Nintendo: the Nintendo 64

Presenters:Ayami Nakanishi

Asuka Oya

Laurent Pawlowski

Dustin Ciarla

Today’s Agenda① 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 RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

The Early Fragmented Market

All the technology was created in the USA The Fairchild (1975) The Atari Wars (1975-1978) Atari VCS 2600 is the victor (1979)Atari captures 80% of the market

Nintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Problems for AtariNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 nolonger 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 WestNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 SuccessNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo grabs major market share: Japan (92%) North America (95%) Europe (52%)

NES consoles sold: 62 millionSega consoles sold: 10 million

Large success attributed to the popularityof the Super Mario Bros game.

Level 2Nintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Sega creates the Megadrive console tosteal 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…EventuallyNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo responds late in the game withthe 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 ChallengersNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

New competitors release their own consoleswith 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 GameNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

By June of 1996 Nintendo unveiled itscontending system: Nintendo 64 [N64]

Nintendo’s late start resulted inconsiderable market share loss Sony Playstation: 100 million Nintendo 64: 34 million Sega Saturn: 10 million

Cartridge ConcernsNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo decided to maintain its cartridge format for playing games on its N64 for The following reasons:

① Pirating protection② Resilience and Quick Loading③ Enhancement Options④ Onboard Saving feature⑤ Compatible with Internet Distribution

Strategy

Unforeseen RepercussionsNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo’s concerns over cartridge andconsole technology unfortunately hurtNintendo 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 RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 WaitNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 20th century.

Self-SabotageNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo’s target market were children aged 4-12.

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 RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 CostNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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: 10 000 YenPS1 games cost: 6000 Yen

Console cost was high despite Nintendo’s “at cost” sales strategy.

High console R&D

Sony’s IronfistNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Sega released its Dreamcast in Nov. of 1998.

Sony released its Playstation 2 in Mar. of 2000.

Sega admits final defeat in Jan. of 2001. Nintendo Gamecube enters market in

Sept. of 2001. Microsoft Xbox enters in Nov. 2001

And the Winner is…Nintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th 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 FutureNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo will have to compete against: Sony’s Playstation 3 Microsoft’s Xbox 2

Sony has experience in the consoleIndustry and will remain a major player.

Microsoft is committed to investing in theXbox project.

So where does Nintendo fit?

Nintendo’s FutureNintendo RecapVideo Game History

•Embryonic•1st Generation•2nd Generation•3rd Generation

Nintendo’s DownfallCurrent Situation

•4th Generation

Nintendo’s Future

Agenda

Nintendo is too late to leverage theirbrand loyalty amongst older gamers.

Nintendo’s console technology will alwaysbe one step behind competition.

The child market segment is small and less lucrative, however the opportunity forprofit does exist.

Nintendo will entrench itself into youth gaming via the handheld industry.