…and Burn
Late 1984 and 1985 belonged to the home computer market, and the handful of software makers that had survived the crash. But the industry wasn’t dormant. In 1983, Nintendo had made a splash in its native Japan with the Famicom game console – short for Family Computer. Vastly ahead of anything in the American market with its processing power, the Famicom seemed like a shoo-in for the American market until the crash happened. Nintendo initially approached Atari to market the Famicom in the western hemisphere, and at first, it seemed like a done deal – both sides were eager to join forces.
Then one of the biggest decisions in the entire history of the business of video games took place, signaling the rise of one company and the fall of the other – and all because of a misunderstanding.
At a 1984 Consumer Electronics Show, Atari and Nintendo were close to inking the Famicom distribution pact. Very close. As a show of good faith, Atari had received rights to translate Nintendo’s games for the U.S. home computer market, and the future looked bright – until Atari executives noticed a new version of Donkey Kong running on an Adam computer at Coleco’s booth. Infuriated, they confronted their counterparts at Nintendo, who threatened to yank the home console rights out from under Coleco. By the time the misunderstanding was settled, there had been a changing of the corporate guard at Atari, and the deal was off. Nintendo was on its own, and by the time it made it to market with the American version of Famicom – now called the Nintendo Entertainment System – U.S. investors and consumers had turned a cold shoulder toward the video game business.
Through a series of brilliant marketing maneuvers, such as including a remote-controlled robot called R.O.B. with the system and selling the resulting package as a toy, Nintendo broke into the market and kick-started a renaissance of the game industry. But it wasn’t about to let another crash begin: Nintendo clamped down on licensing and manufacturing rights, forcing anyone wishing to make games for the NES come to Nintendo to have the cartridges manufactured. Anyone circumventing the built-in security features which would allow only licensed software to run was swiftly and aggressively sued, including an Atari subsidiary, Tengen, which battled with Nintendo over the cartridge rights to a simple Russian puzzle game called Tetris. Nintendo won the battle, and the rest – including Tengen – was history. Read the remainder of this entry »