In its big iPhone unveiling, Apple (AAPL) spent an unusually large amount of time showing off a video game demo.
There’s a darn good reason why.
An increasing number of people are using their smartphones for gaming. Juniper Research expects the number of mobile game downloads to triple in the next five years, and said that mobile devices “will become the primary screen for gamers.”
Hear that, Microsoft (MSFT)?
No doubt, the proliferation of smartphones and tablets is one of the drivers of that growth. The simple fact that more people are armed with smartphones translates into more potential mobile gamers.
But as mobile technology continues to advance — like it has with the iPhone 5S’s 64-bit processor — the very concept of mobile gaming is changing.
Even feature phones had games like Tetris and Snake way back in the 1990s, so the idea of people playing some form of interactive entertainment on their phones isn’t anything new. But we’ve come a long way from praying for line blocks when we just know we’re going to get a series of L-blocks instead.
Hell, did you see the demo for Infinity Blade 3? That looks nearly as good as the early games on Sony’s (SNE) PS3 — and it’s on a tiny machine that fits in one hand.
And while I could spend all day talking about how awesome that is for gamers like me, these changes also important for investors.
Namely, in a world where mobile games look like Infinity Blade 3, what does that mean for companies like Zynga (ZNGA)?
Zynga made a name for itself with FarmVille, which was released in 2009 and has graphics that look like they belong on a Super Nintendo. Can it really compete with games that take full advantage of 64-bit processors and dynamic rendering and a whole bunch of technical stuff that basically sounds like magic?
Actually, it might.
And that’s what’s so interesting about this new era of mobile gaming. Consumers aren’t limited to choosing between Tetris and Snake. We have a whole broad range of mobile games to choose from, including many games that were originally released on consoles. Final Fantasy IV, Chrono Trigger, Star Wars: Knights of the Old Republic and plenty of other games originally released on consoles have since been ported to mobile game stores.
This means that publishers can be more aggressive and more ambitious about the types of games they put on mobile devices. Which also means they can be more ambitious about pricing.
For instance, Infinity Blade 2 is $6.99 on Apple’s App Store. If Electronic Arts (EA) can deliver a mobile game with immersive gameplay and graphics, there’s no reason it can’t charge more than $7. If you can charge $300 for a voice encryption app, I’m betting $30 for a quality, immersive game is feasible.
(As an aside: A co-worker of mine said he’d pay $60 to stand in line at a store for three hours just for the right to press a button to download Chrono Trigger onto his Kindle Fire … so, you get the kind of demand that’s waiting on the more enthusiastic side of the gamer chain.)
Add in-game purchases like item upgrades, etc., and you’re sitting on a goldmine.
The companies that stop thinking in terms of “mobile games vs. console games” are the ones that will profit the most. And right now, it looks like Sony is in the lead.
Sony’s upcoming PS Vita TV seriously complicates the distinction between mobile gaming and console gaming. The device will allow games for Sony’s handheld system, the PS Vita, to be played on a television. And with the release of the Ouya and similar consoles — which offer the ability to play mobile games on a big screen — is it really that difficult to imagine a future where “mobile games” and “console games” are antiquated terms from a time when people could only play games on one device at a time?
There’s a big future for mobile gaming. Right now, it’s up for grabs, and anyone from Apple and Google (GOOG) to publishers like Zynga and EA stand to profit from it.
So don’t be surprised when we see even more mind-blowing game demos during announcements for the Galaxy 5 or the iPhone 6.
Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.