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Who is winning the handheld war?

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Who exactly is winning the handheld wars? Sony says it is, and Nintendo says it is. Sony says the PSP is selling faster, from launch, than the PSOne or PS2. The PSP is selling neck-and-neck in the US and Europe with Nintendo's DS. In Japan, however, the DS is clearly trouncing the PSP. Whatever the reality is of who is edging out who, Sony's learning some tough lessons in the handheld market. For the first time in a while it isn't a clear market leader. And, worse, not only are the fanboys not with Sony, but key software corporations aren't either.

In the last few weeks, movie support for Sony's UMD discs has fallen away sharply. The Hollywood Reporter claimed that Paramount, Universal, 20th Century Fox and Universal are either significantly scaling back UMD movie support, or cutting it completely.

There are three clear problems with Sony's UMD movie strategy:
1. Who the heck wants to pay a DVD price for a movie you can only play on your PSP?
2. Any early adopter with technical savvy (ie the kind of people who own PSPs) can load movies onto Memory Sticks and watch them on their PSPs, or transfer them onto their video iPods.
3. An early rush of rubbish to the UMD format meant there were loads of titles to watch, most absolute rot. Sony's response? Apparently, they're working on a gadget to let you watch UMD movies on your TV.

The problem here? The limited disc capacity of UMD means the quality won't even match those free DVDs currently cover-mounted on every newspaper. On the other side of the handheld war, things look much better. A redesigned, slimmer and more aspirational DS, the DS Lite, is due for release in June. This will give the DS "sex appeal" to compete with the PSP. A web browser will eventually let the DS compete against the PSP in the "multimedia" realm.

Multimedia is a side-show, though. As one Hollywood executive said of the PSP to the Hollywood Reporter: "It's a game player, period."

But while games on the PSP are largely retreads of PS2 titles, the DS is increasingly home to quirky, inventive and unique gems - from Nintendogs to Trauma Centre, Phoenix Wright to Metroid Prime: Hunters.

While Sony has played on multi-functionality and looks set to fail, Nintendo's DS looks set to triumph by making the best games. It's a lesson Sony would do well to remember when it comes to PS3.

Sharks snag minnows as console market "transition" bites

Microsoft has bought the legendary Lionhead, home of games genius Peter Molyneux and titles including Fable, Black & White and The Movies.

But this bold acquisition counts as nothing compared to Sega. In one day recently it swallowed Islington-based Sports Interactive, makers of Football Manager, as well as hockey and baseball management simulations and San Francisco developer Secret Level, makers of America's Army, Karaoke Revolution, Magic: The Gathering Battlegrounds and Star Wars: Jedi Starfighter. This follows Sega's recent snaffle of The Creative Assembly, the brains behind the Total War series.

What's happening? Simple, the games market's tough right now - and rather than go to the wall, some developers are opting to be swallowed by a big fish. We're in a "transition" market. That means that people are bored of their old consoles - they're spending less on them. Yet, they haven't got round to buying their shiny new one. Not enough people own Xbox 360s, not enough people care about their Xbox or PS2. The result? Put a game out now and it may only sell a few units. Meanwhile, costs for the games small developers are making are spiralling - these companies are working on games three years away. And they're racking up staff costs for hundreds of programmers, artists and others to produce the kind of photorealistic, highly complex games we'll be expecting then.

Yet, the money isn't coming in now. Except, of course, for those who accept the Faustian pact that is being snaffled by a publisher - less freedom to work on what you want, but lots and lots of money to make games with.

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