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Nintendo Co., Ltd.

Nintendo Co., Ltd.

60, Fukuine Kamitakamatsu-cho
Higashiyama-ku, Kyoto 605
Japan
(075) 541-6111
(800) 255-3700; (800) 422-2602
Fax: (075) 531-9577
Web site: http://www.nintendo.com

Public Company
Incorporated
: 1889 as Marufuku Company, Ltd.
Employees : 1,002
Sales :¥534.325 billion (US$4.04 billion) (1998)
Stock Exchanges : Tokyo
Ticker Symbol : NTDOY
NA1C : 339932 Games, Toys, & Childrens Vehicle Manufacturing; 421920 Electronic Games Wholesaling

Nintendo Co., Ltd. is a toy and home entertainment concern that is famous worldwide for its popular home video games. Nintendos products arose in the mid-1980s from the relative obscurity of the amusement arcade to change the concept of home entertainment in both Japan and the United States. Nintendos main U.S. product, the Nintendo Entertainment System (NES), and its Japanese counterpart, the Family Computer (Famicom), were embraced by consumers of both nations, but increased competition in the early 1990s from a new generation of video machine competitors loosened Nintendos commanding hold on the market. The companys commitment to quality and innovation, as represented by its Nintendo 64 machine and software, kept Nintendo in the game as it advanced through the increasingly competitive environment. In the late 1990s, the revitalization of its hand-held, portable Game Boy system by way of the Pokémon game concept proved to be one of the companysand the $15 billion industrysbiggest successes of the period.

Playing Card Company: 1880s-Early 1960s

Nintendo was founded as Marufuku Company, Ltd., in Kyoto, Japan, in 1889 by Fusajiro Yamauchi, the great grandfather of the current president of Nintendo. Marufuku made playing cards for the Japanese game of Hanafuda, which is said to have had its origin in Tarot cards. In 1907 Marufuku introduced the first Western-style playing cards in Japan. Marufuku initially made the cards for Russian prisoners of war during the Russo-Japanese War of 1904-05 when the soldiers wore out the decks they had brought from Russia.

Between 1907 and World War II Marufuku solidified its status in the playing-card business. World War I, in which Japan fought on the side of the Allies, did not affect business in any remarkable way. In 1925, however, Marufuku began exporting Hanafuda cards to Japanese emigré communities in South America, Korea, and Australia. The years 1925 to 1928 also saw Marufuku developing a new, more effective marketing strategy that placed its products in tobacco shops. These marketing moves were complemented by Marufukus aggressive advertising, as Japans business practices became more Westernized.

World War II devastated the Japanese economy and delivered a hard blow even to the previously modest but stable home amusement market. The playing card industry and Marufuku, though, fared far better than most. In the austere postwar climate, when entertainment had to be cheap and simple, the demand for playing cards only decreased slightly. Marufuku, whose physical plant had not been damaged much in the war, thrived in the years following the war.

Hiroshi Yamauchi became Marufukus president in 1949, embarking on a wide-ranging program to modernize and rationalize the way his familys company was run. In 1952 Marufuku consolidated its factories, which had been scattered throughout Kyoto. In 1951 Yamauchi changed the company name to one more appropriate to the leisure industry; he called it the Nintendo Playing Card Company, Ltd. In Japanese, the word Nintendo has a proverbial meaning that loosely translates as, You work hard but, in the end, its in heavens hands.

Business boomed in the postwar era. In 1953 Yamauchi responded to a shortage in playing-card-quality paper by challenging his company to develop plastic playing cards. After initial difficulties in printing and coating the plastic cards, Nintendo started mass-production. In 1959 Nintendo first showed its sharp eye for the childrens market when it released playing cards in Japan that were printed with Walt Disney cartoon characters. By 1962 business was so good that Nintendo decided to go public, listing stock on the Osaka and Kyoto stock exchanges.

Diversification: 1960s-Early 1980s

A year later Nintendo began the drive towards diversification and innovation that eventually led it to the late 1980s boom that made its name a household word. First, in 1963, Nintendo augmented its product line by marketing board games as well as playing cards. By 1969 the game department was so successful that a new game production plant was built in Uji city, a suburb of Kyoto. The year 1970 saw Nintendo introducing electronic technology for the first time in Japan with its Beam Gun Series. An especially popular example of this technology was the laser clay-pigeon shooting system, introduced in 1973, in which arcade players aimed beams of light at targets projected on a small movie screen. By 1974, Nintendo was exporting this and other projection-based games to the United States and Europe.

In the next few years, arcade game technology made remarkable strides, with Nintendo in the vanguard. In 1975, in cooperation with Mitsubishi Electric, Nintendo first developed a video game system using a video playera technology made more complex the next year when a microprocessor was added to the system. By 1977 this technology was being marketed as part of the first, relatively unsophisticated generation of home video games.

In the amusement arcade Nintendos games were beginning to feature higher levels of technology. In 1978 Nintendo developed and started selling coin-operated video games using microcomputers. This innovation, which in 1981 resulted in such arcade hits as Donkey Kong, gave to arcade video games the complex graphics and stereo sound that Nintendo would later market for home use.

As the 1980s began, Nintendo started selling the Game and Watch product linea handheld series of electronic games, such as football, with liquid crystals and digital quartz micro-hardware. By this time, Nintendo found that its export business required a firmer foothold in the United States and established Nintendo of America, Inc., a wholly owned subsidiary, in New York City. In 1982 the U.S. office was moved to Redmond, Washington, and established there with an operating capital of US$600,000. As the 1980s progressed, the company focused on the development and marketing of home video technology. A new plant was built in 1983 in Uji city to meet the production requirements of Nintendos new flagship product, the Family Computer. Famicom, which allowed arcade-quality video games to be played at home, came to be played in more than 35 percent of Japans households.

With Famicom swiftly selling in Japan, Nintendo began exporting it to the United States. In 1985, however, when Nintendo was ready to enter U.S. homes, the home video market there seemed all but tapped out. The United States had experienced a dramatic home video boom in the late 1970s and early 1980s, but by mid-decade this boom had ended, leaving the U.S. industry with hundreds of millions of dollars in losses. The sales of the U.S. home video industry had plummeted from a $3 billion peak in 1983 to a $100 million trough in 1985. These figures did not daunt Nintendo, which quietly test marketed its games during the darkest depths of the U.S. slump. The response was enthusiastic. Nintendo concluded that the problems in the U.S. home video market were caused by an excess of uninspiring, low-quality games with which an undisciplined industry had flooded the market, losing the trust and patience of its customers as it went after quick profits.

