updated 6/9/2004 9:16:23 AM ET 2004-06-09T13:16:23

Nintendo Co., which dominates the portable video-game machine market, said Wednesday it is developing a new home game console code-named "Revolution" in an apparent attempt to catch up with rival Sony Corp., which makes the PlayStation 2 console.

Nintendo president Satoru Iwata refused to give details, saying he feared competitors will steal the plan, but said a prototype, which will be shown next year, will deliver "new ideas" for entertainment and won't be merely a more powerful version of its current Game Cube machine.

Iwata reiterated his view that Nintendo should not follow the strategy of Sony, which is working on a more powerful chip to drive its next home game machine.

He said the gaming industry is reaching a dead end as its past formula for success — dazzling consumers with more sophisticated imagery — no longer works. Game sales have been declining for years in Japan, and growth has been slowing even in the more solid U.S. market, he said.

"What we need is not a next-generation machine but a next-generation way of playing games," Iwata told reporters at a Tokyo hotel. "We need to propose a new idea so that the game industry can overcome its current crisis."

Global sales of the Nintendo Game Cube at 15 million lag behind Sony's PlayStation 2, which dominates the home console market with more than 71 million sold worldwide. U.S. software giant Microsoft Corp. had sold nearly 14 million of its Xbox consoles worldwide as of the end of last year. (MSNBC is a Microsoft-NBC joint venture.)

Nintendo, the Kyoto-based manufacturer behind the Super Mario and Pokemon games, is also facing competition from Sony in handheld game machines, a market Nintendo dominates with its Game Boy Advance.

Sony says it will start selling a portable version of its PlayStation machine later this year in Japan and overseas at a later date.

To counter that threat, Nintendo is planning a new portable game machine for later this year in the United States and Japan. The Nintendo DS, which stands for "dual screen," adds a new twist to its handheld GameBoy Advance by having two color liquid-crystal displays.

That allows players to see a close-up on one monitor and an overall map on the other in some games, or use one as a touch-panel to turn or move figures in other games, as well as relay scribbled messages to another player through a wireless connection.

"Double screens and touch panels are not new technologies," Iwata said. "The idea of using them for a game machine is new."

Takashi Oka, an analyst at UFJ Tsubasa Securities Co. in Tokyo, said Nintendo will likely hold up against the threat from Sony's offerings because of its ability to come up with appealing game software. Sony's PlayStation Portable, nicknamed PSP, will also probably be mostly used to watch video instead of playing games, he said.

"Nintendo's power in creating game software is still going strong," Oka said. "I don't consider the PSP as a game machine so its arrival won't affect Nintendo."

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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