Analyst: Nintendo's Focus On Games Drives Handheld Space

A new report from analyst group DFC Intelligence's David Cole has examined the handheld game space, particularly focusing on Nintendo with its phenomenally successful DS as compared to the competition offered by Sony with the PSP as well as the growing mobile market.

The full text of Cole's report, which was released on the analyst firm's official website, follows below:

"The appeal of portable games is fairly obvious. Portable is all about the ability to play a game anyplace and anytime, untethered by a bulky TV set or computer. It is a way to capture both the hard-core gamer and the more casual mass-market consumer that can be intimidated by the complex and expensive console and PC game market. Portable games are at the forefront of many of the leading trends in interactive entertainment: mobility, casual games, emerging markets, role-playing/character building/item trading and so on. This is an industry already generating billions of dollars a year from over 100 million users around the world. So why does it seem that when it comes to actual revenue generation only one company has figured out the portable game market?

Of course, Nintendo is the dominant player in the portable game space. Despite the fact that hundreds of millions of cell phones and other portable devices can play games, it has been the dedicated portable game devices from Nintendo that make all the money. Even with significant competition from Sony with the PSP, the Nintendo DS was the hot system of 2006. The DS is driving the mobile game space even as other devices continue to become more sophisticated in their game play capabilities. The DS is even taking much of the steam away from the new console systems. Recently much of the attention has been on the Nintendo Wii, but in terms of numbers and impact it is the DS that is creating the biggest revolution.

In many ways it is not surprising that it takes a company with a singular focus on games to really drive the mobile space. Why should portable games be any different than console and PC games? Hundreds of millions of people own personal computers. PC software is widely available and doesn’t require buying a dedicated hardware system that will go out of date in a few years. Furthermore, anyone can develop a PC game without having to pay expensive license and royalty fees to the hardware manufacturers. Nevertheless, games for the console systems from Sony, Nintendo and Microsoft far outsell PC games.

There is clearly something to be said for devices dedicated to a single task over multipurpose devices. This is especially true for those consumer types that have more than a casual interest in the product. In other words, a dedicated device is most attractive to the type of consumer that is willing to pay actual money for a product. A cell phone or basic PC can be great for playing free games, but if you want to spend money on an activity, to most consumers it makes sense to invest in the proper tools. A Swiss army knife is a handy little gadget, but would you use it to cut steak or chop firewood?

When viewed in that sense, dedicated game systems have the key advantage of being inexpensive. Sure you can buy the latest flashy cell phone or a souped up PC to play high-end games. However, those devices are likely to cost a combined $1,000 premium over lower-end devices that don’t focus so much on playing games. That is more than a PlayStation 3 and a PSP combined. At under $400, a Nintendo Wii and DS combination truly looks like a bargain, even for a game player that also wants to buy a PC and cell phone.

However, cost is only one reason for the success of the Nintendo DS. With the DS, it seems Nintendo has finally been the one to get a good handle on the “casual game market.” “Casual games” are a bit of a trendy misnomer. They usually refer to games that are simple to pick-up and play but can be very competitive and addictive.

Oftentimes, it is used to refer to simple action games like Pac-Man and Tetris. However, it is also used to describe the play of classic card and board games like hearts or solitaire. No matter how it is defined, for years there have been tens of millions of users that play “casual” games but generate very little revenue. This is especially true for all the free play that is done on personal computers.

The original Nintendo Game Boy, launched in 1989, came with the casual game Tetris. Tetris was a huge hit, but by the late 1990s Nintendo’s portable systems were focusing on products targeted towards the core, often younger, Nintendo user base. The most notable line of these products was the massively successful Pokemon franchise.

The core Nintendo products remain a key focus for the DS, but the company has diversified its line-up, and thus audience, with games that appeal to a wide variety of users. These include the virtual pet Nintendogs series, the brain training games, interactive storytelling mysteries, Elite Beat Agents music game and familiar games like Sudoku and Clubhouse Games which has popular card and board games (poker, checkers, mahjong etc).

What makes these titles standout from similar versions for previous portable platforms is the touch screen interface. DS is short for dual screen and at what first appeared to be a gimmick is a truly utilitarian addition to the portable platform. A user can still control the system using the traditional button pushing, but now there is the option of using a stylus and touch screen. This control scheme works great for more low key products and those intimated by button mashing.

