home video strong as ever in consumer electronics biz

While many manufacturers and licensees of coin-op video games are crying (some rather loudly) about continuing soft sales for new goods to "our end" of the business, the consumer (home) side remains ro­bust, with predictions indicating that it could grow even bigger in 1989.

Whether operators like it or not, home video has just enjoyed its best holiday season yet and the bloom is hardly off its rose... whereas pur­chases of new coin-op games by operators and distributors are just as sluggish as they were last fall. Needless to say, a few speculate that the success of home games has had a negative impact on coin-ops, but the consensus of opinions shared say the national coin drop is not "off" to a degree that would dictate such buying caution in the field.

Such was the "good news/bad news" buzz at the Winter Consumer Electronics Show held at the sprawl­ing Las Vegas Convention Center Jan. 7-10. As at past C.E.S. shows here, the coin folk gathered in the

 

West Hall where individual exhibits of home cartridges and personal computer discs by such as Taito, Sega and Atari's Tengen division were "dwarfed" by the mammoth World of Nintendo "cathedral."

 

Cathedral is an apt word to de­scribe this huge hall-within-a-hall since its design provides individual display booths to licensees like Cap­com, SNK, Data East, Konami-Ultra, Sunsoft, Tradewest, etc. along the

 

 

 

 

 

 

 

 

sides, with Nintendo of America's own kiosks of hardware set up in the middle. The very word "Nintendo" identifies home video to millions of people today and appears in such nationally-syndicated newspaper columns as those by Art Buchwald and Erma Bombeck.

By some estimates, Nintendo "controls" around 80% of the home cartridge market ... a market which dwarfs the PC floppy disc side (i.e. software for computers made by Commodore, IBM, Apple, Amiga and the "other Atari"). The firm hopes to clear the $1 billion sales mark in 1989, with one estimate that it could actually hit $1.7 billion be­fore the new year is out (if you pen­

 

cil that out by a 40-hour work-week, it means Nintendo could actually book orders amounting to $850,000 per hour!).

SUIT/COUNTERSUIT

The only way any video game maker has had access to the huge Nintendo retail market has been via a Nintendo license. The company has been scrupulous about the game titles it accepts and about the num­ber of cartridges it allows into the retail market. However, in the first serious test of Nintendo's sovereign­ty over this "captured market," Atari Games (Tengen) sued Ninten­do for $100 million in damages two weeks before Christmas and also

 

 

 

 

charged the company with "mono­polizing" the market. Simultaneous­ly, they announced their intention to produce Nintendo-compatible car­tridges by themselves, and had R.B.I. Baseball "on sale" at the Win­ter C.E.S.

The trade waited for a response from Nintendo and got it just days before the Vegas show started. On Jan. 5, Nintendo commenced legal action in the U.S. District Court in San Francisco charging breach of contract, violation of federal and state trademark laws and unfair competition and even iivoked the RICO act. A press release was cir­culated in the West Hall and the speculation largely amounted to

this: no matter who wins this suit, nobody except the parties them­selves could get hurt. Why?

If Nintendo wins, some believe their discipline over the home video market will continue to guide it pro­perly by preventing any "glut" of game titles on toy store shelves that theoretically could lead to another collapse of home video similar to the one in the early part of the decade. If Atari wins, then all Nintendo li­censees could theoretically produce as many cartridges as their retail reps have asked for (more than Nin­

tendo normally allows). This was the basis of the Atari/Tengen suit... that it was frustrated because deal­er orders far exceeded the amount of cartridges Nintendo would allow them to produce. Lost sales.

We have a separate story on the suit elsewhere in this issue. For now, let's simply say that many in­dividual Nintendo licensees have prospered under the present dis­cipline (many making more money from home video than from coin-op), that they could possibly make more (a lot more?) if Nintendo could no longer dictate production numbers ... but that this could be a short­haul rush for profits that could quickly die if the market became

 

 

 

 

 

 

 

 

saturated and a price war began. Naturally enough, everyone associ­ated even indirectly with the case is watching for further developments.

RELEASE DATES

The politics of home video are of some interest to coin operators, but their main focus is on the length of time the manufacturers put between release of the original coin-op ver­sion and the home package. Despite

the fact that home video is more lucrative for the developers right now, they are, in the main, sensitive to the coin operator's "need for time" to make his money before hit­ting the home with a scaled-down version of any respective game.

