16-bit a winner during Christmas season - video game industry - Home Products: Consumer Electronics

Discount Store News, Jan 6, 1992

16-bit a Winner During Christmas Season

Early returns from Christmas '91 revealed that retailers nationwide achieved strong sales in both Nintendo's and Sega's 16-bit video systems and software, although Nintendo reportedly peaked at Thanksgiving.

The advantage that Sega seems to enjoy is reflected in the movement of third-party licensees, where longtime Nintendo stalwarts like Acclaim have announced plans to produce Sega Genesis games. However, many retailers feel that when a full range of Super NES software hits the market during the first half of 1992, Nintendo may rally. At present, Sega appears to have between 60% and 70% of the 16-bit market, Nintendo owns about a third, with the remainder going to NEC.

But change is sure to come. NEC, which recently entered a strategic alliance with third-party giant Konami in Japan, has a lead in CD-based technology that is comparable to the 16-bit lead Sega enjoyed over Nintendo.

Since both Nintendo and Sega plan to release their CD hardware later this year, battle lines are being drawn early. Software developers who have hitched themselves to the NES phenomenon are now looking at a rapidly expanding industry, and are attempting to find their own niche in the market.

"We're not a steady date for Nintendo anymore," noted Konami vice president Emil Heidkamp. "The industry is changing from a game business to an entertainment business, and the implications are enormous."

Like many other software developers, Konami is now looking at an industry that will soon resemble the record or film industries, a business that can no longer afford to cater exclusively to the tastes of 13-year-old boys.

"The 8-bit business held up a little better than we thought, but it is strictly a Top 5 business now," Heidkamp said. And even having all of the Top 5 may not be enough to support a developer. Instead, software companies are looking to the age of the CD game - and trying to predict changes from present technology.

"It will be very much like the music business," Heidkamp said. "We have to develop entertainment for all tastes. For instance, I can see a time when there will be a rating system, with R, PG and G ratings for video games."

Sixteen-bit hardware is clearly changing the way Americans relate to game playing, pushing the average age and degree of sophistication of the user up sharply. "The 8-bit player plays for physical control and fantasy," noted Electronic Arts' Bing Gordon. "The 16-bit business is about simulations and strategy."

In short, software developers who grew up appealing to 8-bit players will have to find new approaches to get into 16-bit successfully, and probably a whole new set of approaches to appeal to the CD-ROM user.

As important as target marketing, in the long run, is the issue of compatibility in the interactive CD market. While Philips, Commodore and NEC may have a jump on the competitors, software developers are having a tough time handicapping the eventual winner. "Can anyone figure out what [Nintendo] is doing," asked Electronic Arts chairman Trip Hawkins, in an address at Intertainment '91 in October. "In June, it looked like they traded Sony for Philips and a player to be named later . . . The way in which these [technologies] are incompatible is a severe, severe problem."

For software developers, it's not as simple as the Beta/VHS war, Hawkins said. "That was just a manufacturing issue, not a development issue. With digital software, it's a total development, design and engineering problem. . . it's like trying to take a BMW and use a hammer to turn it into a Mercedes. You might as well have built the car from scratch."

And even if the 10 or 12 major players in the interactive CD market were to agree on one standard (a very remote possibility), there is still the issue of initial price point.

The NES at $89 offered entree to a clearly defined technology for a modest price; the Genesis or SNES at less than $200 offer a clear cost/benefit equation to the average American, delivering superior game play, graphics and sound for about one-fifth of the price of the only competing technology, the personal computer.

Selling interactive media, on the other hand, is much more difficult.

"You have to go out and educate the consumer and explain to them what this widget is and why they should spend money on it," Electronic Arts' Hawkins said. "Then if you tell them it's going to cost $1,000, that's just not going to work." He visualizes some sort of Trojan Horse, a black box that's a music machine, a film machine, a cable receiver and also an interactive CD player for less than $500. "Then you've really got something."

Installed base is vital. Without compatibility and a mass-priced machine, developers say, the initial development cost for CD-based games will kill the technology.

According to Konami's Heidkamp, the production cost for an 8-bit game might range up to $250,000; for a CD game, $1 million wouldn't be surprising. And if there are four or five mutually exclusive platforms available, that development cost could easily hit $4 million.