No-No Nintendo : Expensive Video-Game Systems May Fall to Rivals, Tight Budgets

Like many 13-year-olds, Kevin Artino wants one of those new Super Nintendo video-game players for Christmas this year. You know, one of those $200 video-game systems that promises faster action, sharper pictures and just a whole lot more fun than the old games can possibly offer.

The only problem is that, like many 13-year-olds, Kevin already has the old $100 Nintendo system--plus nearly $1,000 worth of game cassettes--and his parents aren’t willing to pay for the new game player and the $50 to $60 game cartridges it requires.

So far, Kevin is doing without this Christmas. And, apparently, so are many other children.

Prices of the new Nintendo systems--coupled with unprecedented competition from the rival, $150 Sega Genesis video-game system and a miserable consumer economy--have combined to ease the once-feverish growth of the nation’s video-game market, a market that accounts for nearly one-third of the $13 billion spent on toys in the United States each year.

By some analysts’ counts, unit sales of game players, and possibly game cartridges, will be lower this year than the year before, producing the second consecutive dip in unit sales since video games blitzed the market in 1987. Sales revenue, analysts estimate, will remain about even with last year’s $4 billion, a far cry from the 30% growth the industry enjoyed in 1990 and years prior.

But perhaps more important to the nation’s traditional toy makers, and maybe some parents as well, some analysts believe that this holiday season could be the first in four years that is not thoroughly dominated by video-game frenzy and the juggernaut-like grasp of Nintendo of America.

“For traditional toy makers, this is a positive sea change,” says John Taylor, a toy analyst with L. H. Alton, a San Francisco brokerage. “And there’s more than one manufacturer who’s cheered that Nintendo is finally at a crossroads.”

Among the toys expected to generate strong sales this holiday season are Fast Traxx, a radio-controlled vehicle; Super Soaker squirt guns; Nerf bow and arrow sets and the full gamut of Teenage Mutant Ninja Turtle merchandise, although Turtle-mania is said to be ebbing as well. (For girls, who tend not to be the primary recipients of video-game systems, the hot Christmas toys are Water Babies, Barbie and a variety of Little Mermaid dolls and items.)

Nintendo, which was one of the truly great marketing successes of the 1980s, isn’t about to concede the end of the video-game frenzy nor its domination of the industry it resurrected from the ashes of Atari in 1985. It has just kicked off a $25-million advertising blitz--much of it on late afternoon kiddie cartoon shows--for its new system and promises to do whatever it must to keep up the sales pace for the system it introduced in early September.

“We’re very much on track for what we hoped to accomplish this year,” says Peter Main, Nintendo’s marketing executive and the man widely credited for turning on a whole generation of young boys to the exploits and heroics of two mustachioed plumbers named Mario. “But nothing is a slam dunk--ever.”

Although Christmas is the most visible test of a toy’s acceptance, analysts caution that the real hurdle for Nintendo’s new game system will come early next year. Analysts say Nintendo should quickly satisfy the pent-up demand from its band of loyal followers, many of whom are expected to snap up the 2 million to 2.2 million units the company says it expects to sell this holiday season.

“But what happens next year?” asks Sean McGowan, a toy analyst at Gerard, Klauer, Mattison, a New York brokerage. “I just don’t see how they can sell the 5 million units they’re predicting to sell. I think they’ll be lucky to sell 4 million, and I’m predicting that they will only sell 3 million.”

One of Nintendo’s primary obstacles is the surprising success that archrival Sega has enjoyed with its Genesis system. Introduced in early 1990, Genesis was the first to bring 16-bit computer electronics to video-game players, a vast improvement in speed and graphic quality over the 8-bit computer chip that powers the original Nintendo system.

However, Genesis languished on the market until early this summer, when Sega lowered its price $50 to $149, just months before the new Nintendo system was introduced. Now, some retailers, including Target stores, report that Sega and Nintendo sales are running about even. Jim McCurry, chairman of Babbages, the video-game and personal computer software retailer, says Sega is outselling Nintendo in his nationwide chain. And Kmart reports that Super Nintendo has not performed up to early expectations.

Sega’s advantage is not just the $50 price differential. There are now about 125 games available for the Genesis, while Nintendo hopes to have 25 games ready for introduction by Christmas.

Some analysts suspect that Sega, with its nearly two-year head start, has already captured much of the market’s early demand for a 16-bit video-game machine, typically exhibited by older, more sophisticated players, and will use its price advantage and game library to further its lead.

Zapped Don’t tell the Mario Brothers, but video games are losing their hold over the American toymarket. Game sales will still be relatively strong this Christmas, but the influence of the video game is waning among the 8-to 13-year-old audience.