Rachel Rosmarin, 02.07.06, 10:00 AM ET Burlingame, Calif. -
You can't blame videogame industry executives if they wanted to push the "reset" button on 2005. Videogame consoles neared the end of their product life cycles, customers held off buying new titles and gamemakers felt the effects.
Last week, game kingpin Electronic Arts (nasdaq: ERTS - news - people ) announced a 31% earnings decrease for the most-recent quarter, predicted a loss for the next and laid off hundreds. Also reporting grim news recently: game publishing heavyweights THQ (nasdaq: THQI - news - people ) and Take-Two Interactive.
Meanwhile, Sony (nyse: SNE - news - people ), Microsoft (nasdaq: MSFT - news - people ) and Nintendo (other-otc: NTDOY.PK - news - people ) are all bringing new game machines to life at a time when competition for consumers' entertainment dollars has never been fiercer. Microsoft made the first move with the Xbox 360 three months ago, but with fewer than 700,000 units sold so far, gamers appear to be reserving judgment and waiting for Sony's PlayStation 3 and Nintendo's Revolution, both expected by the end of 2006.
But while Sony's and Microsoft's boxes will eventually offer expensive high-definition disc players and complex processors, Nintendo's new machine will take a different tack, says Perrin Kaplan, vice president of marketing and corporate affairs for Nintendo of America. Employing a radical new interface and games designed to appeal to hard-core gamers and nontraditional audiences alike, the Revolution can help move Nintendo from its position as the steady third player in the American gaming market, Kaplan says.
With lessons learned from the standout success of its portable Nintendo DS--the company garnered 82% of portable software sales and sold 13 million DS units last year--the company has never had a clearer opportunity to differentiate itself to American audiences. We asked Kaplan how the company plans to do that--and for some details about the new machine.
Forbes.com: Why did consumers spend fewer entertainment dollars this past year, and what is Nintendo doing to stave off the softness in game sales seen by your competitors?
Kaplan: This past year we saw consumers get savvy--they want to experience new innovative software. We have seen this challenge grow over the past year as the console market has seen some decline. The industry library shows a plethora of the same type of games--and while many of them are popular, all good things run dry after a while.
While some spending may have gone outside of games this year, if companies make appealing games, that won’t be a problem.
Nintendo started out more than 100 years ago as a company that made Japanese playing cards called hanafuda. You could say that was our first software, and it is proof that we’ve always been about the games. Games are really No. 1 for us. Of course, some game titles go across all three main platforms, but we make a good portion of our own games.
What makes Nintendo's corporate culture and tactics different from its competitors?
Inside Nintendo, we call our strategy “Blue Ocean.” This is in contrast to a “Red Ocean.” Seeing a Blue Ocean is the notion of creating a market where there initially was none--going out where nobody has yet gone. Red Ocean is what our competitors do--heated competition where sales are finite and the product is fairly predictable. We’re making games that are expanding our base of consumers in Japan and America. Yes, those who’ve always played games are still playing, but we’ve got people who’ve never played to start loving it with titles like Nintendogs, Animal Crossing and Brain Games. These games are Blue Ocean in action.
So what aspects of the new Revolution are "Blue Ocean" and will create a new market?
Well, first there’s this new controller. It is out of this world, literally! You can now move your hand, arm, wrist or body to control the game. If you were playing a fishing game, before you would just press buttons on a controller held in both hands in front of you. With this, you can move your arm back and forth and cast your bait. It senses depth. As someone who doesn’t spend hours per day gaming, I was thrilled with the experience.
We’re also offering what we call the “virtual console"--the ability to download nearly every kind of Nintendo game going back to the original Nintendo Entertainment System through the GameCube. We think there is an untapped nostalgia market: Gamers who grew up and cut their teeth on these older games could come back.
How does the Revolution compare with other Nintendo products that have changed game-industry design standards?
We’ve launched product designs that our competitors adopt, such as the first directional pad, or wireless controllers or controllers with tactile feedback. One of the reasons we’re not giving a lot of details about the design of the new console prior to its release is that there’s no way we’re going to let that happen again.
All signs point to an aging gamer demographic--at least in the U.S. Isn't Nintendo ceding too much ground to Sony and Microsoft by not offering certain edgy, first-person-shooter (FPS) titles?
If you take a look at our library, you will find games in each genre, including FPS. That’s not the core of what we want to develop, but we do offer them. You could argue we have the widest array of games of all the hardware companies.
Does the "virtual console" effort represent Nintendo's entire online strategy?
No. More will be described soon. We will use the Wi-Fi component in a different way for each game, just like with the DS.
Though the new console won't include a high-definition disc player, how does the impending format war between Sony and Microsoft affect Nintendo?
For us, it's all about the experience, not if the technology allows you to play your game on the high-definition formats, which are now in such a small percentage of homes. Many independent sources tell us that experiencing current high-def games on a regular TV makes it near impossible to see everything clearly. That means the majority of homes are experiencing something lesser than what they bargained for.
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