by Steven Kent
What makes Nintendo’s platform so much cheaper than competing machines is the lack of a CD-ROM drive. Critics claim this is a great weakness. Everyone thinks the transition to CD-ROMs is inevitable because they can be manufactured much more quickly and inexpensively than cartridges. They also have much more memory, which allows developers to throw in movie and music clips. There is a problem, however. There is a difference in data-access speed of 1,000 times. To get around this, companies have had to build in lots of internal memory in the machines. But that is expensive. For software houses, it is cheaper to make CD games, but Nintendo says its cartridges will be priced the same as CDs and that for hot titles there will be plenty of margin for profit.3
Cartridges are a very expensive medium, however, and many game developers resented Nintendo’s decision to continue using them. Sony’s licensing structure was built around a $10-per-game arrangement that included manufacturing disks, manuals, and packaging. Compared to the cost of pressing CDs, manufacturing cartridges for Project Reality would be prohibitively expensive. At the time, it cost more than $20 to manufacture an 8-megabyte cartridge, compared to less than $2 to press a 640-megabyte CD. And the additional storage space on CDs could be used for video clips, animations, audio files, music, and larger games. Even as Lincoln told the media that Nintendo had forms of compression that would vastly increase the amount of information that could be crammed into an 8-megabyte cartridge, it was widely accepted that Project Reality games would simply be smaller than those on Saturn and PlayStation.
Speculation about why Yamauchi had chosen cartridges ranged from curiosity to antagonism. Tom Zito, founder of Digital Pictures, said that Nintendo went with the cartridge format because cartridges are harder and more expensive to copy—making it easier for Nintendo to avoid piracy. Other game company executives claimed Nintendo went with cartridges so that it would have complete control over the manufacturing of games for the console and maximize its profits.
It was a combination of things. There was a technology element to it and there was that counterfeiting element to it, big time.
The technology argument, I think, at the time was legitimate…. At the time, Takeda [Genyo Takeda, the Nintendo engineer working with Silicon Graphics to design Project Reality] and those guys felt very strongly that it was absolutely essential to have it on a cartridge in order to do the kind of things that we wanted to do with Super Mario.
The counterfeiting thing, I think, turned out to be correct, with the huge counterfeiting problem that Sony has.
I’ve seen speculation about how this was some plot to control third-party publishers. That’s completely nonsense. There is just not a grain of truth in that thing. No discussion like that ever occurred; that was never an issue. It was strictly technology and counterfeiting.
—Howard Lincoln
In the days leading up to the 1994 Summer Consumer Electronics Show, Nintendo made two more announcements. On June 5, Lincoln announced that Alias Research, one of the leading computer-graphics companies, would create custom software tools for Project Reality. On June 23, Lincoln announced that the final name of Nintendo’s new console would be “Ultra 64” and that Acclaim Entertainment would create a game called Turok: The Dinosaur Hunter for it. Then came the closed-door meetings at CES, in which reporters and analysts were shown glimpses of Killer Instinct and told they were running on prototype Ultra 64 hardware.
On January 5, 1995, Nintendo announced that Silicon Graphics had completed the final chip set for Ultra 64 and gave the console’s final specifications. Critics, such as Trip Hawkins, openly challenged Nintendo’s assertion that Ultra 64 would be ready in 1995. But with the announcement that the chip set was complete, Nintendo’s claim that a powerful system would be ready later that year seemed more believable.
According to the announcement, Ultra 64 would indeed have a 64-bit processor—easily the fastest processor in any of the next-generation consoles. Ultra 64 would also have a separate graphics processor that could generate 100,000 texture-mapped polygons per second, while handling several graphics-enhancing processes such as ray-tracing, anti-aliasing, and tri-linear mip-mapping interpolation—processes that were not available on PlayStation or Saturn.
