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As Partners Step Back, Nintendo Embarks on Quest
LOS ANGELES, March 2 (Reuters) - Fans of Nintendo's classic video
game, "The Legend of Zelda," are accustomed to rooting for
an underdog warrior on a quest to reclaim a magic power and defeat
the forces of darkness closing in on all sides.
Investors in Nintendo Co. Ltd. might recognize the story.
The Japanese company, which once dominated the U.S. video game
market, finds itself in a tough spot. Sales of its GameCube console
are flagging; partners are pulling away and rivals are targeting its
last stronghold - handheld games.
THQ Inc., one of the biggest publishers of games geared toward
Nintendo's young target market, said last week it was killing a
number of GameCube projects after its games for the console sold
less than expected during the holidays. Sega Corp. and Electronic
Arts Inc. have also said they will end or look at curtailing
development of sports titles for the GameCube.
After shedding more than half their value in 2002, Nintendo shares
are off another 15 percent in 2003, compared with a drop of about 3
percent in the benchmark Topix index.
"The real question is, as we start 2003, what are we going to
do differently?" George Harrison, the senior vice president of
marketing for Nintendo of America, told Reuters in an interview.
"For us it's about trying to get the GameCube business moving
and restore the confidence of the licensees."
Problems of Own Making
Nintendo said in February it would give away one of four games with
the GameCube and began discounting some of its bestsellers. The
company has warned it would miss GameCube sales targets by more than
10 percent this fiscal year.
"We believe the weakness of the GameCube is indicative of
specific problems with GameCube sell-through rather than an
indication of weakness in the industry overall," Gerard Klauer
Mattison analyst Edward Williams said in a recent note.
The $149 GameCube holds third spot in the United States behind Sony
Corp.'s dominant $199 PlayStation 2 and Microsoft Corp.'s $199 Xbox,
even though recent GameCube titles like "Metroid Prime"
have been hits.
Video game industry watchers expect a round of hardware price cuts
this May will lop $50 off all three consoles, but so far Nintendo
has been mum about plans for such a discount.
"We believe at $149 with a free game ... that selling GameCube
hardware at $149 presents all the value the consumer needs,"
Nintendo's Harrison said.
In the mid-1980s and the early 1990s, on the strength of franchises
like "Mario," "Metroid" and "Zelda,"
Nintendo dominated the U.S. video game hardware market, fending off
challenges from the likes of Sega and NEC Corp.
But since Sony entered the U.S. marketplace with the PlayStation in
1995, Nintendo's market share has been waning. The GameCube has
lagged since its November 2001 launch.
To be sure, others are also suffering. Sega abandoned the hardware
business in 2001 to become a games publisher, but has struggled
since and is in the midst of a merger with Sammy Corp. Speculation
has popped up that EA or Microsoft could try to step in as a
"white knight" to rescue Sega, a prospect both have
denied.
Falling Part of Revenue
"The GameCube market is probably the one surprise for the
business, (in) that it's not performing as well as a lot of
publishers thought," Take-Two President Paul Eibeler told
Reuters. But he was quick to add that with games like the next
"Zelda" title, "...they could bounce back
quickly."
That game, "The Legend of Zelda: The Wind Waker," could
hold the key to the console's immediate future. Coming March 24, at
a price of $49.95, it is already, via a pre-order program, the top
game at online retailer Amazon.com.
Harrison said 300,000 discs had already been pre-sold, offered in a
bundle with two other classic "Zelda" titles.
"It's clearly what we need... to get the GameCube moving,"
he said.
But now even the company's stranglehold on the handheld market is
under attack. Next month, Nintendo will release the Game Boy Advance
SP, an updated version of the portable device that features a new
design and a backlight, for $99.
"The price point at $99 is a little high, especially when you
compare it to where the GameCube, PS2 and Xbox are," THQ's
Farrell said last week. THQ is a major Game Boy publisher.
Wireless giant Nokia has unveiled its own portable gaming deck and
phone, the N-Gage. Game makers like Activision Inc. and Sega have
said they will develop for the device.
"In short, Nintendo is being attacked from all sides and the
company may need to change some of its long-running habits,"
market researcher DFC Intelligence said.
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