Nintendo's Quest: Staying Popular

``Keep your toes over the edge and make sure you have some magic elixir.'' ``Use your fist on the wall, hit the man on the head five times and take the candle.''

INSIDE a white building at forest's edge here, advice like this is doled out from 4 a.m. to 10 p.m., every day, 50,000 times per week.

Phone calls come in from owners of video games with names like ``Metroid,'' ``Quest,'' and ``Gyromite.'' They are answered by armies of highly-trained experts sitting in three-by-five-foot cubicles and staring at blinking video screens. These game-play wizards are to video make-believe what ``Dear Abby'' is to modern-day dilemma.

Don't laugh. Tips and strategies offered by ``game counselors'' are a big part of the reason Nintendo-mania has become the biggest juggernaut in the history of toys.

The Japan-based, United States subsidiary will capture 80 percent of the video game industry's $5.1 billion in US sales this year - reaching nearly one out of three American homes. (By comparison, Barbie Dolls will sell close to $680 million and Teenage Mutant Ninja Turtles will sell about $500 million.)

But this year, hints of slowing sales have company executives biting their nails.

``From day one the pundits told us this wouldn't work, and when it did, they said it wouldn't last,'' says Peter Main, vice-president of marketing for Nintendo of America Inc.

Launched in 1985, a year after the home video game market nearly went bottom up, Nintendo sold mostly to boys aged 8 to 14.

But now the company is reaching out to adults - who account for a third of sales - and girls. Hand-held machines called Game Boys (released last year at about $90), super-graphic units with 16-bit computer chips (due in Japan next year for $190), and a national game network over phone lines are the next generation of Nintendo ideas.

``The $64,000 question is how much further can they go now that they are bumping up against the same penetration once achieved by Atari,'' says Sean McGowan, toy industry analyst. In one of the quickest reversals in retail history, the $2.2 billion in sales achieved by Atari, Colecovision, and Intellivision in 1983, dropped dramatically to $100 million by 1985.

Analysts blamed a limited number of play patterns in the games that eventually left kids bored.

But the enduring appeal of video games to adults has not been proven, Mr. McGowan says.

``[The adult market] is the only place left to go, and older consumers just don't have that much time to play.''

``Anyone who thinks video games will continue to be a $3- to $4- billion industry forever should seek professional help,'' remarks Standard & Poor's Paul Valentine, who has been predicting Nintendo's demise as a passing fad for two years.

Based on the downturn this year of hardware sales - about a million units fewer than last year - and frequent discounting to move products, Mr. Valentine says Nintendo sales will flatten after Christmas.

From there - as was true in other toy fads from dolls to male action figures to stuffed animals - a 40- to 70-percent downturn can be expected, he says.

In these headquarters just north of Seattle, Nintendo officials are taking every measure to see this does not happen. Emphasis is not on flashy hardware or graphics, but rather a constant flood of creative software that keeps consumers coming back for more.

``Our analogy is Hollywood,'' says Blaine Phelps, who trains game counselors. ``We are not here to talk the world into buying more theaters, we are here to be the Steven Spielbergs who create the stuff that makes them want to come inside.''

Since launching its home Nintendo Entertainment System - a cereal-box sized console that sells for $99 and hooks to the back of a TV - about 300 programs have been released to play on it, ranging from medieval warfare to tennis. Another 150 are in development for release in six months to a year.

Since consumers must shell out a hefty $35 to $60 per program, company priority rests with finding out what consumers want more of, don't like, or don't understand.

Besides the 250 around-the-clock game counselors who answer questions and poll callers, Nintendo has another 250 consumer representatives to answer questions on assembly, repair, and the availability of specific games in local stores.

The company also sponsors national symposia for adherents as well as critics of the games - so-called ``PowerFest'' tours that include tournaments for youngsters and daily focus groups in which kids play the games while company officials monitor from behind one-way glass.

``It's genius marketing,'' says McGowan. ``Nintendo is bending over backwards to be responsive.''

Hard hit by media, parents, and educators for a reliance on violent themes in their games, Nintendo has pushed for more educational and problem-solving games. Last May, the company gave $3 million to the Massachusetts Institute of Technology (MIT) for studies on how children learn.

``There's no reason this software can't be harnessed creatively for learning math, science, and English skills,'' says Nintendo spokesman Bill White. ``The catch is holding the entertainment value - labeling something `educational' is a straight turnoff for kids.''

But until the MIT project produces new theories, key words to sales are ``fun,'' ``exciting,'' and ``challenging.''

``If it's all work, no play, people don't want it. If it's all fun and no challenge, it won't sell for long,'' says Howard Phillips, Nintendo's so-called ``Game Master.''

Mr. Phillips and his production staff of 30 people screen prospective new games, 95 percent of which are created at parent organization Nintendo Co. Ltd. in Kyoto, Japan.

Game programs are sent via phone line from Kyoto to Redmond. Engineers here play the games for hour upon hour looking for programming flaws, as well as inappropriate language, musical, or cultural references. Names of characters may be changed, as well as game rules. Responses are then sent back to Kyoto via fax machine.

To fine-tune one recent football game program, this process was repeated 30 times, according to research and development director Don James. ``We let our guys go wild on it,'' he says.

There are also about 60 licensees who create games for Nintendo, from American companies like Milton Bradley or Parker Brothers to game firms in Europe and Australia.

To refine their notion of what it is that captivates kids about video games, Nintendo keeps Game Master Phillips on the road, talking to parents, teachers, businessmen, and kids in local communities.

``They're really active and challenging, not like playing board games,'' says Colin Mayer, an 11-year-old from Los Angeles. ``You have to concentrate on what's coming next, and they get harder as you go along.''

``They're so much safer than real life,'' says Mr. Phelps, who played games from age six until he graduated college and came to work at Nintendo. En route to becoming game-counselor trainer, he has played Nintendo four-to-six hours a day for the past three years.

``It's nice to be able to completely blow it, start over and eventually conquer all your mistakes,'' he says.

Besides the number of quarters placed in the arcade versions of their games - which Phillips says will signify success or failure in a matter of days - Phillips relies on his own internal feedback system as to what tickles his fancy. Because he is credited with having mastered more games faster than anyone in the history of video games, his opinions carry a lot of weight.

Phillips is also editor of Nintendo's monthly ``Nintendo Power,'' which polls users and retailers in every issue about what's hot and what's not.

``Nintendo has been brilliantly managed from the beginning,'' says Standard & Poor's Valentine.

``They've been far more sensitive to the needs of consumers and retailers and in controlling the flow of inventory so as not to end up with the disastrous gluts that plagued Atari.''