A Fleeting Glimpse of the Consumer Electronics Colossus

Mid-July.

Unlike the sweltering heat of California, the climate in Japan is generally much milder.

But some people's inner turmoil is far more intense than that of Lin Lixin is far away in California.

Nintendo headquarters.

The latest document was presented to the president, Hiroshi Yamauchi, on his desk.

[Letter of Intent to Further Deepen Cooperation Based on the 1988 Cooperation Framework]

Hiroshi Yamauchi took a deep breath, and the wrinkles on his face relaxed slightly.

After so many days, we finally have some good news.

The sudden defection of this group of traitors from Namco really infuriated the 62-year-old man.

It was just a change to the royalty clause, but I never expected these bastards to jump ship to Sega without even a word.

Is this how they repay Nintendo for nurturing them?!

Besides these bastards who chilled his heart, there was also Hudson, who had already defected to NEC.

They even created some ridiculous PC-Engine, which was touted as a "Famicom killer," and broke the Famicom's long tail.

Damn it, I'm surrounded by a bunch of traitors!

Such a swarm of insects was enough to infuriate him.

He admitted that the royalty system is indeed an extremely harsh set of rules, and it wouldn't be an exaggeration to call it oppression and exploitation.

But can't these people understand that it is precisely this system that has sustained Nintendo's foundation?

Only by concentrating all its resources in this way can Nintendo maintain its dominant position.

Only by maintaining this wonderful hegemony can third parties possibly benefit.

These idiots really don't understand the situation.

"Well, at least there's good news today."

Hiroshi Yamauchi noticed his blood pressure was soaring again, so he quickly composed himself and asked his secretary to pour him some tea.

His gaze fell on the documents in his hand.

The sender's name was written at the bottom of the letter.

[Ken Kutaragi]

The head of Sony's HOME-VIDEO division, who is also responsible for liaising with Nintendo.

This is the main event of today.

Actually, this wasn't their first contact with each other.

The audio chip used in the SFC is Sony's PCM audio technology, recommended by Ken Kutaragi.

He argued vehemently back then, wishing he could live right in Nintendo.

It was this persistence that moved Nintendo's top executives, who ultimately abandoned the mature Yamaha FM sound source and switched to Sony's PCM sound source.

It must be said that this choice was absolutely the right one.

Although GAMENOVA has been focusing on sound quality, and even recently produced Hi-Fi 24-bit audio, their competitiveness in the Japan market is not yet at a dominant level.

At least for now, Nintendo here.

Sega's new console was impressive, and it did make a name for itself with its arcade style and fast-paced gameplay.

But they can't impact Nintendo's core customer base.

Over time, although its own SFC did not have a large market share in North America, it remained surprisingly stable in Japan.

Sony's PCM audio source played a significant role in this achievement.

Its natural, realistic, and richly layered sound is indeed much more sophisticated than Yamaha's highly electronic FM synthesized sound source.

It was that collaboration that officially brought Nintendo and Sony together.

Once the connection was established, Hiroshi Yamauchi set his sights on another important technology held by Sony.

CD-ROM.

Nintendo has always been constrained by its limited storage capacity.

This has never changed from the FC to the present.

To solve the fatal problems of FC cartridges having a pitiful capacity of only 64KB and the inability to save, Nintendo followed GAMENOVA's example and developed its own floppy disk drive.

This thing instantly raised their capacity limit to several MB.

However, everyone knows in their hearts that this capacity is probably still far from enough.

The reason is simple: across the sea, GAMENOVA had already taken the lead in using CD-ROMs while everyone else was still trying to popularize floppy disk drives.

The patent pools of Philips and Sony, combined with GAMENOVA's proprietary format technology.

This resulted in a terrifying specification with a capacity of several hundred MB.

Yes, Nintendo does indeed own many excellent IPs, and it also has a number of excellent third-party developers.

But with such overwhelming numerical superiority, it's really hard to have the confidence to resist.

Hundreds of MB means that GAMENOVA can cram live-action cutscenes, a large amount of voice acting and sound effects, and even countless high-definition textures into the game.

Even if they don't need any of these, they can still convert all that capacity into levels, making it a game with plenty of content.

Such a visible difference naturally made Hiroshi Yamauchi restless.

While gameplay is paramount, that doesn't mean other things are unimportant.

The capacity must be sufficient!

But mechanical hard drives are expensive, so that's definitely not an option.

NAND flash memory chips can't achieve such a large capacity, and they're manufactured by Gamenova, so it's even less likely that this technology would be used.

After going around in circles, the only option left is the CD.

However, CDs are not like floppy disks; their patented technology is firmly held by Sony and Philips.

