The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World (44 page)

Nintendo built the Famicom around the 6502 processing chip, a close cousin of the 6507 that Atari used in the original Video Computer System (VCS). Technology had evolved, however, and Nintendo’s engineers were able to reap more power from the chip. Along with added memory, the Famicom had a number of components (including a second processor for generating graphics) that had been either unavailable or too expensive in 1976, when Miner and Alcorn designed the VCS. This upgraded architecture allowed the Famicom to produce more colors and more detailed graphics than the VCS or any system before it.

Of the Famicom’s many innovations, the most important was its controller. The VCS was initially designed to play sophisticated versions of
Pong
and
Tank
and came with both paddles and joysticks, but most of its games used a joystick. That turned out to be a weakness. VCS joysticks were versatile for their time but were uncomfortable to hold. To use them, most players had to
grip the square base with one hand and move the stick with the other. People often complained that their hands cramped or their fingers locked around the base after long stretches of game playing. Also, the stick, not designed to withstand the kind of stress players often placed on it, often broke.

Mattel had added a measure of ergonomics, durability, and sophistication to game controllers with its Intellivision game pad, which featured a flat disk that players pressed with their thumbs. Though it took players a while to get used to the disk, most felt that the Intellivision controller added precision to gaming.

For the Famicom, Nintendo designed a new kind of controller that was derived from the +-shaped direction pad that its lead engineer, Gumpei Yokoi, developed in the late 1970s for the Game & Watch LCD games. Somewhat similar in concept to the disk on the Intellivision controller, the Famicom controller allowed players to maneuver characters by pressing on the + pad with their left thumb.

The design of the Famicom’s controller was both elegant and functional. The joystick, once the symbol of video gaming, was about to be replaced by a newer and more universally applicable device. Most people found the Famicom controller easier to use and more comfortable to hold.
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The Famicom controller was easier to use than the Intellivision controller. Nintendo’s + pad was more intuitive than Mattel’s disk. Intellivision’s controller also included a twelve-button membrane keypad that was cumbersome to use. The Famicom controller had a simple two-button design.

The Japanese launch of the Famicom was not without problems. A bad chip set in the original design caused the system to crash during certain gaming conditions. Hiroshi Yamauchi, president of Nintendo, decided to recall the entire first shipment of Famicoms and replace the chips. Though it cost Nintendo a small fortune and alerted retailers to problems with the new console, Yamauchi decided that protecting the Nintendo name was more important than preserving the initial momentum of his sales.

After that initial setback, the Famicom became a spectacular success. Nintendo sold more than 500,000 Famicoms within two months of introduc
ing the system into stores. Encouraged by his success with Japanese consumers, Yamauchi set his sights on exporting his game console to the United States. The only problem was that no one in America seemed particularly interested in video games any longer. As far as retailers and software makers were concerned, the U.S. video game industry was dead.

One lesson Hiroshi Yamauchi learned from his attempts to break into the U.S. arcade market was that popularity in Japan did not automatically translate into success in America. Ron Judy and Al Stone, the men who represented Nintendo’s products to arcade distributors, struggled to get people to take their products seriously. Even
Radarscope
, one of the top arcade games in Japan, had
gone unnoticed in the United States. Had it not been for the runaway success of
Donkey Kong
, Nintendo might have never carved a niche in the U.S. market.

Yamauchi had heard the stories that the U.S. video game industry was collapsing. Atari had already announced its low earnings by this time, and Warner Communications stock had already dropped. The worst was yet to come, but Yamauchi certainly knew that the 1982 Christmas season had not lived up to expectations. Even so, he believed that the Famicom was different, that it was the best video game console ever made. What he needed, however, was a powerful network to market the system on a worldwide basis. Even with its strong presence in the arcade business, the name Nintendo meant very little to retailers outside of Japan.

With no presence in the retail channel and no way of making inroads, Yamauchi decided that Nintendo needed a partner to represent the Famicom in America. He decided that the best partner would be Atari. At Yamauchi’s suggestion, Nintendo of America vice president Howard Lincoln contacted Atari early in 1983.

Ray Kassar was still running the company when Lincoln called, but his tenure was coming to an end. The call came four months after Kassar’s announcement about not reaching sales goals, and Warner stock was still in decline, due to investor doubts about Atari’s future. Investors also had doubts about Kassar himself. The allegations of insider trading were public by this time, and Kassar, Atari’s once lofty CEO, was fighting for his corporate existence.

Lincoln called Kassar to suggest a partnership. He had been authorized to offer Atari a license to sell the Famicom internationally in every market except Japan. Lincoln’s offer was fairly straightforward. In exchange for allowing Atari to sell the system under its own label, Nintendo would receive royalties on every unit sold and have unlimited access to sell software for the system.

The offer placed Atari in a no-lose situation. Licensing the Famicom did not necessarily equate to making a good faith effort to market it. What Lincoln and Yamauchi did not know was that General Computer, the Massachusetts game developer that had produced most of the games for the 5200, had begun work on a new game system for Atari—the 7800.

If the new system proved to be more powerful than the Famicom, the license would have enabled Atari to smother the Famicom globally. If, on the other hand, the 7800 did not sell well, a partnership with Nintendo could provide Atari with an escape hatch. Kassar asked for a meeting.

Lincoln and Minoru Arakawa, president of Nintendo of America, flew from Seattle to Atari headquarters in Sunnyvale, California, to explain the details of the partnership.

Lincoln and Arakawa received royal treatment during their visit at Atari. Not only did they meet with Manny Gerard and Ray Kassar, but Steve Ross, president of Warner Communications, stepped into the meeting to shake their hands. When they finally sat down to discuss the partnership, several of Atari’s top executives crammed into the conference room to listen. As far as Lincoln and Arakawa could tell, things were going better than expected.

The next step in the negotiation process was for Nintendo to demonstrate the Famicom. Yamauchi sent several Famicom consoles to Atari’s research and development labs and invited members of Atari’s executive staff to watch a demonstration of the system at his corporate headquarters in Kyoto, Japan. Kassar did not attend that showing but sent a delegation led by Skip Paul, Atari’s legal counsel.

After the initial demonstration of the Famicom console, negotiations evolved into a three-day struggle over prices and royalties. Paul claimed that Kassar and Gerrard were interested in making a deal but wanted to make some changes in the contract. Lincoln had to make sure that Nintendo’s best interests were not compromised. Both Kassar and Yamauchi, the only men with the authority to approve a final deal, appeared anxious to iron out the details.

On the third day of negotiations, Lincoln warned Paul that Yamauchi was getting annoyed with all of the haggling and delays. Paul excused himself to call Kassar. When he came back, he said he had received final approval and that a contract should be drawn up.

The deal never went through.

The collapse began at the 1983 Summer Consumer Electronics Show in Chicago. While all appeared to be moving smoothly, Coleco debuted the Adam Computer. It was playing
Donkey Kong
, a game Nintendo had licensed to Coleco.
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Yamauchi, Arakawa, and Lincoln went to the show expecting to finalize their marketing arrangement with Atari. Instead, they received an angry message from Kassar, claiming that Coleco’s use of
Donkey Kong
on the Adam breached the licensing agreement Atari had made with Nintendo for the home-computer rights to the game.

In an effort to pacify Atari, Lincoln called for a meeting that evening with Arnold Greenberg, president of Coleco. Perhaps Arakawa and Lincoln remembered how quickly Greenberg had backed down when threatened by Universal Studios, or they may simply have been enraged that Coleco had made a new version of
Donkey Kong
without clearing it, but they sat back and watched as Hiroshi Yamauchi put on a show for Greenberg.