Yamauchi's Fateful Decision
Welcome to Player Two Start! This is a timeline created jointly by Nivek and myself, with contributions from many other users.
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"I honestly don't know where I'd be right now if Yamauchi hadn't made that phone call. The Nintendo/Sony deal, the deal that shaped...practically the last 20 years of video gaming, I can't even envision a world where that deal didn't go down. Certainly not a world where I'd still be playing video games."- Dan "Shoe" Hsu, managing editor of Electronic Gaming Monthly, June 2011
"Working with Victor and working with everyone in that industry for six great years absolutely prepared me for everything that's happened to me down the road. I can't call myself a gamer, but video games definitely opened the door for me. So I still have kind of a soft spot for them."- Jennifer Stigile, season 1 American Idol winner, in the June 20, 2005 issue of People magazine
"You know, I almost thought of suing to break them up, like what happened to us in 1999. They were so huge at that time. But I was never one to back down from a challenge. There was a niche for us. A small niche but a niche nonetheless. But it was always going to be an uphill battle."- Bill Gates, in a 2005 Forbes interview
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June 24, 1991
Howard Lincoln and Minoru Arakawa, two high-ranking Nintendo representatives, were eating a quick breakfast in Amsterdam before their meeting with representatives from Philips later that day. The meeting would solidify Nintendo's new business partnership with one of the top electronics companies in the world, a partnership to design a new add-on for the Super Nintendo Entertainment System. The console had yet to debut in North America or Europe, but the future already looked bright for the system, which had been selling well in Japan. The new CD add-on would help to futureproof the console against efforts by competitors, especially their growing rival Sega, to outmuscle their SNES with new technology.
The men were nervous. They knew the company was reneging on a deal it had already made to produce a CD add-on with Sony. Still, the stakes were too high and Sony's demands were too much. Philips, they were told, would give much better terms and would allow Nintendo more control over its properties, especially the highly lucrative Mario franchise, which had become one of the most recognizable in the world. It was far too risky to allow a company like Sony that much control over an icon like Mario. While the men, especially Arakawa, had their trepidations, both of them prefering a partnership with Sony over the unfamiliar company Philips, it was a deal that had to be made if the SNES-CD was going to happen the way that Nintendo wanted it.
Half a world away, Nintendo's president Hiroshi Yamauchi sat in the company's Kyoto headquarters, reading and re-reading his company's contract with Sony. The contract, which Nintendo had made back in 1988, gave Sony complete control over all games created for the SNES-CD add-on, including games featuring the company's flagship characters such as Mario, Link, and Donkey Kong. Nintendo, which had built a dominating market presence by maintaining complete control over its games and properties, was ceding an unacceptable amount of control to Sony through the contract. Sony would be allowed to publish anything it wanted for the add-on. Intellectual property concerns aside, this opened the floodgates to the kind of shovelware and porno games that had nearly destroyed the entire industry in 1983.
But the idea of partnering with Sony, the company that had developed the Super Nintendo's cutting-edge soundchip, was an intriguing one indeed. The company's knowledge of hardware and advanced computer tech was nearly unparalleled and their add-on could give the SNES an incredible amount of muscle. Then there was the question of honor...breaking the agreement by going behind Sony's back would almost certainly be met with anger, perhaps even lawsuits. Yamauchi read the contract again, his eyes scanning over the most troubling clauses. He was in a no-win situation and he knew it. The best solution he saw was partnering with Philips and he'd sent two of his best men to Amsterdam to hash out a deal with them, one that would allow Nintendo far more control over its properties.
But as much as the idea of giving up so much control troubled Yamauchi... every time he closed his eyes he saw the potential that Sony brought to the table. He could see the games that could be made for the system, the possibilities that abounded. He was far more unsure of what Phillips brought to the table. Their CD-I technology was impressive, but Sony had already proven itself. Ken Kutaragi had risked his CAREER because he saw the potential of the SNES. If Nintendo made this deal, it would always have a champion in Kutaragi, a brilliant and gifted man, a visionary...
Yamauchi put his head in his hands and took a deep breath. With shaking palm, he reached for the phone.
"This is Yamauchi. I want to speak with Mr. Ohga right away. I need to see him as soon as possible."