Data East's Bob Lloyd, for exam­ple, told us emphatically that he sticks by his one-year rule. This company will release Bad Dudes to Nintendo buyers in June or July.

Data East will also introduce a 2­player home version of Bally's Ram­page in February (they still have BurgerTime on their order sheet; Lloyd says "the game never dies").

Tradewest intends to bring Quar­terback out as a Nintendo home car­tridge in February. They are still marketing Double Dragon and in­tend to intro Magic Johnson's Fast Break this summer (this, licensed from Arcadia Systems). Tradewest also showed a new home piece call­ed Taboo which they licensed from Rare Coin-It (we didn't learn if this item will also become a coin-op game or not).

SNK will bring Guerrilla War to the home this April, along with an­other title called Baseball Stars. Their biggest hit, P.O.W., will be released as a Nintendo cartridge this June (about eight months or so since its coin-op entrance). On the other hand, SNK is presently launch­ing a coin-op game called Ikari III: The Rescue which they consider one of the best uprights they've ever had, so they've got hands well onto both arms of videobiz.

RUSSIANS ARE CONUNG

Atari/Tengen, as mentioned, is producing and marketing its R.B.I. Baseball apart from Nintendo. By March, lawsuit permitting, they will bow Gauntlet and Pac-Man for Nin­tendo buyers with Super Sprint, Rolling Thunder and Vindicators coming by May. And now for some­thing completely different!

Many in the manufacturing "in­crowd" (like Romstar's Rene Lopez) know about this Atari game but it's still not common knowledge in the industry. Atari has licensed a video game developed by Russians. It's true. The piece is called Tetris and the team leader was designer Alexi Paszitnov of the U.S.S.R. Academy of Sciences.

The home version could come out this April but the coin-op kit began shipping in quantities to Atari deal­ers around the last week of January. See separate story about the "Rus­sian invasion of the video game world" elsewhere in this issue.

Joe Robbins, with son Richie, manned the Sunsoft section of Nin­

 

 

 

tendo's mega-exhibit. This division of Sun Electronics concentrates on the home market (Joe's been quiet

for a while in coin-op). They have four titles coming to market (Blaster Master is available now). A future

title will be called Batman (there's a movie coming in June) which Joe says will be released around Sep-

Nintendo Strikes Back At Atari

C.E.S. showgoers didn't see Ata­ri's Tengen display at the Nintendo supra-booth this year. Tengen main­tained its exhibit just outside the "great wall of Nintendo" in the Las Vegas convention Center's West Hall where showgoers looked as much at the people manning the booth as at the product, wondering what was in their hearts now that they'd taken on "the giant" in court.

Just two weeks before Christmas, Atari Games sued Nintendo of Ameri­ca for $100 million in damages for not being allowed to produce more car­tridges of their games like R.B.I. Baseball under their Nintendo con­tract (which gives them access to the lucrative NES retail market). No one had ever defied Nintendo's rigid con­trol of cartridge production before ... and everyone waited for Nintendo's response.

That response came loud and clear on Jan. 5 when Nintendo's Senior VP (and attorney) Howard Lincoln an­nounced that the home video giant was answering Atari's suit ... as well as its intention to independently man­ufacture and distribute games for the NES previously produced under Nin­tendo license ...with a suit of their own. In addition, Nintendo has termi­nated Atari/Tengen's license agree­ment, a moot point since Atari's in­dependent action pretty much did the same thing.

Nintendo's lawsuit asserts claims

 

against Atari/Tengen for breach of contract, violation of trademark laws and unfair competition. They also charged conspiracy and RICO. "This case may well be expanded, said Lin­coln. "Our engineers are examining this product for infringement of Nin­tendo patents, copyrights and other intellectual property rights. If there is infringement, Nintendo will proceed against anyone violating its rights," added the attorney who has been most successful in prosecuting coin­op infringement cases.

Regarding Atari/Tengen's original suit, Lincoln said Nintendo will "vigor­ously defend itself against this anti­trust lawsuit which accuses Nintendo of improperly controlling the supply of cartridges to their NES system. He described the Atari suit as a "red her­ring designed solely to divert attention from Tengen's plans to violate its license agreement." No company has ever been allowed to make or market cartridges for the Nintendo NES without Nintendo's consent and/ or physical involvement. They decide whether or not to accept a game title and also peg the actual number of cartridges to be manufactured ... a number which Atari felt was below the amount they could and should be able to sell to the home business.

