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Nintendo adds cameras, music playback to DS

best-selling DS is the undisputed champion of the handheld game market, but nipping at its heels are all the other feature-rich devices that have launched in the past four years.
Image: Nintendo's new portable video game console, the \"DSi\"
Nintendo unveils the company's new portable video game console, the DSi, in Tokyo on Thursday.Yoshikazu Tsuno / AFP - Getty Images

It's official: The much-buzzed-about Nintendo DS makeover is no longer just a fanboy's fondest wish, it's the real deal.

During a press event in Tokyo Thursday, Nintendo president Satoru Iwata took the wraps off the DSi, which packs two bulit-in cameras, music playback and a bigger display than the current model.

The DSi will ship in Japan on November 1, migrating to the U.S. in 2009. It will sell for 18,900 yen, which translates to about $179.

This is the third iteration of the DS since the platform launch in late 2004, and the system is the undisputed champ of the handheld game market. Nipping at its heels, though, are all the other feature-rich devices that have launched in the past four years, such as the iPhone, the iPod touch, and the Sony PSP, which also gets a refresh in mid-October.

The DS has done gangbuster business for the venerable Japanese company since its 2004 launch. To date, Nintendo has sold nearly 80 million DS’s worldwide, and has consistently outsold all comers — even the spotlight-hogging Wii — month after month in the U.S.

But the PSP is starting to gain momentum, particularly in Japan. A report from Enterbrain, a Japanese game-magazine publisher, during the first half of the year. The PSP 3000, due out later this month, features a built-in microphone and a better screen.

Michael Pachter, an analyst with Wedbush Morgan, says the "design changes (on the DSi) are aimed at creating a better gaming platform than the PSP that’s got better functionality." The announcement clearly is meant to blunt any momentum Nintendo's competitors may be enjoying — particularly in Japan.

Denise Kaigler, vice president of corporate affairs for Nintendo America, says that "the market appears to be maturing for the current DS" in Japan. "There are about 23 million DS's sold in Japan, into 49 million households," she says. In other words, half of all households in Japan already own a DS — and they need a good reason to buy another one.

"One of the reasons we're not actually introducing the DSi into the Americas yet is because we see a lot of potential left for the current Nintendo DS Lite," she says, pointing out that the product had a record-selling year in the U.S. in 2007, and is on track to beat that year by about 29 percent in 2008.

Still, Nintendo faces a significant combined threat from Apple's iPhone and iPod touch in the U.S. market. Apple has stated very plainly that it intends to be a big player in the handheld game market. In March, the company rolled out a software developer’s kit intended to get third parties creating games and other cool stuff for the iPhone and the iPod touch.

The App Store, Apple’s marketplace for these applications, opened for business in July and to date, there are more than 900 games available for free or for purchase. The Nintendo DS, by contrast, took four years to amass a software library of 600 games.  

Of course, many of the 900 games in the App Store are variations of Sudoku and “Bejeweled.” But developers are clearly psyched by the openness of the platform — and the potential audience for their games. And Apple is clearly demonstrating that it’s serious about games, too.

At its “Let’s Rock” event in San Francisco last month, Apple exec Phil Schiller demonstrated a very special version of EA’s “Spore” on a revamped iPod touch, and Jobs called it “the funnest iPod ever.”  He even went so far as to dub it “the best portable device for playing games.” Our own Citizen Gamer, Winda Benedetti, interpreted that statement as a shot across the bow at Nintendo and Sony.

But Pachter says he thinks Nintendo is less worried about Apple and more interested in trying to squeeze Sony out. “They’ll gladly let Apple have its niche of 20- to 40-year-olds who are too hip to be believed, but I don’t think they want to cede the games market.”

Especially not in Japan. The recent spike in PSP sales — spurred by last year's rollout of the cheaper PSP 2000 and Capcom's mega-selling, PSP-exclusive "Monster Hunter Freedom 2G" — has naysayers predicting the DS's imminent demise. The announcement of the DSi should serve to quell those in comments in Nintendo's home country, he says, and whet the appetite of Nintendo fanboys in Europe and the U.S. 

"I think the success of the Wii and DS has given (Nintendo) the confidence that anything they do that works in Japan will work elsewhere," he says.