Uncle John's Ahh-Inspiring Bathroom Reader (87 page)

“I was hitchhiking the other day and a hearse stopped. I said, ‘No thanks—I'm not going that far.'”

—Steven Wright

Today's video game business is less about boing! and crash! than it is about ka-ching! and cash! Here's part V of the story of video games.

As we told you on page 411, back in 1981, Atari was the world leader in video games. In 1983 Nintendo offered to sell Atari the licenses to their Famicom game system, but they couldn't come to an agreement, so Nintendo decided to go it alone. They renamed the American version the Advanced Video System (AVS) and in January 1985, introduced it at the Consumer Electronics Show in Las Vegas, one of the largest such trade shows in the world.

They didn't get a single order.

Nintendo's problem wasn't so much that the AVS was a bad system, but more that the American home video game industry was struggling. After several years of impressive growth, in 1983 sales of video game consoles and cartridges suddenly collapsed without warning. Video game manufacturers, caught completely off guard, lost hundreds of millions of dollars as inventory piled up in warehouses, never to find a buyer. Atari's loss of $536 million prompted Warner Communications to sell the company in 1984. Mattel sold off its version, Intellivision, the same year and shut down their entire video game division. Many other companies went out of business.

Meanwhile, computer technology had finally advanced to the point that companies were able to manufacture and sell home computers at prices that families could afford. By 1982 a computer called the Commodore 64 could be bought for as little as $200, which was $100 less than the cost of an Atari 5200.

Why buy just a game system when you could buy a whole computer—which also played video games—for the same price or lower? Just as the video game industry had evolved from dedicated Pong-only games to cartridge-based multigame systems, game systems were
giving way to the personal computer. Stand-alone video games were dead…or so most people thought.

Hiroshi Yamauchi, the president of Nintendo, didn't see things that way. His company didn't make personal computers and he didn't know much about the American market. But Famicom game systems were selling like crazy in Japan, and he didn't see any reason why they shouldn't also sell well in the United States. So what if the company didn't receive a single order at the Consumer Electronics Show? He told his American sales team to keep trying.

Nintendo's American sales team was headed by Minoru Arakawa, who also happened to be Yamauchi's son-in-law. Arakawa
had
to keep trying. He didn't have any choice—he was a member of the family.

One of the problems the AVS was up against was that retailers had been badly burned by the video game crash of 1983. They weren't about to put any more nonselling video games on their shelves. Arakawa decided that the best way to proceed was to conceal the fact that the AVS was a video game. He couldn't do that while it was still called the Advanced Video System, so he renamed it the Nintendo Entertainment System, NES for short.

He added a light pistol and some shooting games, so that he could say it was a “target game.” (Guns and target games still sold well in toy stores.) Then he added the Robot Operating Buddy (ROB), a small plastic “robot” that interacted with a couple of the games played on the NES. “Technologically speaking,” Steven Kent writes in
The Ultimate History of Video Games,
“ROB offered very little play value. It was mostly a decoy designed to prove that the Famicom was not just a video game.”

With a new name, a light gun, and a robot, Arakawa was sure the NES would sell. He rented a booth at the Summer Consumer Electronics Show and set the ROB out in front, where everyone could see it.

He didn't get a single order.

Why didn't retailers want to buy? Were consumers turned off too? Arakawa didn't know for sure, so he set up a focus group
where he could watch young boys—Nintendo's target market—play NES games. Observing the scene from behind a two-way mirror, Arakawa heard for himself how much the kids disliked the NES. “This is sh*t!” as one kid put it.

Arakawa was ready to throw in the towel. He called his father-inlaw, told him the situation was hopeless, and suggested that Nintendo pull the NES out of the U.S. market. But Yamauchi refused to hear a word of it. He didn't know much about the Consumer Electronics Show and he didn't know much about focus groups. One thing he did know was that the Famicom was
still
selling like crazy in Japan, so why couldn't it sell well in the United States? There was nothing wrong with the NES—he was certain of that.

Yamauchi told Arakawa to test it one more time—in New York City. This time Arakawa left nothing to chance. There were about 500 retailers in the city, and Arakawa and his staff visited every one. They made sales pitches, delivered the game systems, stocked store shelves, and set up Nintendo's in-store displays themselves. They made plans to spend $5 million on advertising during the Christmas shopping season, and—without permission from Yamauchi—promised retailers they would buy back any game systems that didn't sell. And they
never, ever
referred to their video game as a video game. The NES was an “entertainment system.”

With the buyback guarantee, retailers had nothing to lose, so they agreed to stock Nintendo, even though they didn't think it would sell. They were wrong—more than 50,000 games sold by Christmas, prompting many stores to continue stocking the NES after the holidays. Arakawa launched similar tests in Los Angeles, Chicago, and San Francisco. The NES sold well in each city.

In 1986 Nintendo expanded its U.S. marketing push nationwide and sold 1.8 million game consoles, and from there sales grew astronomically. They sold 5.4 million consoles in 1987 and 9.3 million in 1988. By 1990 American sales of the NES accounted for 10% of the entire U.S./Japan trade deficit.

