Handheld gaming devices are headed for a downward trend in the next few years as they are overtaken by sales of mobile phones and tablets.

Dedicated handheld gaming devices are a sustainable niche and forecasts remain relatively flat through 2017.

However, smartphone and tablet use for gaming purposes continues to expand, making the mobile market an increasingly important part of the market.

Senior analyst at ABI Research Michael Inouye said mobile devices will continue to heavily compete with dedicated handheld gaming devices.

ABI Research's new report Portable Gaming Devices discusses the dedicated handheld gaming market and both the influence and competitive impact mobiles are having on the industry.

The report found that sales of Nintendo's 3DS experienced a far weaker second quarter of 2011, which resulted in a dramatic lowering of the price. Much of the poor sales are blamed on mobile gaming.

Mr Inouye added: "The mobile and tablet markets have increased consumers' price sensitivity. First party developers and key game franchises will be vital cogs for the industry in the future."

Posted by Claire Marshall

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