Most importantly, Nintendo has put real thought and money into its development and marketing. The company doesn’t simply port its franchises onto mobile platforms, but instead either completely rethinks its key franchises or creates new IP. For example, the Pokemon franchise was developed for the portable systems. This is in stark contrast to most mobile games which tend towards cheapo affairs with a big name license as the only selling point. Sure throwing well-known IP onto a portable system can make a quick buck, but it is a far cry from what Nintendo does. Consumers have clearly rewarded Nintendo for its extra effort.

In 2006, DS sales exploded around the world. By the end of the year, the DS had sold about 35 million units in only two years on the market. The Game Boy Advance, launched in 2001, has sold an additional 75 million units. If you add in the Sony PSP at over 20 million units by the end of 2006, you get some really big numbers. That is 130 million dedicated portable game hardware units sold in a little over five years.

That is not far behind console system sales and compares favorably to the ubiquitous Apple iPod which has sold nearly 90 million units since its launch in 2002. In Japan, the DS dominates the entire game market and has sales surpassing the console systems. With about 15 million units sold by the end of 2006, the DS is well on its way to becoming the best selling game system ever in Japan.

In other words, portable games are clearly hot. Unfortunately it often seems that Nintendo is the only company making money in the market. If you look at the top-selling DS and GBA games they are all from Nintendo. Third-party publishers have had some success, but it pales in comparison to Nintendo franchises like Pokemon and Nintendogs.

In the console market, a similar trend occurred where third-party publishers had trouble making money on Nintendo platforms. Publishers truly began to thrive in the console market only when Sony came along and established the PlayStation platforms. In the portable market, Sony is trying to do the same with its PSP. The PSP targets an older, more hip crowd that has not been a primary focus for Nintendo. Although overshadowed in the past year by the DS, the PSP did manage to ship over 20 million units in less than 2 years. It also has become a legitimate platform for independent game publishers. Take-Two Interactive’s Grand Theft Auto: Liberty City Stories became the first third-party title to generate over $100 million in revenue, even though it was released less than a year after the PSP had been on the market.

The PSP is behind the Nintendo portable systems in sales, but it has already surpassed the cell phone game market. In North America the clear leader in cell phone games is EA Mobile, established from Electronic Arts’ purchase of Jamdat in December 2005. For cell phones, EA Mobile has over 100 top games available via leading North American and European carriers. However, for the first nine months of fiscal 2007, EA Mobile generated over twice as much revenue from a handful of PSP games than all its cell phone games combined (in that period, EA even made more money from Nintendo portable platforms than its cell phone business).

Next month DFC will be releasing several new reports, including detailed analysis and forecasts for the portable game market. We highlight that while this is a market that is clearly growing, it is also a market with a proven history and track record. Unfortunately many companies looking to enter the space choose to ignore both the realities of history and the current market conditions. Even if one claims they are competing with Nintendo it is important to understand what the company has done to make portable games successful.

Of course, it is hard to imagine how someone can be in the mobile game space in a major way and say they are not competing with Nintendo. One can not become a big dog without facing the other big dogs. As for those that claim mobile games are a market waiting to emerge, they are ignoring a key fact. Mobile games are a market that is already here."

NINTENDO NEWS: WII ARE NO. 1

Feb. 21, 2007 - Nintendo's new Wii™ has become the best-selling video game system of any kind in January in the United States, and the fastest-selling new-generation home system. According to the independent NPD Group, Wii sold through 435,503 systems to customers in its January reporting period. By comparison, that's 70 percent higher than any other new video game system in its first January of availability during the last 10 years.

In addition, Nintendo DS™ once again triumphed as the top-selling portable system, with nearly 239,000 hardware and more than 2.4 million software units sold. In combination, Nintendo game systems accounted for nearly as many unit sales (46 percent of the total market) as those of all other manufacturers combined.

The continuing success of Wii and DS demonstrates that the public has embraced Nintendo's philosophy of entertaining current gamers in new ways, and expanding gaming for the masses. Four of the top 10 best-selling games in January were for Nintendo systems, both home and portable.

The only limit on Nintendo's success is the availability of Wii and DS systems, which continue to sell out as fast as Nintendo can ship them. Shipments are being made continuously to feed the huge demand around the country.

Ah, venerable Nintendo. Always charming in its multiple stabs at the gaming market - be it the portable or stationary - despite the recent arms war with Microsoft and Sony in which the company has decidedly fallen behind. But so what? Slowly but surely, it's starting to dawn on people that Nintendo thinks a bit differently when it comes to gaming, of which the Nintendo Revolution and its motion sensitive controller is a perfect example. Enter the Game Boy Micro, which is really more of the same.

