Console Wars (2015)





“Name?” Nintendo’s receptionist asked, looking up at a tall, finely dressed gentleman with short dark blond hair.

“Olaf Olafsson,” the man replied. As his copper-colored eyes fixed on the receptionist, a smile slid across one side of his face, while a slight scowl draped across the other. “And I am here to see Mr. Lincoln,” Olafsson said in his singsongy style of speech, which bordered on iambic pentameter. “He should, of course, be expecting my visit. Though perhaps I have arrived a tad early.” The receptionist confirmed his appointment with Howard Lincoln and asked him to wait in the brightly lit brown and white lobby.

Olafsson walked passed a glass case containing an ornate crystal horse’s head and sat down on a brown couch. It had been a long day thus far, and it was nice to get off his feet. He had grown accustomed to spending much of his days in transit, but traveling to Nintendo of America’s headquarters in Redmond, Washington, didn’t make for the easiest trip. Nevertheless, there was something very endearing about Redmond. Normally, he divided his time between Manhattan, Los Angeles, and the postcard cities of Europe, so it was nice to be somewhere quaint and quiet. Taking a moment to appreciate his surroundings, he leaned back on the couch and reflected on the unusual life trajectory that had led him here.

Olaf Olafsson had been born and raised in Reykjavik, Iceland, where he developed a keen passion for math, science, poetry, and athletics. When he was seventeen years old, he parlayed his exploits as an amateur Icelandic Renaissance man into a scholarship at an American college. Embracing this opportunity to expand his horizons, he left his homeland and emigrated to the United States, where he studied physics at Brandeis University. In 1985, as he neared the end of his undergraduate studies, Olafsson saw his future cleanly divide into two distinct paths: he could continue on this track by getting his master’s and PhD and then joust for position in the small but distinguished community of physicists, or he could live an unexpected life filled with many and diverse interests. Though the spirited competition involved in the former option intrigued him, he was leaning toward the latter. His mentor, a physics professor named Stephan Berko, wished to talk him out of abandoning the scientific path, and so set him up to meet a distinguished former student: Michael “Mickey” Schulhof, a high-level executive for Sony’s American division. In an unexpected twist, the meeting ended with Olafsson not only retiring from a career in physics but accepting a job at Sony. Schulhof hired the young man from Iceland to introduce a new technology called CD-ROM. Rising to the challenge, Olafsson traveled around the world to demonstrate the amazing audio and visual power of compact discs to tech companies like HP, Apple, and Microsoft.

In early 1991, Olafsson was promoted from introducing hardware to selling software. More specifically, he was named president of a new division called Sony Electronic Publishing, which would be responsible for the production of any digital content for computers, multimedia players, or videogame systems. This included anything from a CD containing the complete works of William Shakespeare to an interactive game based around an upcoming blockbuster film. The primary source of this content would come from a pair of multibillion-dollar entities that Sony had recently acquired: a prestigious film studio (Columbia TriStar Pictures) and a premier record label (CBS Records). As a result, Olafsson’s initial job was to familiarize himself with the various branches of Sony’s newest assets and figure out how, if at all, they might fit under the new umbrella of electronic publishing. Whether on the set of a new movie or in the recording studio with a popular artist, Olafsson thoroughly enjoyed learning all aspects of the entertainment industry . . . except when it came to videogames.

Personally, he knew very little about videogames. They had not been a part of the social scene back in Iceland, and by the time he got to America he was too old to get sucked into Nintendo-mania. So to understand the industry, he relied on information from Imagesoft, Sony’s game publishing imprint, based in Santa Monica. Imagesoft was a third-party licensee of Nintendo and had released two games for the NES: Solstice and Super Dodge Ball. Both had been well regarded by critics and well received by consumers, but neither was particularly profitable. This led Olafsson to believe that for all the talk of videogames becoming big business, there wasn’t really much money to be made. To test his hypothesis, he met with the Imagesoft team.

It turned out he was wrong. There was actually a lot of money to be made in videogames; it’s just that Nintendo was making most of it. And whatever money they weren’t making themselves was, essentially, being allocated to companies they deemed worthy of eating the remaining slices of the pie. Olafsson realized that the secret to Nintendo’s power lay in the cunning licensing process they had created, which required would-be business partners to jump through a complicated series of hoops.

