Rebirth Tokyo 1986

Chapter 318 Sony's Road to Success

After briefly explaining the dining regulations of Xinghai Group, Masato Takeshita's tone became gentler and he became more down-to-earth.

"The hotel will serve the food soon, so I won't waste your time. I hope everyone can eat and drink well."

The hotel’s dishes are very good, with both meat and vegetarian options, as well as large seafood that looks very expensive.

The waiter cut it on the spot and then divided it equally among everyone.

More than an hour later, seeing that everyone had almost finished eating, Masato Takeshita got up and went to Sakaguchi Hironobu's table.

"Sakaguchi-san, I'm your fan. Final Fantasy is really fun."

Then he talked endlessly to several senior Square executives about his gaming experience over the past few days.

A president who loves games can definitely comfort people more than one who knows nothing.

"The president is exaggerating. Our games can only be considered excellent, but they are far inferior to Nintendo's."

Although sales are good, none of the Final Fantasy series works have received a perfect score to be considered a masterpiece.

The highest score, the 6th generation, was only 37 points.

However, this game has received very high reviews in Europe and the United States and is considered to be the best production of the generation.

"The target is Nintendo, which is great. Game makers should have such ambitions."

Although countless game companies are dissatisfied with Nintendo's tyranny, they admire Nintendo's game production capabilities very much.

Mario and Zelda are both classic games that cannot be more classic.

The dream of any game company is basically to reach or surpass the level of Nintendo.

The company's soul figure Hironobu Sakaguchi must be praised, and the other two giants Tomoyuki Takechi and Hisashi Suzuki cannot be ignored.

He made a solemn promise to the two of them.

"Please rest assured that Rogers, the president of Star Ocean Games, will not interfere with Square's work, and the company will continue to operate independently."

"What we need is not a second StarCraft game studio, but a Square Enix with an independent and innovative soul."

If Rogers frequently interferes in Square's operations, the company will only become like StarCraft Games.

This is the law of world development. Those in a lower position are always easily influenced by those above.

"Yes, we understand, President."

"Please rest assured, President. We know that you are a man of your word."

The two of them responded, and even Takechi Tomoyuki did not think that Masato Takeshita was deceiving him.

In a way, this is the benefit of status.

……

After successfully taking down Square, Rogers was in a good mood and hummed a little tune happily in his office.

"Dong dong dong."

Hearing someone knocking at the door, he regained his usual seriousness.

"Please come in!"

"Hi!"

Hearing the president's voice, the secretary first responded and then immediately reported the business.

"Sony's Managing Director Nobuyuki Idei wants to visit us again. What does the president think?"

Nobuyuki Idei is a giant who promoted the third revolution in the world's game industry and is also the father of the PS game console.

Under his leadership, the retail prices of games have dropped significantly while fully protecting the interests of game publishers and producers.

It can be said that he further promoted the prosperity and development of the gaming industry.

"Tell General Manager Izui that I am free this afternoon and welcome his visit."

Rogers was very troubled by this persistent Sony executive.

But he was also deeply fascinated by the future world depicted by Nobuyuki Idei.

I was very confused inside.

"Yes!"

Xinghai Entertainment had just returned to work after lunch, and Nobuyuki Idei couldn't wait to come to Rogers' office.

After a few simple polite words, Nobuyuki Idei went straight to the point.

"President Rogers, don't you think the gaming industry is too sick right now? The high prices of games have resulted in both game manufacturers and players losing, with only second-hand stores making huge profits."

“This phenomenon should not continue to exist.”

In the 90s, facing competition from Sega, Nintendo had to launch the Super Nintendo game console.

The Super Nintendo is still a game console made in cartridge format, but it is different from the red and white machine in the 80s.

As the game memory increases, the cost of cartridge production increases, and the retail price of the game soars.

In the Famicom era, game prices were generally around $40, but in the Super Nintendo era, prices generally skyrocketed to $100.

Of course, if you calculate it in Japanese yen, the increase is not that dramatic. The price has only increased from 5800 yen to 9800 yen.

After all, the Japanese yen appreciated rapidly after the Plaza Accord, while the US dollar depreciated relatively.

As for the components of this,

The cartridge cost and royalties to Nintendo are fixed at 3000 yen, game production costs and equipment depreciation are 1000 yen, insurance costs are 600 yen, publisher fees are 1100 yen, advertising costs are 600 yen, retailer profit is 2500 yen, and game company profit is 1000 yen.

