Nintendo Company History

What's Eating at Nintendo?

What's Eating at Nintendo? George Harrison of Nintendo discusses where the GameCube went wrong and what they're doing to lead the next generation.

No console seems to generate as much emotion among the gaming populace as Nintendo's GameCube. You either love it or hate it, and – especially if you're on a message board – you will defend your opinion to the bitter end. That's the way it's always been for a hardware maker that's historically unafraid to blaze its own trail in the marketplace. However, there's also no denying that the little purple system has more pressing issues than Internet flame wars – hardware sales are lagging behind the PS2 and Xbox in the U.S., third parties are giving less support to the system, and even Nintendo's top franchises of the past aren't selling the millions they used to.

George Harrison, senior vice president at Nintendo of America, isn't afraid to admit that his company made mistakes. In this interview with Electronic Gaming Monthly, Harrison notes that Nintendo's concentration on first-party development hurt the GameCube in the early months after launch, putting them at a disadvantage against the PlayStation 2 and Xbox almost at the start. However, he's equally quick to note that Nintendo is not out of the picture yet – read on to see how Harrison sees the next generation of console and handheld systems will play out.

EGM: Our first question: Do you think the GameCube has failed in the United States? George Harrison: No, I don't think it's failed. I think we've had individual successes with things like Zelda: The Wind Waker and Smash Bros. and others. If there's a shortcoming for us on GameCube, it's not delivering enough consistent breadth and variety of software. That really is the key. Consumers, I think, are past the time when they buy a system just to get one game. We used to believe that was the case. But, you know, we're happy with the results of the drop to $99, and we think it's going to get the system into a lot more people's hands. We've found that consumers that own the system are buying a lot of software, though, so our issue is really how to attract enough people.

EGM: At the same time, though, a lot of the software people buy for the GameCube is Nintendo-made software. Has it been a problem keeping third parties happy? George: Well, we started about a year and a half ago to make a real, concerted effort -- not just within Nintendo of America, but a lot of the people at the top of the company -- to say that we really need third-party support. We can't do enough games ourselves to fill up the entire calendar year, but there are also certain types of games we aren't really good at, and where other people have franchises. So that's where you saw the effort with people like Capcom, LucasArts, Namco and others. They've really demonstrated some good results for us. We've tried to do it in unique ways, too; not always just with monetary support. We have provided them with marketing support in some cases. We've also done things like offer Mr. Miyamoto's expertise and cooperation in trying to help make the game better. As you saw in Soul Calibur, we've also offered the use of our characters -- they put the Link character in Soul Calibur, and in the early weeks the GameCube version was actually outselling the PlayStation 2 version, even though the PlayStation 2 has a much larger install base in terms of hardware. It shows us that there's a variety of ways to work, but certainly the importance of the third parties is not underestimated. While it's something we got started on belatedly with the GameCube, it's not something we're going to take our eye off in the future.

EGM: Why did it start so late? The third-party support issue was something that cropped up with the N64 as well. With companies like Microsoft entering the fray, that kind of support is even more important. George: Yeah. I think it's pretty clear. I think we are maybe rightly confident in our own titles and our own ability. But as the machines have become more sophisticated, it takes more time and more people to make a high-quality game, and we can't get a Miyamoto spectacular every quarter. It's just not possible. Also, when we launched the GameCube, we put the concentration of our development kits in the hands of only a few people -- internally, of course, with Mr. Miyamoto's EAD team, but also with Rare. And Rare didn't deliver a single game for us at the launch, when their history had been to make some really great games for us in the past. That hurt us, and it led us into this gap of titles, starting after the launch and lasting for about seven or nine months until Mario Sunshine came out. Consumers want consistency. They would never buy a DVD player that had only one or two good movies a year; they want consistency and variety, and we're trying hard to make sure that's not only resolved for the GameCube, but as we go into the next system.

EGM: What will you do for the next system, then, in terms of third-party support? What would you do differently in the future? George: Certainly we have to get [third parties] development kits on a timely basis. They need their kits a year and half or two years in advance to really make a quality game that'll be ready to go at launch.

