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New worries for Nintendo

On Oct. 7, Nintendo Co. Ltd.’s unchallenged dominance of the handheld video gaming market will be under direct assault when Finnish mobile phone giant Nokia Corp. unleashes its new N-Gage device.
/ Source: Puget Sound Business Journal (Seattle)

On Oct. 7, Nintendo Co. Ltd.’s unchallenged dominance of the handheld video gaming market will be under direct assault when Finnish mobile phone giant Nokia Corp. unleashes its new N-Gage device.

The N-Gage, which will retail at $300, is a combination cell phone, PDA and gaming device, and is the first serious competitor to Kyoto, Japan-based Nintendo’s GameBoy Advance and GameBoy Advance SP.

However, industry experts say Nokia isn’t Nintendo’s only worry — late next year, Japanese electronics company Sony Corp. will launch the PlayStation Portable, or so-called PSP.

Nokia’s and Sony’s handheld initiatives, first announced in early May, come at a time when another of Nintendo’s flagship products, the GameCube video-game console, is facing fierce competition from Redmond-based Microsoft Corp.’s Xbox. (MSNBC is a Microsoft-NBC joint venture.)

Wes Nihei, editor in chief of Oakland, Calif.-based GamePro Magazine, said Nintendo is undoubtedly under fire from three of the biggest technology companies in the world.

At the same time, Nihei isn’t ready to count Nintendo out of the game just yet.

“I think you can argue what the N-Gage’s impact is going to be either way at this point,” he said. “On paper, Nokia’s device looks like competition for that aging Nintendo gamer.”

Nihei pointed out that the number of gamers currently playing the GameBoy Advance and the GameBoy Advance SP gives Nintendo a sizable lead over the N-Gage and the Sony PSP.

According to Tom Harland, a spokesman for Nintendo of America Inc., Nintendo’s Redmond-based subsidiary, 14.4 million GameBoy Advance units have sold since its launch in June 2001, and 1.6 million SP units have sold since its launch in March.

Harland acknowledged Nintendo faces stiff competition, but thinks the company’s huge library of games will make the GameBoy a consumer’s first choice.

“We’ll have 320 games available for the SP and Classic GBA by the end of the year,” he said. “If you count backwards compatibility with older versions of GameBoy, we’ll have 1,000.”

In addition, the GameBoy Advance SP retails at $99 and the GameBoy Advance $65. Harland said there are no plans to cut prices for the upcoming holiday season.

While Nokia has managed to sign up Electronic Arts — the largest video-game publisher in the market — to support the N-Gage with marquee titles such as “Lara Croft,” the device will launch with only 10 games.

Michael Pachter, an analyst with New York City-based Wedbush Morgan Securities Inc., thinks the dearth of N-Gage games could hurt Nokia’s chances.

“I think Nokia is really going to blow it on this device,” Pachter said. “There’s no content for the N-Gage. Who’s going to buy it? I think you’ll see 1 million units sell to the Sharper Image crowd this season and then it’ll die off.”

That said, Sony isn’t going to just die off. Pachter thinks the PSP represents a serious long-term concern for Nintendo.

“It’s going to be a monster,” Pachter said of the forthcoming PSP. “It will have hundreds of titles and wireless gaming capability. I think Sony is looking to dominate the handheld gaming market the way it now dominates the console market.”

GamePro’s Nihei said the PSP will hit Nintendo where it is most vulnerable — its aging fan base.

Many of the company’s fans who first bought Nintendo video-game products are now in their mid-to-late 20s and want different types of content than they did when they were younger, he said.

“Nintendo’s core audience is getting older,” Nihei said. “That’s a trend we have yet to see Nintendo seriously deal with. They’re moving very slowly to change with the times, and that concerns me.”

Nintendo’s Harland disagrees with that sentiment. He pointed to a number of GameBoy titles for this holiday season that target an older audience.

“We launched ‘Advanced Wars 2,’ a tactical war game,” he said. “It’s like playing chess with a full army of helicopters, naval vessels and long-range artillery. That’s not something a 9-year-old gets his head around.”

On Nov. 3, Nintendo will release “Fire Emblem,” which Harland describes as a “hard-core strategy role-playing game that anyone who likes ‘The Lord of the Rings’ will like.”

” ‘Fire Emblem,’ ” he said, ” has tons of intense characters and hours of game play.”

As for future iterations of the GameBoy, Harland remains mum. However, he said Nintendo is keeping a close eye on the PSP’s capabilities, which have not yet been clearly outlined by Sony.

“We haven’t announced what we’ll do in response to the PSP,” he said. “But its late 2004 launch gives us a year to prepare for it.”

Copyright 2003 American City Business Journals Inc.