NINTENDO SCORES THIRD-PARTY PRICE CUT

DAN ALAIMO

ATLANTA -- In a move likely to further stimulate the video game business, Nintendo of America, Redmond, Wash., has cut the prices on its game software.

Following a price reduction of its Nintendo 64 hardware to $149.95 earlier this year, the company cut the costs to third-party game developers so software can be sold at suggested retails of about $69 and promoted for $59. This will make the cartridge-based Nintendo 64 software more competitive with the compact disc-based games of Sony PlayStation and Sega Saturn, said Howard Lincoln, chairman of Nintendo of America.

"We are lowering the prices we charge our third-party publishers for manufacturing Nintendo 64 games," said Lincoln during last month's Electronic Entertainment Expo here. While emphasizing that Nintendo does not control the prices these companies set, he said, "I am confident that this price reduction will translate into lower retail prices."

Prices for Nintendo 64 software are now in the $75 to $89 range, said George Harrison, vice president of marketing and corporate communications. "That is on the high side for a discretionary purchase, particularly if you are talking about boys, 9 to 17 years old," he said.

This will result in rental revenue growth for supermarkets that rent the software and game systems, industry observers noted. While the increase should be noticed as the new games come out, it will be especially evident during the fourth quarter, they said.

At the same time, the company is dramatically increasing the number of games available for the hot-selling and short-in-supply platform, said Peter Main, executive vice president of sales and marketing. There will be 40 to 45 Nintendo 64 titles out by Christmas, up from the 17 available now, he said.

These products will be backed by a massive promotional campaign, Main said. "We are not leaving anything to chance. We will match last year's spending of $200 million" when the company launched Nintendo 64 in the United States, he said.

The marketing will be highlighted by a cross promotion with the Taco Bell division of Pepsico, Somers, N.Y., and will continue rental promotions with Blockbuster Entertainment, Fort Lauderdale, Fla., he said.

"We are involved with Taco Bell this November and December, which is a huge opportunity for us and a good audience for us of 12- to 24-year-old males," said Harrison.

Among the key titles for the second half of the year are "Star Fox 64," which was released at the end of June; "Goldeneye 007," due Aug. 25; "Major League Baseball Featuring Ken Griffey Jr.," due Sept. 15; and "Banjo-Kazooie," a title that will appeal to purchasers of "Super Mario 64" when it is released Nov. 24.

Nintendo took advantage of a press conference at E3 to claim credit for the resurgence of the video game market. Total revenues for the game industry were up 68% for the first four months of the year, while Nintendo's were up 156%, said Lincoln.

"This growth is fueled by sales of next-generation hardware and software," he said. "There is no question that games are hot." Nintendo now has 56% of the total U.S. video game market, Lincoln noted.

Meanwhile, Sony Computer Entertainment, Foster City, Calif., noted that the 4 million-unit installed base of its PlayStation platform leads Nintendo 64's 2.6 million, and the 250 software titles for PlayStation greatly exceeds Nintendo's 17. "This year we are looking to bring 6 million PlayStation units into the United States," said Kazuo Hirai, chief operating officer.

Sega of America, Redwood City, Calif., which is running third in the advanced game console race, did not promote any numbers for its Saturn platform during E3.