Say hello to my little friend

Sure, hardcore gamers are more likely to go for the wirelessly enabled Nintendo DS or even the Sony PlayStation Portable - but the 101 x 50 x 17 mm, 80 g device doesn't cater to those. Instead, it caters to casual gamers who just want to fire up a quick game in a tenth of the time it takes the PSP to load a Ridge Racer level, or who quite simply cannot be bothered to lug around the several-times-larger DS or PSP.

Small enough to clip on a key chain, the Game Boy Micro trumps the vast majority of mobile phones yet sports a truly brilliant 2-inch display which, alongside that of the DS, is Nintendo's best to date despite its 32K colour limitation. Granted, it's a bit small, but it still assumes the majority of the front of the device - also host to the venerable Game Boy setup consisting of a four-way controller as well as A and B buttons; shoulder buttons in chrome are also part of the line-up.

Although quite good, the controller setup of the Game Boy Micro leaves a bit to be desired in the tactile department as there is no proper distinction to acknowledge when a button has been pressed. One thing we're particularly pleased to see, though, is the inclusion of a dedicated earphone 3.5 mm jack; begone the combo charger/earphone ports and required dongles of yesteryear - the Micro lets you listen and charge at the same time.

It's all about the games

So what makes Nintendo think a system as ancient as the Game Boy Micro - compatible with the Game Boy Advance and Game Boy SP - can survive being alongside the aforementioned PSP and DS? For one, the games. With a back catalogue of over 500 titles, the Micro has access to one of the most solid libraries of games ever to be published; many low on graphics, but high on gameplay.

Then there's the issue of simplicity, with the casual gamer long having been neglected. Where the PSP and DS offer up gaming sessions that can go on for hours (cramps aside), the Micro is perfect for a sneaking a quick fix everywhere and anytime - due in no small part to its size as well as a combination of simple controls and its ability to get a game afoot in no time at all.

And, as if all of that wasn't enough, it also offers a competition-slamming battery life of more than 8 hours. Who said cartridges were no good?

Availability

The Nintendo Game Boy Micro is now available worldwide, shipping for $100 USD and €100 EUR in North America and Europe, respectively. Nintendo Game Boy Micro

Conclusion

In a world of high-powered portable gaming consoles, the comparably low-tech Nintendo Game Boy Micro manages to stay surprisingly competitive courtesy of its focus on simplicity. Its miniscule size, easily accessible controls and massive back catalogue of games with a focus on gameplay over graphics makes it an excellent choice for anyone looking to escape the constraints of mobile phone gaming. Let's face it: who could resist getting their Mario on with this little Micro marvel?

What's positive:
Superbly small; excellent screen; massive back catalogue of titles

What's negative:
3D graphics and complex interaction traded for simplicity.

OVERALL Score: 78%

Written By Jørgen Sundgot, Wednesday 14 December 2005

From DigiMon to Tamagotchi, there are dozens of choices for the virtual pet lover. The latest, "Nintendogs," ($30, rated E) debuts in the United States next week, exclusively for the Nintendo DS handheld game machine.

Available in Japan for months, "Nintendogs" is a lifelike digital rendering of perhaps the most universally admired of all domestic animals: puppies.

It's a superb example of just how interactive the DS can be with its microphone, built-in wireless and two screens -- one of them touch sensitive.

As in the real world, obtaining a pet starts with a visit to the kennel. After toying around with several breeds, my wife and I settled on a Shetland sheepdog. She named him Huggy.

The dogs are shown in 3D and do an amazing job of mimicking the real thing: they'll sniff around, pant and bark when excited. (They even engage in some unpleasant but necessary business).

The DS touch screen and microphone are ingeniously used. You can "rub" your pet by stroking it on the bottom screen.

You teach your pet various tricks by speaking into the microphone, then rewarding your dog with a rub on the back or behind the ear.

Huggy has only mastered the basics so far, including "sit," "lie down" and "shake."

The trick for owners is to say each command clearly and consistently. Barking orders, in my experience, prompted tail wags but not much else.

In "Bark Mode," your DS will scan the wireless airwaves for fellow pet owners to play with. (I never had the good fortune to bump into other players, however).

"Nintendogs" is real time, so it's important to frequently check on your pup.

I neglected Huggy for two days and returned to find him thirsty, hungry and in no mood to play.

Guilt-ridden, I gave him a bowl of food and water, which he quickly gulped down. He then curled up and took a nap. I quietly saved the game and turned off my DS to give him some dream time.

Checking on Huggy isn't the chore I thought it would be -- it's fun teaching him how to beg, shake, play catch and take walks around the virtual block.

After only a few weeks, I've already formed an emotional attachment with my pixelated pup.

