×

Can Panasonic Survive the Video Game ‘Jungle’?

Seventeen years ago, Panasonic tried to break into the video game industry, lasting only three years before it was forced out. Now it’s ready to try again.

panasonic_jungle_200.jpg

The company has unveiled the Jungle, a new handheld gaming system that will target players of online games. It’s a niche other companies have left wide open, but analysts—to put it kindly—are extremely skeptical about the company’s odds of success.

“It’s mind-boggling,” says Billy Pidgeon, senior analyst with M2 Research. “I can’t see how it can be profitable … Anyone with a lick of common sense can see this is not the thing to do.”

That opinion (which is widely shared among video game industry observers) is due to a number of factors: competition, development costs and necessity (more specifically, the lack thereof.)

The handheld gaming market is becoming increasingly crowded. Panasonic will face several established competitors, including longtime king of the hill Nintendo, which is about to being the roll out of its 3DS system, which will offer games in stereoscopic 3D without the need for special glasses, and Apple, whose iPhone and iPod Touch devices have quickly become a significant market threat.

Meanwhile, Sony has a new version of its PlayStation Portable in the works and developers are finally beginning to take an interested in Android-equipped cell phones.

That puts the Jungle amongst a lot of predators.

“I don’t expect it to be successful,” says Colin Sebastian of Lazard Capital Markets. “Based on what we’ve seen so far, I’d say there’s limited opportunity for the device. … It seems like an N-Gage redo.”

The N-Gage is just one of several carcasses that litter the handheld gaming space—but it’s perhaps the most well known. Nokia, in 2003, offered a combination cell phone/gaming system. The problem was: The games were so-so at best, and the phone was clumsy to use. The result? The N-Gage became one of the most ridiculed gaming devices in the industry's history.

And analysts weren’t nearly as cynical about that device.

Panasonic has not unveiled a lot about the Jungle. It announced the system via a website and has not, so far, given a price, launch date or much information about games for the Jungle.

The only title announced so far for the system is “Battlestar Galactica Online,” a massively multiplayer online (MMO) game (allowing hundreds of people to play with or against each other simultaneously). That game is browser-based, though, making it available to anyone with a computer — just like every other successful MMO, raising questions about how necessary the Jungle actually is, even to its target audience.

“If you want to do MMOs on the go, you can do that with a netbook or a laptop,” says Pidgeon.

Handheld—and most console—gaming systems have typically steered clear of MMO titles, which Panasonic seems to see as an opening. The reason that field remains open, though, is the expense and risk that comes with making those kinds of games.

While developers point to the overwhelming success of Activision’s “World of Warcraft” (which has 12 million subscribers) when discussing the genre, most games have a much lower player base. And when they flop, it can be disastrous. Realtime Worlds, a company founded by one of the creators of the “Grand Theft Auto” franchise, spent five years working on “APB,” but tepid gamer response led to the MMO shutting down within three months of its launch. (The company has since gone out of business.)

The games take years to make and cost millions—and with no installed base of customers, Panasonic will have trouble finding a talented team to work on one. (And established publishers are unlikely to pair up with the company, since even converting existing games carries a cost.)

Panasonic bungled its first entry into the gaming space. Its second attempt, though, might have shareholders longing for those days.

Questions? Comments? TechCheck@cnbc.com