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Wednesday, May 12, 2004 - Page updated at 12:00 A.M.
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Gamers, start your handhelds

By Kim Peterson
Seattle Times technology reporter

SUSAN GOLDMAN / BLOOMBERG NEWS
Reggie Fils-Aime, executive vice president of Nintendo of America, introduces the Nintendo DS.
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LOS ANGELES — Sony and Nintendo said yesterday they intend to shake up the video-game business by developing portable devices that can play more sophisticated games, connect online and appeal to a broader range of customers.

The announcements are the talk of the show this week at the Electronic Entertainment Expo (E3), the annual video-game convention that runs through Friday at the Los Angeles Convention Center.

The companies have competed for years in the traditional game-console market, but Sony said it began looking to expand outside the home as it became clear more customers wanted to take entertainment on the road.

Sony also said yesterday it would drop the price of its PlayStation 2 to $149, matching Microsoft's price cut in March for the Xbox console.

Mobile devices such as cellphones and digital music players have soared in popularity, and both Sony and Nintendo want to tap into that success with their players, the Sony PSP and the Nintendo DS.

"The proliferation of mobile devices is at an all-time high," said Kaz Hirai, chief executive of Sony Computer Entertainment America. "The PSP will enter an already crowded space, but one with much growth opportunities."

Nintendo has dominated the handheld-game market with its Game Boy series. It said the DS was conceived after internal debates about whether to make a more powerful Game Boy or something completely different.

The companies showed prototypes but gave no pricing information and few details about what games would be available at launch. Nintendo expects to debut the DS in the United States by the end of the year; Sony said its PSP will go on sale next spring.

Both players are slightly smaller than a paperback. Analysts speculated the devices will cost between $149 and $300.

For Sony, the PSP fits into a broader strategy of expanding its line of entertainment products, selling content online and weaving it all into a vast proprietary system. It recently launched its Connect music service, which sells songs in its own format for playback on its own devices, including the PSP.

The PSP displays games and video on a 4.3-inch color screen and will be able to connect to wireless networks. It will not play games made for PlayStation systems because it works with a new storage format, Universal Media Disc.

The 2-inch discs can store up to 1.8 gigabytes of data; Sony hopes the PSP popularizes their use for storing music and movies.

The PSP plays movies, music videos and sports programs stored on the discs. It could compete with the growing number of handheld audio and video players.

Nintendo, with its Game Boy, has for years had a near monopoly over handheld game players. Executives acknowledged Sony's threat to its market share yesterday.

"Will it decline?" asked George Harrison, a senior vice president at Nintendo. "Well, it certainly can't go up."

Nintendo has struggled to make its hardware more appealing to older players, fighting the perception that its games are best for children and young teens. Reggie Fils-Aime, an executive vice president, said Nintendo knows it's not going to be the company for hard-core gamers.

"I understand that if you're among the terminally hip, Nintendo isn't your only choice for gaming," he said.

The PSP will have some initial appeal, Harrison said, but Nintendo's DS will be more durable and have a longer battery life.

The DS displays games on two screens, including one sensitive to touch. Players can use the included stylus to draw or write messages to each other. There is a microphone for voice commands.

The devices connect to wireless networks and can react to each other up to 30 feet apart. They play games stored on new media cards about the size of a stamp, but also play Game Boy Advance SP games.

Sony aims the PSP at video gaming's prime demographic: men, 18 to 34, who have money and will spend it on games.

Analysts said Sony is upping the average age for the handheld-player market with the PSP, which could eventually have a range of features.

"Ultimately, it's going to be an iPod, a Walkman, a Watchman and a portable DVD player," said Wedbush Morgan Securities analyst Michael Pachter. "It'll have everything. I think that's brilliant."

Some industry watchers have speculated the PSP could sell for as much as $299 but that's too high for the mass market, said Zelos Group analyst Billy Pidgeon

Peer Schneider, network director for IGN/GameSpy, which runs video-game-enthusiast sites, said the PSP should cost around $149 to score big.

The PSP is on hard-core gamers' wish lists, and most major game publishers have agreed to produce games for it, said Pidgeon. But it's important not to write off Nintendo, which has years of experience in the handheld market tweaking the balance of game library, hardware price and battery power, he said.

"If Nintendo keeps to its strategy of cheap hardware and long battery life, and can compete with the PSP on the games side, then Nintendo has more than a fighting chance," he said.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2004 The Seattle Times Company

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