It has been years since Nintendo (NTDOF
) could claim the top spot in the $20 billion video-game universe. True, its handheld Game Boy is one of the industry's enduring standbys. But game consoles, which hook up to televisions, are the mainstay of the business, particularly since they generate sales of high-margin software. Over the past six years, Sony Corp.'s (SNE
) popular PlayStation has steadily grabbed share from Nintendo 64, a technologically superior machine that was popular with kids but ignored by older gamers. 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 the company has spent hundreds of millions developing and promoting. It hits the Japanese market on Sept. 14, and industry execs and analysts are already 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 does just one thing: games. The idea is that fans will flock to a console that's not loaded with gimmicks they'll probably never use.
Nintendo is also betting 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. "So we're coming to market with a decree that is simple yet accommodating."
The 128-bit GameCube is expected to lure core fans: North American and European families. The question is whether it can sell in Japan, home to hundreds of game-design and publishing houses. "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; he expects 12 of them to be part of the 15-20 titles launched with Xbox in the U.S. in November and in Japan next February.
HELPFUL HINDSIGHT. Nintendo has learned from its mistakes and is now wooing developers, too. For years, it stuck to the silicon-cartridge format for game software. The bulky units were costly and difficult to design for; they alienated game developers, who deserted Nintendo for Sony. Nintendo chose an optical disc developed by Matsushita Electric Industrial Co. as GameCube's storage medium. Although smaller in size than a DVD, it is based on the same technology and offers game designers the same easy platform to work on. That way Nintendo can release a dozen game titles before yearend--a company record.
Nintendo needs a winner. Declining sales of its two older platforms, N64 and GameBoy, 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
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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