Atari has claimed that consumers have been frustrated by the unavaila­bility of some of its most popular titles. Lincoln acknowledged this frustration

 

and said that Nintendo and all of it licensees have been suffering through a worldwide chip shortage which has existed since early in 1988. "This shortage, together with unprecedent­ed demand for NES cartridges, has required Nintendo to allocate chips among all its NES licensees, includ­ing Tengen," Lincoln explained. "We have made this allocation fairly and responsibly and their lawsuit is entire­ly without merit," he added.

Lincoln also said that Atari's alle­gations concerning Nintendo's secu­rity chip system are equally without merit. This security system, which is designed to permit only "genuine car­

tridges" to be used in the NES, pro­tects the quality of the software and is the subject of various intellectual property rights owned by Nintendo, the firm contends. Actually, the whole concept of an interchangeable car­tridge system is the subject of con­sternation as another firm says it's got exclusive rights to this idea (but that's yet another story).

CONTRETEMPS

The fascinating part of all this is that Atari itself was on the "Nintendo side of the ledger" back in earlier times when it tried to control access to its 2600 home system and lost in the famous Alpex case. Therefore, Atari's legal defeat back then could serve them as a pro-cause precedent in this new case.

tember (he also info'd that he's "thinking" about bringing it out as a coin-op but hasn't made his mind up yet).

Konami and its sister home car­tridge company Ultra have a large combined spread of titles, but none are currently still roasting on the coin-op market. They put a lot of space between releases to each re­spective field. Games of note now on Nintendo shelves include Contra, Life Force, Top Gun and Double Dribble. (Konami reportedly main­tains its additional Ultra division in order to get more titles out under Nintendo's quota system.)

Taito Software has quite a list of titles for PC disc users. Games avail­able now for one or more of the po­pular computers include Arkanoid, Bubble Bobble, Sky Shark, Roston and Operation Wolf (the latter only for Commodore, Amiga and the Ata­ri ST).

Capcom's Nintendo catalog offers Legendary Wings, Bionic Comman­do and 1943. Curiously, it also offers game titles (some of which won't be available until June) never heard of before and many never destined to sport a coin slide - like Mega Man 2 and The California Raisins.

There are quite a few home car­tridges that sit on toy store shelves which were never brought out in coin-op version, although (with the possible exception of Zelda) those that hit in the coin locations are usually the biggest hits later on in the home. There are also companies like Milton Bradley and Broderbund who have no relationship to the coin market who market titles through Nintendo which coin operators have never heard of either.

SUMMING IT UP

There was nothing "new" in home video at C.E.S. to speak of. Sure, another Nintendo licensee called Bandai had one of those "elec­tronic target rugs" on the floor which activated the screen (remem­ber Sente's Stompin'?). But by and large, this arm of the video game business continues lustily along, although the hickup Atari's suit gave Nintendo could result in some interesting heartburn in a market which thus far has been tooling along like a Swiss watch.        Q

 

 

 

The makers of Guerrilla War and, P.O.W. (who are also the develop­ers of Tradewest's Ikari Warriors) launched what they believe will be their third upright hit in a row with Ikari III: The Rescue. The game was unveiled at an informal distributor meeting at the Hamilton Hotel in Itasca, Ill. Jan. 16-17 and production models began shipping from the Dynamo plant the very next day.

The game should already be posi­tioned at distributors, and at many arcades and routes, even before the ACME show opens in Reno later this month. It features the familiar screen characters as on Ikari War­

 

riors but the mission this time is to rescue the son of a president by us­ing such weapons as machine guns, knives, grenades and TNT explo­sives. Players can also elect to punch and kick.

Ikari III is a 2-player cooperative like the predecesor. It has a buy-in feature as well as continuous play. Operators will also like knowing it's priced like Ikari Warriors. The new piece is available with either 19" or 25" monitor. SNK will show the up­right at the Reno outing, as well as anew kit called Prehistoric Isle for horizontal conversions. And ... they will also take the wraps off a 2-play­

 

er twin-gun video called Mechan­ized Attack.

This big new piece will probably be built for SNK at Dynamo. It has coin buy-in plus a continuous play feature; and it has a special button on the end of each rifle that shoots grenades. "Just watch the money this piece takes in," said SNK's American prexy Paul Jacobs.

So, there'll be three new SNK videos to inspect at ACME and at first blush, it looks like it should be an exhibit high on the showgoer's dance card. Here are some snap­shots taken at the Ikari III meeting.