Nintendo Set To Capture 85% Of Video Game Market

Nintendo has had a stellar year with amazing games to play and the sales have proven that they’re by far and away the market leader in the video game industry. Estimates put them at around 85% of the market, meaning nearly every system sold is one from Nintendo. The L.A. Times has done some additional reporting giving us more insight to just how popular the NES truly is.

Interestingly enough they think that the bubble may burst and that video games are destined for the clearance bins just like earlier in the decade. Obviously no one knows for certain what the future may hold, but call us crazy for thinking video games are here to stay. Time will tell! A few inaccuracies like $69 for a “cassette” (come on people – these are Game Pak cartridges, not cassettes!) are glaringly wrong (most games are between $29 and $45), but the article in general is a great read.

 

No Mere Child’s Play: Aggressive marketing may help Nintendo snare 85% of the video game market this year. But its mystique shows signs of slipping.

December 16, 1988|CARLA LAZZARESCHI | Times Staff Writer

Source: LA Times: http://articles.latimes.com/1988-12-16/business/fi-369_1_video-game-market

 

Santa is being asked for lots of video games this Christmas. But not just any video games–only Nintendo’s.

Not Sega’s. Not Atari’s. Although these two game systems are–at least from an adult’s perspective–roughly equivalent to Nintendo, they carry the curse of the also-rans: the Lee’s and Wrangler’s to the Levi’s of the denim world.

“Most kids at school have Nintendo,” explains Sonya Pritzker, a 13-year-old Santa Monica eighth-grader. “If they have Sega or Atari, they don’t talk about it.”

And why should they? Nintendo has done a brilliant job of capturing and protecting as much as 85% of what analysts estimate will be $2.3 billion in sales this year.

“A mystique has been created,” says Bruce Apar, editor of Toy & Hobby World magazine. “That’s all there is to it.”

But the mystique is already showing some early signs of slippage.

Analysts say that despite the continued hoopla among the pre- and early-teen set, the pace of video game sales, which has accounted for as much as 25% of the nation’s retail toy sales in the past two years, has slowed, and sales could peak next year.

Nintendo was also hit earlier this week by a $100-million lawsuit from Atari Games, alleging unfair monopolization of the market. Atari also released its own, unlicensed versions of Nintendo games, a move that could severely weaken Nintendo’s hold on the market.

“Mark my words: It’s a Cabbage Patch waiting to happen,” says Trip Hawkins, president of Electronic Arts, a publisher of software games for the personal computer referring to collapse of Coleco’s Cabbage Patch doll. “This is a toy. And that means it’s a fad.”

Still, if Santa’s mail bag is any indicator, the Nintendo system–and not its competitors–is the preferred gift among many youngsters this holiday season.

Why? The answer appears simple enough on the surface. Nintendo, virtually single-handedly, resuscitated the video game market in 1985, two years after it did a spectacular crash and burn. And not only was it first, it was good. Nintendo’s animation quality, while not as highly rated as that in Sega’s later entry, is still far above that of the early video games.

Finally, Nintendo gets high marks for the quality of its fast-paced games, whose characters and gyrations seem to possess the power to mesmerize their core audience: boys ages 7 to 14. Characters such as the Mario Brothers, two miniature, mustachioed muscle men whose job it is to rescue the Princess Toadstool; Zelda, another hapless princess held captive by the evil Ganon, and Piston Honda, one of the top-of-the-card contenders in “Mike Tyson’s Punch-Out!!”

It all comes together neatly at the cash register, where the cassette players retail from $80 to $160, depending on the number of accessories you’re talked into buying, and the game cassettes themselves fetch upward of $69.

By year-end, Nintendo expects to have found a home in 11 million U.S. households. And, if corporate projections hold, by the end of the 1989, about 27% of American families will own a Nintendo set.

“Once you’re that big, it doesn’t matter if someone else has a better system,” says Toy & Hobby World’s Apar. “They were more aggressive earlier, and they won the market.”

But beyond getting into the market first with quality products, Nintendo has spent no small amount of time trying to understand–and manage–that market.

