Nokia Aims to Grab Hold of Hand-Helds
A taco wasn’t what mobile phone giant Nokia had in mind when it launched an ambitious effort to crack the portable video game market and dethrone longtime leader Nintendo Co. a few months ago.
Since then, the Finnish phone maker’s $300 N-Gage -- a game machine with a phone -- has been largely ignored by consumers and roundly ravaged by critics who have derided what they see as its awkward design and ungainly form.
“It’s too expensive,” said GameSpy.com editor Dave Kosak. “You have to take apart the whole thing to put in a new game cartridge. Then you have to put it back together and wait for it to boot up again. The batteries don’t last very long.
“And when you hold it up to your face to use the phone, it looks like a taco.”
Nokia acknowledges that the N-Gage may not be perfect. If it isn’t, that doesn’t mean the company won’t one day manage to dethrone Nintendo, maker of the perennially popular Game Boy.
“They don’t have to be successful on the first go,” said Sam May, a telecommunications analyst with U.S. Bancorp Piper Jaffray. “They’re open to failure because they’re trying to go where no one’s gone before.”
Nokia, which last year made 40% of all the mobile phones sold in the world, not surprisingly wants to capitalize on the demand for fancy handsets that play music, take pictures or play games. It does not want to get stuck supplying the bare-bones, low-margin units that wireless companies give away free.
“Nokia believes portable devices will converge with cellphones,” May said. “So why sit around and wait for someone else to do that? Why not go on the offensive and do it yourself?”
According to Nokia, it has sold 400,000 N-Gages worldwide since the device went on the market Oct. 7. Some analysts believe the number is closer to 200,000 -- with most of those sales in Europe, where the phone is offered at a steep discount with some wireless subscriptions.
Whichever the number, it’s small in comparison with sales of Nintendo’s $100 Game Boys, which fly off the shelves at a rate of 1 million a month.
Executives at Nokia, which posted revenue of $31 billion last year, say they aren’t discouraged. In fact, the company already is working on a second version of the N-Gage and plans to have more than 80 games for it available next year.
“The way we see it, we’re just on level one of this game, and we’re trying to get to level two,” said Nada Usina, Nokia’s general manager of entertainment and media for North America. “We’re in this business for the long haul. We’re in this game because we want to win it.”
Nokia will have another rival next year, when consumer electronics giant Sony Corp. plans to introduce its own device to vie for a piece of the $3.7-billion hand-held games market. The PSP will play music, movies and games. It will not, however, include a phone.
Others have tried to depose Nintendo, which has sold 160 million Game Boys since 1989. The Japanese company credits Game Boy’s success to a single-minded focus on games, rather than trying to cram too many features into a sleek case.
The device’s current iteration, Game Boy Advance SP, “is just perfect,” Kosak of GameSpy.com said. “You can play tons and tons of games on it. The design is really nice. And the batteries last a long time. You can’t underestimate how important battery life is for this audience.”
As for the N-Gage, Kosak can’t say anything nice. Few game enthusiasts have. Games Industry, a British website, cited the N-Gage’s “appallingly poor design.” Other critics have compared its bulky, oblong shape to a Frisbee or a burrito.
Wall Street analysts have echoed the negative reviews.
“It’s a $300 paperweight,” said Michael Pachter, a game industry analyst with Wedbush Morgan Securities.
Electronics Boutique Holdings Corp., one of the two game retailers stocking the N-Gage, missed its target of selling 12,000 units at its 1,400 stores in October, contributing to a disappointing quarter.
The bestselling individual N-Gage game in October was “Tomb Raider,” which sold 2,960 copies, according to market research firm NPDFunworld. THQ Inc.’s “MLB Slam” baseball game sold just 153 copies.
“I don’t think the performance is giving anyone reasons to throw parties,” said Tim Walsh, president of THQ’s wireless games business, who nevertheless believes the N-Gage is “a really strong concept.”
To accelerate sales, Nokia in late October offered a $100 instant rebate at Electronics Boutique and Gamestop, the other retailer stocking the device. Nokia has launched a $100-million global marketing campaign for the N-Gage.
Nokia would have to sell 7 million N-Gages and more than 10 million games to begin making money, a goal unlikely to be achieved for another year or so, according to a UBS Securities report.
That may never happen. But Nokia is seeding the market by paying game publishers to develop titles for the device.
Activision Inc. in Santa Monica made a version of its “Tony Hawk Pro Skater” game, originally released four years ago on the PlayStation. Calabasas-based THQ has developed three titles for the N-Gage. And Eidos of Britain released a “Tomb Raider” game.
