Original subtitles

[dramatic music]

id

- Video games have come on hard times these days,

with closeout sales, discount prices just about everywhere.

- Atari, the people who brought you Pac-Man, today said

it is packing up some of its California operations

and laying off 1,700 employees.

- As the home gaming industry in the U.S. is crashing,

Nintendo has its next big hit, which is the Famicom,

or Family Computer, in Japan.

- [speaking Japanese]

id

narrator: The stage was set.

The American playing field had been leveled.

Arakawa saw an opportunity.

- One day | opened up a box from Nintendo Japan,

and it was this little game system,

this Famicom game system, so | plugged it in,

and it was so incredibly awesome to play these games

that | had been playing in the arcade,

but now | could actually play them on my own TV.

- [speaking Japanese]

- Family computer [speaking Japanese].

- Despite its name,

which definitely tried to convince people

that it had a sort of a personal computer aura to it.

- [speaking Japanese].

- But really the primary draw

of the family computer, or Famicom,

was that it was gonna play

the absolute best versions of Nintendo's video games.

- [speaking Japanese]

- We'd actually grown up with Atari,

but, frankly, didn't play a lot of it

‘cause Dad was always bringing home the new stuff,

so we had the Famicom.

He was obsessed with bringing home the new things.

- | mean, in the early days of the Family Com,

there were some games

my boys just loved that were so out there.

- They end up using one of Gunpei Yokoi's inventions,

what we now know as a, you know,

traditional video game controller with a D-pad and buttons.

Joysticks were great for arcade games,

and that's what all the game consoles at home

used at that time, but Nintendo was like,

"No, we're gonna go a different direction."

[gentle music]

id

- It may be the most addictive toy in history

and it's definitely the hottest thing this Christmas,

Nintendo video games.

id

- Something was missing. - Can | play?

- Wait your turn. - Then along came

Head-to-Head Electronic Football by Coleco.

- Introducing the Multicron 20-function calculator watch.

- A power sweep, he fights through for the tackle.

You pass. He blitzes, intercepts!

- This is real competition.

narrator: Meanwhile, Yamauchi and Yokoi continued

their cunning, shape-shifting model

of following trends and seizing opportunities.

One day on his commute, Yokoi noticed the man

next to him fiddling with an LCD calculator.

As he watched, fascinated,

the man punched buttons in idle boredom.

Suddenly Yokoi wondered if weary commuters

looking to pass the time might be interested

in a portable gaming device.

- J Game Watch S

< Game watch f

< Game Watch Sf

< Game Watch Sf

f [speaking Japanese] Game Watch f

~ [speaking Japanese] Game Watch f

f [speaking Japanese] Game Watch f

< Game Watch! S

[pensive music]

id

- Gunpei Yokoi was one of the lead designers at Nintendo.

- Yokoi had another one of his,

you know, sort of famous ideas

about how do we take something that already exists,

that's inexpensive, and change it up?

You know, in the way that he had done with things

like the Love Tester or the batting machine,

and so Nintendo takes calculator technology

and starts making games.

- In the late '70s Nintendo came out with the Game Watch,

which was a little pocket console that played LCD games

and also doubled as a watch.

- Using segment display the same way

that you can see all digits from zero to ten

just on the letter eight

if you light them up in the right sequence.

This was before they got into true video games.

narrator: The Game & Watch wasn't the first of its kind,

but its cleverly-conceived

and sometimes awkwardly-named games

were head and tails above the competition.

- Pretty fun little games.

There was one called "Fire."

We called it "Bouncing Burning Babies."

Horrible name, but anyway,

it was these little things that bounced down,

and you'd have to bounce them in a trampoline to safety.

- Yokoi-san needed a way of moving the character around,

so he invented this directional pad,

or D-pad, with an up, down, left, and right.

- Here's the Nintendo Family Computer, or the Famicom.

This is actually a really interesting one

because it's the first run of the Famicom,

and if you-- if you were to look at most

Nintendo Family Computers,

if you looked at the controller,

the B and A buttons

would be round just like the buttons on the NES,

but these ones are square.

The controllers are hardwired, so if the controller breaks,

you would need to get it professionally repaired,

and they'd install a new controller on it for you,

which was kind of a huge pain in the neck,

and in fact, this is in-- this is in really good shape.

I'm really--I really lucked out when | bought this.

