Bizarro Sun Yat-sen said:
The point is that they won't increase enough to keep up with users' expectations for the hardware. With profit margins already pretty low, developers won't spend more money unless they can make more money, and it's not clear that next-generation portable game sales will be any higher than current generation sales.
Well, this poses a potential problem for PSP-type games (and a little less of an issue for DS games), considering Sony's stance on providing greater technological resources for the developers to meddle with. Depending on the price (and this is under the assumption that the initial cost will be very high), you reach a different (and smaller) demographic, reducing profit margins because of the smaller market penetration. Developers won't want to spend too much money because the returns won't be attractive enough to offer any incentive to do so. If people go in with the expectation that the PSP will be equal or superior to PS2 graphics, then you'll definitely be disappointed with a majority of the games that won't take advantage of the extra power. Of course, you'd have to assume that all of this is an issue only if people really do expect that much from portable gaming. GBA seems to be doing fine with it's minimal tech.
I don't keep up with the whole business side of the portable market, but are profit margins really that low? I thought the reason why portable gaming was so attractive was because of the potential for high-profit games off minimal budget expenditures? Sure, you'll have games that do very poorly, and then you'll have games that do extremely well (Golden Sun, FF, Pokemon), but that's the case for most console games too. Nothing is guaranteed to grant the developer easy profit, so of course the amount of money allocated to game development in any respect, whether it's console or portable will be affected and dependent on the franchise released and the platform developed for.
With the success of the GBASP, you can only assume that the market will be just a lucrative .. well, at least from a hardware perspective. With the PSP as competetion, we'll have to see how that affects Nintendo's market share. When you have a huge user base, it's up to the developer to decide how much of a risk to take concerning allocating funds to whatever game they decide to release. IIRC, the most successful titles in the portable market haven't necessarily been the most technically advanced. I think taking this into consideration, customer 'expectation' of the hardware won't have much of an affect on game sales because AFAIA, technically advanced games don't necessarily dominate the sales charts.
Bizarro Sun Yat-sen said:
Therefore if development budgets stay the same, yet users expect most software to exploit the hardware's capabilities, they'll be disappointed.
I really don't know about it. As each hardware generation gets more advanced, development becomes more and more like its console bretheren. You'll have the big-budget studios that can pump out amazingly beautiful games because they have the money to do so, and you'll have the poor tech. games that don't. It's entirely dependent on market conditions -- so far it seems to be doing well for itself. Games will certainly be more epxensive, and I'm positive that because of the system capabilities and the game graphics, people will be willing to pay more money for seeminly better games (in the superficical sense). With this in mind, I'm sure the market can only get bigger as the content becomes more attractive to the general consumer (more casual/older gamer demographic), which opens the ability to reach a larger user base to profit from.