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Nintendo's Challenge

By Steven Mallas
January 11, 2005

Some recent news from Electronic Arts (Nasdaq: ERTS) got me thinking about Nintendo (Pink Sheets: NTDOY) and its brand management. According to Electronic Arts, players of Gamecube's next entry in its NBA Street franchise, to be called NBA Street V3 -- how's that for a clever moniker? -- will find a bonus feature: Characters from the historical lore of the console video game giant. Mario, Luigi, and the pulchritudinous Princess Peach make up the Nintendo All-Stars team, and from what I can infer, it's going to be one crazy game of b-ball when those lovable goofballs hit the screen (the game's executive producer, Wil Mozell, says an "authentic Nintendo court" will be included). The game should be out sometime next month.  

This is cool for Electronic Arts and its property because it will benefit from the association with such popular characters. But it could be even cooler for Nintendo, a company that probably wants to take away some heat from other hot video game entities.

After all, as I mentioned in an article last year on the next Nintendo hardware unit, the company isn't exactly the biggest name in its field these days. A deal like this can help spread the word to fans of the EA sports title that Nintendo is still a viable force in the console universe. Granted, the release states that the Mario characters are to be included only in the Gamecube version of the franchise, but I think that even people who own the system will need as much of a push as any potential buyer of the next Nintendo console.  Believe me, many current Nintendo devotees will need plenty of persuasion to back the company's next console upgrade, when they could swing for Sony's (NYSE: SNE) third PlayStation or Microsoft's (Nasdaq: MSFT) sequel to the Xbox.

I sense that most teenagers and adults are leaning toward forgoing Nintendo this time around in favor of the other two brands. The perception is that one's selections will be limited by sticking with the Mario/Donkey Kong house. For instance, if you wanted to play the latest console versions of, say, Contra or Castlevania, you needed to have a PlayStation 2. Likewise, for the latest version of Grand Theft Auto, you needed a PlayStation 2 or will need an Xbox (Grand Theft Auto: San Andreas will be released on this platform in June). Many games are indeed available for all of the systems, but I think that the perception of Nintendo's limited options remains. Adding to the perception, some retail places devote less shelf space to Gamecube software. Nintendo will counter that its users get all the great Mario titles, but I don't think this generation buys into those mythologies as much as previous ones did. Blame it on the Mario franchise being too childlike, blame it on age compression, whatever -- the plumber is going to have a hard time competing with Sony.

Of course, the really young kids still love the cartoonish characters, but when these kids get older, I'm not confident that they will remain with the Nintendo brand. Perhaps Nintendo needs to step up and perform more licensing arrangements with many other companies (I know of one other arrangement, in which Link from the Zelda world appeared in the Gamecube version of Soul Calibur II) to get back some mindshare. Maybe a complete overhaul of the company's marketing message would help, too.  

In the meantime, if you want exposure to the video game industry, make sure you also consider the publishers who supply the content for the platforms, such as Activision (Nasdaq: ATVI) and THQ (Nasdaq: THQI). I wouldn't make any long-term bets on Nintendo or Sony, since the way to play this industry is not through the generators of hardware but through the third-party developers, who tend to have more at stake with each new console in terms of development costs and the like. It should be noted, though, that the hardware concerns do create software as well. 

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Fool contributor Steven Mallas owns none of the companies mentioned, but he does enjoy his Gamecube system.