Nintendo launches the Cube in Europe

By Kristie Lu Stout
CNN Hong Kong

TOKYO, Japan (CNN) -- Mario and Luigi are ready to test their mettle in a new market.

After introducing its latest generation console to Japan and the U.S., Nintendo is launching the GameCube in Europe on Friday.

Nintendo, Microsoft and Sony are continuing their battle for a piece of the $20 billion game industry.

"We have three very well capitalized competitors in game hardware that are very serious about the business and have the financial wherewithal to make the other two move," said Jay Defibaugh, a Tokyo-based game analyst at Credit Suisse First Boston.

Price wars

It's a battle so intense that game box makers have to slash prices even before a product hits the store shelves.

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Weeks ahead of Friday's launch, Nintendo dropped the European price of the GameCube from 250 euros to 199 euros.

The move followed Microsoft's decision to drop the European price of the Xbox to 299 euros, putting it on par with Sony's PlayStation 2.

Nintendo has sold more than 2.5 million GameCube consoles in Japan and the U.S., and a price adjustment may help boost sales in its latest market.

"What we know about Europe is that it is very price sensitive," said Defibaugh. "It will do Nintendo some good to start at a lower price point."

"Microsoft made the mistake of setting its initial price point too high," he said. "And that could have repercussions on users who might come around to question a system that has to have a price cut implemented so quickly."

Nintendo's lower price tag would also encourage sales of its lucrative game titles like Luigi's Mansion, an adventure game starring the popular Nintendo character in a haunted house, and NBA Courtside 2002, a basketball title featuring L.A. Lakers superstar Kobe Bryant.

"The more hardware they can sell, the more software they can sell which is high margin," said ING Barings Japan game analyst Lisa Spicer.

Targeting toddlers

Europe currently accounts for over 20 percent of Nintendo's global sales, and in contrast to Japan, the region has an increasingly younger demographic.

"Nintendo is viewed as a kiddie toy and in Japan we don't have a high birth rate," said Spicer.

"In the U.S. and Europe, at least the birth rate is growing and Nintendo needs to capitalize on that trend."

Nintendo plans to initially ship 500,000 units in Europe, and is relying on a low price point as well as its popular game brands to woo the market once again.

During the heyday of the Nintendo's previous generation game console, the Nintendo 64, European gamers developed a soft spot for Pokemon and Mario.

Incidentally, both characters feature in the GameCube hit Super Smash Brothers Melee, a head-to-head fighting game that has sold over a million copes in Japan.

"One of its clear strengths is its software titles like Pokemon, Zelda, Donkey Kong and Mario," said Defibaugh.

"When it comes to moving game hardware those in-house titles enable Nintendo to differentiate its platforms from those of its competition."

The ability to link a GameCube with Nintendo's popular Game Boy Advance (GBA) handheld may also spur sales.

"We'll see a number of new games for Nintendo, those games that are playable for both GameCube and the Game Boy Advance – some sort of cross platform synergy," said Defibaugh.

"If Nintendo can transfer any of its popularity from its handheld products to GameCube, that would be very welcome indeed."