Children
  • Print, Chinese Walls, and “Objective” Journalism
  • Twitter’s New Photo-removal Policies
  • Steve Ballmer Leaves Microsoft’s Board
  • What Consoles Say About iPads
  • Uber Opens API
  • The Samsung Nook
  • Gaming and New Market Disruption
  • Why the PS4 is Winning
  • Uber Testing On-Demand Product Deliveries

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