Sony's Playstation came out of nowhere and basically stole the video game market with nary a true competitor in sight. If Nintendo wants its market back, it needs to make some dramatic changes to the way it does business. Though Sega fired the first shot in the upcoming next generation console wars with Dreamcast, Sony's PS2 announcement was a bombshell. What's Nintendo's next move?

Nintendo Is Not Dead
First off, let's start with where Nintendo is now. Nobody really takes Nintendo too seriously in America. Not anymore, anyway, now that Sony has pushed N64 to a distant second in market share. The assumption is that Sony's next-generation Playstation will inevitably conquer the video game industry as its predecessor did, shoving Sega and Nintendo to the wayside. Unfortunately for Sega, that may very well be true for them (but not quite as bad as many people are speculating; expect the Dreamcast to do moderately well). But also unfortunately for Sony and Sega, Nintendo isn't going anywhere. Those who think Nintendo's profits are drying up or that their presence in the industry is waning don't know the facts, and I hope to set everyone straight.

Nintendo was Japan's number one seller in game software for the fourth quarter of 1998 with about 3.4 million units¹. Granted most of those numbers are from Game Boy games, but in a country where N64 is pretty much a non-contender, that's incredible. If that's not enough, how about the fact that Japanese investors voted Nintendo as the number one investment in the twenty-first century²? You heard that right, Nintendo ranks ahead of Fuji Photo Film, Toyota, etc. for earnings potential in the next century. Want more? For the fiscal year ending March 1998, Nintendo raked in $1.3 billion in pre-tax profits³. In comparison, such Fortune 500 companies as Raytheon, Time Warner, and Gateway posted lower post-tax profits for the same period (Nintendo's profits after taxes were $634 million). The comparison probably isn't fair, but it's still an interesting indicator of Nintendo's performance. In case they need extra money for R&D or marketing, Nintendo has about $4.6 billion in cash and cash equivalents. With that kind of capital and no debt, Nintendo is certainly in an enviable financial position.

These numbers are meaningless if Nintendo doesn't have a solid strategy for reclaiming some (or preferably, all) of its market share. So what's Nintendo got up its sleeve? Nintendo obviously isn't going to release any specifics right now, but there are a few things that we know they want to do, and certainly a lot that they absolutely need to do.

Catering to the Masses
"So, we’re recognizing that we can’t just do a certain genre of games," Howard Lincoln stated in an interview. It's about damn time they realized this. Nintendo alienated older gamers with an opening lineup of N64 games geared mainly toward the young. Although they've worked hard to fix their skewed targeting, N64 will ultimately forever remembered as being more the child's toy than the Playstation. Part of Playstation's success can be attributed to its being marketed toward a more adolescent and adult audience. With darker, more mature games and a strong line of sports titles, Sony captured the attention of gamers 18 years and older while Nintendo chased 6-12 year-olds.

This needs to change, and by all accounts, it looks like Nintendo is willing to make that change. Rare, the developer of GoldenEye and the upcoming Perfect Dark, will undoubtedly make another first-person shooter for the next generation Nintendo. Sports games, which were conspicuously missing from N64's beginning months, are practically guaranteed to launch with the new Nintendo. Second-party development houses Retro Studios and Left Field Productions have already been confirmed as N2000 developers. If you've read the feature on Retro Studios, you'll know that they're currently working on sports games (possibly a football game). Left Field, resonsible for Kobe Bryan in NBA Courtside, will probably go on to make an N2000 basketball game.

While that will take care of the American release, the Japanese launch will undoubtedly need an RPG to be successful. A dearth of RPGs on N64 is quite possibly the largest reason why the system hasn't taken off there. No RPG developers have been announced, but it's very likely Nintendo will (or already has) found someone to fill that gap.

Courting Developers
Let's face it. Cartridges suck. Sure, it was a wonderful to experience the land of Hyrule with no interruptions, navigating the dungeons with seamless transitions from one place to the next, but imagine if the game had been on a larger storage medium. Better music, more textures, even an overall better game since the designers could concentrate solely on gameplay rather than space constraints. It's these concerns, in addition to high cost, that kept third-party developers away from Nintendo 64. This time, in an effort to gain the support of as many developers as possible, they're providing plenty of space to work on. Nintendo will most likely choose DVD, and even if they don't, the medium is guaranteed to hold at least 1 gigabyte (and possibly even offer writability). Besides acknowledging that games today need more space, Nintendo is making another statement: they desperately want third-party support and they're doing all they can to get it.

IGN64 has reported that Nintendo has been talking to third-parties about developing on the new machine, and there are even rumors that they have started talking to Square in an attempt to gain their support. This, more than anything, is the new face of Nintendo. Having apparently swallowed their pride, they are finally acknowledging that third-parties no longer need Nintendo (as they did during the NES days), but that Nintendo needs them. By catering to their desires (a large, inexpensive storage medium and a powerful CPU), Nintendo is following the Playstation's model of success: make it as attractive to third-parties as possible. There's little doubt that this time around, third-party support won't be as lacking as it is for N64.

Delivering Power... Loads of It
There's no questioning it; the specs on the next generation Playstation are mind-blowing. Nobody expected that kind of power, and undoubtedly the announcement sent shivers down the spines of Sega and Nintendo executives. Unlike Sega, however, Nintendo has a chance to fire back. Not too long after the PS2 announcement, a Nintendo spokesperson remarked that the new Nintendo will not only match or exceed the PS2 specs, but will also be competitively priced. If you're asking, "How the hell will they do that?" you're not alone. Sure, if your console is coming out a whole year after the competition's it better damn well be more powerful and cost as much (if not less). But the important thing to remember is that Sony is well-equipped to mass produce expensive chips (they and Toshiba have set up a joint-venture company for the sole purpose of producing PS2's CPU) and Nintendo would have to have their chips manufactured outside the company. Not being a large electronics manufacturer and not having close ties with any such companies definitely puts Nintendo at a disadvantage.

Still, Nintendo has the benefit of time, and they have the best hardware engineers in the world working on the system. ArtX, the company designing N2000's hardware, was formed from a group of former Silicon Graphics employees. If anyone can produce killer 3D hardware, it's them. Rumors of hardware support for NURBS (Non-Uniform Rational B-Splines; basically an accurate way of defining free-form curves) is encouraging, as such support would enhance the quality of graphics in games (though they're harder to use than polygons). Hopefully, ArtX will remember to include massive floating-point power along the lines of PS2's Emotion Engine, which allows for complex physics calculations and other real-world simulation.

Before the end of this year we'll have concrete information on the innards of the next generation Nintendo. Cartridges aside, N64's hardware didn't fail to impress. It's a fair bet that N2000 won't either.

The Bottom Line
Nintendo's defeat in 32/64-bit console war was the ultimate wake-up call. With success comes arrogance, and Nintendo's arrogance nearly cost them their core business. But every cloud does have a silver lining, and many would agree that Sony's success has made Nintendo a better company. With a lot to lose in the coming years, Nintendo is taking the next generation very seriously, mobilizing second-party developers, recruiting third-parties, and regrouping their resources under the N2000 banner (don't forget that N2000 is only a code name). They know what they're doing, and even if they don't come out on top, N2000 will be a bona fide success.

¹Next Generation
²Next Generation
³Nintendo Annual Report