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POW! BAM! SOCK!

The video game business is about to grow up--fast.

Nintendo Co.'s Aug. 23 announcement that it will team up with Silicon Graphics Inc. to create a new generation of games portends the start of a whole new market. Nintendo and Silicon Graphics are just two among a host of companies trying to set a new standard in home electronics. The objective: machines that not only play games but also run educational software and even act as the brains for interactive television.

In the process, companies such as Sega, 3DO, and Atari, among others, are challenging the computer and entertainment industries for dominance of the next-generation market for electronics. "Each of these companies has bigger plans than just a game machine," says Gilman Louie, chairman of game-software maker Spectrum HoloByte Inc.

The technology that's suddenly being incorporated into video games is impressive. The Nintendo-Silicon Graphics machines are expected to hit the market in two years, cost less than $250, and feature microprocessors and video and animation that would put today's $2,000-plus desktop computers to shame. After lagging behind the technical advances of archrival Sega Enterprises Ltd., "we just punched [Sega] in the nose," boasts Nintendo senior vice-president Howard C. Lincoln.

Plenty of other competition is developing. The video game wars started escalating last January when William L. "Trip" Hawkins III announced his new game technology, the 3DO Interactive Multiplayer. That $700 device, due this Christmas, includes a CD player that can present interactive movies and games as well as music. Atari Corp. followed with a $200 machine called Jaguar, also due this Christmas, with an optional $200 CD player available next year. Sega already sells an add-on CD player to add live-action video to its Genesis game player, but promises a brand-new machine within six months.

AN EDGE. Nintendo, however, may now be the team to beat--at least if it can keep the price of its machine at the promised $250. Silicon Graphics is certainly motivated to help Nintendo succeed. It needs to sell the microprocessors used in its workstations into high-volume new markets to keep the manufacturers who make the chips profitable.

Aside from that, Nintendo plans to prime the market before launching its new home games. It is offering to license the technology first to manufacturers of arcade video games, such as Capcom USA Inc. and Acclaim Entertainment Inc. Arcade hits usually translate into home hits a year or two later, so Nintendo hopes to hit the home market with an edge. Biff, boom, whap: Before the game makers are done, they'll have started a fight that will make Mortal Kombat look like kid stuff.THE VIDEO-GAME EVOLUTION

Product/ Date Quality/

Price available Features

SEGA CD Nov. 2-dimension animation;

$300 1992 grainy video

3DO MULTIPLAYER Late 3-D animation; near-

$700 1993 TV-quality video

ATARI JAGUAR Late 3-D; near TV-quality

$200 1993 with $200 add-on

NINTENDO PROJECT Late Expected to have film-

REALITY 1995 quality, 3-D video

$250

DATA: COMPANY REPORTS, BUSINESS WEEK

Richard Brandt, with Kathy Rebello, in San Francisco


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