By
Piers Harding-Rolls

Although the DS sold through 1.6 million units in Japan during the first half of 2008, this represented a substantial and rather rapid decline from first half 2007 sales of 3.7 million units. Compare this to the performance of the PSP, released around the same time as the DS in Japan, and our long-standing view that the PSP had the technological legs to maintain a longer sales cycle compared to the DS can not be disputed. PSP sales in the first half of 2008 were almost 2 million compared to 1 million in the equivalent period in 2007.

So while the DS has been in heavy decline in Japan, it seems that many consumers are now turning to the PSP in large numbers, not least due to the massive success of Monster Hunter Portable, which topped sell-through in Japan in the first half of the year. With DS sales as they are in Japan a refresh of the DS platform would appear to be in order to regain the initiative and that's exactly what was announced by Nintendo in October at its Tokyo press conference in the form of the DSi.

On the surface Nintendo's DSi appears to be a direct response to the multimedia functionality of the PSP and other handheld devices such as the iPod Touch, which are increasingly encroaching on the gaming space. This may be true to a lesser extent, but the DSi's new features - SD card support, dual cameras, dual 3.5" touch screens, on-board web browser, ability to download and store DSiware content - are also very much a natural evolution of Nintendo's current content and hardware strategies, without necessarily trying to replicate what these other devices deliver to the consumer. What is clear is that games content is increasingly networked or connected via the internet and that there is increasing experimentation with different methods of interaction with games devices, and the DSi follows this trend.

We have all been aware of Nintendo's determination to plough its own furrow to market success in recent years and as such it is unlikely that the company will have succumbed to competitive pressure from the PSP and produced a me-too product. Yes, the functionality is similar to many mobile and handheld devices on the market, yet it will be the unique experiences and applications Nintendo delivers with this functionality that the company hopes will set it aside from the competition. This upgrade also aligns its handheld platform more closely to the Wii, with enhanced forms of interaction, SD card support, web browser and content download, again a natural product evolution for the company.

So is the DSi enough to re-ignite Japanese interest in DS platform? Our DS sales volume data clearly shows the surge in new sales prompted by the launch of the DS Lite in 2006, which suggests that this evolutionary rather than revolutionary product strategy can work. While purely hardware reasons for upgrade are certainly less emphatic now than they were with the DS and DS Lite, much of the DSi's potential must rest in the applications and experiences that Nintendo can offer using its new features and functionality. These applications and content will aim to deliver a more personalised experience to the consumer, prompting those families that share one or two handhelds to invest in a DSi for each family member. While delivering on this aim represents a considerable challenge, Nintendo's ability to create unique content remains undiminished and it is this, alongside the Japanese consumers' very content-elastic hardware buying decision making, that should result in an upsurge in sales for the platform.

The SD games team will be revisiting its forecasts for the DS platform and will be adding a new platform line to its forecasts for the release of the DSi. This was almost certainly result in improved total DS platform sales in Q4 in Japan, although there is likely to be some offset created by a drop in DS Lite sales as a consequence of the DSi launch.

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