Star struck or striking out?

In 1985, dedicated video games rose from the ashes to begin flight towards today's worldwide $20 billion industry. But in those days, with young people fixated on movies like Rocky and Rambo, the success of interactive entertainment was far from assured. Hollywood wowed 'em then with Back to the Future. The little story our industry was trying to sell was 'back to life.'

As a business, we've never lost our appetite for measuring our success against Hollywood's. As has been noted repeatedly, for the past several years U.S. retail revenues from video games have run neck and neck with Hollywood's domestic box office. And certainly, among our core users, we've clearly eclipsed the movies as an entertainment choice.

Today, the bigger question is whether we can learn from box office history in order to solidify and expand the popularity of interactive entertainment.

The first lesson has to do with technology. Does better technology matter? Well, maybe, and maybe not.

Clearly, moviegoers loved it when the pictures first added sound and, later, color. These were true technical watersheds. But not every technical advance makes a difference. When theaters added Cinerama, digital sound, even those headache-inducing red and green 3D glasses, there was no discernable box office impact, proving that no one goes to a good theater, no matter how impressive, to see a bad movie.

Video games have enjoyed similar momentous leaps in technology and creativity. And predictably, many companies mistakenly assumed that more technology automatically meant more interest. Every year, it seems, some new technology comes along to 'reinvent' our business. The PC. CD-ROM. DVD's. Computer animation. The Internet. Bigger processors and hotter graphics chips.

What we've learned is that not all technology is created equal. Devices may make headlines, but on the bottom line, content remains king.

To Nintendo, this is not a revelation. There are now just three manufacturers of dedicated video game hardware and hundreds of companies creating games to play on these machines. You don't have to dip too far into a business plan to find out that software is where the profits live. And just like Hollywood, the lure of the big hit is irresistible. Just one break-through property can make a company.

But lessons learned from the movie industry would indicate that most of these game developers, no matter how motivated, are destined to fail. Once there were dozens of small studios with designs on taking motion pictures by storm. But most of them ran aground—as will most of these game development firms—on the harsh seas of innovation, quality and competition.

We don't need more games—we need better games and new ways of playing them.

There is an impressive history of innovation in our industry. At one time, simple side-scrolling adventures seemed revolutionary. Peter Molyneaux effectively invented the 'god-game' genre with Populous and Black and White—which Will Wright ingeniously applied to urban development in Sim City.

Unfortunately, for every visionary there are hundreds afflicted with creative blinders, satisfied simply by trying to cash in on someone else's invention. Indeed, just as in Hollywood, even innovative companies are guilty of needless repetition. No matter how much you loved the original, did we really need three versions of Rambo? Or five different Rockys?

In the final analysis, we are an entertainment business, just like the movies. We have hits and flops, our own beloved franchises and mega-stars. And we'll measure our success just like Hollywood, on the ability to create something fresh and exciting and irresistible for our audience. It is pointless to separate the creative from the financial, because in asking, 'Who will lead?' and 'Who will succeed?' you'll find the answer is the same.