Tablets Cannibalize Portable Game Players, Small TVs

There's a lot of attention being paid to tablets cannibalizing PCs. As we've said in the past, we think PC cannibalization from tablets is overstated. But the cannibalization phenomenon is real: We wrote in a June report (The Products That Lose When Tablets Win) that we expect tablet cannibalization to accelerate in the next six to 12 months as slightly less affluent consumers buy tablets and have to make tough tradeoffs. Several predictions we made in the report are already coming true. We made the call that:

"Portable game player sales will go off a cliff. Portable game players (PGPs) like the Nintendo DS already have huge penetration, so there's a natural saturation point that PGPs are reaching anyway. That saturation combined with cannibalization from tablets and smartphones, which fulfill the same casual, on-the-go gaming scenarios but also multitask with email and other applications, spells trouble for PGPs. The Nintendo 3DS is already reporting weaker-than-expected sales, and we expect this trend to continue."

Much to Nintendo's chagrin, this prediction is proving accurate, as Nintendo reported that its 3DS sales plummeted to 710,000 units this past quarter from 3.6 million units the quarter before.

In the June report, we also wrote that game console sales would not be negatively affected by tablets and could actually see a boost from increased interest in gaming as mainstream consumers find joy in games like Words With Friends and Angry Birds. 

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