Seizing Opportunity: Mid-1980s

Nintendo came to the United States in full force in 1985 with its American version of the Famicom, renamed the Nintendo Entertainment System. First year profits were astounding, and the skillfully managed demand of the U.S. market showed few signs of softening from its introduction to the end of the decade. According to Yamauchi, Nintendo owed its success to its ability to control the quality and amount of game software being sold for its NES systems. The NES hardware was similar to its Japanese precursor, the Famicom, consisting of a Nintendo control deck, hand controls, and the game cartridges themselves. The control deck sported an eight-bit computer that generated stereo sound and images in 52 colors. It hooked up with the purchasers television set to allow the viewer to play a complex video gamewhich could take up to 70 hours to completeby manipulating a joystick that controlled movement in two dimensions.

The NES control deck was sold at close to cost, about US$100, to place it in as many homes as possible. Nintendo then made a profit by selling its own game cartridges at US$25 to US$45 apiece, and by arranging lucrative licensing agreements with the numerous computer software manufacturers who were eager to get a piece of Nintendos pie by creating software for Nintendos games.

Company Perspectives

At Nintendo we are proud to be working for the leading company in our industry. We are strongly committed to producing and marketing the best products and support services available. We believe it is essential not only to provide products of the highest quality, but to treat every customer with attention, consideration and respect. By listening closely to our customers, we constantly improve our products and services.

We feel an equal commitment toward our employees. We want to maintain an atmosphere in which talented individuals can work together as a team. Commitment and enthusiasm are crucial to the high quality of our products and support services. We believe in treating our employees with the same consideration and respect that we, as a company, show our customers.

From the very beginning of its U.S. home video foray, Nintendo gained customer loyalty and enthusiasm by producing or licensing sophisticated, challenging, and surprising software for its NES. By 1989, this practice had translated into a 75-80 percent share of a US$3.4 billion home video game market. But the business strategies that brought Nintendo to its position of dominance soon came under intense scrutiny. Stymied competitors, the U.S. government, and Nintendos own licenseeswho found that Nintendos mode of granting licenses for game software could soak up as much as 50 percent of their profitsall came to regard Nintendos trade practices with a suspicion that led to widely publicized litigation.

Nintendo and most industry analysts maintained that a lack of quality control killed the first home video craze in the early 1980s. To avoid making the same mistake, Nintendo erected a demanding series of market controls. Each of its licensees was limited to developing only six new game titles a year. Nintendo manufactured its own patented game cartridges and required would-be software programmers to buy the cartridges in batches of 10,000 and then to assume full responsibility for reselling the game cartridges after they had been programmed by the licensee. To make certain that hardware competitors and software licensees would not try to circumvent Nintendos control, Nintendo included a security chip in each game cartridge. Games programmed on cartridges lacking this microchip appeared scrambled when one tried to play them. Nintendo reserved the right to modify games or to forbid a licensee attempts to market a game that had been deemed unsatisfactory in evaluations conducted by the company. When a licensee game gained approval, the developer had to wait two years before selling a version of its game to Nintendos competitors. Because of these safeguards, the quality of Nintendo-compatible software remained high. Yet dissatisfaction developed in the U.S. industry with Nintendos control.

In December 1988 Tengen Incorporated, a subsidiary of Nintendos archrival Atari and a Nintendo software licensee, filed an antitrust suit. Tengen wished to make games that would run on Nintendos NES without having to go through Nintendos series of quality-control measures. Having cracked the code programmed into the microchip in Nintendos cartridges, Tengen released a game without Nintendos approval. Nintendo filed a countersuit in February 1989 claiming patent infringement. By then Tengen parent company, Atari, had jumped into the fray, filing a separate US$100 million antitrust suit against Nintendo. As the litigation piled up, it became apparent that cultural differences in business practices were near the heart of the conflict.

Playing the Market: Late 1980s

The 1980s were otherwise a successful decade for Nintendo. The company concentrated on popularizing its existing products and developing new ones. In Japan Nintendo developed and started to sell a Family Computer Disk Drive System, which hit the mature Japanese market in 1986. The way this new product expanded communications capabilities of the Famicom was dramatically showcased in 1987, when Nintendo in Japan organized a nationwide Family Computer Golf Tournament. Players throughout Japan used modems, public telephone lines, and disc facsimile technology to compete against each other from their own living rooms in Nintendos home video game version of golf. Nintendo looked to the day when nationwide tournaments could be conducted with contestants comfortably ensconced in their living rooms. The network, which Nintendo soon hoped to duplicate in the United States, allowed people throughout Japan not only to play Nintendo games against each other but enabled people to download information from stock companies and trade in stocks, shop, or make ticket reservations.

In 1989 Nintendo announced a deal with Fidelity Investment Services, Boston, to bring this technology to the United States. For about US$200, American owners of Nintendos NES could buy a modem, a controller/joy stick, and a Fidelity-designed software cartridge that would allow the use of their home entertainment hardware for a more serious purpose: managing stock portfolios. A US$3 million grant in 1990 to Mits Media Lab was earmarked for researching the possibility of making video games more educational.

Despite such serious uses of its equipment, Nintendo remained synonymous with high-technology home fun, largely due to its expert marketing techniques and customer support. In 1988 Nintendo began publishing Nintendo Power magazine for its U.S. customers. This magazine, aimed at adolescents, was filled with game-playing tips and announcements concerning recently developed games and hardware. For those times when Nintendo Power could not help a frustrated game player, Nintendo introduced a 20-hour telephone bank with advice from 300 game counselors.

Further public relations efforts included a deal with Ralston Purina Company in May 1989 to market a citrus-flavored Nintendo Cereal System, featuring edible versions of the heroes from Nintendos video games. In 1989 Nintendo also teamed up with PepsiCo and the nationwide toy retailer Toys R Us for special joint promotions and in-store displays. Nintendo spent $60 million on U.S. advertising that year.

In 1989 Nintendo also returned to the handheld electronic game market it had created a decade earlier. The battery-operated Game Boy, about the size of a paperback book, featured interchangeable game cartridges, stereo sound, and complex dot-matrix graphics. In Japan Nintendo unveiled a new 16-bit advanced version of the Famicom, dubbed the Super Family Computer. Its more complex electronics meant more challenging games, more interesting graphics, and more realistic sound. Nintendo waited to release the U.S. version of the 16-bit machine until it felt the market was ready.

The companys leader, Yamauchi, one of the richest men in Japan, did not own a car or a television. He professed a disinterest in electronic games, saying he preferred chesslike board games. A frugal and cautious businessman, Yamauchi had a reputation for a reserved demeanor. His personality was compared to the minimalist architecture of the companys headquarters in Kyoto. Despite Yamauchis disciplined management style, the company was still able to create an environment in the research and development division that was conducive to creativity.

