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Nintendo's next generation
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August 24, 2000: 12:59 p.m. ET
Video game company introduces new system to compete with PlayStation2
By Staff Writer Chris Morris
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NEW YORK (CNNfn) - Forget the winner of "Survivor." The biggest secret in the entertainment world for the past 16 months has been how Nintendo plans to maintain or improve its position in the next generation console gaming wars.
The Japanese company unveiled its strategy Thursday, formally introducing the Gamecube, formerly referred to only by its code name "Dolphin." Designed to compete with Sony's PlayStation2, Sega's Dreamcast and Microsoft's upcoming X-Box, the system's introduction takes the battle for the living room to the next level.
The company also took the wraps off of its handheld GameBoy Advance, the next generation of its portable gaming unit.
Nintendo says the Gamecube will go on sale in Japan in July 2001. A U.S. launch is set for three  months after that. As yet, the company has not set a retail price.
Fueled by a 405 MHz IBM chip dubbed the "Gekko," the heart of the Gamecube is significantly slower than its competitors. Nintendo downplays the significance of this, saying the chip is tailored specifically for games, which should result in a machine that makes it easier for developers to work with -- meaning more, better titles.
"Instead of going for the highest possible performance, which does not contribute to software development, our idea was to create a developer-friendly next-generation TV game machine that maintained above-standard capabilities," said Nintendo in a statement published on its Web site.
"Our technology is designed to do only one thing well -- and that is to play great video games," added Peter Main, Nintendo of America's executive vice president of sales and marketing, in a conference call. "What matters is what the user wants, not what we want to give them."
But the Gamecube lacks a DVD drive, which many see as a key component to the PlayStation 2 and X-Box. In addition to being game machines, these consoles will allow consumers to watch DVD films or listen to music CDs. This integration of entertainment modes has been predicted as a model for the future. Rather than several separate machines, you'll be able to own one that can take care of all of your home entertainment desires.
Nintendo, however, has opted to stay focused on its gaming core audience.
"It's not our goal to be a home multimedia device," said Main.
It's a bold move for the company, but it's one that some analysts say could pay off.
"Historically, Nintendo has had a pretty tight focus on things that relate to gaming," said John Taylor of Arcadia Investment Corp. "They want to make it clear that this is a machine for that."
Taylor also says that he expects DVD players to be common enough by the time the Dolphin comes out that having that added feature won't necessarily be a draw for consumers.
One thing Nintendo's not ignoring is the power of the Internet. The Gamecube features an adaptor for both a 56K modem, which will be available at launch, and broadband connections, which will launch subsequently. While the company only showed technological demos of games in development at its Spaceworld conference, none of the titles it highlighted showed multi-player capabilities.
The company says it will demonstrate the first playable games for the system at the 2001 Electronic Entertainment Expo, the gaming industry's trade show.
Keeping the spotlight
The fact that Nintendo has been working on a next generation machine is hardly surprising. What is astonishing, however, is how well it has been able to shield the device from the industry, analysts and notoriously curious gamers.
After announcing a few details about the machine at the 1999 Electronic Entertainment Expo, Nintendo went into silent mode. While Sony (SNE: Research, Estimates) trumpeted the graphical capabilities of the PlayStation 2 and Microsoft surprised ... well, nobody, by announcing plans for its own next-gen console, Nintendo steadfastly refused to release even a single screen shot from the Gamecube.
Today's rollout puts Nintendo square in the spotlight, but keeping consumer interest focused on the Gamecube will be tricky in the months to come. On Oct. 26, Sony's PlayStation 2 will hit U.S. stores and is expected to sell out almost immediately -- entrenching the company for the critical Christmas shopping season, and giving it a one year head start over Nintendo.
The PS2 will retail for $299 and is expected to boast a library of 50 available titles when it launches, a record number of games launched simultaneously with a console system. Sony has said it plans to initially deliver 1 million units for sale in the U.S., and expects to increase that number to 3 million by March 31, 2001 -- the end of the company's fiscal year. Whether that will be enough is a big mystery. When it went on sale in Japan, the PlayStation 2 sold 1.8 million units within the first two months.
Besides being first to market, Sony's next generation console will also be backwards compatible with the current PlayStation. In other words, the new system will be able to play games from the old one. That won't be the case with the Gamecube.
"The challenge is delivering anything new to the consumer (when you worry about backward compatibility)," said Main. "In this case, the change in media absolutely prevents (compatibility) from being possible."
Nintendo's not about to cede the mobile gaming market, though. The company also unveiled its new 32-bit Gameboy Advance, the follow-up to its successful GameBoy device. Set to go on sale March 21, 2001 in Japan, with a U.S. launch set for July, the system will start out with five new titles and will play old Gameboy games. Priced just shy of $100, the system features a screen that's 50 percent larger than the current Gameboy.
Like the Gamecube, the Gameboy Advance will also be Internet ready. Nintendo also rolled out the Mobile Adaptor GB, a system that will allow gamers to hook their Gameboys up to cell phones for multi-player competition.
Software sells the machine
Analysts are quick to point out, however, that it's not hardware that will be the chief deciding factor in whether the Gamecube is a success. It's the games that ultimately count.
"There's no question that Nintendo has the industry's strongest in-house development. Their market share is way above Sony or Sega," said Taylor. "As long as Nintendo continues to do the great games it does, it's going to continue to attract customers."
And if there's one thing Nintendo can rightfully boast, it's a roster of highly recognizable games. Pokemon, Mario, Donkey Kong and Zelda are legendary names in the gaming world - and they all belong to Nintendo.
Sony's not the only competitor Nintendo needs to worry about, though. Sega's Dreamcast has been on the market for just shy of a year now. And though sales haven't been as strong as the company had hoped, the upcoming batch of software products are getting good industry buzz -- and the company's online gaming network, set to launch early next month, will be a first among console systems.
The bigger worry, though, is Microsoft (MSFT: Research, Estimates). The company's initial foray into the console gaming market -- the X-Box -- has been receiving universal praise from the developers building games to go with it. And with Microsoft's marketing muscle behind it, the X-Box is expected to be a strong contender in the market when it goes on sale next year. 
-- Click here to send email to Chris Morris
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