Despite New Competition Nintendo’s Future Looks Better Than Ever
Sure, the NES isn’t the new kid on the block any longer with new competition heating up from NEC’s TurboGrafx-16 and Sega’s Genesis. The new machines boast more processing power and prettier graphics, but also have price tags more than double what the NES commands. What this means in the near term is that Nintendo is expected to easily continue to bring in record profits. After all, simply selling a home console isn’t where the money is made, but rather it’s the software that continues to supply the most profit. After all, everyone needs new games to play, and the majority of the most popular ones are coming to the Nintendo.
Official NES systems numbers from Nintendo, which reports sales from September through August, show the NES in a continuous upward trend. Below are the shipment numbers from NCL (Nintendo Japan) to NOA (Nintendo of America), who in turn distributes the consoles to retailers:
- September 1985 – August 1986: 210,000
- September 1986 – August 1987: 1,810,000
- September 1987 – August 1988: 5,360,000
- September 1988 – August 1989: 9,320,000
We also have our first indicator of how the Game Boy is performing, with a total of 380,000 shipped out in the month of August alone. We expect those to have sold already, with many more in transit for the busy holiday shopping season.
NES Game Paks, more commonly referred to as game cartridges, are where most of the profits lie and now that last year’s microchip shortage is over, Nintendo and its third party licensees have been raking in the money hand over fist. For all of 1988 Nintendo sold about 33 million game cartridges, and 1989 is expected to bring in 50 million. What’s truly astonishing is that Nintendo is predicting 70 million for 1990! For even more reporting, check out the article below by Don Clark of the San Francisco Chronicle:
Zero Hour For Invaders
September 8, 1989|By DON CLARK, San Francisco Chronicle
Get ready for a new round of video game wars.
Atari dominated the first video game wave, while Nintendo has been rolling over all comers in the industry`s second big contest. Now, Atari, Sega and NEC are launching a major counterattack with a new breed of machines.
The Sega and NEC products, which the companies have just begun to ship, are supercharged versions of the game consoles that have created a new relationship between youngsters and TV sets. Atari, which dominated the first video game wave, is placing its bets on a $169 portable game player called the Lynx, which will compete with Nintendo`s hand-held Game Boy.
In addition to hardware companies, the new systems represent an opening for computer software companies that missed out on the Nintendo boom. Electronic Arts of San Mateo, Calif., which had shunned the craze, said in a prospectus that it must join the video game market to sustain its growth.
“We are not doing video games now, but we will be doing them in the future,“ said Allan Epstein, president of Accolade, a San Jose, Calif., software publisher.
The strategies share a theme: If you can`t beat `em at their own game, change the playing field.
Nintendo`s machine, which can be purchased for about $89, crunches just eight bits of data at a time. Sega and Nintendo, for more than double the price, are promoting new technologies offering sharper graphics.
The $189 Sega Genesis system uses a full-blown 16-bit microprocessor chip. NEC`s $199 TurboGrafx-16 adds a 16-bit accessory chip for handling graphics.
“We believe the video entertainment field is maturing,“ said David Rosen, chairman of Sega America, whose U.S. headquarters is South San Francisco. “What we are doing is bringing the true arcade experience into the home.“
But the $3.4 billion question is: Can technical improvements alone make up for Nintendo`s presence in nearly 20 million U.S. homes?
“Nintendo has a good 80 percent of the market, but they have not upgraded their system,“ said Lee Isgur, an analyst at PaineWebber Inc. “They`ve made themselves vulnerable to innovation.“
Wishful thinking, other market watchers said.
“Contrary to what Sega and NEC believe, this is a software-driven industry, and Nintendo far and away has the best software out there,“ said Gary Jacobson, an analyst at Kidder Peabody & Co. “I think Nintendo will continue to dominate the marketplace with the eight-bit machine.“
History may provide some lessons. Atari was winning the first video war when its sales reached $1.7 billion in 1982. But a brutal crash followed in 1984; the entire industry`s sales totaled $100 million by the next year.
Nintendo, which began rebuilding the market in 1985, tried to avoid the problems by imposing tight controls on the quantity and quality of game software. Though outside companies develop many games, Nintendo supplies all the cartridges that hold the software. Software companies that make a game title for Nintendo can`t sell it for competing game machines.
The results? Nintendo`s sales are expected to hit $2.6 billion this year, up from $1.7 billion last year.
Unit sales of machines may slow to 7 million in 1990, Nintendo predicts, compared with 8 million this year and 7 million in 1988. But software — where Nintendo makes most of its profits — is another story. It expects sales of 70 million cartridges in 1990, up from 50 million this year and 33 million in 1988.
Three articles from The Times News Idaho | August 25, 1989 page 26:
Craig has been covering the video game industry since 1995. His work has been published across a wide spectrum of media sites. He’s currently the Editor-In-Chief of Nintendo Times and contributes to Gaming Age.