But if there's one thing that video game makers have learned the hard way, it's that
staying
ahead in the business can be a lot harder
than
getting
ahead. For all their successes, Nintendo has made their share of blunders, too. They clung to the NES a few years longer than they should have, on the assumption that its market dominance would allow it to keep ahead of its rivals. They were wrong.

When a rival company called Sega introduced their Genesis system in 1989, Nintendo ignored it, even though the Genesis was twice as powerful as the NES. They shouldn't have—Genesis introduced a character called Sonic the Hedgehog, an edgy, anti-Mario character who appealed to older kids
and
adults the same way that Donkey Kong's Mario had appealed only to kids. In late 1991, Nintendo introduced SuperNintendo, but it was too late. Sonic's appeal, combined with six years of waiting for Nintendo to update their system, helped Sega get a toehold in the market…and outsell Nintendo.

But Nintendo's biggest mistake of all came in 1992. The industry was gearing up for yet another generation of game systems—using CD-ROM disks instead of cartridges. CD-ROMs were cheaper to make and stored more than 300 times more information than a Super NES cartridge, allowing for much more sophisticated graphics.

Nintendo had no experience with CD-ROMs, so they made plans to partner with Sony Corporation to make the new system. But there was a problem—Sony had already announced plans to introduce its own game system (Play Station), and Nintendo executives were worried about revealing Nintendo's technological secrets to a competitor as large and powerful as Sony. So what did they do? For some reason, Nintendo waited until the day
after
Sony announced the partnership. Then they made an announcement of their own: they were ditching Sony and partnering with the Dutch electronics giant, Philips.

Though the company had lost ground to Sega in the U.S. market, Nintendo was still the world leader in video game sales, and many Sony executives were reluctant to challenge Nintendo's dominance. The consensus: scrap the Play Station project because Nintendo will wipe it out. But Sony CEO Norio Ohga was so furious at being humiliated by Nintendo that he almost singlehandedly forced the company to continue work on the project.

The Sony Play Station was introduced in Japan in 1994 and in the United States in 1995. Nintendo eventually scrapped its CD-ROM–based system and introduced the Nintendo 64, yet another cartridge game system.

The Nintendo 64 was a blunder of Atari proportions. Compared to the Play Station, it had poor sound, poor graphics…and poor sales. By August 1997, the Play Station had surged past both Sega and Nintendo to become the industry leader. Sega, which spread their resources over too many game systems at once—Genesis, Saturn, and another one called Dreamcast—fell to a distant third and in January 2001 got out of the hardware business altogether. Today they only make game software.

Nintendo's decision to stick with cartridges for the Nintendo 64 continues to haunt them today. When Sony introduced the Play Station 2 in 2000, they were careful to make it “backward compatible,” so that virtually all 800 of the Play Station 1 games could be played on the new station. Extra bonus: Because the PlayStation 2 uses a DVD player instead of a CD-ROM player, you can also watch movies on it.

The Nintendo Game Cube, introduced in 2001, is another story. It uses a
mini
DVD-ROM system that doesn't play movies and isn't compatible with Nintendo 64 game cartridges. That means Nintendo 64 owners have no incentive to buy the Game Cube, because their old games will be just as obsolete whether they buy Game Cube or PlayStation 2.

Even worse for Nintendo is the new kid on the block: the Microsoft Xbox. Considered even more technologically advanced than the PlayStation 2, Xbox is giving both Nintendo and Sony a run for their money.

Who will be the next Atari? Will Nintendo's game systems slip to third place behind Sony and Microsoft, or even disappear entirely? Will the PlayStation 2 stay on top, or is the Xbox the new king of the hill? What comes next?

Stay tuned—if there's one thing to be learned from the video game industry, it's that the game is
never
over.

When Uncle John read this article by David Wallechinsky in
The People's Almanac,
it immediately made him want to pack his bags and head for the hills to find all the lost loot. But, of course, he's not really going anywhere, so he thought he'd share the info with you. (If you find any treasure, don't forget who told you about it.)

There are billions in lost treasure scattered throughout the United States. That's the educated guess of one old treasure hunter, and many of his colleagues think that that's a conservative estimate.

For one, there's loot buried by robbers like Jesse James and Ma Barker “until the heat died down” but never recovered because the robbers were shot or hung before they could retrieve it. There are also gold mines whose owners died without revealing their locations, now hidden by the camouflage provided by the passage of time. And there are misers' hoards, lost caravans, and caches of pirate loot hidden from coast to coast. These bonanzas really exist, and finding one would be the fulfillment of a dream shared by thousands.

No matter where you live, there's a pretty good chance that some sort of treasure lies lost and forgotten nearby. Getting information about it may involve spending time reading stacks of ancient newspapers to find stories about people who died without revealing where they'd hidden their coins, or legends of old silver mines in the hills that few take seriously anymore. The public library will have listings of books under “Treasure Trove” and “Treasure Hunting” that may offer a lead. Librarians are usually glad to dig up stories about local hoards from their often-overlooked collection of pamphlets and newspaper clippings.