Japanese gaming firm Nintendo, creator of iconic characters Donkey Kong and Mario Brothers, has seen profits drop amid weak sales of its latest console.
Gaming console makers are fighting to push consumers buttons
Net profit dropped 21% to 36.6bn yen (£179m; $308m) in the six months to 30 September from 46.5bn yen a year ago.
Sales dropped 6.2% to 176.4bn yen as demand for the firm's GameCube waned.
Already fierce competition is set to intensify next year as Nintendo and rivals Sony and Microsoft launch more sophisticated gaming machines.
Nintendo said that the cost of developing its next generation "Revolution" console, due for release in 2006, was weighing on earnings.
Firms are having to spend more on their products as they look to lure increasingly demanding consumers in a multi-billion dollar market that is growing annually.
The new machines will offer features such as larger hard drives, improved wide-screen graphics, CD and music players, internet and wireless connections, and innovative control pads.
Even so, pricing power is being squeezed and makers are having to offer discounts to shift products.
Nintendo said that its fiscal first-half earnings also were hit by price cuts for its twin-screen portable game player, the DS.
Despite the drop in earnings, profits topped market estimates thanks in large part to gains made in foreign exchange transactions, the company said.
Nintendo also kept to its full-year earnings forecasts of 75bn yen, down from 87.4bn a year earlier.