Tucked in the woods here, west of State Route 520, is a little piece of the Mario Kingdom.
the unassuming doors is the business built by Mario, the pudgy plumber,
and Luigi, his lanky brother, as well as characters like Link, wielder
of the mystical Master Sword, and Princess Zelda, of the royal family of
Hyrule. All of them, and more, are the pixelated children of Shigeru
Miyamoto, the Walt Disney of video games and creative genius of the
Nintendo Company of Japan.
But while Mr. Miyamoto is dreaming his
dreams across the Pacific, an army of marketing types is at work here in
Redmond, inside the shiny new headquarters of Nintendo of America. This
palace of play is quiet, but there's trouble brewing in the world
around it: three decades after the mustachioed Mario burst into arcades
via Donkey Kong, plucking countless quarters from people's pockets, the
kingdom is under siege.
Nintendo's enemies have arrived by
battalions. Angry Birds, Fruit Ninja and other inexpensive, downloadable
games, particularly for cellphones and tablets, have invaded its turf.
Changing tastes and technology have called into question the economics
of traditional game consoles, whether from Nintendo or Microsoft, maker
of the Xbox. Nintendo recently posted the first loss in its era as a
video games company, a prospect that would have been unimaginable only a
few years ago. And while game consoles aren't going away, analysts are
skeptical that the business will regain its former stature soon.
of which makes Nintendo's next move, and what is happening here, so
crucial. Nintendo counterattacked on Nov. 18, when a new version of its
Wii game console arrived in stores nationwide.
The original Wii,
the first wireless, motion-capturing console, was nothing less than
revolutionary. The simplicity of its controller, which Mr. Miyamoto
helped design, attracted new audiences like women and older people.
Customers lined up in stores for it - and then it simply faded. Now, the
new console, the Wii U, may be Nintendo's last, best hope for regaining
its former glory. Executives are hoping for a holiday hit, and perhaps
even another runaway success.Initial demand appears high.
GameStop, the video game retailer, opened 3,000 stores at midnight on
Thursday for Black Friday sales, and before long almost all its Wii Us
were sold out, according to Tony Bartel, GameStop's president. "I think
people are starving for innovation, and Wii U is giving them that
innovation," Mr. Bartel says.
The Wii U is a recognition that the
living room is no longer the province of a single screen. More people,
particularly the young, now watch TV with a smartphone or tablet in
hand, the better to tweet a touchdown or update their Facebook status
during a commercial. The Wii U looks like a mash-up of an iPad and a
traditional console, with a touch screen embedded in the middle. It's no
mere festival of joysticks, buttons and triggers.
But will it be
the blowout that Nintendo needs? Many industry veterans and game
reviewers are skeptical. They question whether the Wii U can be as
successful as the original, now that many gamers have moved on to more
abundant, cheaper and more convenient mobile games.
"I actually am
baffled by it," Nolan K. Bushnell, the founder of Atari and the
godfather of the games business, says of the Wii U. "I don't think it's
going to be a big success."
The bigger question is what the future
holds for any of the major game systems, including new ones that Sony
and Microsoft are expected to release next year. Echoing other industry
veterans, Mr. Bushnell says that consoles are already delivering
remarkable graphics and that few but the most hard-core players will be
willing to pay hundreds of dollars for a new game box.
things will continue to sputter along, but I really don't think they'll
be of major import ever again," he says. "It feels like the end of an
era to me."
Nintendo is unbowed. Mr. Miyamoto was involved in
developing the original Wii, and had a role in the Wii U as well. He
rarely gives interviews, and was unavailable for comment for this
But one recent evening in Redmond, Corey Olcsvary, a
Nintendo product marketing specialist, was slashing his fingers across
the touch screen on the GamePad, as the Wii U controller is called,
casting "throwing stars" at a ninja gang that sprang from the corners of
a giant TV screen. In another game, a group of players chased Mario -
one of the most popular video game characters ever - around a maze shown
on a TV while Mr. Olcsvary stared at a bird's-eye view of the maze on
his GamePad and tried to help Mario dodge his pursuers. The players
shouted when they caught sight of Mario's red overalls and cheered when
they tackled him.
Starting in December, people will also be able
to use the GamePad as a remote control to set recordings and change
channels on their cable and satellite TV services.
Fils-Aime, president and chief operating officer of Nintendo's United
States unit, acknowledges that mobile games have changed the market. But
he says wide recognition of the Nintendo and Wii brands, and of Mario,
Zelda and other favorites available exclusively on Nintendo systems,
will offer a strong tail wind for the Wii U.
"It comes down to
providing consumers new, unique experiences they can't get anywhere
else, experiences that really make them say, 'Wow, this is fantastic,' "
Mr. Fils-Aime says.
