Nintendo Dominates 'New-Generation' Home Video Game Market
Apr. 04, 1988
REDMOND, Wash. (AP) _ In an office park in this Seattle suburb, a staff of 92 people is kept busy answering questions like, ''When I'm in the Legend of Zelda, how do I find the Tri-Force in level seven underworld labyrinth?''
In most customer service departments, that would stop 'em cold.
But for executives at the home office of Nintendo of America Inc., the 40,000 to 50,000 children who call each week with such arcane inquiries about Nintendo's home video games are a reassuring sign their toy is still tops.
A little over 18 months ago, Nintendo, a 99-year-old Japanese playing card manufacturer and maker of the popular arcade game ''Donkey Kong,'' jumped headlong into home video games, an American market most thought was stone dead.
Today, the wholly owned subsidiary of Nintendo Co. Ltd. of Japan claims to have captured 70 percent of a U.S. market that should hit $1.9 billion in 1988.
For 1987, Nintendo of America had sales of $750 million out of a $1.1 billion market. That helped push profits for Nintendo Ltd. to $172.8 million on sales of $987 million for fiscal year 1987, ending Aug. 31, compared with profits of $113.1 million on sales of $829.5 million in fiscal 1986.
''Without question they're the preeminent force in the video game industry,'' said Rick Anguilla, editor of Toy & Hobby World, a trade publication that has ranked the Nintendo Entertainment System as the top- selling toy for the past six months.
''They learned from the mistakes that were made the first time around and they had the foresight to see that the American consumers were not the ones who stopped playing video games,'' Anguilla said. ''It was more a case of American and Japanese manufacturers putting so much bad product in the marketplace that it sort of ruined it for everybody.''
At the height of the video craze, $3 billion in games were sold in 1982, Nintendo says. But by 1985 the fad appeared over, with sales just $100 million and manufacturers unloading $35 game cartridges for $5 or less.
About that time, Nintendo began test-marketing its entertainment system - a small computer that played game cartridges, and two sets of control panels. Add in a light gun and foot-high robot that would act out some games and the list price was $199.95.
''You really have to admire the nerve to walk into a lot of retailers in 1985 and ask if they wanted to buy a video game,'' Anguilla said.
But Bill White, Nintendo advertising and public relations director, said the product had been wildly successful in Japan, selling more than 10 million units since 1983, with games in 30 percent of all Japanese homes.
''We liked it right from the start,'' said Michael Goldstein, chief financial officer for the retailing giant Toys R Us. The more detailed and higher-quality games made consumers feel they were getting their money's worth, he said.
If there's been a problem, Goldstein said, it's been supply. ''When you have something that's hot, it sells out,'' he said.
For last Christmas, the game packages were reconfigured, eliminating the robot, and sold for around $100.
White said that nearly four months later, Nintendo still has trouble keeping up with demand. It shipped 3 million entertainment systems last year, and recently upped its 1988 forecast from 5 million to 7 million.
Steven Eisenberg, leisure industry analyst for Bear, Stearns & Co. in New York, said he doubts such growth can be sustained. But he said the video game industry has re-established its stability and should see long-term gowth of 12 percent to 15 percent a year.
Competitors Atari Corp., with about 16 percent of the market, and Tonka Co.'s Sega, with about 10 percent, may make some inroads, but are far from challenging Nintendo's dominance, Eisenberg said.
What brought video games back from the dead, Eisenberg said, were Nintendo's elaborate graphics, sharp resolution and high-quality sound. Also, notes Anguilla, there's a factor toymakers call ''play value'' - what laymen call ''fun.''
The old-style games often had plots as simple as eradicating space bugs flitting around the screen. But Nintendo games are intricate. The top seller, a sword-and-sorcery yarn called ''The Legend of Zelda,'' leads players through 700 scenes in which they defeat wizards, solve mazes and eventually rescue the Princess Zelda - a process that can take up to 90 hours, and then be played all over again.
Nintendo maintains strict control, awarding licenses to game makers to produce five new titles a year each. Nintendo gets final say on content.
Among the 55 existing or planned titles are a souped-up version of ''Donkey Kong'' called ''Super Mario Bros.;'' ''Rad Racer,'' a car-race game, ''Ice Hockey,'' and ''Mike Tyson's Punch-Out,'' a boxing game promoted by the heavyweight champ.
Howard Phillips is Nintendo's product analysis manager, in charge of approving the games. He's more widely known, however, as president of the Fun Club, a fan organization with more than 1 million on its magazine's mailing list.
Phillips says Nintendo is looking at expanding beyond its initial target market of boys 8-15, with more adventure games and versions of the TV shows ''Jeopardy'' and ''Wheel of Fortune'' that should appeal to adults.
In Japan, the Nintendo box has been used to provide stock market quotes, home shopping and even to power a knitting machine, he said.
Phillips also oversees the phone bank of game counselors, who, he says, get asked the Zelda and the Tri-Force question about 5,000 times a week.
The answer? ''Go to the tip of the nose and defeat all the Wall Masters and push all the blocks, and a secret passage will appear,'' he said.
''The kids will know all about that.''
End Adv Monday April 4