Nintendo: Calling All Players

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Nobody doubts that Nintendo's Wii is a game changer. In the past, consoles targeted mainly die-hards. Nintendo's Wii (and its portable DS console) were arguably the first to be successfully marketed to ordinary consumers. That move to the masses is expected to help swell the $30 billion market in the near future. It's also helped counter Nintendo's image as a company that's propped up by gamers in their teens or younger—something the company's own market surveys in Japan have found to be true. Over the years, the core 18-to-35 male gamer crowd mostly had migrated to the machines of Nintendo's rivals, Sony and Microsoft (MSFT), which offer edgier games and more realistic graphics.

One reason Nintendo now needs to reach out to die-hard gamers is that there are risks to a strategy heavily favoring ordinary consumers. For instance: Casual gamers won't aggressively buy up game software. Like other game companies, Nintendo earns the bulk of its profits off games, not consoles. Eiji Maeda of JPMorgan Chase (JPM) estimates Nintendo's profit margins on games exceed 80%, vs. less than 5% for consoles, and that the average Wii owner will buy more than six games over the next three years. To keep raking in the money, Nintendo needs to attract the die-hards who are sure to be repeat buyers.

A Whole New Game

Whether Nintendo or any other game developer can repeat Zelda's success with gamers of all stripes is open to debate. "We'll have to see if it's even possible to do what Nintendo says can be done," says Kai Tanaka, a midlevel manager at Namco Bandai Games.

For developers, attempting the impossible is just a by-product of what might be called "the Wii effect." Most developers would never have guessed that a fitness-oriented offering like Wii Fit, which peddles yoga and hula hoops and will cost $75 when it debuts Dec. 1, would be a big draw. But the fact is that Nintendo has rewritten the old rules—and in the process it's become too influential to ignore. Plenty of other developers are following suit. Rocket Co. plans to come out with its own fitness game for the Wii Fit board next year. The high-tech board will also work with Konami's Dance Dance Revolution Hottest Party. Recently, Electronic Arts (ERTS) released Boogie, which lets players sing, dance, and star in their own videos. "Wii Fit shatters the image that video games are unhealthy and that anyone playing them needs to get out more," says Tecmo's Yasuda.

Hall is BusinessWeek's technology correspondent in Tokyo
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