Nintendo Gets Investor Support for GBA

by Steven Rodriguez - April 26, 2004, 9:02 pm EDT
Total comments: 32 Source: Bloomberg

Now that we know more about the PSP, people seem to think the smart money is with Nintendo stock.

A Bloomberg report is saying that now that the videogame industry has more information about the Sony PSP, investors have started to realize that Sony might not swoop in and take a chunk of Nintendo's 95% global handheld stake quite so easily.

In large part due to the expected PSP price range and features the unit will have, analysts have figured out that the PSP is more directly targeted to the adult pocketbook, while Nintendo's handheld audience is spread out across all age groups. This means that even if Sony does do well with the PSP, it's likely that they'll only be affecting half of Nintendo's audience, those above the age of 16. Since parents are the main source of games for the young'uns, and no mother or father with intellegence would be willing to fork out $250-400 for a portable game system, it would seem that Nintendo and the $99 Game Boy will be fine in the short term.

Last year, in the days following the PSP announcment at E3 last year, Nintendo's stock dropped 16%. Since investors took a look at the big picture, though, Nintendo's stock has shot up 39% and is still going strong. Expect stock prices to sway again at this year's show, where Nintendo will lift the lid on the Nintendo DS, and Sony will fully show off the PSP.

PRESS RELEASE

Analysts Predictions on the Handheld Market

A new report finds that new handhelds will be successful, but won't be able to overshadow Nintendo's market.

Nintendo's Game Boy to Maintain Dominance in Market it Pioneered

SCOTTSDALE, Ariz., April 28, 2004 - Long the sole territory of Nintendo's Game Boy line, the handheld gaming market has suddenly become crowded with competition, reports In-Stat/MDR (http://www.instat.com). However, the high-tech market research firm finds that, with three new handheld consoles coming to market, Nintendo is not intending to rest on its laurels, offering new product lines and accessories in an effort to maintain its hold on this market. As a result, Nintendo will enjoy continued success in the market segment that it pioneered with both its Game Boy and its new DS platform.

While the Nokia N-Gage, Tapwave Zodiac and Sony PlayStation Portable (PSP) focus on gaming, they do offer other features, ranging from digital audio players to Bluetooth capability to mobile phone functionality that make them new types of consumer convergence devices. However, according to Brian O'Rourke, a Senior Analyst with In-Stat/MDR's converging markets and technologies group, "Nintendo is the most successful company in the history of handheld games. While all three of these new platforms have higher prices, and are targeting an older demographic than the incumbent Game Boy platform, none will be able to escape Nintendo's long shadow."

In-Stat/MDR has also found that:

Sony will also be successful in this market as it should be able to draw on its PlayStation experience and substantial software library to succeed in the handheld market. The PSP is scheduled to make its debut in Japan in the fourth quarter of 2004.

Nokia, though it may struggle at times, has initially shown the resources and determination to succeed in this market. Nokia will face substantial challenges in establishing the platform and assuring the availability of sufficient software to entice consumer interest.

A start-up company founded by ex-Palm executives, Tapwave may be the odd man out, as it has difficulty competing with the heavyweights in this market. Tapwave has the most difficult task of the three competitors in establishing its platform. It is currently available only on the web and does not have the deep pockets of its competitors. As a result, it will be challenged in attracting third-party publishers to develop game software, the lifeblood of any game platform.

The report, Emerging Handheld Game Platforms: It's Not Just Game Boy Anymore (#IN0401151ID), includes in-depth analysis and forecasts for the emerging handheld platforms, as well as for Nintendo's platforms. Shipment and revenue forecasts through 2008 are provided for the Nokia N-Gage, Sony PSP, Tapwave Zodiac, Nintendo Game Boy Advance SP, next-generation Nintendo Game Boy, and the Nintendo DS. Analysis of mobile gaming markets are also provided. Results from In-Stat/MDR's technology panel survey on emerging handheld platforms are provided as well.

To purchase this report, or for more information, please contact Courtney McEuen at 281-246-4668; cmceuen@reedbusiness.com. The report price is $2,795 U.S. Dollars.

Talkback

Shift KeyApril 26, 2004

So the world DOES have some sort of common sense! I am pleasantly surprised.

Ian SaneApril 26, 2004

I think it's a little premature to declare the GBA as the winner since everything could change at E3. Plus the GBA is not Nintendo's future, the DS is. If I was investing I would at least wait until the DS was shown. That device could very well make or break Nintendo.

I don't think the PSP can beat the Gameboy brand on it's own merits. But it could take over the market if Nintendo f*cks up with the DS. That's a risk I wouldn't gamble on without at least seeing the DS first.