(This is the POD. IOTL, Hiroshi Yamauchi never makes this call.)
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"I honestly don't know where I'd be right now if Yamauchi hadn't made that phone call. The Nintendo/Sony deal, the deal that shaped...practically the last 20 years of video gaming, I can't even envision a world where that deal didn't go down. Certainly not a world where I'd still be playing video games."- Dan "Shoe" Hsu, managing editor of Electronic Gaming Monthly, June 2011
"Working with Victor and working with everyone in that industry for six great years absolutely prepared me for everything that's happened to me down the road. I can't call myself a gamer, but video games definitely opened the door for me. So I still have kind of a soft spot for them."- Jennifer Stigile, season 1 American Idol winner, in the June 20, 2005 issue of People magazine
"You know, I almost thought of suing to break them up, like what happened to us in 1999. They were so huge at that time. But I was never one to back down from a challenge. There was a niche for us. A small niche but a niche nonetheless. But it was always going to be an uphill battle."- Bill Gates, in a 2005 Forbes interview
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June 24, 1991
Howard Lincoln and Minoru Arakawa, two high-ranking Nintendo representatives, were eating a quick breakfast in Amsterdam before their meeting with representatives from Philips later that day. The meeting would solidify Nintendo's new business partnership with one of the top electronics companies in the world, a partnership to design a new add-on for the Super Nintendo Entertainment System. The console had yet to debut in North America or Europe, but the future already looked bright for the system, which had been selling well in Japan. The new CD add-on would help to futureproof the console against efforts by competitors, especially their growing rival Sega, to outmuscle their SNES with new technology.
The men were nervous. They knew the company was reneging on a deal it had already made to produce a CD add-on with Sony. Still, the stakes were too high and Sony's demands were too much. Philips, they were told, would give much better terms and would allow Nintendo more control over its properties, especially the highly lucrative Mario franchise, which had become one of the most recognizable in the world. It was far too risky to allow a company like Sony that much control over an icon like Mario. While the men, especially Arakawa, had their trepidations, both of them prefering a partnership with Sony over the unfamiliar company Philips, it was a deal that had to be made if the SNES-CD was going to happen the way that Nintendo wanted it.
Half a world away, Nintendo's president Hiroshi Yamauchi sat in the company's Kyoto headquarters, reading and re-reading his company's contract with Sony. The contract, which Nintendo had made back in 1988, gave Sony complete control over all games created for the SNES-CD add-on, including games featuring the company's flagship characters such as Mario, Link, and Donkey Kong. Nintendo, which had built a dominating market presence by maintaining complete control over its games and properties, was ceding an unacceptable amount of control to Sony through the contract. Sony would be allowed to publish anything it wanted for the add-on. Intellectual property concerns aside, this opened the floodgates to the kind of shovelware and porno games that had nearly destroyed the entire industry in 1983.
But the idea of partnering with Sony, the company that had developed the Super Nintendo's cutting-edge soundchip, was an intriguing one indeed. The company's knowledge of hardware and advanced computer tech was nearly unparalleled and their add-on could give the SNES an incredible amount of muscle. Then there was the question of honor...breaking the agreement by going behind Sony's back would almost certainly be met with anger, perhaps even lawsuits. Yamauchi read the contract again, his eyes scanning over the most troubling clauses. He was in a no-win situation and he knew it. The best solution he saw was partnering with Philips and he'd sent two of his best men to Amsterdam to hash out a deal with them, one that would allow Nintendo far more control over its properties.
But as much as the idea of giving up so much control troubled Yamauchi... every time he closed his eyes he saw the potential that Sony brought to the table. He could see the games that could be made for the system, the possibilities that abounded. He was far more unsure of what Phillips brought to the table. Their CD-I technology was impressive, but Sony had already proven itself. Ken Kutaragi had risked his CAREER because he saw the potential of the SNES. If Nintendo made this deal, it would always have a champion in Kutaragi, a brilliant and gifted man, a visionary...
Yamauchi put his head in his hands and took a deep breath. With shaking palm, he reached for the phone.
"This is Yamauchi. I want to speak with Mr. Ohga right away. I need to see him as soon as possible."
(This is the POD. IOTL, Hiroshi Yamauchi never makes this call.)
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