game over chapters 13 & 14. chapter 13 from russia with love nintendo almost completely...
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Game OverGame Over Chapters 13 & 14 Chapters 13 & 14
Chapter 13Chapter 13From Russia with LoveFrom Russia with Love
Nintendo almost completely saturated their Nintendo almost completely saturated their target market, this being target market, this being young boysyoung boys
Nintendo was surprise to find that Nintendo was surprise to find that young young girlsgirls six to fourteen years of age were six to fourteen years of age were primary players.primary players.
AdultsAdults enjoyed Nintendo games for enjoyed Nintendo games for example, Jeopardy and Trivial Pursuit example, Jeopardy and Trivial Pursuit
Surprises Surprises
American adults enjoyed playing other American adults enjoyed playing other adults and staying up late when their adults and staying up late when their children went off to bed so they could children went off to bed so they could surprise their children with their surprise their children with their improvements.improvements.
Initially the Japanese did not target adults Initially the Japanese did not target adults because in the Japanese culture they because in the Japanese culture they believed that leisure’s were a waste of believed that leisure’s were a waste of time time
Something for everyoneSomething for everyone
GameboyGameboy Gameboy took children and adults by Gameboy took children and adults by
storm storm Gameboy was everywhereGameboy was everywhere Gameboy could even be Gameboy could even be
seen flying first-class, nobody seen flying first-class, nobody
was leaving home without itwas leaving home without it
Nintendo began a searchNintendo began a searchfor an for an
"arcade type monster game""arcade type monster game"
What they found was a What they found was a "simple and hypnotic" "simple and hypnotic" game called "Tetris." game called "Tetris."
So the search began again So the search began again to find the owner of the to find the owner of the rights and buy them. rights and buy them.
Who created Tetris????Who created Tetris????
Alexey Pajitnov created a game that Alexey Pajitnov created a game that consisted of descending pieces; if the consisted of descending pieces; if the pieces fit perfectly together the row would pieces fit perfectly together the row would then disappear then disappear
http://www.ebaumsworld.com/tetris.html
Road Tetris traveled…Road Tetris traveled…
Vadim Gerasimov was the young computer Vadim Gerasimov was the young computer hacker that created a color version of Tetris. hacker that created a color version of Tetris.
Victor Brjabrin sent Tetris to the SZKI, the Victor Brjabrin sent Tetris to the SZKI, the Institute of Computer Science in Budapest Institute of Computer Science in Budapest where where Tetris (Russian Version) fell in the hands of Robert Stein.
Gilman Louie wanted to Stein to "put it (Tetris) Gilman Louie wanted to Stein to "put it (Tetris) in a red box and get the rights" from Russia in a red box and get the rights" from Russia with love. with love.
Who owns the rights?Who owns the rights?
Stein sold the rights of a game he did not Stein sold the rights of a game he did not own yet to Mirrorsoft and spectrum own yet to Mirrorsoft and spectrum Holobyte Holobyte
Stein tried to back track and claims that Stein tried to back track and claims that Tetris was Hungarian made and tried to Tetris was Hungarian made and tried to cut the Soviets out of the deal.cut the Soviets out of the deal.
Stein’s Tetris computer rights!Stein’s Tetris computer rights!
Finally a deal was made between Stein and Finally a deal was made between Stein and Elorg (Electronorgetchinica, ministry for the Elorg (Electronorgetchinica, ministry for the import and export of hardware and software.) import and export of hardware and software.) Stein finally was able to confirm his exclusive Stein finally was able to confirm his exclusive rights to sell Tetris for rights to sell Tetris for computers computers only.only.
1988 Arakawa wanted Tetris for game boy 1988 Arakawa wanted Tetris for game boy His plan was to sublicense a deal for His plan was to sublicense a deal for hand hand
held rightsheld rights with Henk Rodgers with Henk Rodgers Rodgers worked on Stein to bid for the Hand Rodgers worked on Stein to bid for the Hand
held rights held rights
On the search again, this On the search again, this time for answerstime for answers
After weeks of Rodgers never receiving After weeks of Rodgers never receiving an answer he decided to head to an answer he decided to head to Moscow. Not knowing that Stein and Moscow. Not knowing that Stein and Kevin Maxwell (now overseeing Kevin Maxwell (now overseeing Maxwell's electronic-media companies) Maxwell's electronic-media companies) unbeknownst to one another all headed unbeknownst to one another all headed to Moscow to find some answers.to Moscow to find some answers.