DoerrApril 26, 2004

so lets get this straight theres actually good news about Nintendo these days.
Lately everything I read about them is so negative.

Shift KeyApril 26, 2004

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Plus the GBA is not Nintendo's future, the DS is.

I'm going to leave the DS in the experimentation basket alongside the Virtual Boy at the moment, because we still know so little about the total package.
As for making or breaking Nintendo, don't start jumping to conclusions yet. Pass judgement once the contenders have shown their true form.

BloodworthDaniel Bloodworth, Staff AlumnusApril 26, 2004

With portables, it's not just a matter if you can afford to buy one, but whether you afford to let an eight-year-old leave it on the bus.

And yeah, the DS is an addition to the Game Boy line. It can play GB cartridges simply so people don't have to carry both.

odifiendApril 27, 2004

Ha! Confirmed! (I've been away awhile, I knew it was rumored) So why don't they just call the damn thing a Game boy then?
This though is good news and it indicates that Sony has probably thought only prematurely about their pocket system. Still its not like they can't 'Xbox-it' and throw money in PSP until the genereations over.

thecubedcanuckApril 27, 2004

I still wouldnt rush out and invest your life savings here folks.

MarioApril 27, 2004

Thanks for the advice, i was just about to do that.

My gut instinct from the beginning has been that the PSP won't be the slightest threat to Nintendo, so far it's still holding up, i can't wait for E3.

Bill AurionApril 27, 2004

We should just all invest in EA...

RABicleApril 27, 2004

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I still wouldnt rush out and invest your life savings here folks.

Master of the obvious, please sit down.

ruby_onixApril 27, 2004

Last we heard, I thought Sony Europe's president was saying the PSP was likely gonna be in the $400-450 ballbark range. Now this analyst is suggesting $200-400?

Here's the worrysome part.

Quote
Sony expects to make money on the PSP, though it may take a loss when the console first goes on sale, Sony's Furusawa said.
...
Sony lost money on PlayStation and PlayStation 2 immediately after the consoles went on sale, Furusawa said. Both consoles are now profitable.

The PlayStation and PS2 did sell at a noteworthy loss at the start. As costs went down, they eventually started to turn a profit (although the PS2 is notoriously overpriced right now). Was the later profit enough to offset the initial losses in the final tally? Maybe. Maybe that's what Sony's shooting for here.

A $450 "GameBoy killer" is doomed to fail horribly. But a $200 one?

But then again, taking a $200-250 loss per-unit on the hardware is one heckuva big risk. Especially since Sony's been saying they plan to have 10 million PSPs on store shelves (or preferably people's hands) by the end of their first year. Do the math on that one yourself.

And not only is that a much bigger risk than any $50 loss they've tried to maintain on their earlier consoles, but their other consoles have had game-royalty fees coming in for them. Just about everyone knows that royalty rates on handhelds are pretty slim (to try and keep the game prices below those of their superior home-console cousins). And the average handheld owner (read: GameBoy owner) in America only owns about 2.5 games, compared to 8 games for a PS2 owner.

Don't get me wrong. I still expect a horrible flaming death from the PSP (at which point I'll probably miss it, and want one). But that suggestion of "$200", combined with those quotes from an SCE spokeswoman, lead me to believe that if Sony lets it all hang out and goes for broke on this one, they will have a pretty decent chance for success. Lets call it the "Can they run through the deadly-volcano-path fast enough to survive, if they take their pants and shoes off first?" question.

Of course, their better bet for success is if they abandon the "GameBoy killer" idea and carve out their own niche somewhere (maybe eating a small PDA market or two). Like, if Nokia goes out and makes a cell-phone called an "N-Gage 2". It might be a success, but it won't have "won where the N-Gage lost", because it fought a completely different battle.

Ian SaneApril 27, 2004

"As for making or breaking Nintendo, don't start jumping to conclusions yet."

I'm basing that on the fact that Nintendo execs have basically said as much. From all the interviews and soundbites it sounds like Nintendo is banking their future on the DS.

"So why don't they just call the damn thing a Game boy then?"

To fool investors I guess. All these investors who are supporting the GBA obviously think the DS is something different. All this "third pillar" talk seems to have worked. I think Nintendo may use the Gameboy name for the DS but is probably waiting until E3 for the very reason of keeping investors interested. If they announced it was the new Gameboy before actually showing the system to the public some investors may prematurely back out.

I think a $200 PSP has a reasonably good chance of taking off. Rumour has it the DS won't launch at the usual $100 Gameboy price so the prices may be comparible. If the PSP is $200 and the DS is $150 then the difference in price is comparible to the PS2/Cube difference and that failed to affect anything until the Cube dropped to $100. There are still other factors though. The PSP has to be durable and if it's anything like the PS1 or 2 it won't be.