The final total is 9800 yen.

Koei Tecmo is famous for its expensive games, with the retail price even reaching 18000 yen.

Such high prices have led to an unprecedented boom in Japan's second-hand game market.

Nobuyuki Idei noticed this and thought the pattern was pathological.

His original intention was to cooperate with Nintendo and tried his best to persuade the other party to adopt the CD-ROM format console.

As a result, due to various factors, the cooperation ultimately failed.

Sony's then-president Norio Ohga felt that he had been fooled by Nintendo and was furious. He ordered Nobuyuki Idei to develop Sony's own game console and dethrone Nintendo.

After receiving the order, Nobuyuki Idei naturally chose the CD-ROM format game console.

Compared to cassettes, CDs have countless advantages.

The two most important points are:

First, CDs have a larger capacity and are cheaper to produce.

The production cost of a Super Nintendo cartridge is 1500 yen, while the production cost of a larger capacity CD is only or yen.

If the quantity is very large, the cost can even be compressed to less than 100 yen.

Second, CD production is more flexible, and the number of games produced can be increased or decreased based on market response.

Game cartridges cannot be re-produced and must be re-modeled each time.

Therefore, game companies have to gamble on how much sales their products will have.

Producing too much will result in waste or even losses.

If the production is too small, there will be an embarrassing situation where the game is selling well but the company is unable to produce it itself.

This is especially embarrassing for companies that can only hand over game cartridges to Nintendo for production.

Produce it, because of Nintendo's queuing system, there is a fear that the game will be outdated in a few months.

If we don’t produce it, the white money will be too tempting.

CD is completely different. It can be reproduced anytime and anywhere without the need for remodeling.

Once a game is found to be popular, it can be mass-produced and sold within a few days. In addition, because CD production is flexible and cheap, there is basically no such thing as miscalculating sales in the cassette era and producing too much, so there is no need to pay the 600 yen insurance fee.

The cost of game sales has been further reduced.

Finally, according to statistics from a specialist, CD can reduce the retail price of games back to the level of the Famicom era while ensuring that game producers still have a profit of 1000 yen.

Among them, the CD production cost and copyright fee are 900 yen, publicity expenses are 600 yen, production costs and depreciation expenses are 1000 yen, manufacturer's profit is 1000 yen, distributor's fee is 700 yen, and retailer's profit is 1600 yen.

The total was 5800 yen.

The price can be reduced so much due to many factors.

The first is that the production cost of CDs is low, the second is that Sony has reduced the price of royalties, the third is that there is no need to pay insurance premiums, and the fourth is the reduction in distribution and retail costs.

The reason why the fourth point is reduced is related to wholesale costs.

The wholesale price of Super Nintendo games is 6100 yen, while the wholesale price of Sony PS games is only 3500 yen.

When publishers release games and retailers sell games, they both add a percentage markup based on the purchase cost, rather than adopting a fixed price model.

Of course, this is just a rough analysis, and the actual situation of each game company is different.

For example, Sony's copyright fees are usually between US$5 and US$10.

If the game company is strong, it can lower the price to $5. If you are a nobody, then you must start with $10.

The situation is similar for distribution and retail.
If game companies are strong, the profits of publishers and retailers will be squeezed.

Otherwise, the profits of game companies will be greatly reduced.

“The price is really too high and it’s hard for players to afford it.”

Xinghai Games can produce game cartridges on its own, and the royalties paid to Nintendo are only 1000 yen, so the cost is not that high.

But since Nintendo sells the game for 9800 yen, StarCraft games naturally cannot stand out. As a result, they have to bear the pain of high-priced games, and their sales have been unable to make a breakthrough.

"Yes, that's it."

There was light in Nobuyuki Idei's eyes and he spoke excitedly.

"We at Sony are different. We can lower the retail price to 5800 yen while ensuring everyone's profits."

"This will allow the gaming industry to develop in an orderly manner, and everyone can make more money from it."

Rogers knew that Nobuyuki Idei was right, but the company's development could not rely on simple right and wrong.

Star Ocean Games is too deeply connected to Nintendo to choose to separate at the first opportunity.

"Sorry, we're not joining the Sony camp right now."