- Super Mario Bros, [speaking Japanese]

- [speaking Japanese] - [yelling]

[light music]

- The great story about Mr. Arakawa,

he's a funny guy but also pretty reserved.

- | think his English is fine,

but | think he's a little bit shy,

and | think he would rather

have some of his other people conduct the interviews.

- When | first got the Famicom version of "Mario Bros,"

I'm right up against the end, and there's Bowser,

the guy you gotta beat to rescue the princess,

and he's at the far side of the screen,

and I'm at this side of the screen with Mario,

and so | finally defeated him,

and then nothing happened,

and so | went into Mr. Arakawa.

"| don't--I can't do it. | can't beat it.

| don't Know how to do it." He said, "Hmm, keep trying."

So | played again and again and again.

The game wasn't finished, and Mr. Arakawa didn't tell me.

- So the Famicom is a big hit in Japan,

and Nintendo was like, "Well, the next natural step here

is to take this thing worldwide,

and it's to--it's to bring it to America."

- Here's the metro weather forecast from New York 97.

79 degrees, cloudy skies in Manhattan this morning.

Pollen count today, low and bearable.

narrator: It wouldn't be easy,

but with Nintendo's rich history as a toy manufacturer,

they might just have a chance.

- When Atari failed,

everybody thought the financial problems of Atari

were an indictment of the concept of a console.

- | don't think there was a question

about whether people want to be entertained

or people wanna play, especially then.

It was so retail-driven, and the infrastructure,

trying to get your shelf space,

trying to get people to take inventory,

just getting back in, getting the support

of the retail infrastructure that you would need

was probably one of their biggest challenges.

- Then Nintendo comes along,

and they came to my office in 1985.

| met Howard Lincoln,

and they talked about what they were doing in Japan

and what they wanted to do in America, and | thought,

"Wow, you know, America has kinda dismissed the console.

The public perception, the business press,

you know, the financial markets, everybody's said,

"Yeah, that's a--that was a hula hoop. That's done."

narrator: A gun, a robot, a floor mat.

In one of the great marketing moves of the 20th century,

Arakawa and his sales team sidestepped a retail market

that wanted nothing to do with video games.

They created a line of toy-like peripheral products

that made the whole set seem like a game

for the entire family

that happened to have a video game component.

Enter the Nintendo Entertainment System.

[light dramatic music]

id

- Atari Incorporated is making cuts,

but it will be employee cuts.

The video game maker says

it plans to lay off about 300 workers.

Last year the company lost over $500 million,

laid off more than 2,000 of its Bay Area workers,

and moved part of its operation to Taiwan and Hong Kong.

- It's easy to forget that at the time

video games were considered dead.

So in many ways, Nintendo really had to reinvent

video gaming for the next generation.

| think a lot of people know of Nintendo

as kind of a juggernaut, but back before the NES,

they were basically an arcade cabinet,

you know, an arcade game producer,

and a fairly successful one at that,

but it was definitely a small company.

It was a small family-owned business in Japan

that had a small office

in this backwater town of Redmond, Washington.

They really didn't have any market power, any clout.

Their probability of success was,

| have to imagine, extremely slim at the time.

- What happened during, you know,

during the crash of the early '80s with--

of the video game market where the quality was so bad

and the market was flooded with it

that a consumer just turned off.

- While we were co-- very confident

that it was a successful product,

retailers had a different opinion of it.

- We had to figure out the best way to market the system,

or | guess | should say we should figure out

whether or not it was even feasible.

- When we got ready to launch the NES,

it was decided that we would launch it in New York

since that was gonna be the market

that would make it or break it,

and | took the material, games, product,

and in a lot of cases obviously

| had to have a television there,

and the first ones that we presented it to

was the Woolworth Company's Woolco division,

which was like a Target,

and | started to make the presentation,

and the buyer explained to me right off the bat

that he would advise me to pack up and leave.

That they had lost so much money on Atari,

they wanted nothing to do with it.

- So one of the things that we did to find out

whether or not kids would be receptive

to a new video game system was we did focus groups

both on the west coast and the east coast,

and when we were wrapping up in New Jersey,

the Nintendo executives all came to hear

what the moderator had to say about the result.

Ron Judy said to the moderator,

"Well, what kind of result do you think

we should expect based on this?"

And the answer was, "I've never seen a company move forward

and market a product with this type of result."

He thought, really, that it was pretty dismal.