KnowsNothingApril 27, 2004

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With portables, it's not just a matter if you can afford to buy one, but whether you afford to let an eight-year-old leave it on the bus.

Heh, my bro'gameboy SP was stolen when we were on vacation. Whithin a week of getting back we justr went oundought a new one. We are stiloing of recompence for the stolen gameboy from the hotel, but we wouldn't buy a new system if it was 400 bucks. Heck, if were 400 bucks, we wouldn't take it on anywhere for fear losing it, and then it wouldn't really be a portable system anymore. =p

theRPGFreakApril 27, 2004

If Sony is going to aim the PSP at adult audiences only, they have a big problem. Nokia and Microsoft have tried this startegy, and look where they are now. Anyways, I dont think that kids will simply go crazy for the PSP because if the system is going to cost this much that only adults can really afford it, I would only think of first person shooters, online games, and other games in the genera that wont appeal to a 6 year old kid.

Ian SaneApril 27, 2004

"Nokia and Microsoft have tried this startegy, and look where they are now."

Okay it's obvious that Nokia failed in this department but what's your point about Microsoft? Although they lost money it was by choice and the Xbox has done quite well in terms of market share which was Microsoft's goal in the first place. MS is in a pretty good position for the next gen. The Xbox accomplished exactly what it was supposed to.

Plus the N-Gage's failure has nothing to do with the target market but entirely to do with the fact it was a poorly designed piece of sh!t. It doesn't matter who it's targeted to, a portable that requires the battery to be removed to switch games is going to fail.

mouse_clickerApril 27, 2004

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Okay it's obvious that Nokia failed in this department but what's your point about Microsoft?

Careful what you say- the XBox has done slightly worse than the Gamecube worldwide, so if you want to imply MS did good, the same would have go to for Nintendo, as well as the reverse case. If Microsoft is in a good position for next gen, so is Nintendo.

Ian SaneApril 27, 2004

"the XBox has done slightly worse than the Gamecube worldwide, so if you want to imply MS did good, the same would have go to for Nintendo, as well as the reverse case. If Microsoft is in a good position for next gen, so is Nintendo."

I don't know about that. More is expected out of Nintendo so from a relative perspective they didn't do as well or at least that's how I see it. MS is a console newcomber that managed to carve themselves a decent sized piece of the market and have managed to make the Xbox more known in North America than the Gamecube. Plus they exeeded what people expected of them and achieved their goal of gaining a foothold in the console industry.

Nintendo is in a different situation since they're the veterans in this console war. Because they have more experience more was expected on them. In the end it's likely that from a console perspective Nintendo will have a worse public image and smaller marketshare then they did with the N64. The Cube was expected to fix the mistakes of the N64 and put Nintendo back into the role of a serious contender. It didn't. And although I don't know what Nintendo's own goals for the Cube was it's probably fair to say they didn't reach them.

Microsoft's position in the console industry grew this gen while Nintendo's shrunk. That's why MS is in a good place going in to the next gen while Nintendo is not.

To tie this in with the current topic I'll point out that if the PSP grabs a decent sized chunk of the portable market (say 25%) I would consider it to be a success in the same way I consider the Xbox to be a success.

nickmitchApril 27, 2004

The PSP is an evil piece of overpriced crap. Hopefully no one will buy it and it'll ruin Sony. However much that is likely to happen we must all join hands across the world and hope and pray it does. But in all honesty Sony will bounce back from any PSP failure. For instance unsold PSP's will be melted down in to PS3's.

mouse_clickerApril 27, 2004

Expectations have nothing to do with it, Ian- you're looking at the current numbers, and if you say MS is poised for much more from looking at that informtation, Nintendo is as well.

odifiendApril 27, 2004

Ian was speaking relatively- it's not black and white. A newcomer who people were laughing at and expecting to fail, broke into a market composed of veteran company Nintendo and runaway Sony. Microsoft's policy seemed to be spend and get marketshare. Mission accomplished. Nintendo's goal seemed to correct the trends of the N64. Yet still 3rd parties are dropping them right and left. So they're on a downward trend in the console market. Not only that, they are the forefathers of the business. Developers seem to be jumping ship so it looks as though they are not in a good position for next gen.
It is naive to just look at current numbers. What companies and investors do is look at the past to determine the future. Nintendo's marketshare is constantly shrinking, so companies will think the trend will continue. That's how business works.

mouse_clickerApril 27, 2004

I get that odifiend, but you can't make predictions on MS's future in the industry based on performance this generation without the same thing applying to Nintendo. If you say the XBox Next is poised for success, well, so is the N5.

