Cell phones are displacing video game consoles

When Max Batch wants to play a video game, he turns to his Apple iPhone.

The 22-year-old German has shunned hand-held consoles such as Sony’s PSP and Nintendo’s DS, joining a growing number of people who use their smartphones for online and other games, eroding sales of the dedicated handsets.

“It’s not worth having a hand-held,” said Batch, who spends about 2 euros a month on mobile-phone games and tried out Sony’s PlayStation Portable at the Gamescom fair in Cologne, Germany, last month. “I have an iPhone, and when I want to play, I download something from the app store.”

With more processing power and better graphics than their predecessors, smartphones are eating into the market dominated by Nintendo and Sony. Shipments of game-capable mobile phones are set to rise 11.4 percent to 1.27 billion this year, researcher iSuppli said last month, while those of video-game consoles may be little changed at 52.3 million, and portable units may drop 2.5 percent to 38.9 million.

With casual gaming dominating the market, the iPhone is starting to give the traditional hand-held DS and PSP models a run for their money and will likely continue into the future, iSuppli researcher Pamela Tufegdzic said. Revenue from hand-held gaming units is estimated to be little changed between $5 billion and $6 billion this year, iSuppli said.

Apple’s iPad is another threat. With the success of the tablet computer prompting companies such as Toshiba, Samsung Electronics and Research In Motion to develop similar devices, console makers may be set for more competition.

“There’s certainly increased competition between the hand-held platforms and the mobile devices,” John Schappert, chief operating officer of Electronic Arts, said in an interview. “I think there’s going to be incredible growth happening on the iPad and the iPhone and the Android devices.” Android is Google’s operating platform.

The multipurpose capabilities of mobile phones are making them the platform of choice for young gamers.

“In some countries the first digital entertainment device that people there might touch is a mobile phone rather than a PC,” Chris Lewis, vice president of Microsoft’s EMEA Interactive Entertainment Business, said.