Discussion so how exactly was Nintendo tricked into signing the Sony deal in the first place?

[Lugia667]

By now it's pretty common knowledge that the Nintendo Playstation deal was a terrible one for Nintendo and they were completely right to pull out of it. My question is why they originally signed the deal in the first place? Was the contract vague enough that they didn't see anything wrong? Or were they simply new to that electronics industry at the time?

 

[Catsylvania]

I was just thinking about this the other day and don’t recall seeing anything confirmed. I always simply chalked it up to carelessness and maybe some naivety. Sony provided the sound chip for Super Nintendo. Perhaps there was a belief from Nintendo’s side that one of its own partners was negotiating and drawing up contracts in good faith.

It’s weird because Nintendo took the public heat for backing out of the deal when Sony shouldn’t have pulled those shenanigans in the first place. I suppose Nintendo could have gone back to the table and renegotiated with Sony instead of very publicly announcing a new partnership with Phillips.

 

[oomoepoo]

By now it's pretty common knowledge that the Nintendo Playstation deal was a terrible one for Nintendo and they were completely right to pull out of it.

... is it? Admittedly, I've only ever known the broad strokes of it but this is probably the first time I'm reading something like this. Most of the time when this topic comes up it kinda always sounds like Nintendo backstabbing poor Sony and inadvertedly creating their own worst enemy

 

[N 2 Deep]

I always believed it was oversight

I don't think it was some evil deal cooked up by Sony, but I do think leading up to it some bad blood must have built up for Nintendo to not only renege the deal but also publicly partner with Phillips

Sony was at the top of the world at that point so Nintendo must have smelled something fishy, enough to not even bother renegotiating a new deal

 

[meatbag]

There was definitely some bad blood. IIRC the original deal between Nintendo and Sony for SNES CD-ROM had an agreement that Sony would only use CDs for non-video game software. However, Sony then started up Imagesoft, making it clear they would start publishing games despite this agreement. Which probably pissed Nintendo off since the royalties were already going to go to Sony. So Nintendo... did the asinine move of secretly brokering a deal with Philips, and announcing that partnership the same day Sony announced the SNES CD-ROM.

So yeah. Both parties were at fault. Oh and SEGA was involved in this kerfluffle too, but I'm not too clear on the nitty gritty about that.

 

[Decoyman]

... is it? Admittedly, I've only ever known the broad strokes of it but this is probably the first time I'm reading something like this. Most of the time when this topic comes up it kinda always sounds like Nintendo backstabbing poor Sony and inadvertedly creating their own worst enemy

In the immediate aftermath of Playstation's unparalleled success and Nintendo's crippling loss of third party support (which they still kinda pay the price for to this day) it was easy to look aside the fact that Sony's contract with Nintendo was already a thinly veiled attempt at a Ken Kutaragi power play. Had the deal gone through, Nintendo would've had to not only cede immense software licensing costs to Sony as they were the sole owners of the format, but Sony were also intent on effectively enforcing a lineup onto the hardware that would stand to only benefit themselves in their ambitions to completely obsolete the cartridge format through their own studio efforts. They were already forcing unnecessary costs onto SNES developers by requiring proprietary equipment to utilize the console's audio chip, and Yamauchi had the foresight to realize that Sony's encroachment into entertainment products could end up compromising Nintendo.

Obviously Nintendo weren't exactly the good guys in that story either considering this was still Yamauchi trying to send a message that they have a stranglehold on the market and they decide what goes, but Kutaragi was so insistent on entering the video game space that it was a matter of when as opposed to if. Nintendo just gave them a good narrative. 30 years removed from all of it, I think everyone is happier that the deal never happened.

 

[Famicrono]

Well in the long term it’s debatable if it was a mistake or not… tho I still would side with Nintendo.

Something I always think is that going with Philips for the N64 or whatever the name it would use with CDs would be a much better idea. And they would 90% sure not lose the market leadership.

But that’s maybe off-topic.

 

[Catsylvania]

Here’s a translated interview from 2016 with Shigeo Maruyama (former CEO of Sony Music Entertainment and former chairman of Sony Computer Entertainment) that shed some new light on the whole thing.

Some really interesting stuff in there. These two bits stood out to me though I highly recommend reading the entire interview because it’s really fascinating.