Chapter 14Chapter 14The “Tetris” SongThe “Tetris” Song
Language of the gameLanguage of the game
Pajitnov thought highly of Henk Rogers and believed he “spoke the language of games” and truly loved Tetris
Licensing Licensing
Rogers was very surprised by how naïve the Soviets were about licensing deals.
He walked the Soviets through the video-game business
Rogers never asked for anything in the deal and on February 21 the offer of the hand-held rights to “Tetris” was confirmed
Nintendo who?Nintendo who?
He showed the Russians the home video-game version of “Tetris” he was selling in Japan.
Rogers soon found out the Russians had never heard of Nintendo
Soon realizing that the license for home video game console (NES) he had bought from Atari Games/Tengen to market “Tetris” was a “sham.”
Rogers paid the Russians for all the games he had sold so far
He would soon return with his partners of Nintendo.
Robert Stein soon meet with Belikov who drew up an offer for the coin-operated and hand-held “Tetris” rights.
Elrog Elrog (Electronorgetchinica)(Electronorgetchinica)
Once Elorg signed the protocol agreement Once Elorg signed the protocol agreement guaranteeing Mirrorsoft the right to bid on all guaranteeing Mirrorsoft the right to bid on all remaining “Tetris” rightsremaining “Tetris” rights
Elorg would get the rights to publish in the Soviet Union Maxwell Communications properties, such as Collier’s Encyclopedia and other reference books. This was one demonstration of the Soviets effective ability to negotiate.
Tetris RightsTetris Rights
Maxwell commented that Mirrorsoft had not licensed home video-game rights to “Tetris” so the cartridge must be a pirated game.
A protocol agreement was signed guaranteeing Mirrorsoft the right to bid on all remaining “Tetris” rights, even though the coin-operated and hand-held rights were simultaneously being granted to Rogers and Stein.
The Russians were now back in control.
The judge decided there was no evidence that Tengen had ever been granted the video-game rights.
Nintendo was granted their request for a preliminary injunction.
Nintendo released its NES version of “Tetris” and it sold rapidly
Stein learned his lesson: if he found a great game, he would sew up all the rights BEFORE selling it.
The “Tetris” SongThe “Tetris” Song
Outcomes of VisitOutcomes of Visit Elorg in complete controlElorg in complete control Henk/Nintendo had hand held rights + Video Henk/Nintendo had hand held rights + Video
game console rightsgame console rights Stein has coin operated rightsStein has coin operated rights Maxwell admitted to piracyMaxwell admitted to piracy Now Mirrorsoft was up against Nintendo for Now Mirrorsoft was up against Nintendo for
biddingbidding
Who benefited?????Who benefited?????
Henk Rogers made more from “Tetris” than anyone besides Yamauchi. The Russian government made millions from the game. Nintendo did best of all. Tetris brought Nintendo at least $80 million. Pajitnov and Elorg made close to nothing. Although many believed he should be bitter, for Pajitnov it was important just having his game played everywhere.
Lawsuit between Tangen Lawsuit between Tangen and Nintendoand Nintendo
Tangen: has licensing rights for PC for TangenTangen: has licensing rights for PC for Tangen Tangen: alleges that NES is a computerTangen: alleges that NES is a computer Nintendo: alleges that NES is not a computer, it is a Nintendo: alleges that NES is not a computer, it is a
video game machinevideo game machine Verdict: Nintendo WonVerdict: Nintendo Won See pp. 337-338 of the bookSee pp. 337-338 of the book
Question From Ch. 13Question From Ch. 13
Q: Who eventually owned the computer Q: Who eventually owned the computer game rights for Tetris?game rights for Tetris?
A: Robert Stein finally was able to confirm A: Robert Stein finally was able to confirm his exclusive rights to sell Tetris for his exclusive rights to sell Tetris for personal computers only.personal computers only.