In reality, only ten percent of Nintendos games originated under Nintendos roof. The bulk of the companys products were created by independent designers, some of whom became millionaires in their own right in spite of Nintendos strict guidelines. Designers built games on speculation, paid Nintendo to produce the game cartridge, and then paid for the necessary marketing and advertising. These rules and Nintendos near-monopoly of the video game market led many in the industry to characterize Yamauchi as a tyrant.

A New Game Forming: Early 1990s

Developments in the early 1990s appeared foreboding to Nintendos hold on the market. Several antitrust cases, including one brought by a U.S. Senate subcommittee and one brought by Time warners Atari Games, threatened to change the look of the video game industry. Moreover, the continued success of Sega Enterprises, Ltd. gave Nintendo its first real competitor. It was Segas 16-bit Genesis System that led Nintendo to upgrade its eight-bit machinery. Segas growing product line and state-of-the art programs rivaled those of Nintendo and offered buyers an alternative video game system.

Nintendo was not to be easily vanquished, however. Indeed, many industry observers saw Nintendo as the next Disney, and a survey of school children found that the Mario character was more popular than Mickey Mouse. Although video game sales slowed in 1990, growing less than half as fast as they had the previous year, Nintendos sales increased by 63 percent. When U.S. videogame sales reached $4.2 billion by 1991, Nintendo products accounted for $3.2 billion.

In the summer of 1992 Japans Capcom Co. released Street Fighter II for Nintendo, and the game met with immediate success. Also in 1992, Nintendo produced Super Mario Paint, a drawing program featuring the companys star character, a game based on the Road Runner cartoon character, and the long-awaited Zelda sequel, The Legend of Zelda: A Link to the Past. Nintendo hoped eventually to raise its U.S. household penetration rate from 17 percent to the 35 percent it had achieved in Japan and mirror in the United States the profit-producing ten-to-one software-to-hardware ratio that Nintendo had achieved in its home country.

Nintendos exports to the United States had grown eightfold from 1987 to 1991, and the company held 60 percent of the 16-bit U.S. market at the end of 1992. Yet Sega comparative advertising, begun in 1990, pried open Nintendos grip on consumers. Sega branded Nintendos games as childrens toys, and Nintendo of America failed to respond to the ploy. Nintendos U.S. market share fell to 37 percent by the end of 1993. Jeopardy continued into 1994 when a new generation of machines hit the market.

Segas and Sonys new game consoles were 32-bit systems utilizing CD-ROM disk drives. Segas Saturn and Sonys PlayStation had inherently large storage capacities, thanks to the CD-ROMs, but were considered sluggish. Nintendo, on the other hand used much faster but more expensive silicon storage cartridges. Instead of matching the moves of its competitors, Nintendo concentrated on developing, in partnership with California-based Silicon Graphics, Inc., a 64-bit processor with superior capabilities.

Faced with consumer desertions to the 32-bit machines, Nintendo tried to extend the life of its 16-bit Super Nintendo System by bringing out hot games. Donkey Kong Country, which had been designed for the 64-bit system, was released in a 16-bit format and became the bestselling game of 1994.

The video game machine makers spent millions each year on software development. Independently produced games continued to generate the bulk of Nintendos revenue in this important area: in-house software brought in around 35 percent of sales. In 1995, pressed by the need to produce software for its new machine, Nintendo purchased 25 percent of Rare Ltd., a U.K.- based developer. This was Nintendos first investment in a software maker outside of Japan.

Nintendos promise of a cheaper and more exciting video system by early 1996 dampened Saturn and PlayStation sales somewhat during the 1995 Christmas season. Nevertheless, Sega passed Nintendo in terms of total sales for the first time in the fiscal year ending March 1996. Nintendos consolidated sales fell 15 percent and operating profits fell 24 percent. The 32-bit machines, the economic recession in the important Japanese market, and the defection of independent software producers to the competition contributed to Nintendos downward spiral.

Nintendo 64 (N64) finally hit the market in 1996. Japanese consumers were eager to check out the new system. With preordering rampant and queues outside the stores, some 300,000 Nintendo 64 machines were snapped up by eager addicts on the first day, according to an August 1996 article in the Economist. Anticipating the U.S. release, Sega and Sony cut the prices on their 32-bit units.

The N64 Japanese launch got off to a fast start but stalled just as quickly: only a few games were ready for the format. Nintendo had backpedaled on the N64 release date a number of times, a situation that served to frustrate many independent software makers and led to the defection of some important developers to Sony.

Further complicating matters was the complexity of programming required for the N64 software and programmers frustration with the limited storage capacity of the cartridges as compared to the CD-ROMs used by the competition. Another factor in the mix, one which was not there during Nintendos glory days, was the personal computer (PC). PC makers were fabricating increasingly sophisticated games, drawing talent from the software developer pool and eating into the market.

Difficulties aside, Nintendo continued to live up to its reputation for quality software and produced another blockbuster game. This is probably the most perfectly crafted video game ever, wrote Neil Gross in Business Week. Shigeru Miyamoto, the designer of the original 8-bit Mario game, scored big with Super Mario 64.

Marios fluid movements through dazzling three-dimensional graphics set the game apart from earlier versions and from competitors 32-bit games. Sony and Sega, on the other hand, were not just waiting for Nintendo to rack up points. Sega was the first to release a web-browsing device, and Sony was way ahead of the pack in number of games available. Nintendo continued to feel the pinch and recorded its third straight year of declining financial results in the fiscal year ending March 1996.

In the first half of 1996, sales of the 16-bit Super Nintendo machines and related software plummeted. Sales generated by the new system, due in part to the lack of software, did not pick up all the slack. In September 1996 N64, with eight titles on hand, hit North American shelves; by June 1997, 2.6 million machines had been sold, capturing 50 percent of the market. An additional 2.7 million had been sold elsewhere in the world. Revenue for fiscal 1997 were up 18 percent to $3.5 billion. Earnings increased nine percent to $54 million.

Sony, the market leader, had more than 11 million PlayStations in the hands of consumers worldwide and carried 150 game titles. Nintendo 64 offered just 17 titles for play. The importance of the software lay most clearly in its profitability. Nintendos margins for hardware were one to five percent while software yielded margins of nearly 45 percent. Software produced more than 50 percent of the companys profits. Aware of the dilemma it faced, Nintendo of Americas chairman personally solicited the services U.S. software developers.

In an effort to boost capacity, a sticking point with the game makers, Nintendo put an N64 peripheral in the pipeline. The DD64, a magnetic disk drive, was to also contain a communications device. Still, wrote Seanna Browder in Business Week, there are risks even to this. Historically, add-on devices dont go over big with gamers, who make one initial hardware investment and call it a day. There also the chance that Nintendo could split its market into two campsN64 and DD64. Then, game developers will be scratching their heads, wondering which to support.