Besides, we should all know by now that expectations mean jack squat- they're proven wrong more often than right.

odifiendApril 27, 2004

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Originally posted by: mouse_clicker
you can't make predictions on MS's future in the industry based on performance this generation without the same thing applying to Nintendo. If you say the XBox Next is poised for success, well, so is the N5.

Besides, we should all know by now that expectations mean jack squat- they're proven wrong more often than right.

You can't make accurate predictions.

Yeah, you're right of course about expectations and predictions being broken. However it was just worth noting that "the same thing" does not exactly apply to Nintendo because of the psychological factor of expectation.

Back on topic with the typical blanket statement:
PSP's price is suicidal. At least Microsoft knew enough to price its console with its competition.

Is it me or am I praising M$ way too much lately?

DjunknownApril 27, 2004

I wouldn't say so... MS is giving what North American gamers want without masochistic love, leave that to Nintendo ^_^

its good to hear some good news from the media for a change, looks like even they can sometimes behave.

While the software programmers have boasted its ease of...programming, all that's left is the hardware. It seems for the people who I know have a PS2, its almost expected for it to break down. The PSX was discontinued in Japan, because they couldn't fulfill the hardware specifications that were originally announced. Will the PSP inherit Sony's legacy of 'questionable' hardware?

Ian SaneApril 27, 2004

"Expectations have nothing to do with it, Ian"

Sure they do. It relates to consumer good will. If you're an Xbox owner and the Xbox performed better than you expected then it's likely you'll buy the followup. If you're a Cube owner and the Cube performed below your expectations you might think twice before buying the followup.

To tie that in with the current topic the original GBA was quite flawed. It was just really hard to see anything. Yet people still bought it because of the good image of the GBC. They were able to overlook the flaws of the GBA. The Cube had flaws too but people didn't overlook them. Instead they dwelled on them. That's because the N64 failed to meet expectations set by the NES and SNES so in the eyes of most people it was a failure, even though it really wasn't. The Cube has created the same "failure" stigma as a result of not meeting expectations. Thus unlike the Xbox it's not in a good position going in.

KDR_11kApril 28, 2004

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Originally posted by: odifiend
At least Microsoft knew enough to price its console with its competition.

Hahaha, HAHA MWAHAHAHAAA! Sorry, just couldn't hold it. I mean, they launched the thing at 480 Euros and only dropped the price to 300 after they realized noone's going to buy it at that price!

mouse_clickerApril 28, 2004

Quote
Sure they do. It relates to consumer good will. If you're an Xbox owner and the Xbox performed better than you expected then it's likely you'll buy the followup. If you're a Cube owner and the Cube performed below your expectations you might think twice before buying the followup.

But the Gamecube has sold better than the XBox worldwide, so I don't say the XBox did "good" and the Gamecube did "bad" without using different comparisons for both. Hell, relatively both consoles BOMBED compared to the PS2, but we don't see that comparison very often. Ignore expectations, which, like I said, are wrong more often than right, and look at the numbers- you can't say the XBox is doing well without saying the same for the Gamecube, and vice versa. You can say the XBox did BETTER than we thought, but that doesn't mean it did well. Or you could say the Gamecube didn't do AS good as we thought, but that doesn't mean it did horrible. Regardless, you can't use different comparisons for both consoles and then expect to compare them to eachother. It's like measuring one car's speed in miles per hour and another's in kilometers per hour and then announcing a winner based on those numbers.

kovu_brApril 28, 2004

A console's success can be measured just by units sold (I don't agree with this parameter, but still it's not wrong), but it's a short-sighted comparison. The thing is that Microsoft proved with the X-Box that it can be a viable force in the console market, that it won't just say "Screw you guys, I'm going home" and leave it's system in the gutter if things go bleak. Now when Microsoft releases it's next console people won't see it as the newcomer looking for a quick buck, it'll stand shoulder to shoulder to Sony's next and Nintendo's next. Besides, as noted before, the X-Box wasn't created to generate cash, it was created to show everybody that their comitment to console gaming was serious, so I'd say that the X-Box was a success, and I bet Microsoft thinks the same, it may not have sold well but it sure was successful. Plus, it also showed the developers that it was a viable plataform for their games, so you can bet that 3rd party support won't be a problem for the X-Box 2.