Question From Ch. 14Question From Ch. 14
What did Elorg receive in exchange for signing What did Elorg receive in exchange for signing the protocol agreement guaranteeing Mirrosoft the protocol agreement guaranteeing Mirrosoft the right to bid on all remaining “Tetris” rights?the right to bid on all remaining “Tetris” rights?
A: In exchange Elorg would get the rights to A: In exchange Elorg would get the rights to publish in the Soviet Union Maxwell publish in the Soviet Union Maxwell Communications properties, such as Collier’s Communications properties, such as Collier’s Encyclopedia an other reference books. This Encyclopedia an other reference books. This was one demonstration of the Soviets effective was one demonstration of the Soviets effective ability to negotiate.ability to negotiate.
Thank you!Thank you!
Game OverGame OverCh. 15,16Ch. 15,16
SONIC BOOM (CH.15)SONIC BOOM (CH.15)
1988: Nintendo was “fat and happy” as the 1988: Nintendo was “fat and happy” as the industry leaderindustry leader
Competition was only a nuisance, not a threatCompetition was only a nuisance, not a threat NEC (Japanese communications giant) NEC (Japanese communications giant)
became the only visible threat with $22billion became the only visible threat with $22billion in annual salesin annual sales Released Turbografx claiming a 16 bit system, but Released Turbografx claiming a 16 bit system, but
in reality it had 8 bitsin reality it had 8 bits Couldn’t compete with Nintendo because they had Couldn’t compete with Nintendo because they had
low game quality and they relied too heavily on third low game quality and they relied too heavily on third party game developersparty game developers
Nintendo recognized the need for a 16 bit Nintendo recognized the need for a 16 bit systemsystem
Sega enters market with Genesis system (16 Sega enters market with Genesis system (16 bit)bit) Games had better graphics and sound (arcade Games had better graphics and sound (arcade
style)style) Trendsetters (young teenage boys) were turning to Trendsetters (young teenage boys) were turning to
Sega because the 16 bit system was “cooler” than Sega because the 16 bit system was “cooler” than NintendoNintendo
Examples of Games: Altered Beast, Fantasia, Examples of Games: Altered Beast, Fantasia, Moonwalker (Michael Jackson), Joe Montana 2 Moonwalker (Michael Jackson), Joe Montana 2 Sports Talk FootballSports Talk Football
SONIC BOOM (CH.15)SONIC BOOM (CH.15)
SONIC BOOM (CH. 15)SONIC BOOM (CH. 15)
Sega becomes large competition, but Sega becomes large competition, but still lacked flagship game like Mariostill lacked flagship game like Mario Repetitive gamesRepetitive games
Nintendo develops Super Nintendo Nintendo develops Super Nintendo Entertainment system (SNES)Entertainment system (SNES) Launch of Super Mario WorldLaunch of Super Mario World
Purpose was to destroy SegaPurpose was to destroy Sega Sega launches flagship: Sonic the Sega launches flagship: Sonic the
Hedgehog, which became more popular Hedgehog, which became more popular than Mario Worldthan Mario World
SONIC BOOM (CH. 15)SONIC BOOM (CH. 15)
Backlash from parents of children that own old Backlash from parents of children that own old NintendoNintendo Didn’t want to buy whole new SNES system that is Didn’t want to buy whole new SNES system that is
not compatible with old gamesnot compatible with old games Avg. investment $1500 into old system and gamesAvg. investment $1500 into old system and games
Competition between Sega and Nintendo Competition between Sega and Nintendo allowed for greater licensing controlallowed for greater licensing control
SONIC BOOM (CH.15)SONIC BOOM (CH.15)
Nintendo didn’t want to fall behind Nintendo didn’t want to fall behind anymore, so they recognized that the anymore, so they recognized that the future lied with future lied with multimedia multimedia (CDs)(CDs) CDs allowed for increased storage (8-10 CDs allowed for increased storage (8-10
megabytes vs. 1 gigabyte)megabytes vs. 1 gigabyte) Cheaper for manufacturing ($12-$15 vs. $1-Cheaper for manufacturing ($12-$15 vs. $1-
$2 each CD)$2 each CD) Nintendo recognized the potential $3 trillion Nintendo recognized the potential $3 trillion
in sales by 2000in sales by 2000
SONIC BOOM (CH. 15)SONIC BOOM (CH. 15)
