Howard Lincoln: The GIA Interview

[05.25.01] » In the first of a two part interview, the former chairman of Nintendo of America discusses the past, present, and future for both Nintendo and the rest of the gaming industry.

GIA's Ed McGlothlin talks with Howard Lincoln.

    On the night before this past E3, Howard Lincoln sat in the lobby of Los Angeles's plush Biltmore Hotel locked in conversation about baseball. Despite the open bar and ex-Supremes concert surrounding him, Lincoln was seemingly oblivious to the party.

    "Not my kind of thing," says Lincoln.

    It has been just over a year since he left Nintendo to become chairman and CEO of the Seattle Mariners, but even an 11-game AL West lead and the best record in baseball haven't dampened his enthusiasm for games.

    After watching Nintendo's E3 press conference and the first morning of the show, Lincoln sat down exclusively with the GIA to discuss the industry he helped shape as chairman of Nintendo of America and continues to shape as a Nintendo board member.

GIA: How long have you worked with Nintendo?

HL: I joined Nintendo in January 1983, but I was involved with the company beginning in mid-1981 as a lawyer, when I first met Mr. Arakawa [current president of NOA] and did work for the company.

GIA: This is the seventh E3, and the gaming industry has come a long way since you had to build store displays yourself. How big can gaming get?

HL: I can remember when we were at Consumer Electronics Shows and video games were a very small part of consumer electronics. We were shunned, put in tents, and not treated very well. Now we have E3.

And in terms of growth, I anticipate that the new generation of consoles will help gaming business surpass the motion picture business permanently in terms of revenue, at least in the United States.

GIA: Sony, and to a lesser degree Microsoft, have been touting the convergence of movies and games. Tomb Raider and Final Fantasy will both see movies released this summer. Why hasn't Nintendo taken that tack?

HL: Nintendo is a gaming company. It is not a consumer electronics company, and it is not a computer company, but it aspires to be the best video game company in the world. We design with games in mind, and not anything else.

While the GameCube can certainly be expanded, I think all of Nintendo's focus, at least in the first few years, will be on a handful of great games that are compelling and exclusive. Those will drive hardware, and they will certainly drive software.

There are different strategies Nintendo has vis-à-vis Microsoft and Sony, and it is hard at this point to say who will win. But I think the heritage of Nintendo is important, with great software and people like Mr. Miyamoto. The GameCube is also a platform that uses special disc software as opposed to cartridges, and is quite portable.

GIA: Doesn't a game-focused machine like the GameCube inherently skew toward younger users who don't watch as many movies or listen to as much music?

HL: It may, but there is nothing wrong with that. Owning that market is owning a huge part of the video game business. I think Nintendo and its third-party publishers, who will give a lot of support to GameCube, intend to deliver a variety of entertainment that will skew across all demographics.

Even today, we have games that are mature-rated such as Eternal Darkness and games with universal appeal such as Star Fox: Dinosaur Planet. Certainly some of our games are going to skew younger, and that is fine – I don't want to see Nintendo lose any of that market.

GIA: Silent Hill's producer recently said in an interview that he was ruling out a GameCube version of the franchise because the system was “going to attract mostly younger gamers.” Do you think Nintendo can keep a lock on the younger market yet still compete strongly for older users?

HL: I think anybody who sees GameCube as just for young kids is crazy. Given the variety of software that will be on the platform, and given the excellence of that software, it will skew all the way across the board.

Nintendo comes into the market with proven franchise characters that appeal to a variety of people, they can certainly take the young market and expand from there. I don't think there is anyone at Nintendo who just wants to compete for the younger market and not compete everywhere.

GIA: Do third parties know this?

HL: I see third party developers gravitating to the GameCube because the business model is very competitive. It was very difficult for third parties to support the N64 given the cartridge model. But major third party publishers are and always have been platform agnostic; they are going to support whatever platform has the largest install base.