Nintendo was headed in the right direction, but the progress was not entirely smooth. Sales and profits were boosted in 1997 by Pokémon or Pocket Monsters, a new game played on Nintendos handheld Game Boy machines, but the year was marked by a delay in the launch of the new hardware platform, DD64, and the botched delivery of YoshVs Story, a much ballyhooed software title.

Nintendo came back in early 1998 with the introduction of the Game Boy Camera, a digital offering that sold for $50 and attached to the Game Boy machine. Nintendo sold more than 700,000 of the units in its first five weeks on the Japanese market.

Solidifying its dominance in the handheld market, Nintendo also released Game Boy Color and Pokémon Pikacu, a virtual pet. (The Pokémon game had spawned a multibillion-dollar industry of related merchandise.) In late 1998, Nintendo spent millions on the rollout of The Legend of Zelda: Ocarina of Time and achieved record pre-sales on the game.

The Future Is Now: 1999, 2000, and Beyond

The next generation of video game machines appeared on the horizon late in 1998, when Sega introduced its 128-bit Dreamcast machine to Japan. The system processed data more quickly than both PlayStation and Nintendo 64 and thus was capable of producing more lifelike graphics. Dreamcast was scheduled to hit the United States in the fall of 1999.

Not to be outdone for long, both Sony and Nintendo planned for a year 2000 release of their new machines. Sony said its PlayStation II, which it categorized as a home entertainment system, was even faster than Dreamcast and would produce images with graphic quality similar to animated movies. No longer just a game machine, PlayStation II would accommodate movies and games recorded on digital video disks (DVD). Breaking with industry convention, the machine would also play games produced for the original PlayStation. Nintendo, in a $1 billion partnership with IBM, said its next generation console, code named Dolphin, would also use DVD and exceed the speed of even Sonys offering. Hype aside, Nintendo faced another unsettled transition period as it again maneuvered from one generation of game systems to the next.

Principal Subsidiaries

Nintendo of America, Inc. (U.S.A.); Nintendo of Australia Pty, Ltd.; Nintendo of Canada, Ltd.; Nintendo Espana, S.A.; Nintendo of Europe GmbH (Germany); Nintendo France S.A.R.L.; Nintendo Hong Kong Limited; Nintendo Netherlands B.V.

Further Reading

Abrahams, Paul, Nintendos Errors Could Well End Up Costing It the Game, Financial Times, October 17, 1998, p. 21.

Alexander, Steve, The New 128-Bit Consoles: A Whole New Game, Star Tribune (Minneapolis), May 14, 1999, pp. D1-D2.

Brandt, Richard, Clash of the Titans, Business Week, September 7, 1992.

Browder, Seanna, Steven B. Brull, and Andy Reinhardt, Nintendo: At the Top of Its Game, Business Week, June 9, 1997, pp. 72-73.

Carlton, Jim, U.S. Retail Sales of Video Games Up 32% for Year, Wall Street Journal, November 6, 1998, p. B6.

Dawley, Heidi, and Paul M. Eng, Killer Instinct for Hire, Business
Week
, May 29, 1995, pp. 91-92.

Gross, Neil, Infinitely Cool in 64 Bits, Business Week, October 14, 1996, p. 134.

Gross, Neil, and Robert D. Hof, Nintendos Yamauchi: No More Playing Around, Business Week, February 21, 1994, p. 71.

Hasbro to Handle Pokémon in U.S., Advertising Age, June 1, 1998, p. 44.

Jackson, David S., The Spielberg of Video Games, Time, May 20, 1996, p. 53.

King, Sharon R., Mania for Pocket Monsters Yields Billions for Nintendo, New York Times, April 26, 1999, pp. Al +.

Konish, Nancy, Video Game Giants Are Neck and Neck for the Profit, Electronic Design, September 14, 1998, p. 32A.

Krantz, Michael, Super Marios Dazzling Comeback, Time, May 20, 1996, pp. 52-54.

Kunii, Irene M., ega: Were Going to Blow Them Out of the Water, Business Week, December 7, 1998, p. 108.

_____, Smile, Youre on Candid Game Boy, Business Week, April 27, 1998, p. 8.

Lefton, Terry, Zelda Returns with $10M, Brandweek, October 19, 1998, p. 8.

McGill, Douglas C, Nintendo Scores Big, New York Times, December 4, 1988.

Moffat, Susan, Can Nintendo Keep Winning?, Fortune, November 5, 1990.

Nakamoto, Michiyo, Competition Continues to Squeeze Nintendo, Financial Times, May 23, 1996, p. 36.

_____, Move to New Technology Hurts Nintendo, Financial Times, November 6, 1996, p. 34.

_____, Sales of New Game Lift Nintendo, Financial Times, November 14, 1997, p. 22.

Nintendo Wakes Up, Economist, August 3, 1996, pp. 55-56.

Now, the Latest Beepings from Video-Game Land, Money, July 1991.

Takahashi, Dean, Nintendo Is Top Scorer in Game Sales, But Sony Sees Bigger Hardware Growth, Wall Street Journal, January 19, 1999, p. B6.

Rene Steinke and Mary McNulty

updated by Kathleen Peippo

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Nintendo Co., Ltd.

Nintendo Co., Ltd.

60, Fukuine Kamitakamatsu-cho
Higashiyama-ku, Kyoto 605
Japan
(075) 541-6111
Fax: (075) 551-2722

Public Company
Incorporated: 1889 as Marufuku Company, Ltd.
Employees: 2,280
Sales: ¥471.42 billion (US$3.95 billion)
Stock Exchanges: Tokyo Osaka Kyoto
SICs: 3944 Games, Toys, and Childrens Vehicles

Nintendo Co., Ltd. is a toy and home-entertainment concern that is famous worldwide for its popular home video games. Nintendos products moved in the mid-1980s from the relative obscurity of the amusement arcade to change the concept of home entertainment in both Japan and the United States. Nintendos main U.S. product, the Nintendo Entertainment System (NES), and its Japanese counterpart, the Family Computer (Famicom), were embraced by the consumers of both nations with an enthusiasm normally granted to short-term fads. In Japan one in three households bought a Famicom, and sales trends in the United States pointed toward a similarly spectacular distribution rate for the NES. Nintendos success proved to be no mere fad. What kept Nintendo Mania, as it was known in the United States, from going the way of other toy booms was Nintendos ability to maintain customer interest in its arcade-quality home video games over a long period of time. Nintendos products and its marketing methodswhich featured restraint, an obsessive interest in quality control, and an effective public relations schemegave it, according to a Nintendo executive quoted in Business Week in 1987, a boom with no bust.

