Nintendo of America Inc.

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Nintendo of America Inc.

founded: 1982

Contact Information:

headquarters: 4820 150th ave. ne
redmond, wa 98052 phone: (206)882-2040 fax: (206)882-3585 email: [email protected] url: http://www.nintendo.com

OVERVIEW

Before the release of the PlayStation by Sony Corp., Nintendo was the reigning, undisputed world-champion in the video game industry. Through the mid-1990s, the company was the top seller and producer of video games and game units worldwide. As a company it achieved success with a net income of $528 million in 1997. Nintendo sold its one billionth game in 1995, making it the first company in its market to accomplish this feat. It reached success by spreading its major companies worldwide—in Japan, America, Canada, France, Spain, Belgium, the Netherlands, and Australia. The company focused on bringing fun and quality gaming entertainment to people around the globe. Nintendo has developed a series of products, beginning with the original Nintendo Entertainment system and later introducing the portable GameBoy and the Super Nintendo. Beyond the systems, Nintendo continues to sell video games such as Mario Brothers and Donkey Kong. In 1996, Nintendo introduced the Nintendo 64, the product the company relied on to keep it atop the video-gaming industry. In 1998, however, the Sony PlayStation was outselling the Nintendo 64 (N64) by a wide margin.

COMPANY FINANCES

Nintendo Co. Ltd.'s net income grew to $528 million in 1997, up from $482 million in 1996, or $3.72 per share, up $.32 a share from in 1996. Still, over the four-year period beginning in 1993, Nintendo's net sales have steadily dropped from a high of 634,669 yen in 1993 to 485,612 yen in 1994, 415,240 yen in 1995, and 353,753 yen in 1996.

ANALYSTS' OPINIONS

While Nintendo had lost its dominance of the video game market to Sony, analysts predicted continued success for the company as sales of Pocket Monsters games for the Game Boy machine led the company to a 56 percent increase in sales during the first half of 1997.

HISTORY

Nintendo was the world's leading company in the video game industry in the mid-1990s. It was the top seller and producer of video games and game units worldwide and achieved success with a net income of $528 million in 1996. In 1995 Nintendo became the first company in the video game industry to sell its one billionth game. It has subsidiaries in countries all over the world, including Japan, America, Canada, France, Spain, Belgium, the Netherlands, and Australia. The company launched the Nintendo Entertainment system in 1985 and created the GameBoy in 1989. Super Nintendo was released in 1991, triggering further growth in sales and reputation in the gaming business. The Mario Brothers and Donkey Kong games contributed to the company's high sales throughout the years. In 1996 Nintendo introduced the Nintendo 64 with the hope that it would bring large profits to the company and change the video game industry.

Nintendo can trace its roots back to Japan in 1889, when a man named Fusajiro Yamauchi began producing Japanese playing cards called Hanafuda. They introduced western cards to their country in 1907. The company has proven to be a family affair—Fusajiro Yamauchi was the company's first president and was the great grandfather of the company's latest president Hiroshi Yamauchi.

Hiroshi Yamauchi took over for his great grandfather in 1949, determined to make the company more modern and to make practical changes that would save the company money and make more profits. He united the once scattered companies of Marufuku together to allow the company to operate more efficiently. Marufuku also existed under a new name when Yamauchi changed it to the Nintendo Playing Card Company, Ltd.

In the years after World War II, the company wanted even more progress. Nintendo achieved it by creating plastic coated playing cards in 1953. The company also achieved success in 1959 by producing a line of cards with the likeness of Disney characters on them. The company was doing so well at this time, it decided to go public on the Osaka and Kyoto stock exchanges.

More progress came in 1963 when Nintendo introduced board games along with its playing cards. The company achieved success and expanded the business throughout Japan, and in 1970 it began an important aspect of its business with the Beam Gun Series—Nintendo's first technological project. In four years the company received recognition for these games, then began exporting the projection-based shooting games to the United States and Europe.

Nintendo was helping the video gaming market become more advanced. In 1977 Nintendo was marketing a preliminary, although not very sophisticated, line of video games. They also made huge strides in coin-operated arcade systems in 1978 that featured superior sound and better graphics. These technological breakthroughs resulted in the popular arcade game Donkey Kong.

Nintendo made an important step when it decided to expand its company to America since it was already selling many of its products in the United States. Nintendo of America Inc., which was completely owned by the main company in Japan, was created in New York City. In 1982 the company was moved to Redmond, Washington.

Nintendo's main focus was on home video game units during the 1980s. The company created the Famicom in Japan, so the quality of the arcade games could be realized in people's homes. The Famicom eventually found its way into 35 percent of the households in Japan.