Unless they have the ability to circumvent the patent pool and come up with a bunch of new specifications like Gamenova, they have to cooperate to have a chance.

And so, it came time for Kenjiro Kumamoto, the bridge between the two sides, to play his part once again.

That afternoon.

Ken Kutaragi hurriedly arrived at Nintendo with various documents.

This is a once-in-a-lifetime opportunity, not only for Nintendo, but also for Hiroshi Yamauchi.

This is equally crucial for Ken Kutaragi and Sony.

After so many years of development, the growth rate of the home appliance market has begun to slow down.

If Sony wants to further expand its scale, it can no longer limit itself to its existing businesses and must explore new areas.

Despite the continued success of consumer electronics such as the Walkman, VCR, television, and camcorder, Sony continues to innovate.

To generate a continuous stream of profits.

But the need for expansion has already reached its limit.

The integration of software and hardware is a future trend that is obvious to everyone.

Sony's Betama videotapes were initially eliminated by VHS due to a lack of content support.

As is well known, the same move cannot be used twice on a Saint Seiya!

Sony has never lacked boldness.

Then-President Norio Ohga had recently spent over $6 billion to acquire CBS Records and Columbia Pictures, filling a huge gap in content.

However, this newly acquired large amount of IP resources urgently needs a suitable platform for distribution to generate more commercial value.

Therefore, Kenjiro Ken Kumugiragi, Nintendo's number one die-hard fan, keenly sensed the enormous potential energy in the gaming market.

"President Hiroshi Yamauchi."

Led by his secretary, he entered the unmarked office and met the ruthless tyrant once again.

The first thing he did after taking over was to purge the family's influence, leaving only himself, a ruthless man with the surname Yamauchi, in the entire company.

"Mr. Kujiragi, I have already reviewed the documents."

Hiroshi Yamauchi gestured for him to sit down and took the initiative to talk about the collaboration.

Although he outwardly maintained his composed and strategic demeanor, Ken Kutaragi sensed his growing impatience.

The president's assessment of Nintendo is correct; Nintendo is much more anxious than Sony is.

It seems that GAMENOVA has really caused them a lot of trouble.

Ken Kutaragi remained silent, listening quietly to what Hiroshi Yamauchi would say next.

"Does Sony mean they're planning to collaborate on developing a dual-compatible game console? One that can play Nintendo's Super Famicom cartridges and also run Sony's own disc-based titles?"

"Yes, it's called PlayStation, a multimedia entertainment device we plan to develop. In exchange, we'll develop an external CD-ROM drive for the SFC."

"Um----"

Hiroshi Yamauchi nodded and fell silent.

It's obvious that this brat wasn't telling the truth.

Although Hiroshi Yamauchi is now old, he is not so easily fooled or dismissed.

The conditions in this document are not that simple.

According to the agreement, Sony will have complete control and licensing rights over all CD-ROM games released on PlayStation.

In addition to profits from hardware sales, Sony also takes a percentage of the revenue from third-party game sales.

In addition, there is a right to unilaterally upgrade the technology of PlayStation without needing to obtain cross-licensing from Nintendo.

This is fucking robbery!

Nintendo is always the Nintendo taking things from others, but today someone else took it from them.

What's most infuriating is that it seems like you have no choice but to swallow this humiliation.

If the capacity issue isn't resolved, they'll suffer a huge loss, let alone the next generation. Even in the current fourth generation where they're fighting tooth and nail, they'll be at a severe disadvantage.

The current situation is truly a dilemma.

A single-minded approach has become blocked at both ends.

"We still need to refine some of the clauses in these negotiations."

"That's natural."

Ken Kutaragi nodded in agreement, a strange glint flashing in his eyes.

Given Mr. Yamauchi's fiery temper, the fact that he didn't lose his temper on the spot indicates that the situation is indeed very urgent.

The situation was so dire that even the Yamauchi leader, Mr. Yamauchi, was willing to relinquish a large portion, or even core, of Nintendo's core interests.

Of course, there is also the possibility that he may not have realized at all that a huge time bomb was hidden in this draft agreement.

The contract did not include an exclusivity guarantee.

This means that, legally, Sony is capable of producing hardware that directly competes with Nintendo's core business.

This whole host of outrageous terms, taken together, constituted a huge trap meticulously set by Sony in these negotiations.

Once the time is right, Sony can completely overtake Nintendo and become the new master of the game market, stepping right on Nintendo's head.

"We can discuss compatible consoles later. I hope Sony can first develop usable peripherals for the Super Famicom."

drive."

After the other party left, Hiroshi Yamauchi silently faced the proposal and sighed.

This good news isn't all that great.