Video game titans Nintendo Co. and Sony Corp. are in for some hand-to-hand combat.
Nintendo dominates the market for hand-held video game machines with its Game Boy franchise, which it introduced in Japan in 1989. Nearly 190 million Game Boys have been sold worldwide over the last 15 years. And Nintendo reaps nearly all of the $750 million that U.S. consumers spend on hand-held game players each year, plus a good chunk of the $1.04 billion they fork over for games and accessories, according to market researcher NPD Group.
Now Sony is looking for a piece of the action. Today, in advance of the Electronic Entertainment Expo in Los Angeles, the consumer electronics giant is set to unveil its answer to Game Boy: the PlayStation Portable.
Based on Sony's top-selling line of PlayStation video game consoles, the long-awaited PSP will let users drive fast cars and shoot enemies. It also can serve as a digital music player and portable video player.
As for Nintendo, it plans its own debut today, of DS, for dual screen, a game device with two screens and a wireless connection so that users can play against other gamers and send instant messages.
But there's no denying that Sony presents formidable competition for Nintendo.
"No one should ever underestimate the power of the Sony brand in the consumer market," said P.J. McNealy, who tracks the video game industry for American Technology Research in San Francisco.
Both Japanese companies could use hits. Kyoto-based Nintendo, which depends on game hardware and software for nearly all of its revenue and profit, has estimated that its profit for the fiscal year that ended March 31 were $294 million, down 51% from the previous year. Most of that was because of foreign exchange losses.
Tokyo-based Sony reported a 40% drop in operating income for its game business thanks to slowing console sales and an increase in research and development costs. The unit had an operating profit of $603 million for the fiscal year ended March 31.
Nintendo's DS machine is scheduled to be the first to hit U.S. markets. Executives said the device was on track to be on store shelves before Christmas.
Sony's PSP was supposed to be available here this year too. But in February, Sony said that delays in game development had put off the device's release in North America and Europe until the first quarter of 2005.
If the delay presents a problem, it may be only short term. Larry Probst, chief executive of Redwood City, Calif.-based Electronic Arts Inc., the largest video game publisher, told analysts last month that "PSP can be a very significant platform for the industry and our company -- arguably as big as the Game Boy business at some point."
Some analysts think the PSP and DS may not compete directly because they will appeal to different age groups. With its music and video functions and a price tag that analysts say could be as high as $300, the PSP may be too sophisticated for the core Game Boy demographic of 6- to 12-year-old boys, said Michael Pachter, an analyst at Wedbush Morgan Securities in L.A.
"If you have something that costs $300, you are not going to give it to your kid to drop."
Sony executives said they wouldn't discuss pricing for the PSP until closer to its market launch. Nintendo executives also wouldn't say how much they planned to charge for the DS. The firm's latest hand-held, the Game Boy Advance SP, sells for about $100.
Sony seems more focused on the PSP's capabilities than its price tag. Andrew House, the Sony executive in charge of the U.S. game division, said the company waited to get into the hand-held platform until it could include functions beyond gaming.
"We wanted to spur and create a new market," he said.
PSP players will be able to link up through wireless "hot spots" at coffeehouses, bookstores and airports, he said. The device will be able to play songs downloaded from Connect, the firm's new online music venture. Sony also will sell cartridges with movies that can be viewed on the PSP's 4.3-inch color screen.
Nintendo's DS also is more than a pure game machine. It will come with a stylus -- like those for personal digital assistants -- that players can use to make drawings or write messages that they can send to one another via wireless connections, said an industry executive who has seen the device.
McNealy said the messaging function would attract teenagers who may have outgrown Game Boys. That could help keep Sony at bay. But the most powerful weapon in Nintendo's arsenal is its long tradition of putting game devices in the hands of players.
"Sony," McNealy said, "has its work cut out for it."