Handhelds: The battle for our hands and minds

And to think that it was almost dismissed as a cheap, plastic toy. The debut of Nintendo's DS games console at 2004's Electronic Entertainment Expo in LA was greeted with wide derision by watching technology experts; their attention fixated instead on Sony's sleeker, sexier, more powerful PlayStation Portable, or PSP.

More fool them. Today, Nintendo's dual-screen, low-cost device stands proud as the second biggest-selling games system in history with over 100 million units shifted worldwide – just behind the mega-selling PlayStation 2. Perhaps more importantly, it's knocked the 54 million-selling PSP into a cocked hat, thanks to titles such as Dr Kawashima's Brain Training, Nintendogs and New Super Mario Bros, which have achieved widespread cultural fondness.

Nintendo, creator of the original king of hand-held gaming, the Game Boy, once again seems imperious to competitors. But in the fast-moving world of video games, nothing lasts forever.

What a difference an upgrade makes. On Friday, Sony launches its revolutionary new model, PSP Go – the first dedicated games console without a disc drive or cartridge slot, on which users will be able to download releases from the comfort of their broadband connection. The system will be placed on retail shelves alongside the firm's existing PSP – which will still allow consumers to access games through boxed purchases.

Sony believes this dual approach can snare both traditional gamers and a population rapidly becoming addicted to their download-only iPhones – and really damage to the DS's dominance.

"Consumers want something with heavy processing power, but which can also cater for a more casual, snacking mentality," explains Sony Computer Entertainment UK managing director Ray Maguire. "We needed a smaller PSP that you could put it in your pocket and forget about. PSP Go is as small as you can get with a decent-sized screen and control mechanism – while having the most powerful handheld processor on the market. It's the perfect console for the iPod generation -people comfortable to only have a digital relationship with their entertainment."

The system arrives just as evidence becomes apparent that interest in Nintendo's record-breaking system is beginning to cool. Giant games publisher Ubisoft – a DS success story with its popular Imagine range – reported in July that revenue generated by its software on the console for the first three months of 2009 fell 67 per cent year-on-year. CEO Yves Guillemot opined that the system was "declining quickly" and that the firm would be refocusing its resources on Nintendo's Wii and Microsoft's Xbox 360.

"Sales are about flat in terms of DS hardware, but a few third-party publishers have suffered a decline in software sales," explains industry analyst Nick Parker of Parker Consulting. "Nintendo always does well on its own system, but there's no real growth left in the DS in the market. It's peaked and is going into a downward curve."

However, Nintendo remains confident that there's plenty of life in its wallet-sized wonder. The firm introduced an upgrade of its own in May, the DSi. And although the addition of a camera and web browser didn't quite have the shock value of Sony's disc-less new model, it's ticked along nicely – quietly shifting over one million units in Europe.

Then there's the introduction of Nintendo's own digital offering, DSiWare, which arrived alongside DSi. Obviously built with iPhone in mind, this "virtual store" offers a selection of cheap 'n' cheerful titles via download – often developed by risk-taking, independent companies.

"Nintendo has been careful not to become involved an 'arms race' in terms of hardware," says Nintendo's Senior Product Manager for DS, James Honeywell. "With nearly 10 million consoles sold in the UK, there are a large number of people who feel Nintendo DS is the system for them."

Indeed, Nintendo's own Christmas line-up of software for DS – which includes new iterations in the best-selling Professor Layton and Zelda series – could prove it has a future as the nation's favourite handheld for a while yet.

"It's too early to tell if this will be the best year in DS's history," adds Honeywell, "but we've got a great line-up for Christmas, fantastic software coming and great activity to promote these games to the UK that will surprise and excite everyone."

505 Games, which published one of the DS's biggest sellers with Cooking Mama in 2006, blames an overabundance of competition for the slow down in third-party sales. "It was inevitable this [decline] would occur at some point," comments 505's Managing Director Ian Howe. "There was a flood of product on to the market as everyone jumped on the DS bandwagon, which inevitably led to short-term pressures. But I'm confident that once the market has settled down, there will be a healthy market for retail, publishers and consumers on DS."

