Is Nintendo finally off its game? You couldn’t tell from its public pronouncements, but there are signs the master of Mario is getting plumb tired.

Nintendo of America has never been shy about trumpeting its successes, and for good reason. (The Redmond-based company is, after all, responsible for reviving the video-game market in the mid-1980s.) Most recently, though, when it touted how it had five million-selling game titles in a 12-month period—a first for the industry—and claimed that it led the video-game industry in 1997 by “virtually every meaningful measurement,” it was touting a second-best effort as a success.

Nintendo’s flagship, the Nintendo 64, is losing to the Sony PlayStation by the only measure that really counts: sales. Nintendo estimates it had sold 6.5 million N64 consoles in North America by the end of 1997, while Sony says it had sold 8.7 million PlayStations. The N64 lags in software, too: Independent market researcher PC Data found that in the critical month of December at major chains such as Babbage’s, Target, and Electronics Boutique, N64 titles accounted for 27 percent of unit sales while programs for the PlayStation accounted for 52 percent.

The N64 trails by other measures as well. It has dozens of titles; the PlayStation, hundreds. The average retail price for an N64 game in 1997 was $61, according to research firm the NPD Group, while the PlayStation average was $39. It’s no surprise that Nintendo just announced it would start selling a handful of N64 titles for $39.95.

True, Nintendo does lead the market—but only if you combine the sales for the N64, Super Nintendo, Game Boy, Virtual Boy, and the original NES. And true, the N64 may have million-selling games—but that’s largely because there are so few games for those millions of console owners to buy.

Nintendo’s braggadocio in dealing with these setbacks and its near-silence on others—delays in key games and reliance on expensive cartridge-based technology in an increasingly CD-expectant gaming world—makes one wonder if Microsoft is in danger of being replaced as the most arrogant company in Redmond. And Nintendo can’t help but be aware of the fortunes of another former market leader. Sega, once flying high with the Genesis, has done so poorly with its Saturn console—PC Data estimates it accounted for less than 3 percent of video-game software sales in December—that Sega of America laid off a third of its staff in January.

Nintendo may still have the brand, but when a champion starts competing in the marketplace with bluster instead of brilliance, it usually means the player is past its prime.

Eggdead

The news that Egghead is becoming an online-only virtual shell of itself should come as no surprise to those familiar with its history. Over the past several years, Egghead has ritually gutted its operations to maximize potential “shareholder value.” In 1995, ostensibly to reduce overhead, Egghead moved from Issaquah to Spokane, shedding most of its seasoned merchandising staff. In 1996, Egghead sold off its corporate, government, and education sales division—responsible for half of its revenues and much of its clout with software publishers. In 1997, it closed half of its stores. Now, in early 1998, apparently realizing it still has a few stores left open, it is promising to take care of the oversight. Along the way, Egghead Discount Software begat Egghead Software, which begat Egghead Computer, which begat Egghead.com.

The impetus for this exterior change was not creative, strategic vision—it was, from all indications, a panicked reaction to a market that changed faster than Egghead could.

I was a marketing manager for Egghead from 1988 to 1992, when the chainwas the largest seller of computer software, with more than 210 stores, built on the then-revolutionary precept of a knowledgeable staff selling software below list price. Yet Egghead’s dominance was its Achilles’ heel. The company built an internal bureaucracy more suitable to a slow-moving hard goods retailer like Sears than a fast-moving software industry company, effectively keeping Egg-head from promptly dealing with such threats as mail-order catalogs, computer superstores, and mass merchandisers.

Now Egghead is betting on the growth of the Internet, and seems to be ignoring entrenched players like Cyberian Outpost, Internet Shopping Network, and online versions of those mail-order firms and superstores. It hopes to rely on a brand name that lost most of its meaning for discount price, cool products, and service prior to 1994—about the same time that millions of multimedia PCs started to sell to consumers.

Egghead may find the Internet the perfect place to R.I.P.: Rest In Pixels.

Frank Catalano, a Seattle-area analyst for interactive multimedia and software companies, can be reached at catalano@catalanoconsulting.com.

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