Sony is about to successfully develop the PS game console, which will be a dimensionality reduction blow to the Super Nintendo in terms of hardware.

The only problem is that there are not enough games, so Nobuyuki Idei keeps inviting third parties to play the games.

However, no one is willing to release the eagle until they see the rabbit. So far, no major game manufacturer has directly joined the Sony camp.

"It doesn't matter. It won't be too late until our Sony game consoles can be mass-produced."

Nobuyuki Idei is only doing the preliminary preparations now and has not thought about success. He just wants to leave an impression in front of many game companies.

He believes that once his own PS game console appears, many third-party game manufacturers will choose to join.

Nobuyuki Idei was not wrong. In the future, everyone will rush to join the Sony gaming camp, and Nintendo consoles will continue to lose.

But what’s interesting is that Nintendo has been able to survive thanks to the handheld game consoles, while Sega, the perennial runner-up, was directly kicked out of the console manufacturer ranks by Sony.

The next morning, Masato Takeshita came to Xinghai Game with nothing to do and found that Rogers looked a little sad.

"What's wrong? What happened?"

Rogers frowned, "Nothing, I just think Nintendo might be in trouble."

"What do you mean?"

"Sony is developing a new console, President, do you know that?"

Masato Takeshita nodded, "Of course, not only Sony, but also NEC."

“I don’t know about NEC, but I think Sony can do it.”

Rogers then began to talk about the future that Nobuyuki Idei had described for him.

Masato Takeshita knew that he had a good relationship with Hiroshi Yamauchi and was worried that there might be problems with Nintendo's development.

So he smiled and comforted her, "Don't worry too much. Nintendo has a monopoly on the handheld market, and its game production capabilities are also unique. Even if it fails in the console market for a while, it can calmly reorganize itself."

"Ok, I know."

Rogers thought about it and realized that it was true. He felt much better immediately.

Then he complained, "I don't know what Yamauchi-san is thinking. Why doesn't he want to use CDs?"

CDs can be said to be a revolution in the field of memory, greatly reducing storage costs.

Not only the gaming industry, but all industries including computers, film and television, must keep up with the development trend of the times.

As for why Nintendo chose to ignore the development of the times.

On the one hand, there is the sluggishness of the old overlords themselves.

Nintendo has become accustomed to cartridges. Even though it knows that new technology is better, it is reluctant to give up the immediate benefits and naturally procrastinates.

It’s a bit like Motorola, which knows that mobile phones have entered the digital signal era, but is still stuck in the analog signal era.

Only those with great determination can take drastic measures.

On the other hand, there is the fear of helping potential competitors grow.

The reason why Nintendo broke up its cooperation with Sony was that it was worried that Sony would figure out the game console manufacturing process on its own.

Sony's technical capabilities are far ahead of Nintendo. Once Sony masters the process, it will be difficult for Nintendo to turn around in terms of technology.

This is completely different from Sega. Neither Sega nor Nintendo has much technical strength, so Nintendo has never paid much attention to Sega.

All I can say is, no one is a fool.

Unfortunately, Nintendo is so far behind Sony that it is completely unable to prevent Sony from entering this industry.

Just like Microsoft in later generations, Sony tried its best to stop it but failed.

Fortunately, Microsoft likes to mess around with games, so Sony didn't lose its position as the console leader.

In addition, there is also the factor of not wanting to aid the enemy.

Sony is one of the CD-ROM format standard providers, so if Nintendo uses this technology, it would be like giving money to Sony. Nintendo is reluctant to use new technology for this reason.

But the trend of the times could not be stopped, and Nintendo was ultimately defeated.

"It's normal."

Masato Takeshita then told his vice president the reasons he had thought of.

"Well, that's a pity."

"There's nothing to be sad about. It's normal for a business to have ups and downs. As long as it doesn't go bankrupt, everything will be fine."

Nintendo has a strong financial foundation. In addition to the transfusion from handheld game consoles, it also holds a large amount of cash.

Even if such a company relies on its old capital, it will not collapse easily.

"The president is exaggerating. If a company is really on the verge of bankruptcy, few companies can rise again."

"Yeah, too."

When a company is on the verge of closing down, it is basically equivalent to bankruptcy, and only a few can rise again.

Just like in war, there are very few battles where the outnumbered side wins.

(End of this chapter)