It has been years since Nintendo (NTDOF
) could claim the top spot in the $20 billion video-game universe. Over the past six years, Sony Corp.'s (SNE
) popular PlayStation has grabbed share from Nintendo 64. With the imminent arrival of Microsoft Corp.'s (MSFT
) Xbox, everyone figured that Nintendo would fall from second place to a distant third.
Nintendo, however, is determined to duke it out. Its weapon of choice: GameCube, a new console that hits the Japanese market on Sept. 14. Industry execs and analysts are enthused. "Nintendo's games are dazzling, and its new [$199] machine is priced to sell," says Romain Poirot-Lellig, managing partner of Paris-based Interactive Finance, which invests in game stocks. "I think [Nintendo] can make a comeback."
Nintendo is betting everything on a contrarian, back-to-basics strategy. Sony and Microsoft are pushing black boxes designed as home entertainment centers that play DVD movies and music CDs as well as games. Nintendo's colorful, compact machine plays just one thing: games.
Nintendo also believes that customers are ready for easy-to-play yet entertaining games. It's offering a tempting array, ranging from new versions of classics based on Mario the plumber, Zelda, and Donkey Kong to new additions like Pikmin, in which an ant-like creature helps you, a stranded astronaut, survive on an alien planet. "We believe the $20 billion video-game industry is still rooted in basic game play," says Peter Main, executive vice-president of Nintendo of America.
The 128-bit GameCube is expected to lure core fans, namely North American and European families. The question is whether it can sell in Japan. "You need the Japanese market to get the game developers on board," explains Microsoft managing director Hirohisa Ohura, who is overseeing the Japan launch of Xbox. He has lined up 70 Japanese developers who are working on 130 titles.
Nintendo has learned from its mistakes and is wooing developers, too. For years, it stuck with silicon cartridges that were difficult to design for and alienated game developers. For GameCube, Nintendo chose an optical disc as storage medium; it offers game designers an easy platform to work on. As a result, Nintendo hopes to release a dozen game titles before yearend--a company record.
Nintendo needs a winner. Declining sales of N64 and Game Boy, combined with the cost of shifting over to GameCube and Game Boy Advance, have hit earnings hard. In fiscal 2000, operating profit fell 42% over the previous year, from $1.2 billion to $700 million. For GameCube to provide a boost, Nintendo needs to zap its rivals. Sony will still be troublesome, but Microsoft may be less of a threat than anticipated. Technical glitches have forced a delay in the Japan debut of Xbox from this year to next, and Microsoft's games failed to inspire at a recent trade show, while Nintendo's were a big hit. Mario the plumber takes on the Beast of Redmond? That's a game worth watching.
By Irene M. Kunii in Tokyo
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
