1989

 Meet the man behind Nintendo, the video game maker that is the talk of the country three Christmases running.

To his admirers, Peter Main, vice president of marketing for Nintendo of America, is a master seller of children's entertainment.

They say he is a skilled businessman who has learned lessons from the unhappy history of the video game business and helped revive it into a $3.4 billion industry in only three years.

To his critics, however, he is an aspiring monopolist, squeezing supply and jacking up prices. Charging monopoly, a competitor has sued, and a congressman has called for a Justice Department investigation.

Whatever the case, Main's appearance, manner and background give scant hint that he would be the marketing wizard behind America's hottest video games.

Balding, and with a taste for gray suits and brown ties, he is a 48-year-old newcomer to the toy business who had worked in Canada as a marketer of packaged goods and as a restaurant executive. Although his 12-year-old son and 20-year-old daughter are skilled Nintendo players, he concedes he has "never been proficient."

His introduction to the video game business came by happenstance. A friend and former neighbor in Vancouver, British Columbia, Minoru Arakawa, is the son-in-law of the president of the Japanese company that manufactures the Nintendo games. When he was invited by Arakawa to join Nintendo as head of marketing in America, Main characteristically pored over the company's market-testing research and studied the rapid rise and fall of Atari, the hot game of the early 1980s.

He concluded that Nintendo's games could take off if properly marketed, and that the company could avoid Atari's mistakes. Encouraged, Main joined Nintendo in 1986.

Parents of Nintendo-obsessed children can guess the rest. With Arakawa handling development of the product, Main masterminded marketing. Main's strategy is to take a product that is desirable and, through deft marketing, both stimulate demand and ration its availability, ensuring that Nintendo games are far more desired than readily obtainable.

"Nintendo has become a name like Disney or McDonald's," said Larry Carlat, editor of Toy and Hobby World. "They've done it by doling out games like Godiva chocolates."

Result: Nintendo sold a projected $2.7 billion in video game systems and game cartridges this year, 80 percent or more of the total market. For his contribution, Main has been hailed as 1989 "Marketer of the Year" by Adweek's Marketing Week magazine, a trade publication.

Today, the cacophony from Nintendo games can be heard in more than 15 million homes; on Dec. 26 it will be heard in 20 million. And moving into the malls as well: Game Boy, a $90 hand-held version of the home set that is expected to be one of the top sellers this Christmas.

It takes work to avoid Nintendo. There are Nintendo television shows, a cereal and a magazine, as well as T-shirts, sweatshirts, hats, pins, pajamas, beach towels and school lunch boxes.

Once Nintendo has snared a consumer, Main makes sure not to let go. Nintendo employees use hand-held computers at toy stores to monitor sales. Names of Nintendo Power magazine subscribers are added to a four-million-name data base.

Hot line for puzzled players

As many as 120 "game counselors" answer telephone calls from puzzled players of "Legend of Zelda" or "Super Mario Brothers 2." All of the information is searched for clues to marketing decisions: what products to make and how many to make of them. What does a fickle consumer, aged 8-15, want now?

Nintendo, whose parent is based in Kyoto, Japan, sells its home video game system for about $100. The Nintendo hardware is a simple eight-bit computer that uses video game cartridges to show games and play video arcade sounds on a family's television set. The cartridges, or software as it is termed, sell for an additional $23 to $45 each.

Other video game companies foundered, Main believes, because their games became boring. "After 30 minutes," he said, "you really had enough of the whole thing."

While other companies sell games that are faster and brighter on a television screen - and more expensive. Nintendo excels at variety, with more than 265 games, and complexity: its Dragon Warrior can take 150-200 hours to play.

Where other companies also foundered, Main said, is in flooding the market with their games. 'Inventory management is absolutely critical to this business," he added.

So Main makes sure that scarcity whets the public's appetite and sustains demand. By design, the company does not fill all of a retailer's order and keeps half or more of its video cartridge library inactive.

Keeping Nintendo's offerings in demand through rationing supply is one thing. But far more in dispute is the company's other tactic: building the hardware system in its games with a special "lockout" computer chip, so that only licensed Nintendo software can be played on the system.

Main said that feature is essential to make sure that poor- quality software does not taint the Nintendo name. But other software publishers cannot tap the lucrative Nintendo market without Nintendo's permission.

'Lockout' chip designed to stop software pirates

In Japan, Nintendo's machines do not have the lockout chip. In 1983, when the company first introduced its machines, called Famicom, in Japan, software pirates copied Nintendo software and wrote their own games for the machine. To prevent that from happening in the United States, Nintendo came up with the security chip.

Atari Games, an arcade-game developer, cried foul. "Who gave Peter Main the power to decide what software the American public can buy?" asked Dennis Wood, senior vice president and general counsel for Atari Games in Milpitas, Calif.

Tengen, Atari Games' software publishing subsidiary and a Nintendo licensee, sued Nintendo in December 1988, seeking $100 million in damages for antitrust violations.

Nintendo countersued, charging that Tengen violated its agreements as a licensee when it started marketing software that circumvented Nintendo's lockout system. The suits are pending.

Nintendo's strategy owes much to the cautionary tale of the quick rise and fast fall of the Atari Corp., Atari Games' predecessor and a pioneer in the market for home video games.

Hugely popular in the early 1980s, Atari Corp. was whipsawed by its young consumers' sudden aversion to its games. As a result, Warner Communications, Atari's parent company, reported a 1983 loss of $418 million.

But just as Nintendo has positioned its products as successors to Atari Corp.'s line, new entrants are styling themselves as successors to Nintendo. NEC Technologies and Sega of America, which sell more sophisticated video game systems with more memory and 16-bit computer chips, do not share Atari Games' concerns.

Companies lining up to succeed Nintendo

They say they have no difficulty in selling their products to big toy chains like Toys "R" Us.

They also conspicuously take no position on the crusade of a congressman sympathetic to Atari Games' position. Rep. Dennis E. Eckart, D-Ohio, who is chairman of a House subcommittee with oversight on antitrust matters, does not buy Nintendo's argument that its lockout system is merely a safeguard on quality.

He has asked the Justice Department to investigate Nintendo for monopolistic practices.

By this Christmas, Nintendo, which was introduced in the United States in 1985, had sold 20.3 million systems and 101 million cartridges. Cumulative sales for Main's tenure: more than $6.8 billion.