that make up its name roughly translate as "leave luck to heaven.") In 1929, lacking a son, Yamauchi passed the company to his son-in-law, Sekiryo Yamauchi (who took the family name per Japanese custom when entering an in-law’s business).
Sekiryo Yamauchi's wife also never bore a son, so in 1949 his grandson, Hiroshi, took over Nintendo at the age of 22. During Hiroshi Yamauchi's reign, Nintendo grew by leaps and bounds, cementing its identity as a family-friendly brand with a 1959 deal to produce cards based on Disney characters. He kept his position as president until his retirement earlier this year.
In 1969, Yamauchi established a games department whose R&D work would lead to such breakthrough products as 1977's Game & Watch watches, 1981's popular arcade game Donkey Kong, and 1983's smash hit videogame system Famicom (known as the Nintendo Entertainment System (NES) when, after a few aborted attempts, it finally broke through to the U.S. market in 1985).
Donkey Kong was the brainchild of superstar designer Shigeru Miyamoto, and it gave the company its mascot, the portly plumber Mario, who has since become as ubiquitous as Mickey Mouse. Miyamoto went on to create a series of children’s adventure games around Mario and his slender brother, Luigi.
Technology evolved and NES was succeeded by Super NES (1991), the Nintendo 64 (1996), and Nintendo GameCube (2001). Nintendo has used the increasingly sophisticated Mario and Luigi games to launch each new console, and sales have shown that fans never tire of the characters. (When the Nintendo 64 launched in the U.S., sales of the Super Mario 64 game were almost at a 1-1 ratio with sales of the console.)
The gorilla Donkey Kong (Mario's nemesis in the original Donkey Kong arcade game) has become a minor celebrity in his own right thanks to such games as the Donkey Kong Country series, none of which were designed by Miyamoto. Like Pac-Man, whose popularity spawned Ms. Pac-Man and Pac-Man Jr., Donkey Kong’s popularity has produced a whole family.
Mario and Donkey Kong have also been popular on Nintendo's handheld videogame systems, an area of the business where the company commands more than 90 percent of the market. Nintendo pioneered handheld gaming with the Game Boy, which was released in 1989, squashed the competition with Game Boy Color (1998) and solidified its dominance with Game Boy Advance (2001). Many parents see the inexpensive systems and game cartridges as convenient ways to reward their kids for good grades or give them a distraction during long trips.
But are a family-friendly image and silly cartoon characters enough to keep a brand strong in the 21st century? Like Disney, whose animated empire has lost some territory to DreamWorks and Fox, Nintendo has had to fend off Sega, Sony and Microsoft, all of whom have punched holes in a dominance that stood at 70 percent of the world videogame market in 1995.
Sega, whose Genesis engaged in a bitter battle over market share with Super NES, decided to leave the hardware business last year when its Dreamcast console failed to catch on with consumers. However, it still competes in the software arena, where its Sonic the Hedgehog character vies with Mario for kids' attention.
Sony, however, shocked the industry when its popular PlayStation system took the business by storm in 1995 and sold more units than the Sony Walkman. Its follow-up, the PlayStation 2 (2000), has sold 33.27 million systems worldwide through August 2002.
PlayStation 2 has a one-year lead on its competitors, but its lead is significant and it's unlikely that Nintendo's GameCube and Microsoft's Xbox, with sales of 4.8 million and 3.9 million units, respectively, through August 2002, will be able to catch up. However, Microsoft still has to prove that it's willing to stick around in the videogame business even as it loses money on each console sold (rumored to be around US$ 200 per unit), whereas Nintendo has three important factors going for it: a long track record, a stable of popular characters, and a low price point.
Nintendo's track record in videogames has lasted for almost two decades, which is longer than most of the other companies in the business. While most people assumed that videogames were dead during the mid-to-late 1980's, Yamauchi stubbornly insisted that NES would prove them wrong. As he pushed NES to worldwide popularity, he also managed to make the company's name synonymous with console videogames (as opposed to arcade or computer games).
More specifically, Yamauchi managed to make Nintendo synonymous with brightly colored, fun kids' games. It's a well-known axiom in the videogame business that the quality of the software can make or break a console, and in the case of Nintendo, the quality has always been stellar. While PlayStation 2 and Xbox games are geared more toward adults, most GameCube titles are aimed at kids whose parents want to know that the games they buy won't be excessively violent. Those kids will in turn have kids of their own, and they will likely remember the child-like quality of Nintendo's games.
And at US$ 149, the system is cheaper than PlayStation 2 and Xbox, both of which initially sold for US$ 299 before being reduced to US$ 199 earlier this year (GameCube debuted at US$ 199). While most PlayStation 2 and Xbox purchases are made by adults buying a system for themselves, Nintendo systems are typically bought by cost-conscious parents whose kids have told them that they must have the latest Mario game.
Those three factors form the foundation of a strategy that has served Nintendo well. Fusajiro Yamauchi may have preferred to "leave luck to heaven," but today's Nintendo executives know that a calculated business plan is vital to success, and by all accounts this brand is thriving. It may not be the 400-pound gorilla it once was, but it's certainly no chimp today.