Revolution vs. PlayStation

Nintendo helped revolutionize the video-game industry and continues to dominate the handheld console business with its GameBoy Advance and new Nintendo DS. But on Mar. 24, Sony (SNE) will launch its new PlayStation Portable handheld. Along with Microsoft (MSFT), which makes the Xbox, it's also challenging Nintendo in next-generation home consoles.

At the annual Game Developer's Conference in San Francisco on Mar. 10, Nintendo President Satoru Iwata outlined his broad vision for keeping his company in the race. Widely believed to be available in 2006, Nintendo's next game console, code-named Revolution, will be backward compatible with previous generations of games, wirelessly enabled, and equipped with numerous (still unnamed) features that will change the way people play games, according to Iwata.

It's a tall order. In a one-on-one interview, BusinessWeek Correspondent Cliff Edwards talked to him about those goals and the increasing competition facing Nintendo. Here are some edited excerpts:

Q: You mentioned Nintendo Revolution will have a totally new interface, a completely different look for gamers. Can you elaborate?

A: The new interface will allow some new forms of innovation. Already, you're seeing changes in Nintendo DS, which has a microphone, input pen, and touch screen. We have a number of candidates for a new interface but are not ready to reveal them. All I can say right now is that whatever we choose will be intuitive and easy to use for everyone.

Q: Well, you showed several new games that used voice commands. Is that one of your candidates?

A: It certainly makes a game better to have voice commands, because it can alter how the game is played. But the fact of the matter is, to realize voice commands, all you have to do is install a microphone. We realize a few of our competitors are already thinking of following us on this, so it will not be a defining feature of the new console. We may or may not use the microphone in the new [Nintendo Revolution] interface.

Q: You also challenged game developers to think outside of the box on new games. Why?

A: Games already pretty much have reached the point of photo-realism. Working on more intense graphics is not the only path we can take anymore. Simply relying on the sheer horsepower of the machine will not bring the industry a bright future.

Q: When will you get Revolution development kits out to game creators?

A: Development kits are already out there, depending on which stage you're talking about. All I can say right now is "in the near-future" for the basis platform information they will need to get started on games.

Q: A lot has been said about Microsoft's new Xbox console coming out later this year. If that's the case, it may have a year's lead on you, and many are predicting Nintendo will be the big loser, not Sony. What are your thoughts here?

A: Whether Nintendo is a winner or loser on Revolution totally depends on how our customers react to it, and since they do not know much about it, I can't respond. A year or two from now, it will be interesting to know who ultimately made the right choices. I'm confident we have made the right decisions.

Q: Still, a lot of people say there are lessons to be learned from previous mistakes with console introductions. What have you learned from Nintendo's missteps?

A: I should point out two lessons: We really needed to understand the differences and the needs of the territories, and also the importance of timing. It's important not only to have the right timing of when the hardware is going to be released but also when we are going to be able to introduce quality software.

Q: Nintendo is one of the biggest game software publishers in the world. Does having such big hits make it more difficult to get third-party publishers like Electronic Arts (ERTS) on board, since they have to compete with you?

A: Of course, third-party publishers, like everyone, face increasing risks associated with creating games, and you have to target your resources to the right places and the right platforms. Our competitors [in the hardware business] are the ones who are willing to shell out big money to ensure third-party support, but I believe as long as Nintendo can find the appropriate strategy to make us stand out, they will develop for our platforms.

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