Nintendo, AT&T to plug into the interactive field - Nintendo of America Inc. and American Telephone and Telegraph Co. form joint venture to enter computer shopping field

Discount Store News, Sept 4, 1989 by Arthur Markowitz

Nintendo, AT&T to Plug Into the Interactive Field

Two major corporations, American Telephone & Telegraph and Nintendo of America, last month charged up the interactive computer shopping and information service field when they announced plans to enter the nascent business.

The two companies are expected to form a joint venture to originate and deliver shopping, entertainment and information services, as well as pursuing separate endeavors in the interactive business.

AT&T hasn't commented on its specific plans because a seven-year ban on the company offering such services has just expired. AT&T had agreed to the prohibition as part of the consent decree under which it divested itself of local phone companies.

Nintendo, meanwhile, has set up an NES Network division to develop and market an information service by next year. It has named Jerry Ruttenbur, previously a senior vice president with Home Box Office, to the newly created post of vice president of network products to head up the NES Network.

Other interactive information companies have welcomed the entry of AT&T and Nintendo, claiming these players will make more consumers aware of the industry and expand the business. Nintendo's impact, however, carries even further as its system is expected to cost about half as much as other computers with the power to access any of the information services.

Entrants Face Challenges

Neither AT&T nor Nintendo would comment on the challenges facing their companies' entry into the interactive information business. These include developing the communication architecture for their networks, tying together the different hardware accessories necessary to run the NES Network into a central processor that has only one port, and developing the marketing reasons for retailers and other information providers to sign up with their start-up systems when they are already on other services.

The AT&T ban was necessary in 1982 when the electronic information business was in its infancy, said U.S. District Court Judge Harold H. Greene, who has been overseeing the breakup of AT&T into the long-distance telephone company and seven regional Bell telephone companies. But the restriction isn't warranted now that there are over a dozen players capable of offering vigorous competition to AT&T.

Companies that entered the business during the seven years include Prodigy, Compu-Serve, Minitel, Delphi, Quantum and GEnie as mass market shopping and information services; SourceLine, Gateway and Info-Look as gateways operated by regional telephone companies; and Dow Jones News Retrieval, Lexis, Nexis, Medis and Dialog as specialized information services.

The various services have a total of over 2 million subscribers while the companies and the information providers together have generated over $1 billion in revenues.

AT&T has acknowledged talking with Nintendo about a joint venture, but a spokesman noted the company was "actively considering various options." The large number of companies in the business triggered speculation that AT&T would try to acquire a current online information service as its quick grand entry into the field.

AT&T's acquisition of an information company--particularly a specialized service that provides abstracts and full articles on financial, medial, legal or general topics--wouldn't prevent it from also forming a venture with Nintendo. AT&T would provide the electronic connection and originate some services, while Nintendo would supply the hardware.

Nintendo will use its game system now in about 20 million households as the base for the NES Network.

The control deck used to run the Nintendo game--which sells for about $100 in discount stores--will be the processor for the projected information system, with a keyboard, modem and a device that combines a computer disk reader and a facsimile machine as the other hardware. The other hardware together is expected to cost about another $300 to $400.

A Nintendo spokesman said the company was considering several different configurations for its system and hadn't decided on the exact technology or even marketing plan for the NES Network.

Ruttenbur is responsible for design, marketing and sales of products for the system. The company won't detail its plan until after he joins Nintendo in October, he said.

Trade observers believe that the NES Network will be patterned after the system Nintendo has installed in Japan, where 150,000 households access stock information direct from Nomura Security, the country's largest brokerage firm. The Japanese system--which Nintendo claims is in a test mode--uses the same type of hardware as that proposed for the American network.

In Japan, consumers handle stock transactions through the Nintendo system which has a direct telephone connection to Nomura. Other applications are being tested in Japan, the spokesman said, including home shopping with retailers.

Nintendo's thrust into interactive information services is part of the company's efforts to change its game system from a toy into a computer, a move that will blur the merchandising distinction between toys, consumer electronics and computers.