Maruyama: Yeah…but, there’s gotta be more to it than that, right? It’s easy to say that Sony was 100% the victim, and Nintendo 100% the wrongdoer.

Kawakami: Yes, that’s right.

Maruyama: In fact, that’s the story the company gave all of us while I was working there. It’s a real mystery why Sony never actually filed any kind of lawsuit against them.

Kawakami: Absolutely.

Maruyama: I get the feeling something was going on behind the scenes. After all, there had to be a reason Sony wasn’t able to go after them.

Maruyama: Well, you’re sort of right. But let me get back to the earlier topic. If you think about, all we were doing was making an external CD-ROM drive. It was just a drop in the bucket (bitter laugh).

Kawakami: Indeed.

Even taking into account their software businesses, Sony didn’t consider it a big deal…?

Maruyama: It was a lot of money for us at Sony Music Entertainment, but to the whole of Sony, it was pocket change.

1. The lawsuit thing definitely always stood out to me because it appears like Sony has a pretty strong case for breach of contract. However, given how confidently Nintendo walked away after its lawyers pored over the fine print, it’s possible Nintendo may have been aware of how little of a case Sony had or that there was something else in there that made it really easy to countersue.
2. Then again, it sounded as if Sony generally didn’t really care about the PlayStation add-on. Maruyama makes it clear that it was always Ken Kutaragi’s baby and he kept kicking up a fuss about the whole thing until Sony president, Norio Ohga, was like, “Actually, you know what…”

 

[Lugia667]

In the immediate aftermath of Playstation's unparalleled success and Nintendo's crippling loss of third party support (which they still kinda pay the price for to this day) it was easy to look aside the fact that Sony's contract with Nintendo was already a thinly veiled attempt at a Ken Kutaragi power play. Had the deal gone through, Nintendo would've had to not only cede immense software licensing costs to Sony as they were the sole owners of the format, but Sony were also intent on effectively enforcing a lineup onto the hardware that would stand to only benefit themselves in their ambitions to completely obsolete the cartridge format through their own studio efforts. They were already forcing unnecessary costs onto SNES developers by requiring proprietary equipment to utilize the console's audio chip, and Yamauchi had the foresight to realize that Sony's encroachment into entertainment products could end up compromising Nintendo.

Obviously Nintendo weren't exactly the good guys in that story either considering this was still Yamauchi trying to send a message that they have a stranglehold on the market and they decide what goes, but Kutaragi was so insistent on entering the video game space that it was a matter of when as opposed to if. Nintendo just gave them a good narrative. 30 years removed from all of it, I think everyone is happier that the deal never happened.

I'd go further and argue that the plan was in the end to outright acquire Nintendo by taking over so much

 

[grobla123]

This is 100% on Nintendo's lack of oversight for the deal. How on Earth do you let something like that get a head of you? A big company is fully responsible for their agreements and they could have walked or renegotiated at any time prior.

Its still good though, Sony being a full independent console maker was good for the industry and Nintendo also got to stay around and eventually truly right the ship and also create the blue ocean wave. Its kind of hard to imagine an industry with one less major player, if even temporarily.

 

[boodream]

I'm glad this thread was created, I've been wanting to make a similar one. It's totally incomprehensible to me that the non-implementation of this agreement is constantly being presented by everyone as a huge historical strategic mistake on Nintendo's part when:

1) Sony would have eventually gone into the industry no matter what (and so much the better!)

2) This agreement would have killed Nintendo if it had been applied.

 

[Machrider]

You probably have to understand that this was still the 1980s when this deal was signed and Nintendo was still a fly-by-their-pants "small" company that wasn't run as "professionally" as a global corporation would be today. The Nintendo of today was not the Nintendo of then.

The deal with Sony for CD-ROM tech was signed in 1988, they really only hit the big time with the Famicom around 1984/85, before that, they were a small time arcade company that hit pay dirt with Donkey Kong and previous to that they were all over the map making various products.

They probably did not properly vet the deal and just looked at NEC making a CD drive for the PC Engine and Sega working on one for the upcoming Mega Drive and figured they better sign something too.

Nintendo was kind of "wild" in those days, like Yamauchi for example cancelled the Game Boy and they only released it because the Super Famicom got delayed from 1989 into 1990. Otherwise there would be no Game Boy, believe it or not. The industry was way, way different back then it was much more like the wild west.

