Game Over for Nintendo

Includes: MSFT, NTDOY, SNE
by: Boaz Berkowitz

For the last few years Nintendo (OTCPK:NTDOY) has enjoyed undisputed dominance in the video game industry. Sales of the Wii game console have outsold its competitors, Microsoft (NASDAQ:MSFT) Xbox 360 and Sony (NYSE:SNE) PlayStation 3. It's no secret, but true gaming sophisticates have known for a while that the Wii is actually inferior to the Xbox 360 and the PlayStation 3 which both have better graphics and gaming engines.

The games are considered inferior as well. According to a recent issue of Electronics Gaming Monthly, most of the best selling games are not from Nintendo. They scored some big winners with games like Mario Galaxy and Wii Fit, but most on the best selling list are for competing consoles.

Nintendo, however, never intended to market the Wii to gaming sophisticates. After several years of losing market share to its competitors, Nintendo created the Wii to target traditional non-gamers such as women and the elderly. The Wii is actually nothing much more than a Nintendo Gamecube (last generation's technology) with motion sensors built in. In fact, old Gamecube games will work just fine on a Wii (sans motion control). This also provided game manufacturers with a library of hundreds of existing Gamecube titles that could be cheaply ported over to the Wii by adding in the motion sensor technology.

It was a gamble that paid off in spades, rocketing Nintendo to first place in console sales. Everyone wanted a Wii, but few could get them. Despite denials by Nintendo, I firmly believe this was part of their strategy – to artificially keep supply low to fuel demand. How many people do you know who wanted a Wii simply because no one else could get one?

A few days ago, Microsoft announced what will likely be a major blow to Nintendo and Sony. Microsoft has unveiled Project Natal, a ground breaking accessory for the 360 that is reminiscent of Nintendo's own wireless sensor bar.

I admit, I own a Wii myself having got caught up in the hype as well. And it is fun, but I always found it to be overrated. I even have the Wii Fit which I used a whopping one time. In the end, who has time for video games? I don't, not since my first son was born. Or at least that's what my wife says whenever I get close enough to even think about turning it on. And the excuse that playing the Wii was a form of exercise got old fast. Right around the time I figured out that I could play Wii Tennis just as effectively with a flick of the wrist... while sitting on the couch with a bag of potato chips in my other hand.

But all that could change with the Natal. Far more than just a camera and microphone, the Natal Sensor can capture full-body 3D motion, and has both facial and voice recognition capabilities. The sensor will actually recognize who you are and understand players' voice commands. Best of all, Natal replaces any need for a controller. Instead it turns your own body into the controller. Kick, punch, steer a car, whatever you do, so will your onscreen virtual counterpart. This is truly a revolution in gaming.

Even though Nintendo may have been the first to nudge the door open with this technology, Microsoft seems perched to blow the door right off the hinges. Natal is the kind of technology gamers have been fantasizing about for years, maybe even since the dawn of Pong. You can watch an amazing demo on Microsoft's site here though you may have to download Microsoft's Silverlight web-browser plugin for it to be viewable. No prices for the Natal accessory have been set yet but it could reportedly cost $200, more than a new Wii. But if Microsoft lives up to its promises, who cares? The Wii was so last year anyway.

Is this truly "Game Over" for Nintendo? Only time will tell, but it certainly seems like it. Recent innovations like Sony's PlayStation Eye or Nintendo's Motion Sensor Plus (a peripheral for increased accuracy) do not come close to what Microsoft managed to pull off. Introducing a black colored Wii won't help much either. If Nintendo's only response to this threat is that it is "flattered" Microsoft is pursuing motion control, stockholders should be worried that its management might be asleep at the Wii wheel.

Disclosures: None

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