EGM: Was that a problem with the GameCube? George: It was a problem. As I said, we really concentrated our development kits on most of our internal developers and Rare. But, having said that, there are probably five to eight really important publishers out there, if you look at the concentration within the industry. So we're not talking about a hundred publishers who need development kits, but five to eight who have not only shown the ability to make great games, but have access to great franchises or movie licenses. Those would be the publishers we would focus our efforts on... not just on the Japanese publishing houses, but also on companies in the Western Hemisphere.

EGM: Do you think that, even with the price drop and a new push for third-party support, it's too late for the GameCube to regain a large amount of market share? George: There's no question that the GameCube is unlikely to overtake the PlayStation 2 in installed base. So the question for us is: How do we maximize the GameCube's existence for the next two to two and a half years? We think the price drop to $99 was an important step in that process. It just made it accessible to people who were waiting for prices to come down, or people who said "You know what? I really want to play Zelda: The Wind Waker, but I already own another system." We see people buying it for $99 as a second system; potentially someone who has owned a PlayStation 2 for three years already and know that they have another two or so years to wait. They're saying "I can open myself up to another library of exclusive games here with GameCube."

EGM: Will the increased install base matter much to you in terms of enticing more third parties, or getting revenue? George: It was important for the third parties. The price drop has already accelerated consumer sales, but it's still important to demonstrate that in 2004 and beyond, we will have a viable installed base that the third parties can capitalize on. We have to convince them that it's important to bring their titles over. Every publisher, including ourselves, will have to start shipping resources over to prepare for the next consoles at some point. But, in the meantime, we've got to keep a flow of software coming to the GameCube. So it's a really important balance, but one that's not going to happen by itself. We have to increase the installed base for the GameCube, and we have to go out and make sure we're working closely with the independent publishers.

What's Eating at Nintendo? (Continued)

EGM: What do you think Sony and Microsoft are doing right, and what do you think they're doing wrong? George: I think that in Sony's case, the backward compatibility [from PS one to PS2] gave them a great sense of momentum. That was not possible for GameCube because we were moving from cartridges to discs. I think, in Sony's case, they're doing very few things wrong. While they don't have their own ability to produce huge megahit titles, they were in the right place at the right time with the size, and they got things like Ridge Racer, and particularly Grand Theft Auto, to really drive their whole platform. So I think they're doing many things right, but a few things that are individually driving their overall business. With the Xbox, I think they did a great job bringing the PC gamer into the console world. They lived off the success of Halo for quite some time. I do think, though, that for both Microsoft and Sony, they're placing a lot of emphasis on the online area, which has a lot of interest from consumers, but hasn't really shown much in the way of results yet.

EGM: Do you feel that Nintendo's conservative approach to online gaming may put you at a disadvantage when the next generation of systems come along? George: If we look at the situation as it stands today, we've got about 30 million systems sold between the PS2, Xbox and GameCube, and about a million and a half people have actually bought an online service -- about a million for Sony and half a million for Xbox. So that's about five percent of the hardware install base that spent the money to get involved. Most of those people have yet to spend any money on a monthly or annual basis for a subscription. This holiday season and the following year will be very telling for online gaming, because consumers' free one-year subscriptions will run out and they'll have to decide -- do I spend, or not? That, or our competitors will have to decide whether to continue giving it away for free. So I don't think that we're missing anything by not being involved. I will say, though, that it certainly has played out the way we thought it would in this generation. The hype may have been more important than the actual substance. But having said that, we know that consumers continue to be interested in online gaming, and we know that it has to be a component of our next system. We're thinking about how we can fit it in, what kind of partners we would need, and so on.