Nintendo has been in the business of fun
since 1889. Its founder, Fusajiro Yamauchi, made playing cards. His
great-grandson Hiroshi Yamauchi landed a licensing agreement with the
Walt Disney Company and turned out Mickey Mouse playing cards. By the
1960s, Nintendo was pushing into other toys and games. Then, in 1975,
Atari introduced a home version of Pong, the first hit video arcade
game. Soon, Nintendo was chasing video games as the hot new thing, too.
the history of games hardware is littered with spectacular flameouts,
including Sega, 3DO and Mr. Bushnell's own Atari. Nintendo has endured
through a combination of ingenuity and obsessive focus on both hardware
and software, a path that makes it something like the Apple of video
Its gutsiest bet on the hardware side was the Wii, which
came out at a time when it looked as if Nintendo was drifting to the
margins. Nintendo couldn't afford to join in the arms race, led by its
much bigger rivals Sony and Microsoft, to create systems with the most
graphics horsepower. (Years after its rivals, Nintendo has finally
embraced high-definition graphics with the Wii U.)
strategy led to a big comeback. Nintendo has shipped close to 100
million Wiis, while Sony and Microsoft have each shipped about 70
million of their latest consoles.
Through it all, Mr. Miyamoto,
now 60, was the creative force. But in the last year, he has let some
lieutenants take on more responsibility, the better to prepare Nintendo
for his eventual retirement. Mr. Fils-Aime, who would not predict when
that day would be, says Mr. Miyamoto's engagement at the company
"continues to be at the highest level."
Just as Apple has insisted
on making both hardware and software, rather than licensing the Mac and
iPhone operating systems to others, Nintendo does not create games for
devices made by other companies, including the hundreds of millions of
iPod Touches, smartphones and tablets out there. Industry executives say
this represents a missed opportunity, allowing a new generation of game
brands, like Angry Birds, to emerge unchallenged on mobile devices,
much as Disney did in another realm years ago by allowing Pixar to own
computer animation. (Disney later bought Pixar.)
"It's the hardest
strategic decision Nintendo has had to face in a long time," says
Robbie Bach, the former head of Microsoft's Xbox business. "Would Mario
on an iPhone be an interesting property? I think yes, it would."
Fils-Aime says that won't happen, arguing that Nintendo's approach is
the best way for it to create unique games. "That's the business
decision we've made," he says, though he adds that the company may allow
people to buy its games through mobile phones and have them delivered
to their Nintendo devices.
While it's not unusual for sales of a
particular game console to sag over time, the decline for Nintendo
products in recent years has been especially brutal. The company lost
43.2 billion yen, or about $530 million, in the fiscal year ended March
31, after sharply reducing the price of a new portable game console, the
Nintendo 3DS, in an effort to bolster sales. (Results were also hurt by
a strong yen.) Its revenue was about a third of what it was three years
earlier, when sales of the Wii and a portable device, the Nintendo DS,
"That was a magical moment," says John Taylor, an
analyst at Arcadia Investment, referring to Nintendo's high point a few
years ago. "The market has now moved on from that. I don't think people
view an integrated tablet within the Nintendo ecosystem as nearly as
Another worrisome trend for Nintendo is that the old
way of pricing and selling games seems broken. In a rocky economy, it's
harder to persuade people to spend $50 to $60 - what titles typically
cost for Nintendo, Sony and Microsoft systems - to buy a game. The Wii U
itself starts at $300, versus $250 for the original Wii.
and tablets have given people a nearly bottomless supply of games that
typically cost a few dollars at most. Web and Facebook games are usually
free, with the option to buy, say, a faster car or another virtual item
that enhances the game. Industry veterans argue that you get what you
pay for: mobile and Facebook games that are shallow entertainment
experiences, compared with those of console games.
are also instantly accessible online - and while it takes seconds to
start a game on a smartphone or tablet, it can take minutes to get a
console up and running after turning on all of the relevant equipment.
games have hurt sales of dedicated portable game devices from Nintendo
and Sony, but analysts and game executives say they don't think the
threat stops there.Mitch Lasky, a veteran industry executive and
now a venture capitalist at Benchmark Capital, says he has walked into
his living room, which is brimming with all the major game consoles, a
library of new titles and a 60-inch plasma TV, only to find his children
crowded around an iPhone playing Temple Run, an app-powered game
"They were very much more interested in the
immediacy of the mobile experience," says Mr. Lasky, who has funded
several online games companies. "I'm looking at the $60 game the way I
am a big-budget Hollywood movie. Yeah, I'm buying three or four a year -
Call of Duty, Uncharted - but for the equivalent of television, I'm
going to mobile platforms and free-to-play."
Mr. Fils-Aime says
game developers can offer free games for the Wii U that generate revenue
through the sale of virtual items. Sony, too, is allowing that approach
with games for the PlayStation 3, and it is expected that Microsoft
will more seriously embrace it as well.
It's likely that Nintendo
will eventually face a more direct challenge in the living room from the
same technology companies that have reshaped the mobile games business.
Amazon, Apple and Google are all strong contenders to be in that camp,
given their innovation track records. None have yet developed direct
console competitors that have serious game-playing capabilities.
Nintendo has overcome the odds before. Mr. Bach, the Microsoft
ex-executive, says he doesn't underestimate the company. "I've learned
not to count the Nintendo guys out," he says.
© 2012, The New York Times News Service