Nintendo was founded as the Marufuku Company, Ltd., in Kyoto, Japan, in 1889 by Fusajiro Yamauchi, the great grandfather of the current president of Nintendo. Marufuku made playing cards for the Japanese game of Hanafuda, which is said to have had its origin in Tarot cards. In 1907 Marufuku introduced the first Western-style playing cards in Japan. Marufuku first made the Western-style cards for Russian prisoners of war during the Russo-Japanese War of 1904 to 1905 when the soldiers wore out the decks they had brought from Russia.

Between 1907 and World War II Marufuku solidified its status in the playing-card business. World War I, in which Japan fought on the side of the Allies, did not affect business in any remarkable way. In 1925, however, Marufuku began exporting Hanafuda cards to Japanese emigre communities in South America, Korea, and Australia. The years 1925 to 1928 also saw Marufuku developing a new, more effective marketing strategy that placed its products in tobacco shops. These marketing moves were complemented by Marufukus aggressive advertising, as Japans business practices became more Westernized.

World War II devastated the Japanese economy and delivered a hard blow even to the previously modest but stable home amusement market. The playing card industry and Marufuku, though, fared far better than most. In the austere postwar climate, when entertainment had to be cheap and simple, the demand for playing cards only decreased slightly. Marufuku, whose physical plant had not been damaged much in the war, thrived in the years following the war.

Hiroshi Yamauchi became Marufukus president in 1949, embarking on a wide-ranging program to modernize and rationalize the way his familys company was run. In 1952 Marufuku consolidated its factories, which had been scattered throughout Kyoto. In 1951 Yamauchi changed the company name to one more appropriate to the leisure industry; he called it the Nintendo Playing Card Company, Ltd. In Japanese, the word Nintendo has a proverbial meaning that loosely translates as, You work hard but, in the end, its in heavens hands.

Business boomed in the postwar era. In 1953 Yamauchi responded to a shortage in playing-card-quality paper by challenging his company to develop plastic playing cards. After initial difficulties in printing and coating the plastic cards, Nintendo started mass-production. In 1959 Nintendo first showed its sharp eye for the childrens market when it released playing cards in Japan that were printed with Walt Disney cartoon characters. By 1962 business was so good that Nintendo decided to go public, listing stock on the Osaka and Kyoto stock exchanges.

A year later Nintendo began the drive towards diversification and innovation that eventually led it to the late-1980s boom that made its name a household word. First, in 1963, Nintendo augmented its product line by marketing board games as well as playing cards. By 1969, the game department was so successful that a new game-production plant was built in Uji city, a suburb of Kyoto. The year 1970 saw Nintendo introducing electronic technology for the first time in Japan with its Beam Gun Series. An especially popular example of this technology was the laser clay-pigeon shooting system, introduced in 1973, in which arcade players aimed beams of light at targets projected on a small movie screen. By 1974, Nintendo was exporting this and other projection-based games to the United States and Europe.

In the next few years, arcade-game technology made remarkable strides, with Nintendo in the vanguard. In 1975, in cooperation with Mitsubishi Electric, Nintendo first developed a video game system using a video playera technology made more complex the next year when a microprocessor was added to the system. By 1977, this technology was being marketed as part of the first, relatively unsophisticated generation of home video games.

In the amusement arcade Nintendos games were beginning to feature higher levels of technology. In 1978 Nintendo developed and started selling coin-operated video games using microcomputers. This innovation, which in 1981 resulted in such arcade hits as Donkey Kong, gave to arcade video games the complex graphics and stereo sound that Nintendo would later market for home use.

As the 1980s began, Nintendo started selling the Game and Watch product linea hand-held series of electronic games, such as football, with liquid crystals and digital quartz micro-hardware. By this time, Nintendo found that its export business required a firmer foothold in the United States and established Nintendo of America, Inc., a wholly owned subsidiary, in New York City. In 1982 the U.S. office was moved to Redmond, Washington, and established there with an operating capital of US$600,000. As the 1980s progressed, the company focused on the development and marketing of home video technology. A new plant was built in 1983 in Uji city to meet the production requirements of Nintendos new flagship product, the Family Computer. Famicom, which allowed arcade-quality video games to be played at home, came to be played in more than 35 percent of Japans households.

With Famicom swiftly selling in Japan, Nintendo began exporting it to the United States. In 1985, however, when Nintendo was ready to go into U.S. homes, the home video market there seemed all but tapped out. The United States had experienced a dramatic home video boom in the late 1970s and early 1980s, but by mid-decade this boom had ended, leaving the U.S. industry with hundreds of millions of dollars in losses. The sales of the U.S. home video industry had plummeted from a $3 billion peak in 1983 to a $100 million trough in 1985. These figures did not daunt Nintendo. Nintendo quietly test marketed its games during the darkest depths of the U.S. slump. The U.S. response was quite enthusiastic. Nintendo concluded that the problems in the U.S. home video market were caused by an excess of uninspiring, low-quality games with which an undisciplined industry had flooded the market, losing the trust and patience of its customers as it went after quick profits.

Nintendo came to the United States in full force in 1985 with its American version of the Famicom, renamed the Nintendo Entertainment System. First year profits were astounding, and the skillfully managed demand of the U.S. market showed few signs of softening from its introduction to the end of the decade. According to Yamauchi, Nintendo owed its success to its ability to control the quality and amount of game software being sold for its NES systems. The NES hardware was similar to its Japanese precursor, the Famicom, consisting of a Nintendo control deck, hand controls, and the game cartridges themselves. The control deck sported an eight-bit computer that generated stereo sound and images in 52 colors. It hooked up with the purchasers television set to allow the viewer to play a complex video gamewhich could take up to 70 hours to completeby manipulating a joy stick that controlled movement in two dimensions.

The NES control deck was sold at close to cost, about US$100, to place it in as many homes as possible. Nintendo then made a profit by selling its own game cartridges at US$25 to US$45 apiece, and by arranging lucrative licensing agreements with the numerous computer software manufacturers who were eager to get a piece of Nintendos pie by creating software for Nintendos games.

From the very beginning of its U.S. home video foray, Nintendo gained customer loyalty and enthusiasm by producing or licensing sophisticated, challenging, and surprising software for its NES. By 1989, this practice had translated into a 75 percent to 80 percent share of a US$3.4 billion home video game market. But the business strategies that brought Nintendo to its position of dominance soon came under intense scrutiny. Stymied competitors, the U.S. government, and Nintendos own licenseeswho found that Nintendos mode of granting licenses for game software could soak up as much as 50 percent of their profitsall came to regard Nintendos trade practices with a suspicion that led to widely publicized litigation.