That really is the issue in terms of the type of games they make, and they know the demographics for our business as a whole are much wider than they used to be, including the demographics for Nintendo. I think publishers will give GameCube tremendous support, and as a result of that, you will see games in all genres and for all age groups.

GIA: In the last hardware generation, Nintendo didn't depend much on third parties. How necessary does Nintendo think they are?

HL: Nintendo is the company that created the third party publisher business model. Its relationship with third parties go far back beyond the entry of Sony, or even Sega, into the market. Given the software platform we have now, an affordable hardware price, and what I expect will be huge sales and a rapidly climbing install base, we're going to get the same kind of third party support with the GameCube that we got with the SNES and the NES.

GIA: Speaking of those relationships, Square, Namco, and even Sony were all Nintendo partners at one point, but they are now three of the biggest market forces against Nintendo. All three of those had conflicts with Hiroshi Yamauchi. Does Yamauchi make business decisions based on those conflicts, such as the feeling Square deserted Nintendo?

HL: I would say that Mr. Yamauchi, who has been president of Nintendo for almost 50 years, has an extraordinary record of success. Nintendo is one of the most profitable companies in the world today, and has been for many years, despite the ups and downs of the market on a worldwide basis.

Mr. Yamauchi is a phenomenally successful businessman and a very bright person, and I don't think he makes business decisions on relationships, I think he makes business decisions on business. While personal relationships play a role in any business decision, I wouldn't say that's a key thing.

GIA: Square in particular expressed private interest in developing for GameCube and made a public announcement regarding a desire to make Final Fantasy for the Game Boy Advance. Why would Nintendo turn them down?

HL: We can't always say what is going on when it comes to Japanese companies and their relationship with Nintendo, or where Mr. Yamauchi and Nintendo are when it comes to companies like Square and Enix. But I think Nintendo has been involved with third parties around the world and is always looking for quality software.

GIA: What would you say is the most misunderstood thing about Nintendo in the market today?

HL: In the early years, when Nintendo had great success, there was a perception that Nintendo was very heavy-handed. That wasn't true, and I think that has all gone away as the market has become more competitive.

There has always been a perception, and this is beyond Nintendo, that video games as a whole were passé or just for kids and didn't appeal to a wider group. I think that because Nintendo has been successful with a younger audience as well, it leaves that impression in the minds of many that Nintendo games somehow just appeal to the young.

It's all nonsense, but is something that has always followed Nintendo, and stems from our early success. The interesting thing is all these kids that Nintendo brought up in the video game business are now adults and still enjoy Nintendo franchise characters.

Explaining that to the media is difficult, but I think the entire video game industry is not viewed by the media with the same kind of importance attached to the film business, when in fact the game industry is equal to or larger than the entire film industry. It's always perceived as some kind of niche market or something that appeals to kids, instead of a viable form of entertainment across a wide demographic.

Over time, that's going to change, and shows like E3 will help do that.

GIA: How can the gaming business help speed that change?

HL: The video game business per se is still a very young industry, and it doesn't have the infrastructure or the longevity of the film industry. It's going to take a long time for people to realize that this is a huge industry, with results and potential far beyond film.

Having a trade show like E3 and a trade association like IDSA is helpful, and the industry leaders have spent a lot of time and effort building the IDSA. But frankly, it takes time. The film business has been around over 100 years.

GIA: A number of huge companies have fallen on their faces in the gaming industry, from gaming-specific Atari to behemoths like Time Warner. What did Nintendo know that they didn't?

HL: Nintendo has always been a very financially disciplined company. They have been very careful of their bottom line, profit-oriented, and always focused on making a few outstanding quality games as opposed to a lot of games. That discipline on the development of great software over a long period of time is the key to their success.

Quite frankly, it is a tribute to Mr. Yamauchi that he has focused Nintendo exclusively on video games instead of trying to become involved in anything else and wanting to turn a video game console into a computer. It has always been very targeted to platforms that can support great games, and is a discipline that starts with him and goes straight through the company.

    Continue to part two.