- We're selling a home entertainment system.

This isn't another video game ‘cause the consumer

was definitely done with video games.

They were being sold for 20 cents on the dollar.

We had to ensure that we had the sell-in,

the shelf space in the retailers.

So in order to do that after the demise

of the--what happened with Atari

and all the money that was lost by retailers,

we had to guarantee the sales of the product.

If the retailer put it in, put it out, display it,

we had very expensive displays,

and if you don't sell it, you don't have to pay for it.

[light dramatic music]

id

- So we had to come up with a way to separate ourselves

and really to reinvigorate the market

and reintroduce this type of product to the market.

One of the ways that we came up with to do that

was to use ROB the Robot.

A robot seemed very futuristic

and not related to video games in the past.

- When you get hold of the Nintendo Entertainment System,

when you master ROB the Video Robot

and meet the challenge of "Gyromite--"

- They had this robot thing that was connected to it

that | thought was kinda silly.

- And Nintendo showed off a game-playing robot

that interfaces with the game on your computer screen.

- Nintendo had to kind of frame their system as more of a toy

as opposed to consumer electronics.

Hence the zapper gun, hence the Robotic Operating Buddy,

and they kinda did a Trojan Horse way

of getting into living rooms.

- After being rejected at Woolworth,

next big target, of course, was Toys R Us,

which was gonna be a very difficult sell,

and when we made the presentation to the buyer

there along with other executives in the room,

he said they wanted nothing to do with the product

and they'd lost a lot of money and what have you.

I'm very fortunate that Howard Moore,

the executive vice president, said,

"No, we are gonna take it,

and we're gonna take it in all stores."

[exciting music]

- So Nintendo comes along, and lo and behold,

they took off.

- 81% of toy retailers believe toy sales

will increase this year over last.

Retailers' overwhelming choice for the season's biggest hit

will be the Nintendo Entertainment System...

- Like the Nintendo Entertainment System

with the zapper light gun and ROB the Robot.

[children singing]

- | like the action

and entertainment and challenge of them.

- Because they're challenging.

- Just an action-packed game,

and | like action-packed games.

- The games you can get on it are exactly like the arcade,

and the graphics are almost identical.

id

- Well, if you've joined the chorus

that's saying video games are a thing of the past,

you may have to change your tune soon.

- This ts Nintendo, a flashy little computer

that lets you play video games on your TV set.

- One of the things that I've noticed

is that there's some real beauty to moments in time,

and when the eight-bit Nintendo came out,

it was so good, so novel, so different.

- | first played Nintendo probably around five years old.

Family friends had one, and we'd go over,

and we'd visit them,

and | remember just feeling like such a cool kid

‘cause these kids were just, like,

a few years older than me, and they had a Nintendo,

and they were teaching me how to play,

like, "Duck Hunt" and "Tetris" and "Super Mario Bros,"

and | so desperately wanted my own system.

- And then watching and yelling at the screen with me

or telling me, "Oh, it's right there.

Oh, oh, don't miss it. It's right there."

- It's a beautiful video game, more levels,

more worlds, more story-driven--

- This Mario game, and my mind was just blown,

and | played it every day after school,

| think, for nearly a year.

- Like, there was a significant difference between this game

and all the other video games | had played before.

- Your brain was having to do less of a leap to understand

what stories are being told,

what the characters looked like.

It started something that | still think we feel today

of the storytelling capability of this medium.

- Because they avoided the collapse

and were continuing to develop games

that were better technology, good technology,

some great software.

- It's been the bestselling toy in this country

for three years running.

20 million of these things now inhabit American living rooms.

narrator: The plan worked.

Nintendos, as most kids called them at the time,

spread like wildfire through America's living rooms.

Now that the Trojan Horse had gotten in the door,

what was the plan of attack?

Could they prove to be a lasting player in the U.S.?

There was only one answer to this question:

the games.

id

Were their eight-bit games any better than Atari,

Intellivision,

or the arcade kings who created the industry?

- There's much more involved in playing the game,

much more excitement.

There's better use of color, better use of music.

It's not just stick figures anymore.

narrator: The answer was a resounding yes.

Not only was the technological jump out of this world,

it was the undeniable quality,

the fun factor of those first games,

that sealed Nintendo as the new king of video games

in America and around the world.

A new type of game had been invented.

The visual experience was like nothing that had come before it.

