Apple iPod touch Makes Play for Gaming Market

Apple (s aapl) today announced that the new iOS 4.1 for iPhone and iPod touch arrives next week, and among the new features is Game Center, Apple’s gaming platform. Aside from the impressive demo of Game Center and a 3-D multiplayer game, Steve Jobs surprised everyone by saying the iPod touch is the number one handheld gaming device in the world. According to Jobs, the touch is now outselling game devices from Sony (s sne) and Nintendo — combined.

The iPod touch sales figures — it’s the most popular iPod ever for Apple — lend credence to our thought that traditional game powerhouses are facing vastly increased competition. By leveraging its popular mobile products and app store economy, Apple is opening the doors for game developers to target the 120 million current iOS devices in the market. Additionally, with a now-annual refresh cycle, iPod gaming devices are likely to gain new capabilities faster than competing handheld game hardware: a key advantage as developers try to further push the envelope for games.

That envelope is already getting pushed, based on today’s demo of Project Sword from Epic, a game coming soon for iOS devices. Aside from multiplayer matchups with two iPod touches and Game Center, Project Sword offers an immersive 3-D world due to use of the Unreal Engine. Apple’s A4 chip — now in the new iPod touches — handled the high-resolution game flawlessly on the new retina display of the device. Based on the demo, Apple’s handheld runs the Unreal Engine at least as well, if not better, than Nvidia’s (s nvda) Tegra 2 chip, which I saw first-hand earlier this year, and surpasses performance of any handheld I’ve seen yet.

Another company that might be worried by all this isn’t Sony or Nintendo though; it’s Microsoft (s msft) and its hopes for Windows Phone 7. The new Microsoft mobile platform will leverage the huge Xbox Live user base for similar social gaming aspects, but as I watched Game Center and the software demo, I shook my head. I saw yet another example of Apple beating others by getting a new feature to market, even though, in this case, Microsoft had a lead in this space by a number of years. I’m not predicting the death of Xbox Live, Windows Phone 7 or competing handheld gaming platforms, for that matter. But the ability of Apple to out-maneuver companies in markets they initially established continues to be a key strength for Apple’s future. It’s a game that Apple continues to win.

Related content from GigaOM Pro (sub req’d):

Why Nintendo’s 3DS Is Doomed