Getting into business with Nintendo involved signing their take-it-or-leave-it licensing agreement, which would grant a publisher, like Sony’s Imagesoft, the right to produce up to five different games per year. In exchange for this privilege, the publisher would have to purchase the game chips directly from Nintendo, give them the exclusive rights to their titles, pay a substantial royalty on units sold, and agree to a variety of other strict conditions. Olafsson didn’t find this agreement to be particularly sporting. Nintendo wanted to exert their leverage? They wanted to gouge developers, producers, and publishers? They wanted to be paid everything in advance, before a single game was ever sold? Fine, Nintendo had earned the right to call the shots. But it was the next few steps in the process that Olafsson found to be particularly startling.

After signing the licensing agreement, a publisher would then invest a great deal of time, money, and energy in producing one of their five titles. When they were finished developing a game, they would submit a completed version to Nintendo’s headquarters in Redmond, Washington. At some point in the future (it could take days, weeks, or months) the publisher would find out if their game had been approved. But, as they eventually realized, games were never approved the first time. So Nintendo would fax over a list of changes, and the publisher would redevelop the game to make the necessary alterations. The publisher would once again send the game to Nintendo, who would either approve the revised submission or, more typically, send another fax requesting additional changes. This process was repeated until a game was deemed to be up to Nintendo’s standards.

Following the approval, it was finally time for the game to be produced. Naturally, having invested a lot of resources, the publisher would want to order a large quantity of games to increase their profit potential. But because the licensing agreement contractually ensured that Nintendo would be the manufacturer, they would get to determine how many copies would be made. A good rule of thumb was that a publisher would receive about 25 percent of their desired order, though that total fluctuated based entirely on Nintendo’s evaluation. Lastly, the publisher would then wait for the game cartridges to be manufactured and delivered. This would generally take a couple of months (a month for production, another for shipping overseas) but, like every other step of the process, there were no guarantees. If dastardly winds knocked a cargo ship off course, delivery could be delayed a week, but if a global chip shortage struck, as Nintendo insisted was the case in 1988, then everything could be delayed indefinitely.

Olafsson was appalled by the absurd dynamics of all this. His company was taking all of the risk, yet Nintendo possessed total control every step of the way and received a large share of the rewards. His dismay turned to disgust upon learning that one of Imagesoft’s games, Super Sushi Pinball, had been flat-out rejected and would never be released. He had no idea if this game was any good, nor did he care. His company had spent nearly a million dollars to create this game, and to develop a marketing campaign around the whimsical tagline: “Finally a game that tastes as good as it plays.” Given this hefty investment, its success or failure should be determined by consumers, not by Nintendo. That was not right, not by a long shot. So he had made the decision to visit Nintendo’s headquarters and try his best to balance the equation.

As Olafsson looked around the lobby, he made sure to extract any emotion from his demeanor. He had not come here to rant, rave, or rage. He was here, quite simply, as a businessman who believed it was in Sony and Nintendo’s best interest that a special arrangement be made. After all, the two companies had a rich history together. Sony was the manufacturer of the audio chip for the Super Famicom, and in the coming years that relationship would become even tighter as a result of their joint venture to launch a CD-based game system together. The two companies needed each other, and that should be evident in all facets of their relationships.

“Great to finally meet you,” said Howard Lincoln, a tall, serious-looking man with soothing eyes and a long, moon-shaped face. He was Nintendo’s senior vice president and had a manner of speaking that reflected the prestige of that title. Powerful, but never pretentious. “Very kind of you to make the trip up here to see us.”

Olafsson stood to shake hands. “Ah yes, but of course.”

“I know Redmond’s a bit out of the way, but it’s got a nice charm, no?”

“Absolutely. It’s quite a pleasant respite,” Olafsson began, deploying just the right amount of untraceable European accent so as to sound worldly but not pretentious, “from the scratching and clawing of busy cities.”

“Well put,” Lincoln replied. “Why don’t I give you a tour of the place and then we can get down to it. How does that sound?”

“Lovely,” Olafsson said, waving his hand forward. “You lead, I follow.”

Lincoln took Olafsson through the colorful offices, whimsically decorated with game characters. It felt almost like a tiny Nintendo theme park, except for the noise, or lack thereof. In contrast to the vibrant aesthetics of the place, the employees were relatively quiet. They were all certainly quite friendly and accommodating, but there was a silent seriousness to them, both individually and as a group.

After the tour, Lincoln brought Olafsson into a modern, white-walled conference room that was filled with images of Donkey Kong, Nintendo’s large, lovable, goofy gorilla. The two men sat down at a long, glossy table and briefly discussed this game, which was one of the few games that Olafsson had played himself.