Arcades came to life in living rooms around the world.

And that was only half the experience.

[gentle piano music]

id

Koji Kondo.

You may not know the name, but you definitely know...

his music.

[dramatic orchestral music]

id

[cheers and applause]

[playing "Super Mario Bros." theme]

id

narrator: The music.

The characters.

- Mario time! - [evil laughter]

narrator: The charm.

The magic that Nintendo created in the 1980s

started a renaissance

and created a market out of thin air.

As with all initial success,

the logical follow-up question was: What next?

How do you cultivate a new brand and a new audience?

How could they turn this new audience into a new culture?

[triumphant fanfare]

id

[playful music]

id

- The culture of Nintendo has always been to provide

the absolute best entertainment experience we can

but to also provide the highest quality product we can

and then to provide the highest quality customer service

to the people who play our products.

It's sort of our core culture.

- So when we launched the NES,

we put a questionnaire inside that said, "If you fill it out,

we promise we're gonna send you a newsletter,"

and the newsletter was called the "Fun Club News,"

and the "Fun Club News" president was Howard Phillips.

- And you're about to meet the man

at least partially responsible for Nintendo's popularity.

He's Howard Phillips, also known as Mr. Nintendo,

and for good reason.

An argument could be made that Howard is responsible

for making Nintendo America's bestselling Christmas toy.

- Howard also worked at Microsoft after Nintendo,

so | know Howard,

and Nintendo's been very skilled

at creating relatable voices in their markets

that people can be attracted to,

who can speak authentically about what Nintendo's doing,

and that's not easy to do.

- If you didn't know where to go

or what to do in a particular game, the "Fun Club News"

would give you a tip or a hint on how to do that,

and at the time | was picked to help out being the face

of the "Fun Club News" as the game master,

and | knew all the games and had played all the games

and had beaten all the games,

and so | was a logical choice at the time.

- Here he had been this guy in the warehouse,

and now everyone's like, "Wow, he is great."

- | started working in the warehouse,

pushing boxes around.

| personally moved

all the "Donkey Kong" games out of Nintendo

around the-- to around the country,

and there's about 60,000 of them

that | loaded-- offloaded from one truck

and then loaded onto another truck.

So that's how | got started at Nintendo,

but things progressed quickly from there.

Drop that monkey.

- So once the "Fun Club News" had reached

a subscription base of about 600,000 consumers,

Mr. Arakawa decided we could shift this

to a paid subscription magazine

like the ones that they had in Japan.

- But during that process had wonderful experiences

traveling to Japan

and working with the magazine production company,

you know, lots of lost sleep, lots of bleary eyes,

but really fun, really fun.

- All of the maps, screen shots,

and the layouts were done in Japan,

and then all of the editorial work

and which games we were going to cover

came from the publishing team in the U.S.

We worked together with our Japanese counterparts

to kinda make this blended magazine

that was very new for U.S. players.

- The culture of Nintendo is very conservative by nature

in the sense that they want to be very deliberate

and contemplative about any decision they make.

That said, they also-- there's a very strong recognition

that the Nintendo brand means something

in the video games industry.

[light music]

id

- It's a divisive time right now,

and games can kinda help people kinda come together

and sometimes fall in love.

- Aww, and get in fights

‘cause he beats me at this game.

Like, he just destroys me.

- Okay, maybe you should share your little secrets.

- No. Call the Nintendo counselors.

- Nintendo Gameplay, this is Jenny.

How may | help you?

- There's a flashing heart next to his head sometimes.

- And that's gonna make a set of stairs here...

- Well, the final fortress is kind of a magical maze.

- Have you ever been in the mansion that has the eyeball in it?

- After using the stop magic,

the ghost will be vulnerable to your normal weapons.

- You may be asking yourself, "What are they talking about?"

They're talking strategy. They're talking warp zones.

They're talking Nintendo.

- One free man. - My name is Shaun Bloom.

When | started off at Nintendo,

| started off as a basic gameplay counselor.

- The hammer is located... - When the NES came out,

that's when they started coming out with games like,

you know, "Zelda" and "Super Mario Bros."

where they had these hidden blocks that got you,

you know, a power-up mushroom,

and in "Zelda," you know, if you did this,

you could get this secret thing,

and that's when people started banging their heads on walls

and going, "How do | get through this?"

We were taking calls on the NES, the Game Boy,

the Super NES, Virtual Boy for a little bit, Nintendo 64.