First, explains Peter Main, Nintendo of America’s marketing vice president in Redmond, Wash., the company dissected the rise and demise of the first video craze. Their conclusion was that the market fell apart because it was flooded with shoddy games that confused and angered buyers, not because buyers were suddenly disinterested in the genre.

With that perspective, the company then carefully followed the path blazed nearly three years earlier by Nintendo Co., the 99-year-old Japanese parent corporation whose origins are in making playing cards for the popular Japanese game, Hanafuda. In 1970, the parent corporation started making hand-held computer games and in 1983 introduced its “Famicom,” or Family Computer into the Japanese market. Today, these systems are in about one-third of all Japanese households.

Followed Japanese Model

The system was exported to the United States in late 1985, first in a trial run in New York City and then in a nationwide rollout in 1986. The early games were spun off the popular titles that Nintendo had developed for the coin-operated arcades throughout the nation’s shopping malls: “Donkey Kong,” the original “Mario Brothers” and “Duck Hunt.”

The original titles were big hits, but Nintendo’s success in the United States has come from carefully following its Japanese model, adapting it only where necessary to fit American kids.

For example, “Mario Brothers” and its two sequels “Super Mario Brothers” and “Super Mario Brothers II” are played the same on both sides of the Pacific. (In fact, in Japan, they’re on “Super Mario Brothers III.”) It’s the same with “Zelda” and its sequel, “Zelda II–The Adventure of Link.”

One of the few deviations was made for “Mike Tyson’s Punch Out!!,” when the creators took a popular Japanese boxing game and programmed the heavyweight title holder, complete with gap-toothed grin, into the final rounds.

Beyond the games themselves, Nintendo has overlooked very little when it comes to marketing its product and pampering its primary customers, children.

It advertises aggressively on television, particularly during kiddie hours. It offers a special telephone number staffed by 60 carefully screened game counselors trained to answer plaintive questions from stumped players. (A sample: “Q: How can I beat Bald Bull in Mike Tyson’s Punch-Out!! A: A squarely placed body blow.”) And it publishes “Nintendo Power,” a $15-a-year bimonthly magazine for the estimated 2 million kids in its Nintendo Fun Club.

“They have done a great job managing the market,” marvels Gregory Fischbach, chairman of Acclaim Entertainment, a Long Island, N.Y., company that markets six Nintendo game titles, including “Wizards and Warriors” and “Tiger Heli.”

Until the suit by Atari, Nintendo also seemed to be doing a great job of managing the manufacturing end of the market as well. Because of its belief that the initial video craze was killed by a glut of inferior products, Nintendo has insisted on making all the games intended to play on its system, including those written by licensees such as Acclaim.

Under a set of complex licensing agreements, Nintendo takes the game software from its partners, manufactures the games complete with a unique anti-copying computer chip and sells the completed cassettes back to the licensees for distribution to retailers. The number of copies of a game actually manufactured is determined by Nintendo executives according to their evaluation of the game’s potential and its early sales.

Atari Games has objected to the rationing system, claiming that it is able to sell far more copies of its licensed games than Nintendo has been willing to manufacture. On Monday, Atari Games, which is unrelated to Atari Corp., sued Nintendo for monopolizing the market.

No Comment on Suit

Although Nintendo executives have declined to comment on the suit, marketing Vice President Main said in an earlier interview that the company is following a growth scenario tightly scripted according to the Japanese experience.

For example, Main notes that “Super Mario Brothers III” and other more sophisticated games are already available on the Japanese market but will not be sold in the United States until American kids are ready for the challenge.

“You don’t just jump from ‘A’ to ‘C,’ ” Main explains. “You have to go through ‘B’ first, just as the Japanese did. If you take the player too far, too fast, the challenge becomes too onerous and they don’t have as much fun. The name of the game is to sell games, of course. But the second sale is based on the customer getting full value from the first buy.”

That same type of market management has also led Nintendo to refuse to license any of its games for use on personal computers. “Our object is to sell Nintendo systems,” Main says. “If you want to play ‘Link,’ then you have to buy a system.”

 

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