Nintendo and most industry analysts maintained that a lack of quality control killed the first home video craze in the early 1980s. To avoid making the same mistake, Nintendo erected a demanding series of market controls. Each of its licensees was limited to developing only six new game titles a year. Nintendo manufactured its own patented game cartridges and required would-be software programmers to buy the cartridges in batches of 10,000 and then to assume full responsibility for reselling the game cartridges after they had been programmed by the licensee. To make certain that hardware competitors and software licensees would not try to circumvent Nintendos control, Nintendo included a security chip in each game cartridge. Games programmed on cartridges lacking this microchip appeared scrambled when one tried to play them. Nintendo reserved the right to modify games or to forbid a licensees attempts to market a game that had been deemed unsatisfactory in evaluations conducted by the company. When a licensees game gained approval, the developer had to wait two years before selling a version of its game to Nintendos competitors. Because of these safeguards, the quality of Nintendo-compatible software remained high. Yet dissatisfaction developed in the U.S. industry with Nintendos control.

In December of 1988 Tengen Incorporated, a subsidiary of Nintendos arch-rival Atari and a Nintendo software licensee, filed an antitrust suit. Tengen wished to make games that would run on Nintendos NES without having to go through Nintendos series of quality-control measures. Having cracked the code programmed into the microchip in Nintendos cartridges, Tengen released a game without Nintendos approval. Nintendo filed a countersuit in February of 1989 claiming patent infringement. By then Tengens parent company, Atari, had jumped into the fray, filing a separate US$100 million antitrust suit against Nintendo. As the litigation piled up, it became apparent that cultural differences in business practices were near the heart of the conflict.

The 1980s were otherwise a successful decade for Nintendo. It concentrated on popularizing its existing products and developing new ones. In Japan Nintendo developed and started to sell a Family Computer Disk Drive System, which hit the mature Japanese market in 1986. The way this new product expanded communications capabilities of the Famicom was dramatically showcased in 1987, when Nintendo in Japan organized a nationwide Family Computer Golf Tournament. Players throughout Japan used modems, public telephone lines, and disc facsimile technology to compete against each other from their own living rooms in Nintendos home video game version of golf. Nintendo looks to the day when nationwide tournaments can be conducted with contestants comfortably ensconced in their living rooms. The network, which Nintendo soon hoped to duplicate in the United States, allowed people throughout Japan not only to play Nintendo games against each other but enabled people to download information from stock companies and trade in stocks, shop, or make ticket reservations.

In 1989 Nintendo announced a deal with Fidelity Investment Services, Boston, to bring this technology to the United States. For about US$200, American owners of Nintendos NES could buy a modem, a controller/joy stick, and a Fidelity-designed software cartridge that would allow the use of their home-entertainment hardware for a more serious purpose: managing stock portfolios. A US$3 million grant in 1990 to MITs Media Lab was earmarked for researching the possibility of making video games more educational.

Despite such serious uses of its equipment, Nintendo remained synonymous with high-technology home fun, largely due to its expert marketing techniques and customer support. In 1988 Nintendo began publishing Nintendo Power magazine for its U.S. customers. This magazine, aimed at adolescents, was filled with game-playing tips and announcements concerning recently developed games and hardware. For those times when Nintendo Power could not help a frustrated game player, Nintendo introduced a 20-hour telephone bank with advice from 300 game counselors.

Further public-relations efforts included a deal with Ralston Purina Company in May 1989 to market a citrus-flavored Nintendo Cereal System, featuring edible versions of the heroes from Nintendos video games. In 1989 Nintendo also teamed up with PepsiCo and the nationwide toy retailer Toys R Us for special joint promotions and in-store displays. Nintendo spent $60 million on U.S. advertising that year.

In 1989 Nintendo also returned to the hand-held electronic game market it had created a decade earlier. The battery-operated Game Boy, about the size of a paperback book, featured interchangeable game cartridges, stereo sound, and complex dot-matrix graphics. In Japan Nintendo unveiled a new 16-bit advanced version of the Famicom, dubbed the Super Family Computer. Its more complex electronics meant more challenging games, more interesting graphics, and more realistic sound. Nintendo waited to release the U.S. version of the 16-bit machine until it felt the American market was ready.

The companys leader, Yamauchi, is one of the richest men in Japan, and yet he does not own a car or a television. He professes a disinterest in electronic games, saying he prefers chess-like board games. A frugal and cautious businessman, Yamauchi is known for his reserved demeanor. It is said that his personality matches the minimalist architecture of the companys headquarters in Kyoto. Despite Yamauchis disciplined management style, the company is still able to create an environment in the research and development division that is conducive to creativity.

In reality, only ten percent of Nintendos games originate under Nintendos roof. The bulk of the companys products are created by independent designers, some of whom have become millionaires in their own right in spite of Nintendos strict guidelines. Designers must build a game on speculation, pay Nintendo to produce the game cartridge, and then pay for the necessary marketing and advertising. These rules and Nintendos near-monopoly of the video game market have lead many in the industry to characterize Yamauchi as a tyrant.

Developments in the early 1990s may threaten Nintendos hold on the market. Several anti-trust cases, including one brought by a U.S. Senate subcommittee and the continuing one brought by Time Warners Atari Games, could change the look of the video game industry. And the continued success of Sega Enterprises, Ltd., could mean that Nintendo has met its first real competitor. It was Segas 16-bit Genesis System that led Nintendo to upgrade its eight-bit machinery. Segas growing product line and state-of-the art programs rival those of Nintendo and offer buyers an alternate when they are considering the purchase of a video game system.

Nintendo will not be easily vanquished, however. Indeed, many industry observers see Nintendo as the next Disney, and a survey of school children found that the Mario character is more popular than Mickey Mouse. Although video game sales slowed in 1990, growing less than half as fast as they had the previous year, Nintendos sales increased by 63 percent. When U.S. videogame sales reached $4.2 billion by 1991, Nintendo products accounted for $3.2 billion.

In the summer of 1992 Japans Capcom Co. released Street Fighter II for Nintendo, and the game met with immediate success. For 1992 Nintendo plans to produce Super Mario Paint, a drawing program featuring the companys star character, and a game based on the Road Runner cartoon character. Also in the works is a compact disk package that can play both music CDs or live-action video software. Nintendo hopes eventually to raise its U.S. household penetration rate from 17 percent to the 35 percent it has achieved in Japan. Once Nintendo gets the hardware in place, Yamauchi wants to mirror in the United States the profit-producing ten-to-one software-to-hardware ratio that Nintendo has achieved in Japan.

Principal Subsidiaries

Nintendo of America, Inc. (U.S.A.); Nintendo of Canada, Ltd.