EGM: At the same time, though, both broadband access and interest in online gaming is likely to expand over the next two or three years from now. Wouldn't that put Nintendo's next system at a disadvantage, since consumers are already familiar with the PS2 and Xbox's online abilities? George: We've always believed that the social aspects of gaming are one thing that propels our market forward. We've focused particularly on four-player games and things of that nature, but Pokemon, with its ability to exchange data between Game Boys, really took that to a whole new level of hardware sales for the system. We believe that is very important, and while the core gamers... I know those are your readers, but while core gamers are important for being trendsetters, the breadth of the market says to us that we have to try to please not only the best of hardcore gamers, but also the casual gamers. We're trying to figure out what the right balance is there. We believe games like Mario Kart: Double Dash!! and some of the other things we do so well really can cover the gamut of GameCube owners. Hardcore gamers can really enjoy them, but so can the casual gamers which, in terms of numbers, make up the majority of the market,

EGM: Do you think that games can become as mainstream a medium as movies, television, or radio? George: I think they already are. I think we're seeing people carry their game-playing habit forward in their life, so they're still playing when they're 30 or 35 years old. We're obviously optimistic about the industry, but we are concerned that, as the technology advances, the games themselves can become too complex and leave some people out. Making games complicated and long-playing because you can do it doesn't necessarily mean it'll appeal to a wide range of people. I think Mr. Miyamoto tried to demonstrate with Pac-Man Vs. at E3 that you can have a lot of fun without having to necessarily commit 80 hours to something. We believe that's a big part of the future of the industry.

EGM: What does Nintendo need to do to not only get more market share with the current systems, but to make the GameCube 2 as popular as the PlayStation 1 was? George: I think that, clearly, the improvement in graphics and presentation by the systems is reaching diminishing returns. We've talked about this before, but the reason for a consumer to buy the next generation of hardware, for many of the competitors, is not going to be because the graphics are prettier. It'll ultimately come back to what is a unique gaming experience. Again, with the introduction of Pokemon to the Game Boy, we took that business from selling 3.5 million hardware units a year to 9 million or more. So, it's that ability to generate unique gameplay that stimulates the whole market, and there's going to be a real surge on that. If there's any kind of letup in the competitor's hardware sales this year, it's really due to a lack of breakthrough software. It's something that's hard to do on a continual basis, but you really have to do it, because the market runs off new, unique ideas.

EGM: What are some of the ideas that Nintendo will introduce for the next generation, besides getting into the online market? George: We're looking into all kinds of features. In terms of the hardware itself, we haven't made any final decisions on most of them. I'm not even involved in the making of those decisions, other than to provide for a consumer insight we can gain from here in Western markets. I don't expect anything to be revealed publicly in 2004 about the specifics of the system. We've looked at the combination of things that have taken place in this current generation. We understand that the DVD player had some impact on the PS2 -- certainly not as much when we had a $100 price difference, but certainly when that dropped to $50 over the last year. That's not something we would have guessed or anticipated, because we thought "Gee, we want people to play video games on our hardware, not watch movies." But in terms of making a choice on which hardware to buy, I think backward compatibility and the DVD player had some impact on the PS2. The issue now is to figure out what the best features are for the hardware, and what the right price point that'll still make it a mass-market product at launch is.

EGM: Is Nintendo more open to the idea that the next GameCube won't necessarily be a gaming-only machine? Are you looking at features like connecting the system to your PC or integrating it with other parts of your household? George: Well, clearly we're not an electronics company like Sony. Sony has the motivation to add as many component features to their system as possible. Our motivation is to figure out what features could be added to the game machine that would help enhance the game-playing experience. We're already toying with video-playback in the Game Boy arena. Still, we're not trying to become an all-in-one electronic appliance. We're trying to figure out the best machine we can launch to be competitive.

EGM: Do you think the design of the GameCube itself next to it hurt it in the beginning compared to the PS2? George: I think it didn't look as sophisticated. I think that caused people to maybe pre-judge it, especially since other systems may look a little more like electronic appliances. But there's no doubt in anyone's mind that the GameCube has a very sophisticated chipset. It has great potential and capabilities, and it's driven many great games. And yet, the console that's succeeding the most in this generation is the PlayStation 2, which arguably has the weakest chipset of all three systems. So I think we learned that it's not always about the most sophisticated technology; it's about what you do with it, and it's also about presentation. Consumers want to feel good. We've seen, as an example, the great success of Game Boy Advance SP, which looked a little more sophisticated than the GBA in addition to having a lighted screen and rechargeable battery. That had a great effect on our ability to sell that product to people over 18.

