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Nintendo Focuses on Fun

Nintendo is one of the venerable names in video games. But when it comes to making and selling game consoles, it hasn't been very vital of late.

As the industry embarks on a new technology cycle, President Satoru Iwata is trying to change that. While rivals Sony (SNE - Get Report) and Microsoft (MSFT - Get Report) argue over whose new console has the best graphics or the fastest processor, Nintendo hopes to lure gamers by focusing on making its upcoming Wii game machine fun to play.

Iwata's idea is that there are millions of consumers out there who represent a potential market but who aren't currently playing games. And they won't be lured in by great graphics if the games behind them are too complex or just plain boring.

Nintendo's focus on fun has paid off in the handheld battle. Despite heated competition from Sony's PlayStation Portable, Nintendo's DS has sold well, and -- with its aging Game Boy Advance system -- helped Nintendo maintain its overall lead in the handheld market.

At the E3 game conference last week, I talked with Iwata about Nintendo's plan with the Wii and his outlook for the game industry. (Iwata's comments were translated by company public relations representative Yasuhiro Minagawa.)

TheStreet.com: Nintendo was the distant also-ran behind Sony in the last two console cycles. Where do you expect to end up in this console cycle, and how do you get there?

Satoru Iwata: Actually, we were not acting in terms of what happened in the past. Of course, it's always important to differentiate from the others in this business -- especially in the console business. When Nintendo introduced the GameCube system, we thought we made enough differentiation for the public. Unfortunately, it appears we could not make enough differentiation with other products. When it comes to the Wii console, actually, that kind of differentiation is not that important.

That is, in the history of the video-game industry, all of what the industry has been trying to do is ... beef up the horsepower of the machines. And then, with that beefed-up horsepower, the industry is simply trying to create more gorgeous-looking and more complex video games. Unfortunately, however, that kind of past success formula does not work anymore, and we thought that we really had to change the situation.

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