Q&A: In-Stat On The PSP, DS Handheld War

The latest report from market analysts In-Stat, Handheld Game Platforms 2006: And Then There Were Two, details the duopoly of the handheld market in light of the Nokia N-Gage, Tapwave Zodiac, and Gizmondo’s recent exits, and the future of the market, right through to 2010. "Nintendo followed up successful Japanese and North American launches of its DS product in late 2004 with a successful introduction in Europe in the first quarter of 2005. The DS's two screens have proven popular, and have opened up the handheld market to new types of game play, as well as new demographic groups," says Brian O’Rourke, Senior Analyst for the Converging Markets & Technologies Group at In-Stat. O’Rourke also notes that the DS will continue to outship the PSP due to “very strong sales in Japan”, but believes that Sony will respond with a price cut to the handheld in all major regions by the fourth quarter of this year - it's unclear whether the new PSP bundle might be considered an effective hardware price cut due to the extra value contained within, though. Gamasutra contacted O’Rourke via email to discuss the results and implications of the report. What was the methodology of the report? I spoke in depth to both console vendors/manufacturers and software publishers. The report forecasts handheld shipments and revenues by region through 2010. Why has the DS outsold the PSP, and why do you believe it will continue to do so? The DS's shipment advantage has been overstated somewhat. Through the end of 2005, on a worldwide basis, the PSP outshipped the DS. However, it is true that in 2006 the DS has outshipped the PSP. This is due to two factors. The DS has been substantially outperforming the PSP in Japan. The second, related reason is that Nintendo has had more success with game software for the DS than Sony has had with the PSP. The Nintendogs and Brain Games franchises have been quite successful in multiple markets, which in turn has helped sell more DS consoles. Why have so many other companies failed at their attempts to release a handheld? The handheld market is a very tricky one. A prospective handheld manufacturer must come up with and easy to use, portable system, at an acceptable price point to the vast number of consumers. The key to a successful handheld is not necessarily graphics. Several of Nintendo's challengers over the years (e.g., Atari, NEC) have had superior graphics performance. But they did not succeed. More important is strong software support, and recognizable characters, that appeal to what has been primarily a pre-teen, early teen demographic. This is what Nintendo has understood well, and has executed on. What has Sony done wrong - or is it more a case of Nintendo doing things right? Sony does not have the same number of breakout titles for the PSP as Nintendo has created for the DS. In addition, the PSP costs substantially more than the DS ($199 vs. $129 in the US). And Sony just went to a standalone PSP SKU earlier this year. Before that, you had to buy a package, which included case, ear phones, movie title, etc., for about $250. However, keep in mind that Sony has sold a substantial number of PSPs. This is a very successful product, and will continue to be. Do you think we will see publishers moving away from the PSP in the months to come? No, publishers will not move away from the PSP. Sony is selling too many of them. Publishers are not in the business of throwing away revenue opportunities. Finally, what effect will the console releases in the fourth quarter of this year have on the handheld market? Very little, if any. The markets move separately. If the handheld consoles were launching at the same time as the new consoles, that might be a different story. But that isn't the case.