After announcing that the chip set was complete, Nintendo began disclosing new partnerships with more “dream team” developers. Williams Manufacturing, the arcade company behind such Acclaim cartridge hits as NBA Jam and Mortal Kombat, joined on, as did noted PC flight simulation publishers Sierra and Spectrum HoloByte. Angel Studios, a computer-graphics company best known for making special effects for movies, and Paradigm Simulation, a company that designed high-end virtual reality software, joined the team. Then Ocean of America and GameTek—and the team started looking haphazard. Once, when asked why he selected Ocean as part of his “dream team,” Lincoln was unable to stop himself from laughing. When he was able to respond, he smiled and said, “I’m surprised you did not ask, ‘Why GameTek?’”
But Ultra 64 was not the only “next-generation” system Nintendo planned to release in 1995. Nintendo’s research and development Team 1, led by Gumpei Yokoi, had created a portable game system called Virtual Boy.
Compared to the multimillion color-producing consoles being created by Sega, Sony, and Nintendo, Virtual Boy was an anomaly. Supposedly the heir to Game Boy, it had single-color graphics. The system was built around red LED arrays, so it only showed red objects against a black background. The catch, however, was that it had two mirror-scanning stereoscopic displays that enabled it to create the illusion of three-dimensional objects. Reflections Technology, a Massachusetts-based company that was not normally associated with games, had created Virtual Boy’s stereoscopic LED technology years earlier. But marketing the idea to game companies had proved difficult.
I turned down Reflections Technology twice. They came to me when I was with Mattel and showed me this thing called “Red World.” Then they came to us before going to Nintendo and I looked at it and thought, “This looks very familiar.”
—Tom Kalinske
When Reflections Technology executives took their idea to Nintendo, they found a willing advocate in Gumpei Yokoi. Yokoi, who designed Game Boy, was looking for a new technology that might “encourage more creativity” in games.
I saw that the market was so saturated with video games that it became nearly impossible to create anything new. There were a lot of creative ideas for games for the NES and for Game Boy. But there were not so many new ideas for games for the Super Nintendo. I think game companies ran out of new ideas. I wanted to create a new kind of game that was not a video game, so that designers could come up with new ideas.
—Gumpei Yokoi, former head of Research and Development Team 1, Nintendo Co., Ltd.
Yokoi appears to have been less than excited about creating a system with a single-color display. He looked into making a color version of the technology but found that it would have to retail for over $500, far too expensive.
In the beginning of the development, we experimented with a color LCD screen, but the users did not see depth, they just saw double. Color graphics give people the impression that a game is high tech. But just because a game has a beautiful display does not mean that the game is fun to play.
I also wish to explain that LEDs come in red, yellow, blue, and green. Red uses less battery and red is easier to recognize. That is why red is used for traffic lights.
—Gumpei Yokoi
As the project progressed, Yokoi made his new game console less like a virtual reality head-mounted display and more like a Viewmaster. Deciding that head-tracking caused motion sickness, he created his system without tracking technology. Then he decided that wearing a heavy helmet was uncomfortable, so he mounted the unit on a stand. Instead of a visor, he ended up with a console shaped like a diver’s facemask with a rubberized seal for blocking outside light.
Nintendo first announced work on a virtual reality project in the summer of 1994. In November, the console was unv
eiled at Shoshinkai, a proprietary trade show Nintendo held in Tokyo every winter. The general reaction was less than favorable. One reporter dubbed the system “Virtual Dog.”
The November unveiling of Virtual Boy in Japan signifies an important change in direction for Nintendo. Either it has gone completely mad or it deems the future of videogaming to be crude, red, and likely to induce headaches.4
At the show, Nintendo announced that Virtual Boy would retail in Japan for 19,800 yen (approximately $207). Show attendees seemed unimpressed by the hardware and equally unimpressed by the games, which included a remake of the 1981 arcade classic Mario Bros., a pinball simulation, and a boxing game called Telero Boxer. Of the three, only Telero Boxer tried to take advantage of Virtual Boy’s 3D capabilities.