Further Reading

McGill, Douglas C., Nintendo Scores Big, New York Times, December 4, 1988; Moffat, Susan, Can Nintendo Keep Winning?, Fortune, November 5, 1990; Now, the Latest Beepings from Video-Game Land, Money, July 1991; Brandt, Richard, Clash of the Titans, Business Week, September 7, 1992.

Rene Steinke

updated by Mary McNulty

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Nintendo Co., Ltd.

Nintendo Co., Ltd.

60, Fukuine Kamitakamatsu-cho
Higashiyama-ku, Kyoto 605
Japan
(075) 541-6111
Fax: (075) 551-2722

Public Company
Incorporated: 1889 as Marufuku Company, Ltd.
Employees: 689
Sales: ¥291.20 billion (US$2.03 billion)
Stock Exchanges: Tokyo Osaka Kyoto

Nintendo is a toy and home-entertainment concern that is famous worldwide for its popular home video games. Nintendos products moved in the mid-1980s from the relative obscurity of the amusement arcade to change the concept of home entertainment in both Japan and the United States. Nintendos main United States product, the Nintendo Entertainment System (NES), and its Japanese counterpart, the Family Computer (Famicom), were embraced by the consumers of both nations with an enthusiasm normally granted to short-term fads. In Japan, one in three households bought a Famicom, and sales trends in the United States pointed toward a similarly spectacular distribution rate for the NES. Nintendos success proved to be no mere fad. What kept Nintendo Mania, as it was known in the United States, from going the way of other toy booms was Nintendos ability to maintain customer interest in its arcade-quality home video games over a long period of time. Nintendos products and its marketing methodswhich featured restraint, an obsessive interest in quality control, and an effective public relations schemegave it, according to a Nintendo executive quoted in Business Week, November 9, 1987, a boom with no bust.

Nintendo was founded as the Marufuku Company, Ltd., in Kyoto, Japan, in 1889 by Fusajiro Yamauchi, the greatgrandfather of the current president of Nintendo. Marufuku made playing cards for the Japanese game of Hanafuda, which is said to have had its origin in Tarot cards. In 1907, Marufuku introduced the first Western-style playing cards in Japan. Marufuku first made the Western-style cards for Russian prisoners of war during the Russo-Japanese War of 1904-1905, after the soldiers wore out the decks they had brought from Russia.

Between 1907 and World War II Marufuku solidified its status in the playing-card business. World War I, in which Japan fought on the side of the Allies, did not affect business in any remarkable way. In 1925, however, Marufuku began exporting Hanafuda cards to Japanese emigré communities in South America, Korea, and Australia. The years 1925 to 1928 also saw Marufuku developing a new, more effective marketing strategy which placed its products in tobacco shops. These marketing moves were complemented by Marufukus aggressive advertising, as Japans business practices became more Westernized.

World War II devastated the Japanese economy, and delivered a hard blow even to the previously modest but stable home amusement market. However, the playing card industry and Marufuku fared far better than most. In the austere postwar climate, when entertainment had to be cheap and simple, the demand for playing cards only decreased slightly. Marufuku, whose physical plant had not been damaged much in the war, thrived in the years following the war.

Hiroshi Yamauchi became Marufukus president in 1949, embarking on a wide-ranging program to modernize and rationalize the way his familys company was run. In 1952, Marufuku consolidated its factories, which had been scattered throughout Kyoto. In 1951, Yamauchi changed the company name to one more appropriate to the leisure industry; he called it the Nintendo Playing Card Company, Ltd. In Japanese, the word Nintendo has a proverbial meaning that loosely translates as you work hard but, in the end, its in heavens hands.

Business boomed in the postwar era. In 1953 Yamauchi responded to a shortage in playing-card-quality paper by challenging his company to develop plastic playing cards. After initial difficulties in printing and coating the plastic cards, Nintendo started mass-production. In 1959, Nintendo first showed its sharp eye for the childrens market when it released playing cards in Japan that were printed with Walt Disney cartoon characters. By 1962, business was so good that Nintendo decided to go public, listing stock on the Osaka and Kyoto stock exchanges.

A year later, Nintendo began the drive towards diversification and innovation that eventually led it to the late-1980s boom that made its name a household word. First, in 1963, Nintendo augmented its product line by marketing board games as well as playing cards. By 1969, the game department was so successful that a new game-production plant was built in Uji city, a suburb of Kyoto. The year 1970 saw Nintendo introducing electronic technology for the first time in Japan with its Beam Gun Series. An especially popular example of this technology was the laser clay-pigeon shooting system, introduced in 1973, in which arcade players aimed beams of light instead of birdshot at targets projected on a small movie screen. By 1974, Nintendo was exporting this and other projection-based games to the United States and Europe.

In the next few years, arcade-game technology made remarkable strides, with Nintendo in the vanguard. In 1975, in cooperation with Mitsubishi Electric, Nintendo first developed a video game system using a video playera technology made more complex the next year when a microprocessor was added to the system. By 1977, this technology was being marketed as part of the first, relatively unsophisticated generation of home video games.

In the amusement arcade, Nintendos games were beginning to feature higher and higher levels of technology. In 1978, Nintendo developed and started selling coin-operated video games using microcomputers. This innovation, which in 1981 resulted in such arcade hits as Donkey Kong, gave to arcade video games the complex graphics and stereo sound that Nintendo would later market for home use.

As the 1980s began, Nintendo started selling the Game and Watch product linea hand-held series of electronic games, such as football, with liquid crystals and digital quartz micro-hardware. By this time, Nintendo found that its export business required a firmer foothold in the United States and established Nintendo of America, Inc., a wholly owned subsidiary, in New York City. In 1982, the U.S. office was moved to Redmond, Washington, and established there with an operating capital of US$600,000.

In the 1980s the company focused on the development and marketing of home video technology. A new plant was built in 1983 in Uji city to meet the production requirements of Nintendos new flagship product, the Family Computer. Famicom, which allowed arcade-quality video games to be played at home came to be placed in more than 35% of Japans households.

With Famicom swiftly selling in Japan, Nintendo began exporting it to the United States. In 1985, however, when Nintendo was ready to go into U.S. homes, the home video market there seemed all but tapped out. The United States had experienced a dramatic home video boom in the late 1970s and early 1980s, but by mid-decade this boom had ended, leaving the U.S. industry with hundreds of millions of dollars in losses. The sales of the U.S. home video industry had plummeted from a $3 billion peak in 1983 to a $100 million trough in 1985. These figures did not daunt Nintendo. Nintendo quietly testmarketed its games during the darkest depths of the U.S. slump. The U.S. response was quite enthusiastic. Nintendo concluded that the problems in the U.S. home video market were caused by an excess of uninspiring, low-quality games with which an undisciplined industry had flooded the market, losing the trust and patience of its customers as it went after quick profits.

