NINTENDO'S TASK FOR BURNETT: IMAGE OVERHAUL

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Nintendo has decided it wants to be cool again-or else.

Having made a series of marketing miscalculations last year, Nintendo of America got the bad news this month: It has officially lost No. 1 status in the $6 billion videogame industry to scrappy rival Sega of America.

Now, Nintendo is demanding a complete image overhaul from Leo Burnett USA, Chicago. As early as this spring, the agency must come up with a new TV image campaign, Nintendo's first in three years, and Nintendo is clearly looking for a make-or-break comeback strategy.

The pressure for Burnett on the estimated $50 million account is at an all-time high, as videogame industry analysts agree advertising could indeed be the deciding factor in the 1994 race between Nintendo and Sega.

Industry observers say Nintendo has lost the technological edge to Sega and newer, smaller video-game marketers offering compact disc, virtual reality and multimedia options.

"It doesn't matter how great they tell people Nintendo is; they're behind the curve technologically and in their software development, and that's all that matters," said videogame industry analyst Lee Isgur of Volpe, Welty & Co., San Francisco.

Along with jazzing up its image, Nintendo this year plans to heighten its investment in exclusive software; step up TV advertising; increase promotional tie-ins with other marketers; and place advertising for the first time in videogame magazines.

Those titles include Infotainment World's GamePro and Sendai Publishing's Electronic Gaming Monthly, the two largest and fastest-growing magazines targeting videogame players, in which Sega has advertised heavily via Goodby, Berlin & Silverstein, San Francisco.

Previously, Nintendo limited advertising to its own magazine, Nintendo Power, circulated to 1 million Nintendo owners.

"There's a lot we haven't tried and a lot we think we can accomplish through advertising, where Sega has admittedly been more successful than we have," said Peter Main, Nintendo's VP-marketing.

The two companies' market share in the dominant 16-bit videogame segment has stabilized, with Sega pulling ahead of Nintendo for the first time with 57% for 1993; Nintendo trailed with 43%, according to NPD Research, Port Washington, N.Y.

Despite the longrunning battle in the 16-bit segment, the next challenge for both Sega and Nintendo is to keep their brand images alive while newer, more powerful videogame systems enter the picture, from diverse marketers including Atari Corp., 3DO Co. and Sony Corp., introducing its first videogame system next year.

"Nintendo has a lot of catching up to do, both in advertising and corporate strategy. The next generation of videogames is being decided now, and Nintendo has lost the edge," said Sean P. McGowan, a toy industry analyst with Gerard Klauer Mattison, New York. "That will be hard to recapture with newcomers as powerful as Sony entering the game."

Nintendo concedes it made errors in marketing and videogame distribution last year, but the company believes the problems are correctable.

"We were late in getting some game cartridges out, and it's no secret our decision to edit content on Mortal Kombat [AA, Aug. 16] resulted in lower sales than Sega's," said George Harrison, Nintendo's director of communications. "But we still have a huge franchise ... with kids, and we're taking steps to accentuate that."

While it doesn't have anything as hot as Sonic 3-the latest sequel in Sega's wildly popular Sonic the Hedgehog series-Nintendo has high hopes for its exclusive March 21 release of the first Major League Baseball-theme videogame, starring Ken Griffey Jr. An estimated $3 million TV and print campaign from Burnett backs the game.

Some analysts believe Nintendo may succeed in its comeback.

"Image building is the key here, and Nintendo has a tremendous foundation built on a brand that's still virtually synonymous with videogames. They've been bumped from the top, but it doesn't mean they're not well-positioned to come back strong," said David Leibowitz, a toy analyst with American Republic Securities.

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