A respawn for handheld gaming

Long before our pockets became the humble receptacles for the equivalent of super computers – each laden with apps and games – gamers of yesteryear were desperate to be untethered from their limited, stationary arcades and home consoles, and to play games on the go – enter, handheld gaming. 

There’s no doubt that Nintendo has been the longstanding leader in the handheld game space. What started with LCD-based Microvision, quickly evolved into something far greater. Even when Sony’s PlayStation PSP had skin in the game with a lifetime 80 million units sold, the Nintendo DS outshone its competitor with a lifetime 154 million units sold and commanded the lion’s share of the market.  

Nintendo and PlayStation dominated the market, but faced unique challenges  

Naturally, in the handheld space, the success of both Nintendo and PlayStation lay in the solid brand affinity each held among consumers. However, from a technical standpoint, both offered a stable platform and engineering prowess that helped establish and build trust with developers, giving them a stable framework to develop for. 

What allowed Nintendo to stand out was – not just being a staple household name since the 1970s – but also the immensely popular first party titles that drove the Nintendo DS to global success. Due to the variability in hardware between the DS and PSP, most small to mid-sized developers had to pledge allegiance to a single brand. 

For example, where Nintendo had double display cartridges, the PSP had a single display UMD. What’s more, the added complexity of Nintendo’s stylus and LCD screens meant that developers would have to design an entirely new interface to have a presence across both brands. While this added unique and creative in-game experiences and interactions for users, it also cost a lot more to develop. Whereas, in contrast, the PSP favoured better graphics and more traditional in-game mechanics, making them more inclusive for limited budgets.  

To challenge the dominance of Nintendo and Sony, some smaller manufacturers entered the handheld arena. They used open-source hardware, Linux OS and preloaded games via SD cards. Some of the more prominent handhelds included the NeoGeo X ($199), Pandora ($350) and GCW Zero ($240). Unsurprisingly – or perhaps due to their naming conventions – these devices never caught on. Jokes aside, a lack of consistency and reliability as far as ecosystems and formats for developers to shoot for, led to a gaming catalogue that left a lot to be desired. 

(Please note, prices are from release date and are not currently in line with inflation.) 

As the world became smart, the appeal of handhelds diminished  

The handheld gaming market soon began to evolve, phasing out some of the big hitters as Android and Apple’s conducive approach to games ecosystems came into fruition. In the early days, this smartphone gaming craze spawned now-cult classics such as Angry Birds, Candy Crush and Minecraft. As this technology matured, devices have now become powerful enough to run the likes of Warzone and Fortnight, paving the way for an entirely new method of gaming. 

It was this type of powerful, freemium smartphone content that became too fierce for incumbents to compete with, leading to PSP’s eventual discontinuation. However, this perhaps also demonstrated Nintendo’s first party resilience – earning them the ‘evergreen’ accolade – and creativity with the introduction of the Switch console – once again allowing them to reinvent the wheel – by combining social with portable gaming.  

Freemium model scales down developer enthusiasm  

The dominance of the freemium model may be far-reaching, but it has locked developers into a cycle of producing scaled-down AAA content and/or simple arcade-style games. These are often riddled with in-game purchases and ads to aid in the recoupment of development costs.  

Yet, the scale and feel of these games are reminiscent of the DS/PSP era – when games were specifically made for handheld devices – however, recent years have seen a growing appetite among consumers for open-world mobile games, inspired by the ongoing battle royale phenomenon. 

There is a common denominator between early handhelds and mobile games, and that is that developers are now subject to the policies of host ecosystems. Nowadays, more than half of the world’s gaming spend occurs on Apple and Google’s respective turfs. The free-to-play nature of mobile gaming has pushed developers to succumb to in-game purchases and gaming-as-a-service mentality – again, to recuperate the cost of what feels like low-end development in comparison to the type of graphically scaled down, console-level games that mobile phones are now capable of supporting. 

However, the inherent freemium nature of apps in these ecosystems make it almost impossible for quality games to reach commercial success without in-game app purchases. This forces a glass ceiling on the type of games that developers are willing and able to produce. Free games certainly aren’t falling off the map – they remain prosperous – but there is an overwhelming appetite for more among both developers and consumers. So, where do we go from here? 

Enter the handheld gaming PC   

A logical answer to this appetite for more robust handheld games is the handheld gaming PC; a niche product segment that, for years, was geared towards the enthusiastic, hardware-savvy gamer, with deep pockets. 

Brands like AYA NEO, GPD and OneX were leading the fray, squeezing PC levels of performance into a small form factor – with prices often stretching beyond the $1000 mark. Chinese manufacturers have succeeded in producing powerful hardware and piggybacking off Windows OS – whose compatibility with GamePass, Steam and Epic libraries has provided an enormous range of games to play already. 

However, the Achilles heel for these manufacturers has been in volume bargaining power, software/UI optimisation and customer support to break through to a mass market. 

Valve’s Steam Deck release in February 2022, however, has become a disruptor for the industry, and is seeking to capitalise on the shortcomings of its predecessors. Valve introduced new touchpad ergonomics (essential for PC mode) and secured first mover advantage in creating a stable, bespoke ecosystem – embodied in SteamOS 3.0 – which is more commercially palatable to average consumers. Its open-source nature attempts to shift Microsoft’s monopoly on PC gaming by providing bloatware-less frameworks for other handheld PC gaming brands for free… If Microsoft had no plans to release a handheld gaming Windows device, they may need to reconsider. 

Nintendo’s closed ecosystem DS remains a leading handheld console, despite a lacklustre OLED update last year – and the Steam Deck’s estimated sales of over 1 million unit is a far cry from Nintendo’s 19 million in the first nine months of release. However, the Deck’s release has sent ripples throughout the industry. We’ve seen a flurry of competitively priced products coming to market (from AYA, NEO, OneX), OEM lines announced running SteamOS, and more recently, Logitech G Cloud and Razer Edge. These Android devices may not be able to offer the same breadth of PC-level games as SteamOS-type devices, but they do provide a glimpse of what’s to come when the Android gaming ecosystem is reincarnated to host streaming services like GamePass. Rest assured, the Android game catalogue is in strong need of a cultural shift, both for discovery and support for paid single and multiplayer games, to compete with the scale and quality of Steam Deck’s games. 

This leads us to believe that we’re undergoing a tectonic shift away from hardware-centric gaming ecosystems, as seen in the early days of Nintendo DS and Sony’s PSP, to a more software-led and streaming-orientated integration model. Any platform or OS capable of capturing most devices wins, and in this race, Microsoft, Sony and Valve appear to be best positioned, with GamePass, PlayStation Plus and Steam to benefit form further hardware releases. 

What does Futuresource predict for the gaming industry? 

While the Steam Deck storms through people’s expectations, the mould for handheld gaming is not cast just yet. Other PC brands with solid gamer loyalty are likely to emerge with their own devices. Best positioned for this are ASUS, and particularly, Alienware (Dell) resurrecting its UFO concept in 2020 – and perhaps Lenovo with its Android-based Legion Play product, which never made the MWC 2022 unveiling. 

As for Microsoft, due to platform-based positioning, it’s hard to see them produce a dedicated handheld device, but will perhaps author a line of smartphone-compatible controller devices, to get a piece of the accessory market; similar to the Sony release off the back of a partnership with Backbone in July 2022.  

About the author

Maxym Dmytriyev

Maxym Dmytriyev joined Futuresource as a Research Analyst in 2021, he specializes in research and report production for the whole Gaming Market, and has worked on reports for wider Consumer Electronics. Prior to Futuresource, he graduated with a BA in Business Management from the University of Sheffield.