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Hasbro Kills High-Tech Toy Over Retail Cost : Chip Would Have Pushed Video Game Price to $200

Times Staff Writer

Hasbro, the nation’s No. 1 toy maker, said Wednesday that it has pulled the plug on a secretive $26-million high-tech video game because it would have been too expensive for most families to buy.

The project, nicknamed NEMO, an acronym for “never ever mentioned outside,” was developed with help from electronics whiz Nolan Bushnell, founder of Atari. About half of the 40 people who worked on the project at Isix, a Hasbro subsidiary in Foster City, Calif., were laid off Tuesday.

The announcement came as Hasbro announced third-quarter earnings of $18 million on sales of $368.4 million, compared to net earnings of $11 million on $396.4 million in sales a year ago. The company said the results include a $10-million writeoff for NEMO costs.

Bushnell, who approached Hasbro with the idea two years ago, said he was “frankly shocked they didn’t go forward with it.”

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High Price of Chips

“I’m clearly disappointed because it is a terrific piece of technology,” Bushnell said. “It definitely performed and exceeded their expectations, except for costs.”

He said the main problem was that when NEMO began, the required computer memory chips cost $1.60 a piece. Today, they cost $8.60 each.

“It’s too powerful a technology to be dropped,” said Bushnell, adding that he was personally looking for a new backer.

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Although NEMO was wrapped in secrecy since its inception in late 1986, toy industry sources said the two-way videocassette player was designed to interact with a television set and featured fast-action videos, such as high-speed car chases.

“It had some really good stuff,” said Bushnell, who said he is legally precluded from revealing any details.

“We felt that while we had state-of-the-art technology, we didn’t feel we had a mass market-priced product,” said John T. O’Neill, Hasbro’s chief financial officer. Hasbro’s best-selling toys include G.I. Joe dolls for boys and the My Little Pony line for girls. O’Neill said the machine would have cost around $200, which is more than double the cost of existing home video game machines.

Nintendo Dominates

Hasbro had a working prototype and was designing software when it decided to drop the project, he said.

Despite the reluctance to reveal details about NEMO, toy industry analysts gleaned some information. “We heard it was combining computer-generated characters with live-action footage,” said Rick Anguilla, editor of Toy & Hobby World magazine in New York.

He said Hasbro not only faced technical problems but had to consider the grasp Nintendo of America has on the video game market. “Right now, Nintendo has such an incredible market share of the video game business--about 75%.”

Although toy sales have remained relatively flat this year, Hasbro reported a 24% jump in earnings for the first nine months of fiscal 1988, according to a statement released by Hasbro Chairman Stephen Hassenfeld.

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