“I was quite young back then, but I could tell right away that the game would become a hit,” Olafsson explained with a nostalgic smile sewn to his face. “I remember being enveloped with this addictive sense of wonder. Which, I must say, is high praise from someone who doesn’t much like videogames.”

Lincoln chuckled at the memory. “What’s this about not liking games?”

“Oh, I don’t know,” Olafsson said with a shrug. “They’re certainly fine. I just think they’re a bit of a silly thing. Not so much for me.”

“That’s understandable,” Lincoln said. “But then, I must ask, why be in this business at all?”

“That’s a very good and valid question,” Olafsson said, pointing playfully at Lincoln. “Though it becomes slightly rhetorical in this audience of two because we both know the answer.”

“Because business is business is business?”

“In theory, yes. But under the circumstances that bring me here today, I have to ask if that’s really the case. I’ve read through the licensing agreement, reviewed our contracts, and spoken to my guys about some of their adventures with Nintendo. This business, shall we say, is unlike any other that I am familiar with.”

Lincoln nodded, unsurprised and not at all flustered by these concerns. “I’ll grant you that. It’s a new industry.”

“One with a promising road ahead.”

“Absolutely,” Lincoln replied. “But ten years ago they were saying the very same thing: ‘Videogames are a can’t-miss!’ That, however, didn’t turn out to be quite right. A lack of quality control led to chaos and the whole thing fell apart. Look, I know what people say about Nintendo, and what publishers, retailers, and everyone else thinks about our ‘strict’ agreements.” Lincoln paused to look Olafsson in the eye, trying to show him that this wasn’t just lip service but sincere understanding from a rational individual. “But there really is a method to the madness. From idea to purchase, it’s our job to make sure that a product lives up to Nintendo’s standards in order to create a premium entertainment experience. And if we can do that, then consumers, retailers, and everyone else along the food chain gets fed.”

Olafsson nodded sympathetically. “You’re obviously an intelligent man. That being the case, I think you can imagine where I might attempt to point out a few imbalances in that logic. Nevertheless, I acknowledge that we’re on different sides of the table here and, naturally, ought to possess divergent perspectives on issues like these. “But,” Olafsson continued, sharpening his tone. “If Nintendo gets to make the rules, then, given the company’s long-standing relationship with Sony, I would think that some leeway should be in order.”

“In what sense, exactly?”

Olafsson squinted, choosing his words. “In a very general sense, Mr. Lincoln. But I would venture to say that a good start might be for Nintendo to stop treating us like we’re nothing but slaves on the plantation.”

Lincoln recoiled at the comparison. “That’s a bit drastic, wouldn’t you say?”

“My metaphor? In tone, perhaps. But in sentiment, it feels spot-on.”

Lincoln shook his head. “I think we’re getting off course. And in the spirit of avoiding any further derailment, I’ll just say the following: Nintendo values its relationship with Sony. But our licensing agreement for making games is the same with every company and there are no exceptions.”

“I see,” Olafsson said, realizing there was no use to any of this. If this was how Nintendo wanted to play the game, then this was how it would have to be. As he sat there, he had many thoughts about this peculiar new industry, many thoughts indeed. But regardless of the shape, size, and color of these thoughts, he was very much displeased. At this juncture, however, there was no value in showing off his displeasure. Instead, Olafsson asked his host to tell him about some of the great promotions that Nintendo had planned for the coming year.

“Excellent question,” Lincoln replied, and then launched into an upbeat monologue that he must have already given many times. As Lincoln talked about Mario’s new pet, some kind of green dinosaur with an off-putting name, Olafsson began to zone out and look for new ways to play the hand that he’d been dealt. In the middle of his private brainstorm, his eyes grazed one of the paintings on the wall. It was an image of Donkey Kong readying to throw a barrel that he held over his head. Olafsson returned his eyes to Lincoln, but his mind was stuck on Donkey Kong.

When they had first entered the room, the image had brought back to Olafsson the visceral memory of playing Donkey Kong, but now he was beginning to remember the details of the game. If memory served correctly, Donkey Kong was the story of an arrogant gorilla who enjoyed beating his chest and throwing dangerous obstacles in the way of a courageous little red plumber. Because it was unlike any other game at the time, Donkey Kong was exceptionally difficult to beat. But if a player inserted enough quarters, put in the necessary time, and studied the patterns of the game, it eventually became beatable. And as Lincoln continued to speak about Nintendo’s future, Olafsson couldn’t help but think about what lay ahead for the eight-hundred-pound gorilla in the room.