LAS VEGAS (CNN/Money) - While Nintendo has historically focused solely on game machines, its new handheld system could represent a departure from that philosophy. Scheduled for release this holiday season, the Nintendo DS may play movies as well as games.

In an analyst report issued Wednesday, P.J. McNealy of American Technology Research said a two-hour movie (fit onto a 128 MB flash cartridge) has been successfully demonstrated on the DS. Whether Nintendo will offer this functionality when the machine is released remains to be seen.

"This is a change in Nintendo's traditional focus as a gaming company," he wrote, "but, in our opinion, a necessary move to not only protect its market share in the handheld space but to also expand its revenue streams as its gaming enthusiasts grow older."

If Nintendo does offer multimedia playback in the DS, it would set the stage for an even bigger showdown between the device and Sony's PSP, a game device that also plays movies, though on a larger (single) screen. (Sony last week delayed the North American launch of the PSP until early 2005.)

Nintendo hopes to launch the DS with roughly a dozen games, with prices ranging from $20 to $30, according to McNealy. That's cheaper than previously rumored. Pricing for the system is still being determined, he added.

Nintendo declined to comment on the report, citing its policy of not addressing rumors or speculation.

Since it was announced on Jan. 20, the Nintendo DS has been something of an enigma. The company has kept details about the machine under close guard, only acknowledging it would feature two, three-inch LCD screens and two, separate processors. It is not considered a successor to the GameCube or Game Boy Advance.

Could a price cut be coming for the Game Boy Advance as well?

Those dual screens are, at the moment, proving somewhat confounding to game developers. While the idea of offering two simultaneous perspectives works in theory, they're not sure how to successfully incorporate it into game design.

Dual screens haven't been widely used in many games, even though the option has been available to developers for a few years. (Windows XP supports a dual monitor setup.) Only a dozen or so titles have utilized the feature – mostly flight simulators, which aren't typical handheld gaming fare.

While there are some game genres where a second screen makes sense (such as role-playing games, strategy titles and the aforementioned flight sims), creating a platform game (such as Mario or Sonic) that utilizes a second screen is more problematic. Platform games are among the most popular on handheld systems.

"Part of the appeal of platformers is memorizing the maps, so I'm not sure if adding a map mode wouldn't detract from the gameplay experience," notes one developer who, because his company does business with Nintendo, asked to remain anonymous.

McNealy said he believes developers are now growing excited about the possibilities of the DS after initial skepticism.

Recent media reports have indicated the DS will also offer wireless multiplayer gaming, a feature that has reportedly been dropped from the PSP. If so, that could make the fight between the two systems even more interesting. Wireless technology likely will play a significant role in the next generation of consoles. If the DS does have wireless functionality, it could conceivably sync up with Nintendo's upcoming home console, due in 2006, much as the GBA can link up with the GameCube today.

YOUR E-MAIL ALERTS Follow the news that matters to you. Create your own alert to be notified on topics you're interested in. Or, visit Popular Alerts for suggestions. Manage alerts | What is this?

It's possible, though, that Sony is still weighing the pros and cons of including wireless connectivity, among other features, so take those reports it has dropped wireless with a grain of salt.

EXTENDED PLAY Click here for previous 'Game Over' columns.

If Nintendo does choose to introduce the DS with a low price, that could signal a forthcoming price drop for the popular Game Boy Advance -- particularly as we get close to the 2005 holiday season. A drop to say, $79, would certainly keep interest alive in the GBA SP (the clam-shell designed system), while the original GBA could conceivably go even lower.

A low price point, which would likely result in swift hardware sales, could also work in favor of video game publishers, none of which have included revenue from Nintendo DS titles into their current earnings guidance. (McNealy says it's likely publishers like THQ (THQI: Research, Estimates) and Activision (ATVI: Research, Estimates) will revise their guidance to include this revenue in their upcoming earnings release.) Retailers, such as Electronics Boutique (ELBO: Research, Estimates) and GameStop (GME: Research, Estimates), could also see a boost.

Moving away from a pure game machine would be a big step for Nintendo, but a smart one. The lack of a DVD player hurt GameCube sales tremendously when the console was first released. And if combining handheld gaming and a handheld movie player are the next step for the market, as Sony (SNE: Research, Estimates) seems to be pushing things, Nintendo can't afford to ignore the trend this time around.  

Morris is Director of Content Development for CNN/Money. Click here to send him an email.