Howard Lincoln: The GIA Interview

[05.26.01] » In the final part of his E3 interview, the former chairman of Nintendo of America discusses the magic of Miyamoto, the risk of add-ons, and the global scope of piracy.

GIA's Ed McGlothlin (r) talks with Howard Lincoln.

    Part one of the interview can be found here.

GIA: The idea of adding more entertainment options to one machine, of producing a “set-top box,” is something Sony and Microsoft are getting closer to with their consoles. Is this the future of gaming?

HL: At this point, the evidence would suggest that is something possibly viable in the future but is not right around the corner. I first heard the word “convergence” in the early 80's and spent my entire career in the video game business waiting for convergence to actually happen. I'll probably be a grandfather before it does.

More interactive gaming and all sorts of similar things may happen in the future, but my gut tells me that Nintendo is better focusing on a “lean and mean” GameCube, as Peter Main put it yesterday. The hardware is built so it is very easy to take advantage of things that may happen in the future, should this convergence come. But if I was running Nintendo, I wouldn't waste a lot of time on that.

GIA: Even if convergence does arrive, after your experience with the SNES CD drive and 64DD, do you think add-ons are feasible, at least in the US market?

HL: Some add-ons make sense, and Nintendo has been somewhat successful with accessories that are focused on games. The record in the video game business is that no company has been very successful doing that, and while it could work in the future, there are a lot of risks in that kind of strategy.

There are also risks in building a hardware platform that has every bell and whistle possible, forcing the retail price beyond affordability for the average retail consumer. The idea of focusing on hardware dedicated strictly to video games is just the only one that has been successful so far.

GIA: We saw yesterday at the Nintendo press conference a picture of a product Matsushita will be marketing, a GameCube/DVD hybrid. Do you think that will be viable in the US?

HL: Panasonic is a very strong brand in consumer electronics, and they can take that risk. They can test the waters better than Nintendo, who will be focused on increasing the install base and demand for the GameCube. The agreement makes sense: have Nintendo focus on the gaming hardware and software, while Panasonic tries combining that with other technologies.

GIA: Why make hardware at all if it loses money?

HL: Nintendo, unlike its competitors, has managed to produce hardware that has made money over the life of the platform. The margins are not that significant or immediate, but the idea of subsidizing a hardware platform with hundreds of dollars per unit and expecting to get your money back from software is something Nintendo has never subscribed to. Nintendo has managed to stay strong in the business by not making decisions with that kind of risk.

GIA: Looking back at the last generation of hardware, with the PlayStation's emergence and Sega's shift downward, what did Sony know that others didn't?

HL: I don't know if they knew anything we didn't; Sony is an outstanding technology company and came in with a very viable piece of hardware in the PlayStation. They certainly watched and learned from what Nintendo had done and had a very good business model for their third party publishers. Sony is to be complimented on what they did.

One of the positive things about gaming is that when a Sony or a Microsoft enters the business, the entire business becomes more viable. It is much better to have a business where there are two or three large companies competing fiercely. It's good for the consumer, good for the retailer, and good in terms of the quality of games.

I've always thought that Sony coming into the market and Microsoft coming into the market is an overall good for Nintendo as opposed to something we should be worried about.

GIA: Can the market support three consoles?

HL: It remains to be seen, though there are more than three film companies.

GIA: What do you think is the biggest threat to the video game industry today?

HL: I've always looked at counterfeiting as the biggest problem, because you've got to look at this as an international business. Every market has particular problems, but the threat on a worldwide basis is copying and software piracy. Through the IDSA, we have done a good job trying to combat piracy.

Let's not forget that when we talk about the video game business, it is a strange shorthand for only certain parts of the world – Japan, Europe, and North America. The rest of the world has been denied, in whole or in part, legitimate participation in the game industry because of piracy.

Is Nintendo, Sony, or Microsoft capable of getting into China? Is that a market which is realistically open to our industry? The answer is no, as it is for Russia, eastern Europe, and parts of South America. That is a huge problem, and the industry needs to keep that on the front burner.

Once governments such as China solve this kind of nonsense, and it foremost is a government problem, then huge markets will open and this kind of widely appealing entertainment business will grow at a tremendous rate. The film industry is a good example; we equal the film business in the United States, but we don't on a worldwide basis.

GIA: A lot of gamers in America take a lax view towards piracy. What would you have to say to them?

