Going to the Digital Dogs

Handheld gaming systems have gone to the dogs, literally. That's because Nintendo (NQB: NTDOY) has a hit with its Nintendogs puppy-simulator game cartridges. With its stateside debut in late August, Nintendo moved 250,000 copies of the software in its first week on the market. And with roughly 2 million Nintendo DS systems in the U.S., that means more than 10% of those who own the portable gaming device barked at the early chance to own a virtual pooch.

I received an advance copy of Nintendogs last month, and my two sons were quick to take to the game, which uses voice recognition to allow owners to single out their puppy at a mill before going on to care for it, teach it tricks, and even enter it in Frisbee-catching competitions.

Nintendogs proved to be such a welcome surprise that I eventually buckled to my family's persuasive pressure and bought a second Nintendo DS, as well as a different version of the game. (Nintendo has three titles, each one with six different puppy breeds to choose from.) Why? Well, when the consoles are in Wi-Fi range of each other, two players can have their pets interact with one another.

When Sony (NYSE: SNE) rolled out its PSP device back in March, I figured that Nintendo would have a hard time competing. The PSP comes with a vibrantly colorful screen and has some nifty multimedia features, such as its ability to play back music and movies in the UMD storage format.

However, it's clear that the video game wars aren't won on spec sheets alone. In the console space, Sony reigns with its PS2, but it's clear that Nintendo is getting creative in its efforts to keep the portable market moving along in its favor. Nintendo, for example, has been able to make good use of the microphone and touch-sensitive dual screen on its DS -- along with a recent price cut to $129 -- to make sure that Nintendo remains the top dog in the handheld realm.

Virtual pets have been around for some time. Pet Rocks, anyone? Tamagotchi? Nintendogs is raising the bar in this arena, but others are coming, too. The voice-recognizing Seaman aquarium simulator, which was once a staple of Sega Dreamcast owners, is now being revived for the PS2 platform.

This doesn't mean that PetSmart (Nasdaq: PETM) or Petco (Nasdaq: PETC) are going to go out of business as consumers turn to fake pets that require less costly upkeep. In fact, the more my kids have played Nintendogs, the more they wonder when my wife and I will be finally buy them the dog that we're always talking about getting.

However, the folks that should be worried are the toymakers. I don't know whether Mattel (NYSE: MAT) and Hasbro (NYSE: HAS) have anything up their sleeves for the critical holiday shopping season, but it does seem as though virtual pets will factor into gift-buying patterns later this year.

It's a virtual-dog-eat-virtual-dog world out there. Let's hope the toy specialists come armed with more tricks than simply rolling over or playing dead.

Hasbro has been recommended in theMotley Fool Stock Advisornewsletter service. Mattel is a selection in theMotley Fool Inside Valuenewsletter.

Longtime Fool contributor Rick Munarriz has always loved dogs. His first dog lasted an amazing 18 years. He's not sure how long his virtual pups will last. He does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.