Nintendo came to the United States in full force in 1985 with its American version of the Famicom, renamed the Nintendo Entertainment System. First year profits were astounding, and the skilfully-managed demand of the U.S. market showed few signs of softening from its introduction to the end of the decade.

According to Yamauchi, Nintendo owed its success to its ability to control the quality and amount of game software being sold for its NES systems. The NES hardware was similar to its Japanese precursor, the Famicom, consisting of a Nintendo control deck, hand controls, and the game cartridges themselves. The VCR-like control deck sported an eight-bit computer that generated stereo sound and images in 52 colors. It hooked up with the purchasers television set to allow the viewer to play a complex video gamewhich could take up to 70 hours to completeby manipulating a joy stick that controlled movement in two dimensions.

The NES control deck was sold at close to cost, about US$100, to place it in as many homes as possible. Nintendo then made a profit by selling its own game cartridges at US$25 to US$45 apiece, and by arranging lucrative licensing agreements with the numerous computer software manufacturers who were eager to get a piece of Nintendos pie by creating software for Nintendos games.

From the very beginning of its U.S. home video foray, Nintendo gained customer loyalty and enthusiasm by producing or licensing sophisticated, challenging, and surprising software for its NES. By 1989, this practice had translated into a 75% to 80% share of a US$3.4 billion home videogame market.

The business strategies that brought Nintendo to its position of dominance soon came under intense scrutiny. Stymied competitors, the U.S. government, and Nintendos own licenseeswho found that Nintendos mode of granting licenses for game software could soak up as much as 50% of their profitsall came to regard Nintendos trade practices with a suspicion that led to widely publicized litigation.

Nintendo and most industry analysts maintained that a lack of quality control killed the first home video craze in the early 1980s. To avoid making the same mistake, Nintendo erected a demanding series of market controls. Each of its licensees, was limited to developing only six new game titles a year. Nintendo manufactured its own patented game cartridges and required would-be software programmers to buy the cartridges in batches of 10,000 and then to assume full responsibility for re-selling the game cartridges after they had been programmed by the licensee. To make certain that hardware competitors and software licensees would not try to circumvent Nintendos control, Nintendo included a microchip in each game cartridge. Games programmed on cartridges lacking this microchip appeared scrambled when one tried to play them. Nintendo reserved the right to modify games or to forbid a licensees attempts to market a game that had been deemed unsatisfactory in evaluations conducted by the company. When a licensees game gained approval, the developer had to wait two years before selling a version of its game to Nintendos competitors. Because of these safeguards, the quality of Nintendo-compatible software remained high. Yet dissatisfaction developed in the U.S. industry with Nintendos control.

In December 1988, Tengen Incorporated, a subsidiary of Nintendos arch-rival Atari and a Nintendo software licensee, filed an antitrust suit. Tengen wished to make games that would run on Nintendos NES without having to go through Nintendos series of quality-control measures. Having cracked the code programmed into the microchip in Nintendos cartridges, Tengen released a game without Nintendos approval. Nintendo filed a countersuit in February 1989 claiming patent infringement. By then Tengens parent company Atari had jumped into the fray, filing a separate US$100 million antitrust suit against Nintendo. As the litigation piled up, it became apparent that cultural differences in business practices were near the heart of the conflict.

The 1980s were otherwise a successful decade for Nintendo. It concentrated on popularizing its existing products and developing new ones. In Japan, Nintendo developed and started to sell a Family Computer Disk Drive System, which hit the mature Japanese market in 1986. The way this new product expanded communications capabilities of the Famicom was dramatically showcased in 1987, when Nintendo in Japan organized a nationwide Family Computer Golf Tournament. Players throughout Japan used modems, public telephone lines and disc facsimile technology to compete against each other from their own living rooms in Nintendos home videogame version of golf. The network, which Nintendo soon hoped to duplicate in the United States, allowed people throughout Japan not only to play Nintendo games against each other; it also enabled people to download information from stock companies and trade in stocks, shop, or make ticket reservations.

In 1989, Nintendo announced a deal with Fidelity Investment Services, Boston, to bring this technology to the United States. For about US$200, American owners of Nintendos NES could buy a modem, a controller-joystick, and a Fidelity-designed software cartridge that would allow the use of their home-entertainment hardware for a more serious purpose: managing stock portfolios. A US$3 million grant in 1990 to MITs Media Lab was earmarked for researching the possibility of making videogames more educational.

Despite such serious uses of its equipment, Nintendo remained synonymous with high-technology home fun, largely due to its expert marketing techniques and customer support. In 1988, Nintendo began publishing Nintendo Power magazine for its U.S. customers. This magazine, aimed at adolescents, was filled with game-playing tips and announcements concerning recently developed games and hardware. For those times when Nintendo Power could not help a frustrated game-player, Nintendo introduced a 24-hour telephone bank with advice from 100 game counselors.

Further public-relations efforts included a deal with Ralston Purina Company in May 1989 to market a citrusflavored Nintendo Cereal System, featuring edible versions of the heroes from Nintendos video games. In 1989 Nintendo also teamed up with PepsiCo and the nationwide toy retailer Toys R Us for special joint promotions and in-store displays. Nintendo spent $60 million on U.S. advertising that year.

In 1989, Nintendo also returned to the handheld electronic game market it had created a decade earlier. The battery operated Game Boy, about the size of a paperback book, featured interchangeable game cartridges, stereo sound, and complex dot-matrix graphics. In Japan, Nintendo unveiled a new 16-bit advanced version of the Famicom, dubbed the Super Family Computer. Its more complex electronics meant more challenging games, more interesting graphics, and more realistic sound. Nintendo waited to release the U.S. version of the 16-bit machine until it felt the American market was ready.

Nintendo hopes eventually to raise its U.S. household penetration rate from 17% to the 35% it has achieved in Japan. Once Nintendo gets the hardware in place, Yamauchi wants to mirror in the United States the profit-producing ten-to-one software-to-hardware ratio that Nintendo has achieved in Japan.

Principal Subsidiaries

Nintendo of America, Inc. (U.S.A.); Nintendo of Canada, Ltd.

Further Reading

McGill, Douglas C., Nintendo Scores Big, The New York Times, December 4, 1988.

René Steinke

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"Nintendo Co., Ltd.." International Directory of Company Histories. . Encyclopedia.com. 19 Oct. 2017 <http://www.encyclopedia.com>.

"Nintendo Co., Ltd.." International Directory of Company Histories. . Encyclopedia.com. (October 19, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/nintendo-co-ltd-1

"Nintendo Co., Ltd.." International Directory of Company Histories. . Retrieved October 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/nintendo-co-ltd-1