Even worse, several people who tried the system complained about having headaches after using it. Players needed to focus the mirrors inside Virtual Boy before every use to avoid getting headaches. And even if they did, staring at the red and black screen for prolonged periods of time could still produce headaches or dizziness. By the time Virtual Boy came to the United States, it bore a statement warning that extended use could cause headaches.
In January 1995, Nintendo of America unveiled Virtual Boy at Winter CES in Las Vegas but did not give specific launch information and only showed the partial games that were shown at Shoshinkai. For final launch information, reporters would have to wait for E3.
Nintendo Comes Clean
On May 4, 1995, a Wall Street Journal reporter named Jim Carlton interviewed Greg Fischbach about Acclaim’s annual report. As he reviewed the report, he noted that while Acclaim had earnings projections for Saturn and PlayStation sales, there were no projections for Ultra 64 sales. When he asked Fischbach about this, Fischbach quickly said, “No comment.”
Armed with this information, Carlton called Nintendo marketing and communications manager Perrin Kaplan and told her what he had found. She said she understood and asked for one hour to prepare a response. Kaplan went directly to Howard Lincoln, chairman of Nintendo of America, and Minoru Arakawa, president of Nintendo of America, and told them what had happened. With no other option, they admitted that Ultra 64 would not be released in 1995, and Carlton had a scoop for the next day’s paper.
The next morning, Howard Lincoln came in early and called reporters around the country to warn them about the Wall Street Journal article and to let them know that Ultra 64 would not be out for another year.
The Really Big Show
The first Electronic Entertainment Expo took place in the Los Angeles Convention Center on May 11–13, 1995, and all the major players were ready to put on a show. On the first day, Tom Kalinske, president of Sega, and Olaf Olafsson, president of Sony Electronic Publishing, were scheduled to give keynote presentations from 8:30 A.M. to 9:45 A.M. Kalinske discussed Sega’s heritage in arcades and as a game company. He announced that the retail price of the Saturn would be $399 and began describing what a powerful system it was. Then he gave the punchline—the console had already shipped. September 2, Sega Saturn Saturday, was still going to be the official launch date for Saturn, but 30,000 systems had already been shipped to four key retailers: Toys “R” Us, Babbages, Software Etc., and Electronics Boutique.
Next came Sony’s turn to drop a bomb. Olafsson was supposed to discuss “what it’s going to take to be successful storytellers in coming years.” The topic obviously gave him room to discuss the technological strengths of PlayStation, and he was expected to announce the system’s price and launch date. At the time, it was generally assumed that PlayStation would likely be as expensive, or possibly more expensive, than Saturn. Olafsson started his speech as expected, then interrupted himself.
Olaf [Olafsson] was about two-thirds of the way through his speech when he said, “I’d like to call up Steve Race to tell you a little bit more about the Sony PlayStation.” So I walked up. I had a whole bunch of sheets of paper in my hands, and I walked up, put them down on the podium, and I just said, “$299,” and walked off stage to this thunderous applause.
—Steve Race
Sony clearly won the first battle of E3. By sending Saturns to four retailers only, Sega offended several of its best outlets. Kay*bee Toys responded by dropping Sega from its lineup. More important, releasing in spring or summer, typically slow seasons for video game hardware sales, did not give Sega any advantage. Having a surprise launch meant that Sega had forfeited any chance of having a big send-off for Saturn and gave the appearance of being afraid of head-to-head competition with PlayStation.
I think Japan was scared of PlayStation; at least more than we were in the U.S. Tom was not afraid. Tom was ready to go to battle because Tom was used to hardware that wasn’t necessarily the best in the market anyway.
—Michael Latham
Sony’s surprise was more effective. Even though Saturn came bundled with a highly desirable game, Virtua Fighter, it was too expensive for the consumer electronics category. The $399 price point was known to be more of a high-end electronics ticket, something that people might pay for a stereo component but not for a video game console. Sega was making the same mistake Trip Hawkins had made with 3DO.