HL: It's very foolish to think lightly of intellectual property. This is the lifeblood of this business, and the creative force which makes these great games will disappear if piracy is allowed to go unchecked. It's as serious as somebody taking their own property, a crime, and is stealing somebody else's hard work.

GIA: Outside being a government problem, do you think the new generation of consoles can take any technical steps against that problem?

HL: If you look at where video game piracy is centered, as we know most of this stuff comes from China, then simple enforcement of the laws by Chinese authorities would put a stop to an enormous amount of the piracy.

Everybody in our industry knows exactly where the counterfeits are coming from. People have provided the name, address, phone number and fax number of these pirates to the governments of China and Taiwan for years. If you think of pirates on the high seas, it was the British government that originally wiped them out. Ultimately, no matter what the video game business does about it, the governments must stop it.

I think that will happen because as pirated markets are growing, it becomes apparent that if they want to compete on a worldwide market then intellectual property rights must be protected.

GIA: These issues have more to do with laws than consoles – is this how a highly successful lawyer ended up in the gaming industry?

HL: I was fortunate to meet Mr. Arakawa many years ago when games were still a coin-operated business. I had no idea about games, had never played one in my life, and was very lucky to get into the business when it was small and take advantage of all the opportunities this growing industry afforded me.

GIA: From almost 20 years at Nintendo, what are you proudest of?

HL: It was an honor to participate in the growth of this industry and associate with people like Mr. Arakawa, people who were outstanding businessmen and whom I really admire.

GIA: Just how valuable is someone like Shigeru Miyamoto to Nintendo, both in talent and in a unique level of name recognition for a game developer?

HL: He's extremely valuable – despite his unbelievable success and the high regard in which everyone in the industry holds him, he remains normal. The day I first met him in 1981, he was a nice guy, and when I saw him today on the show floor 20 years later, he remains that same nice guy. That is something which makes him popular more than anything else.

GIA: I've never seen him not smiling.

HL: He's just a very gracious, warm-hearted human being who happens to have exceptional talent and has not been caught up in his success. He just loves this business and loves making great games and brings that kind of almost child-like enthusiasm to development.

Pikmin is an example of his extraordinarily creative mind at work – he buys a house, gets into gardening, and the next thing we know we've got a game that comes from his backyard.

GIA: How can the industry learn from that enthusiasm for making games?

HL: One of the biggest challenges in the industry as a whole is finding and nurturing creative talent. There are only going to be so many masters in our business as there are in the film business. Taking the time to develop these people and bring them along is something we all have to pay attention to.

But there's only going to be one Mr. Miyamoto.

GIA: That's a depressing thought. Nintendo is also unique in the amount of second party developers it has, a number that has been expanding rapidly over the past few years. What are the benefits?

HL: It is very difficult to find outside companies you can invest in and who will have the capability to make great video games. Rare is a great example of a very successful investment by Nintendo, a relationship that goes back 20 years between the principles of Rare and Nintendo, one that included working very closely to nurture that talent.

You're going to have instances where that investment doesn't pay off, but we've been very fortunate with our second party developers. One of the things Nintendo has been trying to do is find those development gems, but there aren't very many out there.

GIA: Over the past few years the American market hasn't just expanded in size, but in the kinds of games we play. More RPGs and quirky titles once not seen outside Japan and being released here. How does this affect development?

HL: I think you're going to see even more creativity and more people developing games. For years, it was a stretch to believe you were playing basketball on screen or going through an adventure; the graphics were simply not credible. That's changing now with the introduction of these new hardware systems, and we are quickly progressing to where the film and television business is. The media is there, and the graphics are there.

Now it becomes more about storytelling and what a developer can do. There aren't the kind of limitations there were with previous consoles, which means a greater range of creativity and universally appealing games.

GIA: Will that merge the Japanese and American markets at all?

HL: There's always going to be differences between the markets and differences in taste. Sports titles are much bigger here than in Japan, while role-playing titles are still bigger in Japan, and Europe is its own market. But we have always been trying to develop games with a worldwide appeal.

GIA: What contribution does Nintendo make to the industry that no one else does?

HL: Nintendo remains passionate about game quality, and the company itself is focused exclusively on the development and marketing of video games and nothing else. It brings that passion in a way which is probably unique among consoles.

GIA: Any last thoughts?

HL: Just that I enjoyed talking with you. And go Mariners!