The biggest challenge to the future of both DS and PSP, however, could yet prove to be the iPhone. After years of refusing to position iPhone (and iPod Touch) as a "games console", Apple has suddenly become more blatant in its desire to challenge Sony and Nintendo. And it's going about it in a shockingly aggressive way.

"When DS and PSP came out, they seemed so cool," said Apple's Marketing Vice President Phil Schiller at an iPod presentation in September. "But once you play a game on the iPod Touch, you think, 'Hey, these things aren't so cool any more.'"

Apple has recently criticised the price and buying experience of its more traditional gaming rivals – and claimed that iPod owners enjoy a choice of over 21,000 games (or gaming "Apps"), compared to 3,680 on DS and just 607 on PSP.

However, Sony is fighting back. The firm has introduced its own rival to iPod's Apps – in the shape of PSP Minis. Like Apple's offering and Nintendo's DSiWare before them, these digitally-downloaded titles are clever, cheap and perfect for a casual gamer; a world away from the power-hungry blockbusters that have defined PSP.

As for Apple's numbers, Sony believes PSP Go's appeal should be measured in quality, rather than quantity and its online selling platform, PSN, is in no way inferior to Apple's App Store.

"PSP Go can compete with Apple's digital offering," adds Maguire. "It doesn't matter how many applications you've got. People clearly won't consume 30,000 applications on any device. There is a relationship between the quality of your games or 'apps' and the number you have. PlayStation has the right relationship with the established development community to make sure what's being developed is of the right quality and worthwhile downloading."

So Sony is setting PSP Go as a direct rival to iPhone – with both companies homing in on Nintendo's audience of non-traditional gamers.

But what of DS? Does it have a trick up its sleeve to remain one step ahead of the competition? The jury is out. "DSi had a big launch, but I don't think it's Nintendo's long-term replacement for DS," adds Parker. "There are rumours of a full replacement for the DS – a 'DS 2' – coming next year. That makes sense to me, and it will be fascinating to see what it contains."

Suddenly, Nintendo's rivals look to have grabbed the upper hand. Could the firm really be preparing a new handheld gaming machine to stifle Sony and Apple's ascent?

Whatever it has up its sleeve, it's a pretty safe bet that – just as when DS launched five years ago – it will involve doing what Nintendo does best: confounding its loudest doubters.

Devices and desires: The history of portable consoles

The DS and PSP may be duking it out in today's market, but the portable games console's history goes back further than these two models.

Mattel Auto Race – 1979

The first-known handheld games device came from toy manufacturer Mattel. There was no "console" as such – "Auto Race" was the only game consumers could play on a device that borrowed design elements from the then-still-futuristic calculator.

Nintendo Game & Watch – 1980

The influence of Nintendo's Game & Watch – which introduced Mario and other classic characters to a generation – is still being felt today. The "console" (again, one game per device) introduced the now standard D-pad control – as found on PSP.

Nintendo Game Boy – 1989

Handheld gaming's true granddaddy. The robust original was the real classic, but Nintendo launched three subsequent iterations: Game Boy Pocket (1996), the Japan-only Game Boy Light (1997), and Game Boy Colour (1998). The combined collection sold just shy of 200 million units worldwide.

Atari Lynx – 1989

Although it had far more under its hood than Nintendo's system, the Lynx's higher price point and poor software line-up soon saw it killed off. Many believe that if it was launched earlier, it could have put up a stronger fight – and changed the course of gaming history.

SEGA Game Gear – 1991

Another pretender to Game Boy's throne, Sega's colour system suffered from poor battery life and like the Lynx before it, proved no real threat to Nintendo's dominance.

SNK Neo Geo handheld – 1999

A critic's darling but never a commercial success, the powerful portable sister of SNK's Neo Geo home console is something of a collector's item to this day.

Nintendo GameBoy Advance – 2001

The first true successor to the Game Boy family, this little beauty single-handedly kept Nintendo in the black as its Gamecube failed dismally to defeat Sony's PlayStation 2 in the home console race.