We recently had the opportunity to go one-on-one with George Harrison, senior vice president of marketing and communications for Nintendo (OTC BB:NTDOY.PK), which has been on the Stock Advisor scorecard since February. Here's what he had to say about the gaming industry and what separates Nintendo from the competition. Everybody now: Wii!
The Motley Fool: Everyone is familiar with Nintendo games, but can you give us a thumbnail sketch of Nintendo the company?
George Harrison: Nintendo, which is based in Kyoto, Japan, was founded in 1889, when it manufactured playing cards. In the mid-80s, it resurrected the home video game business with the Nintendo Entertainment System, and since has sold more than 400 million game systems and nearly 2.4 billion video games globally. Many of these titles feature a stable of exclusive industry icons, including Mario, Donkey Kong, Metroid, The Legend of Zelda, and Pokemon. Our Wii home console and Nintendo DS portable system are the two most popular game systems in the world, and we're the No. 1 publisher of video games. As a company, Nintendo is "pure play," with almost all efforts directed at video gaming, as opposed to incorporating other entertainment features or functions.
The Fool: The market is pretty excited about Apple's (Nasdaq: AAPL ) iPhone as the convergence of cell phones and media players. With the trend pointing to fewer gadgets that do more, will we ever see a Nintendo DS Phone or a Nintendo DS MP3 player?
Harrison: The history of "convergence" devices in the electronics industry is not a happy one. While we never rule anything out, it's been our experience that devices maximized for the sole purpose of playing games tend to outperform other devices, which have to make compromises in technology or interface in order to incorporate game play.
The Fool: Why do you think that the Sony (NYSE: SNE ) PSP -- despite its superior spec sheet -- never made a dent in the growth of Nintendo DS?
Harrison: While this is a question best answered by Sony, there is a clear difference in the stated objectives of the Sony and Nintendo hand-held systems. Sony publicly stated its goal to bring a home video game experience to its hand-held device. Our goal with DS was to serve core gamers, and more importantly, expand the total market of game players with an easy, intuitive interface including a touch screen and voice recognition as well as new kinds of games that would appeal to those who previously had no interest in gaming.
The Fool: Nintendo owns a lot of great characters like Mario, Yoshi, and Zelda's Link. Will we ever see them licensed for games on a rival system?
Harrison: The best way to protect the reputation of our key franchises is to assure that they appear on hardware that can best demonstrate the full potential of game design. Because Nintendo hardware and software development tends to progress hand-in-hand, it's unlikely we will license these franchises any time soon for platforms where we're convinced they would not deliver the same degree of entertainment. Plus, they seem pretty happy at home on their Nintendo systems.
The Fool: The Microsoft (Nasdaq: MSFT ) Xbox 360 or the Sony PS3: Which is the bigger threat to the Wii?
Harrison: Neither. Consider three 30-something suburbanites. On a Saturday morning, two of them drive their big SUVs into a tire shop to buy big new chrome rims. The third is home online, doing product comparisons to figure out which hybrid he wants to buy.
You can say that all three are involved in the "auto improvement" business at that moment ... but it's unlikely the interests of the first two and the hybrid shopper are ever going to overlap. That's how we see the "video game business" right now. Two companies are going in one direction, and we're headed in another.
The Fool: A Nielsen study shows that Wii usage peaked at 5 p.m. during the spring but is now peaking at 8 p.m. during the summer. Does this mean that despite the hubbub this is still a system played mostly by kids and teens?
Harrison: There's no question that the most enthusiastic users of the Wii are also the core players in the overall game industry. What differs is the number of people playing Wii who haven't recently -- or even ever -- played another game system. I think 8 p.m. seems like a time that captures the whole family achieving our core business strategy. Our internal research shows that the Wii is just as popular with the core market as any other home console, so our advantage is in supplementing the core with added players who aren't interested in any other home system.
The Fool: One of the coolest things about the Wii is the process of creating your own Mii. Since the Wii's launch, several toy brands like Bratz and Mattel (NYSE: MAT ) have launched online communities where young kids create their own avatars. Imitation may be the sincerest form of flattery, but are these companies posing a threat to Nintendo?
Harrison: Not at all. Sitting at a computer and using a keyboard is a world away from actually creating your own Mii and having it interact in a variety of different games. With Wii, we think it's a much more immersive experience. Plus, Miis cater to a much broader demographic. Every kind of family member is enjoying creation of their own Miis, and then using them in games like Wii Sports.
Since Nintendo was recommended to Motley Fool Stock Advisor subscribers in February, it has gained more than 76% compared to less then 5% by the S&P 500. Join our Stock Advisor community with a free 30-day trial to unlock online exclusives like this interview.
Microsoft is an Inside Value pick. The Motley Fool's disclosure policy created a Mii to play Wii Tennis.