The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Video game sales have suffered lately--something Nintendo well knows. With Nintendo 64, the company will be : Playing for Keeps
Shaun Lavery, 13, has been an avid video game player for half his life. He’s owned game machines from Nintendo and rival Sega Entertainment and has tried out the new console from Sony.
But as he flips through the latest issue of GamePro magazine, the product that really excites him, and sends him into fits of despair, is the hot new $250 Nintendo 64.
“If I really work hard for three months maybe I could save up for it,” says Shaun, who lives in a Seattle suburb not far from Nintendo’s U.S. headquarters. But Shaun, who gets $5 from his parents for every major chore he performs, doesn’t have to do the math to figure it’s a longshot. “I think its out of my range.”
Three years after Nintendo announced ambitious plans to leapfrog the competition with the ultimate game machine, the Japanese company that once dominated the video game business will begin selling the Nintendo 64 in Japan in the spring, with a United States release scheduled for the fall.
Impatient Nintendo fans eager to get the latest 3-D version of Mario Brothers will flock to the machine, with some even paying exorbitant fees to import it a few months sooner from Japan. But Nintendo’s ability to maintain its position as the world’s leading video game company will depend on whether it can persuade millions of younger boys like Shaun--and, perhaps more important, their parents--that its new machine and the costly software that goes with it will be worth the price.
For Nintendo, the stakes could hardly be higher. It’s been five years since the company introduced a major new game platform. And not only has Nintendo’s share of the market been shrinking, the industry as a whole has seen sales drop alarmingly from their peak in the early 1990s. If the Nintendo 64 fails, some analysts suggest, it could mean the end of the stand-alone video game itself.
Howard Lincoln, chairman of Nintendo America, is resolutely unfazed.
“We are more excited about this product and the future of the business than we were when we launched the NES [Nintendo Entertainment System] in 1985,” says Lincoln, referring to the system that made Nintendo a household name almost overnight. “I’m gambling [ the Nintendo 64] is going to be wildly successful.”
But like Mario himself, Nintendo must negotiate a treacherous path. The Nintendo 64 and the software for it are both complex and costly to produce. Sony Corp.’s new PlayStation machine has a lot of momentum, gaining an estimated half of all game machine sales last year. And software giant Microsoft Corp. is plotting to steer a much bigger chunk of the video game business into the personal computer world.
Certainly the Nintendo 64 is a nifty machine. It packs a 64-bit microprocessor that allows it to spin out fancy graphics now possible only on today’s most powerful desktop computers.
Grab the elegantly designed controller, press your thumb against the nickel-sized cap atop the joystick, and with the tiniest motion you can make Mario walk, run or even swim smoothly in any direction in a brilliantly colored 3-D environment unmarred by the ragged edges typical of video game images. With the touch of another button, you can change camera angles for a better perspective of lurking enemies.
“The graphics beat anything out there,” says Nathan Lockard, an 18-year-old gamer who has published two books evaluating game software and writes a newspaper column in his hometown of Bellevue, Wash. “This gives Nintendo the inside track.”
“It’s extraordinarily powerful. It’s staggering,” says Mark Haigh-Hutchinson, who heads a group at LucasArts that is developing “Shadows of the Empire,” a Star Wars-style game for the new machine. “You really feel like you’re in the air. You get better images and quicker reaction time.”
Nintendo fans say the machine will reignite excitement in the game industry that has been missing since Nintendo and Sega battled with rivaling 16-bit machines in 1991. But there is also a potential downside: “The whole industry could go dormant next year if the [Nintendo 64] turns out to be a dog,” says Steve Kent, who evaluates games for several game magazines.
It has happened before. Atari created the video game business in 1977, and the industry enjoyed a few heady years of fast growth and fat profits. But the bottom fell out abruptly in the early 1980s when too many systems combined with too little good software turned off consumers.
Nintendo revived the business with a deceptively simple strategy: offer a significantly better machine but keep tight control over the quality and quantity of software titles. At the height of its power in 1989, Nintendo sold 9 million video game machines and controlled 80% of the market. Nintendo decided who could build software and how many titles they could build each year. Nintendo told retailers where and how to display their products.
The strategy angered many in the business, but it worked. And the marketing plan for the Nintendo 64 uses key elements of the old approach: a killer machine and a software strategy that relies on just a handful of expensive titles. With $4 billion in cash and no debt on its balance sheet, Nintendo certainly has the resources to make a good run.
But critics say Nintendo’s approach to the new system dramatically pushed up the risks and costs of failure. For starters, the machine was designed by Silicon Graphics Inc., a high-performance computer company with little experience in the consumer world, and thus it’s pricey.
“Going to SGI to build a consumer product is like Detroit going to Boeing to build a compact car,” says Trip Hawkins, chief executive of rival 3DO.
Sony boasts that it sold 800,000 PlayStations in the last quarter of 1995, but the company’s $299 machine was targeted at an older audience. Skeptics say few boys in Nintendo’s target audience of 8- to 15-year-olds will be able to persuade their parents to buy a $250 system.
Sean McGowan, a video game analyst for Gerard Klauer, Mattison, estimates that Nintendo will sell just 6 million to 10 million units in America in the product’s entire lifetime.
And the decision to stick with expensive cartridges also is a huge gamble. Whereas games on CD-ROM typically sell for from $15 to $60, cartridges for Nintendo’s game will start at $70.
But being the only company basing new systems on cartridges means that if kids show a major preference for the lightning-fast performance they offer, Nintendo could strike it rich.
Nintendo, which has a huge room filled with young gamers answering millions of questions from game fans, figures its ultimate weapon is its deep understanding of these young game players.
“When you probe this group of sub-15-year-olds,” says Peter Main, Nintendo’s top marketer, “it’s ‘Me and my friends and pizza and a 40-inch screen showing who is more macho than who.’ ”
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Video Game Gamble
Nintendo is taking a major gamble by sticking to its traditional cartridge format while the rest of the industry turns to CD-ROMs. Some of the pros and cons of the two formats:
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CD-ROM Manufacturing cost, including license: $10-$15 Memory capacity: 550 megabytes, enough for full-motion video and dialogue Access time: Very slow Durability: Easily scratched
Cartridge Manufacturing cost, including license: More than $25 Memory capacity: 8 megabytes, no video or dialogue Access time: Very fast Durability: Almost indestructible
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