Nintendo ran into a problem before it began to sell systems in the United States because many Americans had bought systems exported from Japan. The industry's boom had ended, and Nintendo was losing hundreds of millions of dollars. Nintendo fought through these difficult times in the 1980s and marketed successfully during the industry's worst days. Nintendo had figured out the problem in the industry at the time: people were not buying because the other companies were flooding the market with bad games.

The Nintendo Entertainment System (NES) was introduced to the U.S. market in 1985. The system sold very well and began Nintendo's hold of the American market. Through marketing and product and quality control, Nintendo had reached a high level of success.

The Nintendo NES was sold at a cheap price, $100, so many Americans bought the system. The company made the bulk of its money on the sale of its cartridges, which ranged from $25 to $45 each. It sold many of these games due to the fact that many software companies created advanced and entertaining games for the Nintendo system.

Nintendo had a major problem with competitors, licensees, and even the U. S. government, however. This involved the way it dealt with strict licenses on games because Nintendo was not giving a fair share of money to the licensees. The company allowed licensees to produce only six games a year for use by Nintendo, and the games had to be exceptional. If Nintendo decided a game was not good enough, it would not be marketed or sold. To make sure that people would not tamper with this extreme control, Nintendo put microchips in their products so people could not duplicate its games. Competing businesses could not function around these rules, and Nintendo became a hated and contested company by many people and other companies.

Nintendo survived through all of the complaints, though, by relying on marketing instead of strict rules, such as joining Pepsi and Toys 'R' Us for sales promotion campaigns. The company spent more than $60 million on marketing in 1989, a strategy that paid great dividends.

STRATEGY

Nintendo was the dominant company in its field for years. It had controlled the gaming industry by a large margin in the 1990s, yet it was concerned about falling behind in its sales. In fact, in 1994 it controlled more than 70 percent of the market and owned 80 percent of the profits worldwide. Even with this success, the company still had concern over the popularity of the personal computer and games played over the Internet. Many people were switching from Nintendo to personal computers, and Nintendo decided it needed to progress in order to keep its edge. It focused on one machine, the Nintendo N64. This was a new system that had 64-bit gaming capabilities and was considered to be the future of video games. A system that contains 64-bit capabilities could produce superior graphics and has a considerable amount of memory.

The N64 was immensely hyped and in great demand worldwide. Nintendo had to schedule the release of the system at different times in Japan and the United States out of fear that it had not produced enough. The N64 was nearly a year behind its scheduled release date because the company did not want to put it on the market until it was "perfect." This system proved to live up to the promotions by selling more than two million systems in Japan and the United States in its first six months. The N64 did not have many new games out quickly, but it did have the highly anticipated Mario Brothers 64. Nintendo also had a plan in the works to have the Internet work through the N64.

Nintendo continued to use its past strategies, focusing on making games for young boys, which the company felt represented the largest group of people playing the games. In addition, Nintendo emphasized the creation of quality games, not flooding the market with any undesirable games. It also emphasized making games entertaining, adventurous, and fun so that the players would bond with the games.

Nintendo continued to produce and refine its existing products, such as the Super Nintendo and GameBoy, traditionally big sellers Nintendo hoped would continue to sell well. It added a few new games that were crucial to the continuing success of Super Nintendo: A Mario role-playing game, a new Donkey Kong, and a new Ken Griffey baseball game. GameBoy was considered an important product, but one that needed a dramatic change. Nintendo decided to make it smaller to fit in the user's pocket, making it extremely portable. The company changed it further by making it in bright new colors to make it more visually appealing. Most importantly, it enhanced its screen to give the user higher contrast and clarity.

In March 1998, Nintendo drafted the Los Angeles Lakers' Kobe Bryant and the Seattle Mariners' Ken Griffey Jr. to help it beat Sony PlayStation in the sports video game arena. It released Kobe Bryant's NBA Courtside for the Nintendo 64, a National Basketball Association-licensed game that marked the debut of Nintendo sports division. In May 1998, the second title, Major League Baseball, featuring Ken Griffey Jr. was to follow.

FAST FACTS: About Nintendo of America Inc.

Ownership: Nintendo of America is wholly owned by its parent company, Nintendo Co., Ltd., in Kyoto, Japan.

Officers: Minoru Arakawa, Pres.; Howard Lincoln, Sr. VP & CEO, Chmn. of Nintendo of America

Principal Subsidiary Companies: Nintendo is 1 of 6 subsidiaries of Nintendo Co. Ltd. in Kyoto, Japan.

Chief Competitors: Nintendo competes worldwide with makers of video game machines and software. Some of its competitors include: Sega; Sony; IBM; Compaq; and Gateway, Inc.

The company also formed strategic partnerships in 1998, as Psygnosis, a leading global interactive entertainment software maker, announced plans to develop games for Nintendo 64. In addition, Tommy Hilfiger and Nintendo teamed up to develop a line of clothing for young people. Nintendo also entered a new line of business, introducing a low-cost, easy-to-use digital camera.