EGM: Will making your products look more appealing to the older crowd be a major theme for the next generation of? George: Well, I don't think it's about appealing to an older crowd, but I think it's certainly trying to figure out what consumer tastes are. And I think one of the things that Mr. Iwata's trying to figure out is how the next system should look like, and how should we go out and research or test that. But I think that we're still kind of far away from that. The first thing is to get the chipset designed the way we want it; the casing can come after that.

What's Eating at Nintendo? (Continued)

EGM: When will we see the next GameCube? George: We haven't fixed a date yet, but we've said that we understand the importance of not being late next time, so we'll be ready with our competitors. Following the press, it looks increasingly like Sony will have difficulty making the fall of 2005. We're working to meet them in the market, but we'll see when we get there. It's important for us to have great software -- we know that launching without it won't work, but we also realize that we can't be a year late again, as we were with the GameCube.

EGM: Do you want to meet the competition, or beat them? George: I don't think there's really an advantage to beating them. We look at the history of companies trying to beat the market, and we see systems like the Dreamcast or Saturn that not only didn't have enough good software, but also didn't have enough product to meet the retailers' needs. They ended up in constant battle with their own retailer partners,

EGM: Is Microsoft also a concern when determining a release date? George: I think so. They haven't revealed a lot about their plans, but they have certainly indicated that they're committed to this industry, in spite of what they've invested and how much they have lost on the Xbox itself. The Xbox is part of a larger corporate strategy for them, so we have to take them very seriously.

EGM: Nintendo really pushes connectivity; the ability to connect the GameCube and Game Boy Advance together. How important do you think connectivity is for the game playing experience now, and how important will it be in the future? George: I think it could be hugely important, but it has not so far lived up to its potential. In other words, we haven't shown the game that makes it a killer application. But I think it's got to be a part of the future. I would be shocked if it's not a consideration for Sony when they bring out their [PSP] handheld system. So we know there is an answer there -- getting developers to think about it, and being able to spend the time to understand it. We have seen some unique applications of it; Ubisoft did a great job this spring with Splinter Cell, and EA is working on one of the most unique applications with The Sims. But it's one of those things that has a lot of potential that hasn't been yet fulfilled in terms of consumer demand.

EGM: What needs to happen, then? Are you providing a lot of creative support on that end? George: I think two things need to happen. One, we need a lot of creative support. Mr. Miyamoto has a team dedicated to working with EA on these types of ideas. As you probably recall, [former Nintendo president Hiroshi] Yamauchi formed a fund out of his own pocket called Fund Q whose sole purpose was to fund people making games featuring connectivity. Final Fantasy Crystal Chronicles is one of the first examples of that, and that's coming in February. In that case, we started from the groId up, thinking: What can we do with the connectivity to make this a great game?

EGM: No matter how Nintendo or Sony spins it, gamers will likely end up comparing the PSP to the Game Boy Advance next year. How does Nintendo plan to tackle this competition? George: We have to take it seriously. We've had handheld competitors all along, really, since the Game Boy was launched in 1989, and the Game Gear from Sega made a legitimate run at the business for a while. But we've generally succeeded thanks to a couple of things. First, we made sure that we take advantage of our big library of games, and games that could be updated; second, we've obviously introduced the SP, which is more sophisticated-looking and has the lighted screen and the rechargable battery. Home consoles are generally developed on a sequential basis -- finish one, start the next one, be ready in three or four years -- but with the Game Boy, we're always experimenting. We worked on lighted screens and other options for several years before we launched the SP. Many more things are in the works now, too, so we're fully prepared to compete.

