High-end gaming platforms like N-Gage and iPhone could spur a premium gaming market

Nokia’s new N-Gage platform finally went live today, officially discarding the old dedicated N-Gage phone for a software platform that runs on multiple Nokia N-series handsets.

Nokia first announced it would revamp its gaming platform in August, after the N-Gage handheld gaming device generated a cult following but lackluster mass market sales. Instead of trying to create a singular handheld device and game library to compete with the likes of Sony’s PlayStation Portable and the Nintendo Dual Screen, Nokia opted to follow a software approach, turning N-Gage into a robust run-time environment that can be supported on multiple high-end phones. That strategy would open up N-Gage’s premium gaming experience to the more casual gamer unwilling to purchase a dedicated gaming handset.

The launch was originally set for November but was delayed first until January. Instead, Nokia soft-launched the service, allowing N81 owners to trial it before it finally went live today. At launch, N-Gage is supporting five N-series handsets and offering an initial lineup of six game titles--two from Nokia’s own publishing unit and the rest from third-party publishers EA Mobile (formerly Jamdat Mobile), Gameloft and Glu Mobile. Nokia said those releases will soon be followed by an additional seven titles.

Nokia appears to be betting that a premium gaming service and platform may succeed where a dedicated mobile gaming device won’t. In fact, the industry may be witnessing the beginning of a premium mobile gaming segment, driven not only by N-Gage but by popular high-end platforms like the iPhone. Apple recently launched a developer program, opening up the Mac OS X-based platform to third-party applications for the first time.

Sega Mobile director of marketing Carrie Cowan said that the multimedia and processing capabilities of the iPhone match those of the portable gaming consoles such as the PSP, presenting an excellent opportunity for developers to build feature-rich games specifically for the device. In addition, new interfaces on phones allow game developers to look beyond the awkward mechanics of the 12-key number pad and navigation toggle. Sega has already built a prototype version of Super Monkey Ball for the iPhone and iPod Touch that uses the iPhone’s accelerometer as a way to interface with the game by tilting the device from side to side.

“At the end of the day, the RAZR is very important to us,” Cowan said, referring to the simpler Java and BREW platforms that most game developers design their games for. “But the iPhone and N-Gage—we love them. It’s an indication of what’s ahead for us.”

There are already examples of game developers building more graphically heavy and immersive games for specific platforms. MVNO Helio as well as now-defunct Amp’d Mobile have launched several titles designed to take advantage of their device’s high-end hardware. Magmic Games has created a development platform and market place for games on the RIM’s BlackBerry OS. Most games that make it into smartphones are ported titles perhaps with a few more functions or higher-resolution graphics than their Java counterparts.

While game developers will definitely try to take advantage of the new capabilities of N-Gage and the iPhone, it will be a while before that market grows large enough to justify dedicating resources to making games specifically for premium platforms, said Russ Eisenman, senior vice president of global marketing for Hands-On Mobile. At CTIA Wireless, Hands-On released its wildly popular Guitar Hero III title for the BlackBerry platform, which, while optimized for the BlackBerry OS, was essentially the same game released in Java and BREW for Verizon Wireless and AT&T.

“We have to build to the feature sets out there,” Eisenman said. “Phones like the iPhone will always enhance game play, but our strategy hasn’t shifted because of the iPhone.”

Whether the new N-Gage platform will be a bigger success than the N-Gage handset remains to be seen, but its total addressable market has certainly ballooned. Between its launch in 2002 and 2007, when Nokia stopped selling it, the N-Gage sold only 2 million units, a far cry from the 6 million units Nokia originally estimated it would ship in its first year.

The Symbian OS-powered N-series has become the world’s leading line of smartphones as Nokia has come to dominate the smartphone market. The five supported devices at launch--the N95 and N95 8 GB, the N81 and N81 8 GB and the N82—are all later releases in the N-series line, so they don’t comprise the majority of the installed base, but Nokia has said it plans to extend the N-Gage platform to more N-series devices as well as other Series 60 devices made by Nokia and other manufacturers.

N-Gage’s success in the US, however, will be severely mitigated by the lack of availability for the phones. Of the major carriers, only one, AT&T, carries an N-series device, the N75, which is not supported in the initial N-Gage launch. While Nokia has gotten back into the CDMA business, it has focused on low-end devices, not smartphones. Nokia has been trying to build its own direct retail strategy, selling N-series devices at its Nokia stores and online, but it has only designed one other smartphone besides the N75 for US 3G frequencies, the N95, which significantly limits the data capabilities of most of its devices.

Due to its focus on lower-end devices in the US, Nokia underperforms the market when it comes to mobile gaming, according to M:Metrics. In February, 20.1% of Nokia phone owners—about 5.9 million people--played a mobile game on their handsets compared to the 21.4% market average, M:Metrics said. But among the limited number of people who own an Nseries device, Nokia outperforms. More than 30% of all Nseries owners played a mobile game in the same period, M:Metrics said.