GAMES!

The panel members did not visit the R&D labs of Sega, Nintendo, or any other Japanese game company. This was because, due to our over-crowded schedule, I volunteered to pass up these visits. I was already quite familiar with the Sega R&D labs and its director, Mr. Suzuki. As for the other sites, I knew from personal experience in the highly secretive game industry that we would be shown little or nothing of product development at those locations. Indeed, at one of our visits a scheduled presentation on a game system was canceled. On another visit, when it was mentioned that chips made by the host company were used in a particular game system, we were asked later not to mention the relationship in our report.

Despite this lack of direct contact, I will still comment on the relative positions of the United States and Japan in the current video game market.

Others in our group and outside of it have stated that Japan's industries are based primarily on manufacturing. Even if this were not true, it certainly could be said of the Japanese game business. Even though, as I have described in detail, the Japanese do develop game software, it is in the area of hardware development and distribution that they excel.

Sega has always specialized in large-scale coin-operated amusement devices. Today, its huge entertainment centers feature eight-player Indy car racing simulators with full-sized car bodies mounted on motion platforms, two-person motion-based simulator rides, and rides that twirl a video game player in 360 degrees on three axes. The meat and potatoes of Sega's business remains coin-operated video games, but even these have grown in size and complexity.

Nintendo, also a participant in the early days of coin-operated video games, revived the moribund home console game business when it introduced its platform in the early 1980s. With millions of old Atari, Coleco, and Mattel machines gathering dust in closets across the United States, American toy distributors were adamant about not carrying yet another game machine. Nintendo skirted this problem by attaching a toy robot to its system and selling it as an "interactive robot" that just happened to play video games with the user as a side benefit. Needless to say, it may have been the robot that got the consoles into toy stores, but it was the game machine that kept it there.

What kept Nintendo itself in the clover was the way that it dealt with its software developers. A potential developer was originally required to put up a large sum of money simply for the privilege of becoming a licensed developer. It was then up to Nintendo, based on the company's own whims, to decide if it would sell proprietary encoded chips and cartridges to the developer, who was responsible for all marketing and advertising. It just got worse from there. Several game developers made millions; many more went bankrupt because either Nintendo would not sell them enough chips or, worse, Nintendo decided to sell them none at all. This was especially disastrous because the licensing agreement prohibited the developer from porting the game to any other platform. Competition from Sega has since forced Nintendo to enter into more liberal agreements with its developers, but fundamentally, Nintendo is not in the game business, it is in the cartridge-and-chip manufacturing and sales business.

In the United States, attempts to compete in the home game hardware arena have been failures. Both the much-hyped 3DO machine and the Atari Jaguar appear to be on their way to extinction. The 3DO business model was an especially bad idea. The company licensed the rights to build and sell the game platforms (the razor) while retaining the rights to license and collect royalties from software developers (the razor blades). What Sega and Nintendo already knew was that profits from the software subsidizes the hardware. The 3DO model prevented the hardware licensees from dropping the price of the player to competitive levels. As for the Atari Jaguar, probably it just didn't offer much more to the player than existing platforms and had too few games that ran on it.

While at least one American coin-operated video game developer, Williams Electronics/Bally Midway (the original developer of the infamous and extremely popular Mortal Kombat), is doing quite well, the Japanese now maintain dominance in the coin-operated game market.

It now appears that the best hope for American game developers is the personal computer.

During the time when the JTEC panel was in Japan, there was a platform war heating up. Sega was introducing its "Saturn" machine, with Sony going toe-to-toe with its Playstation (Fig. 4.7). Both machines are much superior to the current Nintendo Super NES, but Nintendo, as of this writing, is making a go of it by offering quite good games, such as Donkey Kong Country (Fig. 4.8), that do not require players to buy a new hardware platform. Even so, also as of this writing, initial sales of the Sega Saturn have been disappointing and there is little information about the sales of the Sony Playstation. But if the Saturn isn't flying off the shelves, then there is little reason to believe the Playstation will fare much better.

But American personal computers, running American operating systems, are now becoming capable of offering superior game play on a platform that continues to grow in popularity, largely because it is usually purchased for many purposes other than just playing games. Only time will tell how this competition in the interactive entertainment market will develop, but it looks good for the personal computer.


Fig. 4.7. Sony's Playstation.


Fig. 4.8. Nintendo's Donkey Kong Country.


Published: March 1996; WTEC Hyper-Librarian