A Video Match: The Nintendogs vs. Gangs, Thugs and Wars
By ROBERT LEVINE
At the Electronics Entertainment Expo in Los Angeles last week, the demonstration booth for Nintendo seemed like an island of innocence amid the retorts of digitized gunfire.
While most game publishers showed sequels, sports simulations and shooting games based on grim tropes such as gang violence and World War II, Nintendo was promoting, among other games, Nintendogs. It lets players raise and train virtual pets on the Nintendo DS, the dual-screen hand-held game machine released last year.
Developed by Shigeru Miyamoto, who created the Mario Brothers and Legend of Zelda franchises, Nintendogs is exactly the kind of game the company is known for: addictive, odd and more than a little cute. Nintendo's Game Boy and DS systems dominate the market for hand-held games, and it just announced that it would introduce Game Boy Micro, a sleek, pocket-size machine, this fall.
But the focus at the expo was on the console business, where Nintendo lags. In part because of its image as a console for children, Nintendo's GameCube has only 20 percent of the market in the United States, trailing the PlayStation 2 from Sony by a large margin and the Xbox from Microsoft by a smaller one, according to the NPD group, a market research firm.
"It is not sufficient when it comes to market share," said Satoru Iwata, the president of Nintendo, speaking through a translator in an interview. "But market share is not everything; think about profitability."
For the last two fiscal years, Nintendo's operating margin has been about 25 percent, according to the company. Sony's games business is profitable, but Microsoft's has lost money.
Last week, Sony unveiled its PlayStation 3 and Microsoft showed off its Xbox 360, both of which will feature high-definition video and impressive processing power.
When Nintendo introduced its next console, the Revolution, it avoided talking about specifications, but implicitly conceded that the machine might be less technically impressive than its competitors.
"It has the power of a Ferrari, and they are talking about Saturn rockets," said Mr. Iwata, referring to the three consoles. "But we are traveling on earth."
Instead of superior technology, he said, Nintendo would set itself apart as it has in the past, with imaginative games. The company is the second-largest game seller in the United States, behind Electronic Arts. But that advantage could be hard to maintain as consumer tastes change. Over the last five years, Mario has lost market share to the thugs of Grand Theft Auto as the audience for video games has gotten older and the games themselves have moved into the mainstream of pop culture.
The Revolution will move Nintendo even farther away from the other two console makers. Both the Xbox 360 and the PlayStation 3 represent components of a parent company's master media plan. Sony's console, for example, will use the proprietary Blu-ray DVD format.
Nintendo is interested only in selling games, and the Revolution will need an extra attachment even to play regular DVD's. However, Revolution will play classic Nintendo games from the 80's and 90's that will be available for downloading, including Super Mario Brothers and Metroid.
"They're bobbing while everyone else is weaving," said Scott Steinberg, a vice president of Sega America, which makes games for all consoles. "They've always been about family entertainment, not just technology."
But even with its own popular titles, Nintendo will need support from such outside game makers. It will have to convince them that it can maintain enough market share to make their products viable. Some games, such as the 2K Sports series, are made only for PlayStation and Xbox.
"For a company like Activision, it's less about the market share and more about the economic model," said Kathy Vrabeck, president of Activision Publishing. The question, she said, was whether it made sense to release titles on a third console. "To date, on our older skewing titles for hardcore gamers, the answer is: yes, it is."
Hit games are crucial to console sales. "This is an industry where younger consumers aspire up," said Reggie Fils-Aime, executive vice president of sales and marketing at Nintendo of America, and any machine seen as a mere toy could be shunned. He pointed out that releases like "The Legend of Zelda" appealed to hardcore gamers in their 20's and 30's, some of whom played the early games when they were children.
"I think we were unfairly pigeonholed as a child's system, and I don't think we successfully challenged that," he said. He wants to expand Nintendo's market share by drawing in people who aren't traditional gamers with products that are not traditional games. One recent GameCube title, "Donkey Konga," came with a set of bongo drums that players had to hit in time to music and cues on-screen.
"They're really pushing innovation in game play," said J Allard, who oversees the Xbox business for Microsoft. "But they didn't reveal enough about Revolution for me to have an opinion."
In effect, Nintendo is betting that the games of the future will not demand more power than the Revolution delivers, according to Michael Pachter, a research analyst at Wedbush Morgan Securities. "But I think they're wrong. It's a macho business." Even so, he said, he was impressed with the creativity of Nintendogs, which he described as brilliant.
It would seem that Nintendo's products are aimed at the child in all of us. At the end of the interview, Mr. Iwata took out a Nintendo DS running a product in development, in which math equations ran up the screen and players had to solve them quickly. The software will be able to track players' scores over the course of a day, week or month.
"My mother is playing with this now," Mr. Iwata said. "I think Nintendo is the only publisher in the world that is willing to make this kind of application."