INFLUENCES

Nintendo has consistently led the way in marketing and technological innovations in the video game industry. While Sony overtook the company in sales, Nintendo continued to push its upstart competitor. In June 1997, Sony and Nintendo announced major marketing plans, planning to spend $300 million in the final six months of the year on advertising and promotions.

CURRENT TRENDS

In general, the video game business has experienced problems with many companies putting out substandard products. That has not been the case for Nintendo, which focused on quality graphics and gameplay in its games. Other companies and the industry suffered the consequences, as Nintendo products continued to set the trend.

The company has basically defined the video game industry. Its first innovation was the Beam Gun, a projection-shooting game introduced in 1970. In 1977 Nintendo was marketing an unsophisticated line of video games, but in 1978 the company made huge strides in coin-operated arcade systems featuring superior sound and better graphics. These technological breakthroughs resulted in the arcade game Donkey Kong.

In 1998 Nintendo welcomed the first college to offer a bachelor's degree in video game technology. The DigiPen Institute of Technology opened on the grounds of Nintendo's offices in Washington State where students study math, physics, data structure, business, marketing, mythology, computer languages, graphics, image processing, and animation. Students graduate with degrees in real-time interactive simulation in the world.

PRODUCTS

By 1998, Nintendo estimated having sold 7 million N64 machines; 46 million Super Nintendo machines and 300 million games for it; 60 million Game Boys and 200 million games for it; and 62 million original Nintendo machines and 500 million games.

The Super Nintendo, advanced at its introduction, was the top-selling unit every year of its existence. It was a 16-bit unit that worked with cartridges. The 16-bit capabilities allowed it to have better graphics and memory than the original 8-bit Nintendo system. In 1996 it was still the top selling unit, despite competition. Two of the top five games in the 1996 Christmas season were the Super Nintendo games Donkey Kong 2 and Donkey Kong 3. By the mid-1990s, Nintendo had sold more than 40 million Super Nintendos worldwide and planned to keep selling them.

GLOBAL PRESENCE

The Nintendo companies in Kyoto, Japan, have been more influential than the one in the United States. The Japanese companies operate three plants—all in Kyoto—to manufacture their products. The Japanese parent company is listed on the Japanese stock exchange, rather than an American one. Its main video games, FamiCom and the SuperFamicom, perform stock transactions not possible with American products.

In the late-1990s, the Japanese companies did not profit as much as the U.S. company because the dollar was much stronger than the yen. Net increases for the company as a whole went down because of the decreased value of the yen. In 1996 the Japanese companies suffered an 18 percent decrease in sales compared to its overseas companies who had an 11 percent decrease.

CHRONOLOGY: Key Dates for Nintendo of America Inc.

1889:: Marufuku Company, Ltd. is founded in Japan as a maker of playing cards
1907:: Marufuku introduces Western-style cards in Japan
1949:: The company embarks on a modernization and restructuring operation
1951:: Marufuku becomes Nintendo Playing Card Company, Ltd.
1963:: Begins marketing board games
1970:: Implements electronic technology into games
1975:: Nintendo develops its first video game system
1978:: Develops coin-operated video games using microcomputers
1980:: Creates the subsidiary Nintendo of America Inc.
1985:: Nintendo Entertainment System makes its debut in the United States
1989:: Nintendo launches the Game Boy
1996:: The first 64-bit home video system, Nintendo 64, is launched
1998:: Nintendo forms partnership with Psygnosis

Nintendo had many companies worldwide and planned for further expansion into other countries, such as Europe and Hong Kong in the late-1990s. Complementing companies already operated in Australia, Canada, Spain, France, Belgium, and the Netherlands, which produce systems for countries worldwide.

MARIO MANIA!

Nintendo is probably most closely associated with its video games featuring the Super Mario Brothers—Mario and Luigi. Not only have these heroic plumbers helped sell millions of video games, but they have also been the subject of three different television series and one major Hollywood film. The film, Super Mario Bros., was made in 1993 and features Bob Hoskins as Mario Mario, John Leguizamo as Luigi Mario, and Dennis Hopper in the role of arch-villain King Koopa. It is King Koopa's plan (along with the help of his dedicated Goombas) to take over the world, and it is only through the exploits of Mario and Luigi that he is ultimately foiled. The film was directed by music video whiz kids Rocky Morton and Annabel Jankel. Prior to the Super Mario film, they were best known as the creators of the Max Headroom television series.

EMPLOYMENT

Nintendo works to maintain an atmosphere in which talented individuals can work as a team. Commitment and enthusiasm are important characteristics of employees, and the company strives to treat employees with the same respect it shows to its customers.

SOURCES OF INFORMATION

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