In hindsight, Nintendo should have just let Sony release their Super NES CD-drive, let it fizzle out and die as pretty much every console add-on did back in those days and then made sure to redraw the terms for their next system a lot more carefully.

 

[Mer.Saloon]

It looks like just oversight. Nintendo were still a very small toy company at the time, just making headwind into tech.

 

[Shoulder]

Hindsight is 20/20 here.

Nintendo was strong-arming publishers and developers for the astute privilege of creating games for a Nintendo platform, and Sony I think wanted at least partial control of Nintendo's IPs in this deal. CD-Roms were upcoming future, so whether it was Sony partnering with Nintendo, or them doing it themselves, something was going to give.

As others have said, a lack of oversight, plus Sony's own ambitions too all came into play.

You probably have to understand that this was still the 1980s when this deal was signed and Nintendo was still a fly-by-their-pants "small" company that wasn't run as "professionally" as a global corporation would be today. The Nintendo of today was not the Nintendo of then.

The deal with Sony for CD-ROM tech was signed in 1988, they really only hit the big time with the Famicom around 1984/85, before that, they were a small time arcade company that hit pay dirt with Donkey Kong and previous to that they were all over the map making various products.

They probably did not properly vet the deal and just looked at NEC making a CD drive for the PC Engine and Sega working on one for the upcoming Mega Drive and figured they better sign something too.

Nintendo was kind of "wild" in those days, like Yamauchi for example cancelled the Game Boy and they only released it because the Super Famicom got delayed from 1989 into 1990. Otherwise there would be no Game Boy, believe it or not. The industry was way, way different back then it was much more like the wild west.

In hindsight, Nintendo should have just let Sony release their Super NES CD-drive, let it fizzle out and die as pretty much every console add-on did back in those days and then made sure to redraw the terms for their next system a lot more carefully.

"Wild" is one way to put it. I would go even further and suggest they were arrogant, and a company like Sony was the only one with enough brass to challenge them. Based on what has been told, Yamauchi was not an easy person to work with.


Whenever I hear of the Sony v Nintendo deal, I always come back to Ford v Ferrari, and how THAT deal forced Ford's hand into eventually beating Ferrari in Le Mans. Yes, completely different eras, and completely different industries, but the similarities are there for sure. Ferrari was to Nintendo, and Ford was to Sony in these cases.

 

[boodream]

sorry wrong thread.

 

[Dcubed]

Based on what we know, it was a clause hidden in the contract that Nintendo's legal team overlooked when they signed the deal; and only realised the implications after the fact.

Either way, Kutaragi was always plotting to get into the video game industry. Sony making their own competing hardware was always an inevitability.

 

[bmfrosty]

I always believed it was oversight

I don't think it was some evil deal cooked up by Sony, but I do think leading up to it some bad blood must have built up for Nintendo to not only renege the deal but also publicly partner with Phillips

Sony was at the top of the world at that point so Nintendo must have smelled something fishy, enough to not even bother renegotiating a new deal

Someone at Sony pulled some shit with the contract and Yamauchi was a truly world class asshole enough to turn the plane around. I don't know that there wasn't further dialogue, but turning the plane around was that negotiation tactic of being willing to walk away.

It's too bad that they didn't renegotiate it into a project for the next Nintendo console similar to the sound chip in the SNES. Would have made an interesting alternate history. Maybe one where Sega would have done better.

 

[Marizza Pia Spiritto]

I think it's very funny that in the music industry allegedly Sony was pulling the same kind of power takeover moves at the same time period.

That's why I believe Nintendo's lawyers were blindsided, but not by sheer incompetence. But yeah, if the deal had gone through, it would be much worse for Nintendo's ownership of their IPs than the CDi games were. Nintendo was a small company and they were very new and green to the dirty game of the wider global industry.

I think the way things ended up was much better. Well, Sega might not agree. But Sony entered the market, at first taking over everything, then they settled down, and then Microsoft, another power player promising to consume everything, got into the game and things eventually settled and we got 3 major players instead of how it was: just 2 major players and lots of others trying and failing to break in with their microscopic piece of the pie.

Edit: Plus, that's why Iwata's blue ocean strategy was just plain genius and probably why Nintendo has survived for so long. They could never go up head to head with Sony and Microsoft in terms of money and power and time. He just found another way to expand the market.