EGM: So do you think there will be a new iteration of the GBA technology before we see Nintendo's "real" next-generation handheld? George: Well, I can't really comment on that, but you're going to see some innovations before the PSP even arrives. The wireless adapter that'll be coming with the next Pokemon -- it's called Red/Green in Japan, but it'll be Red/Blue over here -- allows for using a Motorola wireless unit to feature stress-free multiplayer action, the sort of thing that was tethered by a cable before. We've seen people make some initiatives on video in the Game Boy; that probably won't make this holiday, but we're pretty confident it will come in 2004. So we're already working on a lot of things that are being passed around as potential features for the PSP. We think we're more than prepared to compete.

EGM: So you're gonna compete more on the level of improving the SP to the point where it's competitive with the PSP, rather than trying to undermine it by introducing a new system? George: Well, we're going to add on things as we feel like they make sense. However, as for when the next handheld system is going to come, I can't say anything about that right now.

EGM: Nintendo has tried to shed a little bit of its kiddie image with games like Eternal Darkness and Capcom's Resident Evil series. As a whole, though, it hasn't really worked, and people still consider Nintendo a very family-oriented machine. Is that something you want to change in the future? George: Being family-friendly is great with us. That doesn't necessarily put you in a box that says you're only for kids. However, it is something we've worked hard to shed. We didn't really have games like Resident Evil or Eternal Darkness available to us at the launch of the GameCube. But, having said that, we've had some very good successes, and we're very confident that, going forward, [mature titles] will be an important part of our mix. We'll align ourselves with the publishers that do those kinds of things well. We've got Metroid coming out of Retro Studios, and that did very well; we've got that franchise now underway. Silicon Knights is now working on Metal Gear Solid, which is a Konami franchise. In that case, they had a great game franchise but no team to work on it, so they asked if we had a team to work on it. So that will be a regular part of our mix going forward, but it'll also be something that takes time. You can see the "Who are you?" campaign that we've launched just now, and one of the purposes of that campaign is to try to remind people that our characters are really appealing to a broad range of people. The characters themselves are not a reason to think of us as pandering to children. And the online activities -- you know, the more than 200 people creating their own ads, taking a picture and sticking a character face on it, or even sticking Mr. Miyamoto's face on there, it's a sign that people really do embrace our characters. We just need to remind people that they really are ageless in their appeal.

EGM: Will you try to have more mature titles at the launch of the next system? George: I think we're going to have a mixture. We have the right mix of publishers onboard, both in Japan and in the West, who by admission do a better job at some times of games than we do. Our internal capabilities are based around Mr. Miyamoto's expertise, and that gives us certain types of games that have been hugely successful. But we know we need to supplement that. We need to go out to publishers that do those types of games, and make sure they're involved early and have games ready to go at launch, not nine months or a year afterwards.

EGM: Do you wish you had the Grand Theft Auto series on GameCube? George: I think at this point I'm not sure it adds a lot, but if we had it first on GameCube, absolutely. It's been a hugely successful phenomenon, and it's something I'm not sure even Sony could have predicted. Sometimes luck has a lot to do with it. However, it was really a kind of wake-up call that said, hey, there are a lot of people out there, and you can't necessarily know where the next great game is coming from. You have to cast a pretty wide net.

EGM: Which properties or franchises do you think will be the stars for your next system? George: I doubt it would surprise anybody to say that we'll launch with some of our own in-house characters. Other than that, we'll go with the publishers that have the strongest licenses -- either existing brands like the EA Sports franchises, or great movie licenses. We're going to be looking at the strength of publishers, really, to determine who we work with and who we get involved with earliest.

EGM: Last question: What would you say to hardcore Nintendo fans who may be becoming discouraged with your consoles being second or third place over the past few years? George: I would say don't be discouraged. I'm not gonna say that even we're happy with the results over the last couple of years, but don't get discouraged. We still have a great capacity to make breakthrough games and surprise people, so I would say to just be optimistic. If you don't already own a GameCube, you should go out and get one now, because there are a lot of great titles you can enjoy right away. As we get ready for the next system, I think you'll be pleasantly surprised.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Electronic Gaming Monthly.

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