Curse

LifeInfusion · Oct 30, 2006, 10:14 PM // 22:14

Quote:

The New York Times

October 30, 2006
En Garde! Fight Foes Using a Controller Like a Sword
By ROBERT LEVINE

Over the last two decades, video games have looked better and better. As the simple graphics of the first Atari evolved into the photo-realistic images of the new Xbox 360, the revenue picture also improved until an industry emerged from the toy department and grew to be worth $30 billion a year.

It’s the oldest story in the technology sector: processing power drives growth. But now, in an effort to change the plot, Nintendo is eschewing speed and graphics quality in favor of an inventive new controller, in the hope of providing a experience that will appeal to casual gamers.

In the current generation of consoles, the Nintendo GameCube lags the Microsoft Xbox and the Sony PlayStation 2, with about 15 percent market share. But Nintendo, which generally emphasizes gameplay over the latest technology, is still one of the healthiest companies in the game industry. Its Game Boy products dominate the hand-held business, and the company was the No. 3 game publisher in 2005, according to the market researchers NPD Group in Port Washington, N.Y. Nintendo’s stock is up about 65 percent in 2006, at a time when stocks of many other companies in the industry have lagged.

But a big test of the company’s strategy will come this fall with the release of its new video game console, the Wii (pronounced WEE), which will be introduced Nov. 19 in North America and in December in the rest of the world. If the device does not sell better than the GameCube, it would consign Nintendo to a more distant third place in the console business. While the new Microsoft and Sony consoles will have faster chips and more extravagant features, Nintendo is steering clear of that technology in favor of a controller for Wii that senses motion in real space.

In the Wii game Red Steel, for example, the gamer jabs the controller as if it were a sword.

“Most of the game business is going down a similar path toward hyperrealistic graphics which recreate sports or movies,” said Shigeru Miyamoto, a senior managing director at Nintendo and the designer of Donkey Kong, Super Mario Brothers, and scores of the medium’s biggest hits.

“We want to put a little more art into it and do it in a way that casual consumers can enjoy the games,” Mr. Miyamoto said in an interview through a translator.

Both the Xbox 360, which was released in November 2005, and the PlayStation 3, which comes out next month, are powerful machines with multicore processors and multimedia abilities that play a part in the broader strategies of their respective parent companies. They are priced accordingly: $299 and $399 for different versions of the Xbox 360 and $499 and $599 for different versions of the PlayStation 3. Both companies will initially lose at least $100 on each machine they make, according to numerous analyst estimates. (Neither company will reveal their component costs.) The Wii, which is far less powerful, will sell for $250, and Nintendo could make as much as $50 on each unit, analysts said.

“What they are trying to do is come up with better versions of current games and that means a huge amount of money has to be invested,” said Satoru Iwata, Nintendo’s president, who also spoke through a translator. “I think that what others are doing sounds riskier than what we are doing.”

The reason Nintendo has stayed profitable is that it has always operated differently. Using the famous razor-blade business model, Sony and Microsoft lose money on their consoles (the razor) but make their money by charging the makers of games a licensing fee for games that play on their platforms (the blades). Each company also sells its own software, but makes most of its gaming revenue from license fees, typically about $7 for each game sold.

Nintendo makes a small profit on razors but also sells a substantial share of its own blades. Thanks to franchises like Super Mario, Nintendo’s own games represent more than a third of its total United States software sales for the GameCube as well as the Game Boy Advance, according to an industry executive who has seen NPD sales figures and who was granted anonymity because the figures are not publicly available. In fiscal 2006, Nintendo’s operating margins were more than 30 percent, far more than Sony’s game business. Microsoft’s Xbox division is not profitable.

But the same software-centric business model has eroded Nintendo’s market share, as independent developers devoted more resources to the PlayStation. When Nintendo introduced the GameCube in 2001, some hits like the Grand Theft Auto series were not available for it. That cost Nintendo market share, which in turn made it decline as a priority among game developers.

“There are three things developers care about,” says Peter Moore, Microsoft’s corporate vice president of interactive entertainment business and an industry veteran. “Market share, market share and market share.”

The Wii already has good word-of-mouth from game reviewers who like the way it expands what can be done in the medium.

Michael Pachter, an analyst at Wedbush Morgan, predicts that the Wii could capture more than a quarter of the console market.

So far, game makers have also reacted positively to the Wii, partly because the development process will be about $7 million for a typical advanced game — about half the cost of a new game for Xbox 360 or PlayStation, according to estimates from analysts and game publishers. “Nintendo has found a way to engage people without incredibly expensive graphics,” said Robert A. Kotick, the chief executive of the game maker Activision, adding that developers are particularly excited by the Wii controller.

“There is more excitement among third-party publishers about the Wii than there was for the launch of the GameCube,” said David F. Zucker, the president and chief executive of Midway, which will have four games ready for the introduction of Wii, in contrast to one for the new PlayStation.

And Nintendo will continue to earn revenue from its past hits, with a virtual console that will allow consumers to download classic Nintendo titles like Super Mario and The Legend of Zelda for a small fee from a service that will work much like the Apple iTunes Store.

“In the long run,” Mr. Iwata, Nintendo’s president, said, “I think the virtual console could become one of the most significant revenue streams for Nintendo.”

http://www.nytimes.com/2006/10/30/te...=1&oref=slogin

I think that is pretty interesting.

Unlucky Slayer · Oct 30, 2006, 10:17 PM // 22:17

Cant wait for the Bleach game on the Wii... Get to control their sword movements with the controler like a real sword. ^_^

Necris · Oct 30, 2006, 10:58 PM // 22:58

And they say that the Wii isn't 'next-gen'.

Honestly, if you think that graphics and souped up hardware is all that it takes to be 'next-gen' then you're quite shallow with your views of what exactly makes something 'next-gen'.

Go Nintendo. May you never fall like Sega did.

Giga Strike · Oct 31, 2006, 07:38 PM // 19:38

i think the wii will control more than one third of the console market. one half will probably be more accurate.