Will the New DS Break Into the PSP and iPhone's Marketshare?

Over the past weekend Japanese business news source Nikkei.net reported that by year's end Nintendo will release a new version of the Nintendo DS in Japan that incorporates the added features of a built-in digital camera, MP3 music playback and improved wireless functionality. This rumor has yet to be confirmed or convincingly denied by Nintendo. Their official response to the rumor has been:

"We are always developing new products. However, since nothing has been announced officially, we are unable to comment at this time."

To me this reads as yes, there will probably be a new piece of DS hardware released soon, especially when you take into consideration that there were rumblings earlier in the year that an announcement would be made at this year's E3 of a new DS. That didn't happen, but with the once untouchable status of the DS Lite in the handheld market increasing being challenged by the PlayStation portable--it outsold the PSP in Japan only once in the last six months--and news that development of games on the iPhone/iTouch will continue to be a priority for Apple, all the signs are all there that a change in Nintendo's strategy may be at hand. But this doesn't necessarily equate to a shakeup of the handheld gaming market.

For a long time gamers, as well as industry observers have known that although there is some crossover among users, the DS and the PSP don't actually compete. The DS is of course widely popular across the whole of the handheld gamer demographic, but probably tracks heaviest with children and gamers least heavily invested in advanced gaming technology. This has allowed the unit to take advantage of a huge library of playable games aimed at the 'E-For Everyone' crowd, made up of both Nintendo DS cards and GameBoy Advance cartridges, but has also stymied any need for innovation in the DS' hardware. To date, since the introduction of the DS Lite in early 2006, replacing the original DS model, there have been little to no improvements to the the unit's base functionality, including its limited storage capacity and lack of included web browsing functionality, although the latter can be added via an additional card. The only changes have been additional color options, which though driving quite consistent and significant sales, do not address the wants/needs of the tech savvy crowd drawn to the functionality of the PSP and Apple's new offerings.

So, does the camera, music and additional wireless capabilities supposedly coming with this rumored model change that? Not likely. Assuming that these features are coming, which means that the storage issue of the DS must be addressed to accommodate this content, I'll wager they are just designed as new toys to placate a loyal customer base that might otherwise be tempted upgrade to machines like the PSP and iPhone/iTouch that have uses far beyond gaming.

--Tom Milnes