It's this sort of bonding that ultimately makes "Nintendogs" the perfect test run for families considering a real dog -- or anyone uncomfortable with the thought of pet dander, pooper scoopers and veterinarian visits.

There are three versions of "Nintendogs," each with different breeds.

Clearly, pets are becoming more high-tech than ever. In the real world, South Korean scientists recently cloned a dog -- Snuppy, an Afghan hound. Last year, a Texas woman paid $50,000 for a kitten engineered from the DNA of a pet cat she had owned for 17 years.

"Nintendogs" certainly won't replace our love and devotion for flesh-and-blood creatures -- but it's paws-down the cutest virtual pet I've ever cared for.

**** Four stars out of four.
By: MATT SLAGLE

On the Net:
http://nintendogs.com

Nintendo's latest iteration in the long-running Pokemon franchise is proof positive that Pokemon can still sell like hotcakes. Selling through more than 882K units, Pokemon Emerald for GBA was No.1 on the multiplatform chart for the month of May, beating out LucasArts' Revenge of the Sith handily. We examine Emerald's success.

Pokemon is just a fad, right? Far from just being a flash in the pan, Nintendo's cultivation and expansion of the franchise has actually led to an increase in Pokemon sales as the years have gone on. The most recent release, Pokemon Emerald, had the highest first month sales for any game in the series yet.

100 Million Strong
There aren't many video game franchises that can lay claim to 100 million copies sold. In fact, Nintendo has two of the few entrants in the 100M club in the history of this industry. Mario reigns supreme, with over 180 million games sold, but Pokemon has been rapidly closing that gap since its debut in 1995. Nintendo announced recently that 100 million cumulative worldwide units had been shipped. It should be noted that that number includes only portable entrants in the series.

Emerald, despite being the newest entry in the franchise, has accounted for a sizable piece of that 100 Million pie. Nintendo shipped 1.72 million copies in Japan before the title was released stateside. May NPD data shows that the company sold an extremely impressive 882,000 copies upon its American release. The month's #2 SKU, Revenge of the Sith on PS2, moved 490,000 copies by comparison.

"In 2005 it might not be a fever anymore, but Emerald has proven that Pokemon is still one of gaming's elite franchises..."

This data indicates that worldwide shipments for Emerald have most likely surpassed 4 million units at this point. Not bad for a game that offers minor enhancements over its sister titles Fire Red and Leaf Green, which are themselves remakes of the two original Pokemon games.

The Pokemon franchise isn't running out of steam; it's picking up more...

Unmatched Licensing
Pokemon, like every other hit children's property, is about much more than a series of games, or a Saturday morning cartoon. There are most likely more ways for children to interact and experience the Pokemon world than any property in existence. While the games and television show might be what drives the brand vehicle, the other links in the chain aren't just along for the ride. They are what help to perpetuate the brand and ensure its ubiquitous nature continues.

At its peak, Nintendo's Pokemon licensing partner 4Kids Entertainment had licensed out the name to over 500 companies. In 2000 the Licensing Industry Merchandisers' Association named Pokemon the overall license of the year. It also won three other category awards in recognition of the brand's creative licensing and the success it was met with.

While that's all well and good, children's fads can disappear with almost shockingly sudden abruptness. America's Pokemon fever in 2000 netted Nintendo licensing awards and estimated franchise revenues of $3 billion in that year alone, but the licensing revenues and awards are given true weight with the passage of time. In 2005 it might not be a fever anymore, but Emerald has proven that Pokemon is still one of gaming's elite franchises, and the brand's other core elements including the animated TV show and collectable card game are still going strong.

Pokemon Evolution
Nintendo has established Pokemon's permanent position of prominence essentially by never changing the core elements of the series, so it's unlikely that future iterations will stray far from that course.

The first real, full-fledged console Pokemon RPG is hitting the GameCube this October. Set in another Dimension, Pokemon XD will allow developer Genius Sonority to tweak and twist the world as they see fit without harming the ten year's worth of history that has already been laid down. Still, besides a darker tone, it's unlikely that the game will differ too drastically from what fans already know.

Besides XD, things are surprisingly quiet on the Pokemon front. Diamond and Pearl have been rumored for the DS since the system's launch, but Nintendo thus far has remained mum. With that said, it almost seems as though the system was created with the series in mind; wireless communication, touch, and mic capabilities would benefit the Pokemon gameplay experience significantly. By now there are few left who would disagree that a Pokemon appearance on the DS (most likely coupled with a significant campaign, and special edition system) would lead to anything less than a major boon for Nintendo.