More than 20 years ago, Herschel Naghi came up with patented equipment that could clean the inner workings of a Nintendo Entertainment System cartridge in just seconds.
The equipment was called “Eliminator,” and Naghi was a video game repairman at the time. His first creation sold millions.
That was the beginning of L.A.-based Nyko Technologies Inc., a video game accessory manufacturer. Today, it ranks among the top independent accessory manufacturers in the country, second only to first-party game publishers such as Microsoft, Nintendo and Sony.
“Our mission hasn’t changed since that first product,” said Naghi, the company’s chief executive. “What we try to do is introduce unique and innovative products that solve particular problems.”
Since it launched in 1995, Nyko has branded itself less as an accessories manufacturer that produce cables and jackets for game consoles and more as a technology company designing and developing products.
“I’ve never walked into a video retailer and not seen Nyko,” said David Riley, director of New York-based NPD Group.
Before “Guitar Hero” came with wireless guitars, Nyko came up with Front Man, a wireless six-string for Activision Inc.’s “Guitar Hero” I and II, beating the first-party company to the technology. “Guitar Hero III,” released this month, has now gone wireless.
One of Nyko’s best-selling items is Intercooler, a patented portable cooling system for XBox 360, Wii and the PlayStation series.
“When I think of Nyko, I think of Intercooler,” Riley said. “No one had ever given accessories like this a thought until these current generation systems were released.”
There wasn’t a need for such a cooling system until the release of the latest generation of game platforms. Several consoles can now run at once, which can cause overheating and automatic shutdown.
Nyko is a major player in an increasingly dynamic accessories space within the $12.5 billion video game industry. The accessories market has grown by 57 percent to $1.3 billion, based on year-to-date sales data compared with the same period last year.
The accessories market peaked with the introduction of XBox and PlayStation II. Extra controllers, priced between $20 and $30, make ideal candidates for impulse buys.
“You can never have too many,” said Riley, an avid gamer himself. “At the ‘Halo 3’ launch, for example, I had to have a couple of those I’m not sure why but I did.”
It also helps that XBox 360 is customizable, so gamers can buy a new faceplate for the console. That opens new doors for the accessories manufacturing space.
Nyko owns 5 percent of the accessories market; Nintendo, Sony and Microsoft have about half. About 90 companies compete for the remainder.
This year, the company began expanding aggressively in Europe, signing with France-based distributor Innelec Multimedia and U.K.-based Gem Distribution. Nyko also hired a vice president of international sales, a newly created position, to get more of their products into the Asian, South American and African markets.
Competitive industry
Investment in expansion and R & D; is the only way to survive in the increasingly competitive industry, Naghi said.
The company is up against some major challenges. First-party publishers are producing games with sophisticated security codes that make it difficult for manufacturers like Nyko to create accessories, such as controllers. Also, the accessories cannot connect with the hardware and the software of the video games in a way that could void the warranty. And there’s a tendency for costumers naturally to turn to Sony, Microsoft or Nintendo for accessories that complement their games. That makes competition tough.
Among his company of 28 people, five are dedicated to coming up with innovative ideas and designs. Nyko owns about a dozen patents on its products and has more in the pipeline.
“We really have to think outside the box with every product to stay ahead,” Naghi said. “That’s our business model.”
