Nintendo: the Nintendo 64 Presenters: Ayami Nakanishi Asuka Oya Laurent Pawlowski Dustin Ciarla

Today’s Agenda ① Familiarize you with the Nintendo company. ② Go through the evolution of video game technology. ③ Nintendo’s fatal strategic decision. ④ The current and forecasted repercussions. Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda

The Nintendo Story Nintendo was founded in 1889 in the business of manufacturing playing cards. Nintendo gains success in plastic card games (1950’s). Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda

The Early Fragmented Market All the technology was created in the USA The Fairchild (1975) The Atari Wars ( ) Atari VCS 2600 is the victor (1979) Atari captures 80% of the market Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda

Problems for Atari Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda ROI for its venture partner Warner is not high enough. PC price decrease of 1983 shakes the entire market. High-margins on console sales is no longer feasible  Atari had been approached by Nintendo to co-operate in the release of a new console called the Famicom but refused due to monetary constraints.

Go West Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Japanese companies enter the market: Nintendo introduces the Nintendo Entertainment System [NES] (1983) Sega releases the Sega Master System after speeding up its R&D 6 months later (1983) A new business model is introduced. Consoles sold at cost. Profit made on video game royalties.

Nintendo a Success Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo grabs major market share: Japan (92%) North America (95%) Europe (52%) NES consoles sold: 62 million Sega consoles sold: 10 million Large success attributed to the popularity of the Super Mario Bros game.

Level 2 Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Sega creates the Megadrive console to steal Nintendo market share. (Japan 1988 and NA 1989). The Megadrive is superior in all areas: Better graphics Longer/complex games More buttons

Nintendo Fights Back…Eventually Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo responds late in the game with the Super Famicom/Super Nintendo [SNES] (Japan 1990, NA 1991, EU 1992). By 1993 Nintendo recovers ground: SNES consoles sold: 49 million Megadrive consoles sold: 23 million Reason why Sega was unsuccessful: Product life cycle and the economy

New Challengers Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda New competitors release their own consoles with innovative business strategies: 3DO (early 1993) Amiga CD 32 (early 1993) Atari Jaguar (late 1993) Sega Saturn (late 1994) Sony Playstation [PS1] (late 1994) Where is Nintendo?

Nintendo…Late in the Game Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda By June of 1996 Nintendo unveiled its contending system: Nintendo 64 [N64] Nintendo’s late start resulted in considerable market share loss Sony Playstation: 100 million Nintendo 64: 34 million Sega Saturn: 10 million

Cartridge Concerns Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo decided to maintain its cartridge format for playing games on its N64 for The following reasons:  Pirating protection  Resilience and Quick Loading  Enhancement Options  Onboard Saving feature  Compatible with Internet Distribution Strategy

Unforeseen Repercussions Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo’s concerns over cartridge and console technology unfortunately hurt Nintendo in the long run: 1. PS1 games were pirated profusely, however this helped bolster its console sales at eh expense of competitors. 2. Nintendo’s cartridges could only hold 64 mbs compared to 700 mbs for CDs

Unforeseen Repercussions (cont’d) Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda 3) Nintendo’s development of the cartridge/console was too costly and led to an exodus of small developers. 4) The Internet Distribution Project was dropped. 5) Developers shifted their focus to other platforms due to the limitations of the N64 cartridge.

What Took So Long! Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda N64 console required advanced system features due to its late entry into the market. Nintendo broke the barriers in areas of graphics processing, multiplay options, and peripheral design.

Worth the Wait Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo continuously delayed the release of its console for more than 2 years for certain regions of the world. Nintendo’s slogan became “Is it worth the wait? Only if you want the best!” Begging one’s customers to wait has never been one of the successful business strategies of the 20 th century.

Self-Sabotage Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo’s target market were children aged Previous Nintendo generation were ignored, left to the competition. Childish animation: “not cool”. Few game titles of interest to adult population and even fewer for teenagers.

Nintendo Playstation??? Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo had originally contacted Sony to work on a CD expansion for its SNES Nintendo breached their contract with Sony when they approached Phillips to work on a similar project. Through Nintendo’s unprofessional conduct a formidable competitor was formed.

Late and at Twice the Cost Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda N64 games costs were high due to: Nintendo’s royalty system, extensive R&D and developer difficulty in fitting games onto its cartridges. N64 games cost: Yen PS1 games cost: 6000 Yen Console cost was high despite Nintendo’s “at cost” sales strategy. High console R&D

Sony’s Ironfist Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Sega released its Dreamcast in Nov. of Sony released its Playstation 2 in Mar. of Sega admits final defeat in Jan. of Nintendo Gamecube enters market in Sept. of Microsoft Xbox enters in Nov. 2001

And the Winner is… Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Sony PS2 sales: 75 million Microsoft Xbox sales: 20 million Nintendo Gamecube sales: 19 million Sega Dreamcast sales: 9 million Reasons for rankings: Sony and Microsoft are conglomerates with deep pockets, access to diverse networks, etc. Nintendo limited its target audience. Sega has never obeyed the console product life cycle.

Nintendo’s Future Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo will have to compete against: Sony’s Playstation 3 Microsoft’s Xbox 2 Sony has experience in the console Industry and will remain a major player. Microsoft is committed to investing in the Xbox project. So where does Nintendo fit?

Nintendo’s Future Nintendo Recap Video Game History Embryonic 1 st Generation 2 nd Generation 3 rd Generation Nintendo’s Downfall Current Situation 4 th Generation Nintendo’s Future Agenda Nintendo is too late to leverage their brand loyalty amongst older gamers. Nintendo’s console technology will always be one step behind competition. The child market segment is small and less lucrative, however the opportunity for profit does exist. Nintendo will entrench itself into youth gaming via the handheld industry.