Nintendo entered agreement with PhillipsNintendo entered agreement with Phillips Sony retaliates by partnering with SegaSony retaliates by partnering with Sega
Sony thought they would get multimedia deal with Sony thought they would get multimedia deal with Nintendo who turned to PhillipsNintendo who turned to Phillips
By 1992 Sony and Nintendo work out By 1992 Sony and Nintendo work out differencesdifferences Phillips will still make multimedia unit for SNES Phillips will still make multimedia unit for SNES
attatchmentattatchment Nintendo would decide which software to put on Nintendo would decide which software to put on
Sony CD-ROMSony CD-ROM
BORDERS (CH. 16)BORDERS (CH. 16)
Nintendo (Yamauchi) believed that the future Nintendo (Yamauchi) believed that the future was based on computer networkswas based on computer networks
Nintendo NetworkNintendo Network US was supposed to be a large part of the US was supposed to be a large part of the
Nintendo global networkNintendo global network Had even greater potential than Japan with tons of Had even greater potential than Japan with tons of
households owning NES- thought they could link households owning NES- thought they could link these consumers inthese consumers in
Computers were only in 15% of homes, NES was in Computers were only in 15% of homes, NES was in 33%33%
BORDERS (CH. 16)BORDERS (CH. 16)
Online services that would be available on Online services that would be available on Nintendo network:Nintendo network: Electronic banking (bill pay online)Electronic banking (bill pay online) Stock and bond monitoring and purchasingStock and bond monitoring and purchasing ShoppingShopping Airline reservations, etc…Airline reservations, etc…
Failed in JapanFailed in Japan Additional features: gambling, postal services (stamp Additional features: gambling, postal services (stamp
purchasing), etc…purchasing), etc… Parents didn’t want to use a child’s toy to do businessParents didn’t want to use a child’s toy to do business
BORDERS (CH. 16)BORDERS (CH. 16)
Never launched in U.S. Never launched in U.S. Minnesota Lottery EpisodeMinnesota Lottery Episode Nintendo abandoned idea, never committed Nintendo abandoned idea, never committed
resourcesresources
Nintendo then segmented market specific Nintendo then segmented market specific products to specific groupsproducts to specific groups
Advertising and promotion (markdown Advertising and promotion (markdown money!) became key to strategy for growthmoney!) became key to strategy for growth
BORDERS (CH. 16)BORDERS (CH. 16)
Nintendo gradually grew profits to Nintendo gradually grew profits to become the most successful business in become the most successful business in any industry, in any countryany industry, in any country
(Throughout all of this they were still (Throughout all of this they were still worried about the lawsuit with Atari that worried about the lawsuit with Atari that was ongoing)was ongoing)
U.S. struggles in recessionU.S. struggles in recession Nintendo buys Mariners for PRNintendo buys Mariners for PR
BORDERS (CH. 16)BORDERS (CH. 16)
Nintendo branches into EuropeNintendo branches into Europe Game Boy becomes large contributor to Game Boy becomes large contributor to
Nintendo’s successNintendo’s success
Nintendo is found ‘Not Guilty’ in Atari Nintendo is found ‘Not Guilty’ in Atari case case
Nintendo continued to growNintendo continued to grow
BORDERS (CH. 16)BORDERS (CH. 16)
New president: ArakawaNew president: Arakawa 1992 was the biggest year yet, with 1992 was the biggest year yet, with
Nintendo pulling ahead of SegaNintendo pulling ahead of Sega Allied with Sony for multimediaAllied with Sony for multimedia
Nintendo’s Attitude:Nintendo’s Attitude: ““Anyone who chooses to underestimate us Anyone who chooses to underestimate us
will lose.”will lose.”
Key TakeawaysKey Takeaways
A company can’t stay #1 forever if it relies A company can’t stay #1 forever if it relies on old core strengths in a changing on old core strengths in a changing business environment.business environment.
Small and innocent competitors can turn Small and innocent competitors can turn into intense rivalries if left unchecked.into intense rivalries if left unchecked.
Choose a direction- but don’t stick it.Choose a direction- but don’t stick it.