Lord knows what Nintendo wanted with the Gamecube, but I'll tell you what it didn't want to: Fix the mistakes regarding 3rd party support that plaged the N64. Nintendo, for better or worse, plays the game by it's own rules, and they design their consoles for their own needs, not the needs of other developers. As much as they say they lowered licencing fees and made the Cube an easy machine to develop for they still ignored everything the PS2 had (And like it or not the PS2 is the standard of this generation) and created the least viable plataform to develop for in this generation. Most people buy Nintendo consoles to play Nintendo games, but instead of changing that (And build *the* console to own) they're contend with it, therefore right now Nintendo makes great "secondary systems" as most Cube owners have a PS2 or a X-Box as their main system. And right now I'd say that of the big 3 Nintendo has the worst image with the public and with developers, regardless of how well the Cube performed, and that doesn't bode well for it's future.

Of course, as long as there are people like me (And like most of you, I bet) Nintendo will sell consoles but right now I'd say that Microsoft has a bigger chance of dethroning (Bet I wrote that wrong) Sony than Nintendo. Not that I think Sony can be removed from the top anymore...

Oh yeah, and on topic: That's good to hear and I hope Nintendo delivers on those expectations, otherwise their stocks may plummet again after this year's E3.

theRPGFreakApril 28, 2004

I think that you missed my point Ian. What I meant that is that the NGage and XBox's targets are more focused on adults. The XBox has little to offer those who are at the age of 6 and the NGage is also aimed specificlly at adults. Sony's system is at all audiences, so that is what makes it an easy system for consumers to want to buy. With the PSP however, sure I could see an even balance of games on it that appeal to all audiebnces but it will be the price that brings it down in comparison to the GBA.

Ian SaneApril 28, 2004

"What I meant that is that the NGage and XBox's targets are more focused on adults. The XBox has little to offer those who are at the age of 6 and the NGage is also aimed specificlly at adults. Sony's system is at all audiences, so that is what makes it an easy system for consumers to want to buy. With the PSP however, sure I could see an even balance of games on it that appeal to all audiebnces but it will be the price that brings it down in comparison to the GBA."

Okay, that makes more sense. And it made me think of something. If the PSP is designed to be more than a portable game system and has a lot of extra features then it's pretty likely that not too many kids are going to own one. Therefore it would be a waste of time for any games targeted to younger gamers to be released for the PSP. If it's a scaled down Palm Pilot the only people who own one are going to be tech savy adults so games like Ratchet & Clank for example wouldn't sell with that target market. Ironically the first PSP game to be shown, Death Jr, also probably wouldn't be popular with that market.

I think that adding extra functionality to the PSP could very well be what prevents it from reaching it's full potential. The Playstation brand has been popular because it has something for everyone. However if the PSP is for adults (whether intentional or it just turns out that way) then the advantage is immediately with Nintendo as the GBA (and I assume the DS will as well) is a system that has something for everyone. By trying to make an all-in-one machine Sony may very well be giving up what has given them an advantage.

I think that same problem could translate to the PS3 which would give Nintendo a huge opportunity since they provide a more balanced lineup than Microsoft.

KDR_11kApril 28, 2004

Now if we add Sony's falling PS2 sales to the mix, I'd expect a letter to arrive at Sony HQ with a single word written in it: "OWN3D!"

WuTangTurtleApril 28, 2004

As much as i dislike Sony, I do want them to be in the portable gaming market. Competition brings the best out of everyone, and I would just like to say that the Gameboy hardware series IMO has evolved very slowly. I'm not sure but from what i remember Game Gear had better graphics than Gameboy Color. I bet Sony will squeeze into the market but i bet there sales will drastically drop after its release and prolly be competing with The Wonderswan in Japan or the regular GBA.

Whatever happens im just glad about the DS because so far it looks like a huge stage of evolution for the portable market I bet this wouldn't have happened if Sony didnt decide to go portable.

BloodworthDaniel Bloodworth, Staff AlumnusApril 28, 2004

Shaolin's right about the evolution of the GameBoy market. Nintendo has stated that as long as the current generation has healthy sales, they aren't going to be revealing anything about the next step. Since the GBA SP was in development before the release of the GBA, we can be sure that they always have that next step in mind. The one thing that's kept Nintendo in the lead is gently balancing technical power, portability, price, and battery consumption.

I mentioned that price is important because portables can easily be lost by younger gamers, but the other thing to keep in mind is that a portable is pretty much a personal device. When you buy a home console, that's something that everyone plays and can watch along with, and when someone leaves home, that gives another family member a chance to play. Portables aren't as easily shared; you leave home and you take it with you, plus to play multiplayer games, you need to have more than one in your household -- and many people do. So yeah, it's going to be very interesting to see how the first real portable contender since the Game Gear turns out, and whether it can overcome some of these hard traditional barriers.

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