I’m sure that price came from Japan. Tom was frequently dealt some very difficult cards to have to play, and he did a very good job of melding his deck and doing as much as he could with the cards that he was dealt. My hat is off to the guy.
—Steve Race
While Nintendo, Sega, and Sony threw million-dollar parties at E3, Trip Hawkins held a quiet and elegant dinner at a fine restaurant. In his typical socially graceful fashion, he left one seat open at every table and shuttled from one table to the next through the meal so that he could speak with all of his guests. During the meal, a reporter asked him what he thought of Sony. Sighing and looking a bit tired, Hawkins replied, “For a company that is so new to the industry, I would have hoped that Sony would have made more mistakes by now.”
Nintendo executives focused on Super NES, Game Boy, and Virtual Boy rather than Ultra 64. There were no Ultra 64 prototypes for guests at the Nintendo booth, and by this time everybody knew that Nintendo had no plan to release the console in 1995. Lincoln did announce, however, that Virtual Boy would come out in August for a suggested retail price of $179. Nintendo’s other big announcements were three Super NES game—Donkey Kong Country 2, Killer Instinct, and Yoshi’s Island.*
The Launch Season Begins
One problem with launching Virtual Boy, along with the general lack of interest most consumers had in the product, was that the only way to see its 3D images was to place your face against it. This meant that shoppers would not see the 3D images as they walked past them in stores. Also, the system could not be effectively demonstrated on television.
Virtual Boy was released on August 14 to generally lackluster reviews. Although reviewers at Entertainment Weekly and Popular Science gave it glowing reviews, game magazines panned it. When the editors at Next Generation opened the box in which their Virtual Boy was packed, they began playing volleyball with the inflated bags Nintendo had used as packing material. “It was the most fun we were ever going to have with anything in that box,” editor in chief Neil West explained when asked about it.
By mid-August, the industry had already lost interest in Virtual Boy, as Microsoft became the focus of worldwide attention. On August 24, 1995, Microsoft launched Windows 95 (Win95), a major upgrade from previous Windows operating systems that included technology for running games smoothly. Though Microsoft published a few games to accompany the launch of Win 95, it would take months before people realized the deep impact the new operating system would eventually have on gaming. By the end of the year, people would even be able to play first-person shooters without leaving the Windows environment, making computer game installation suddenly easier.
Though it did not make computers as simple to use as consoles, Win 95 went a long way toward closing the gap. Computer games did not catch up to console games in overal
l sales, and the top console games still sold at two to three times the rate of the top PC titles, but video game publishers began eyeing PCs as a viable new platform.
The next big event was the September release of PlayStation. One person who was not going to see this release, however, was Steve Race. On August 7, Race resigned as president of Sony Computer Entertainment of America and resurfaced quickly at Spectrum HoloByte. Few people were surprised by Race’s departure; his ongoing battles with his employers in Japan were well-known.
We had celebrated differences of opinion as to where the product should be and how it should be priced and positioned. I wouldn’t say we had screaming matches, but we just had long pregnant pauses, and I questioned their heritage, from whence they came…. something about female dogs.
—Steve Race
Sony shipped 100,000 PlayStation consoles for release on September 9, almost all of which had been prereserved. The entire shipment sold out. Two days after the release, Sony had already sold more PlayStations than Sega had sold Saturns in the five months since the surprise announcement at E3. By the end of the year, Sony boasted of having shipped 800,000 PlayStations into North America while Sega claimed to have sold 400,000 Saturns.
We told people we would ship on September 9th. We shipped on September 9th. We told them we’d have 10 to 15 titles in the first 30 days, and we had 15 titles in the first 30 days. We said we’d have 50 new titles out by the end of the calendar year. We had 55 out by the end of the calendar year. We built credibility not only with the consumer, but with the trade.