Imagine all those systems, all those games,

and you have to be on demand to answer a question

about any one of them at any time.

- Now people don't call Nintendo.

They go to YouTube, and they just watch someone

play it all the way through for them.

- "Nintendo Power" did this really cool thing where

if you put all of the bindings of the "Nintendo Powers"

together, they made pictures, so there's, like, a Mario

and a Yoshi and a Z-- and a Link and all of them.

So | have all of those on display in my house,

super nerd.

- We would have contests in the magazine, and we'd Say,

"Get your highest score possible,

and then take a picture

and send it into us with your score."

More than one time we would get pictures of a smiling kid,

and then they'd write below it, you know, "83,204."

So they would take a picture of themselves

and send it in and write their score down.

- For the record, | was in fact in the first issue

of "Nintendo Power" magazine for a high score

for "Super Mario Bros."

However, before that | was in the last two issues

of the Nintendo "Fun Club,"

which was the precursor to "Nintendo Power."

[snorts] Nerd.

| think it's pretty safe to say that Howard Phillips

was one of the very first known kind of figureheads in video games.

You know, prior to Hideo Kojima

or Reggie or any of these other people,

he was the first person to kinda put himself out there,

and that was kind of, you know, one of the first

video game celebrities that, like, ever existed.

- The funnest part of working at Nintendo

and working in entertainment

is getting to be face-to-face with the people

who are enjoying the fruits of your labor,

and that means, to me, talking with kids or adults

who were playing the games.

It's serious business. It really is.

[gentle music]

id

- We really wanted to make sure that we could express

the quality of the product.

Ron Judy tasked me with saying,

"We've gotta do something like

the Good Housekeeping Seal of Approval."

- "We have to have something like that,"

and so we developed the Nintendo Quality Seal.

That idea that games had to meet that sensibility

that we had about the quality of the gameplay

was something that we applied to licensees

who wanted to publish on our platform.

- With regard to the games

that were being submitted for approval,

we stayed-- we stayed on top of it.

There were games that were submitted

that were pretty crappy, and some would say,

"Well, that's not an open and free system."

At that time period, an open and free system

would have killed the market again,

just like it had with Atari with crappy games.

- The message that's being sent is that

if you want to play in the Nintendo world,

you need to play by Nintendo's rules,

and if you don't wanna play by Nintendo's rules,

it's gonna be a very, very hard struggle.

- | think the development community,

they all have a horror story about dealing with Nintendo.

- Okay, so this one-- this one, uh...

- [laughs] Difficult to work with?

Probably very difficult to work with.

- We had the quality seal on the products.

That was kinda the marching orders in Japan, in Kyoto,

was that anything that they were gonna produce

would be at a quality level of the arcade game.

What you had to have was a philosophy in a company,

and they had that philosophy, and | think that's made them

different than the predecessors.

All they were really interested in is how many

you could push out, how fast you could push out.

They didn't care that much about the quality of the game.

- It was such a leap over what we'd been playing in console.

For me, from "Pong" to 2600 to seeing

what the NES was capable of was a pretty dramatic slope

just in terms of what the technology was bringing.

- All the products prior to Nintendo,

the quality of the game or the game itself

looked nothing like the image

that was on the box when you bought the product.

Nintendo was the first one in our products

to actually have what the game looked like on the box.

Which also put us way ahead of what had been previously done.

- Nintendo controlled the market,

and they had a monopoly.

| mean, it's plain and simple.

If a store wanted to sell a competitor's stuff,

Nintendo didn't like that, but they controlled the market.

So and--well, what can you do?

Either you had to be on board with them

or be caught without anything.

- We do everything possible for us to maintain

the highest-quality video game product

that was delivered to the consumer.

We did everything we could to assist the retailer

in having the right amount of product,

not the most product.

It was the right amount.

Given how the person is going to promote the product,

display the product, and how much traffic,

knowing how much they can move,

you gotta help them come with that right amount.

To overstock a retailer is not good for anyone,

and to under-stock isn't, but if--

we gotta make certain the consumer gets nothing

but the best quality,

and we spent a lot of time on both of those.

| think those were two of the key factors to our success.

[static crackling]

- Checking inventory, restocking shelves,

replacing damaged packaging,

anything that can be done to enhance sell-through

and turn your Nintendo space

into a place of fast-paced profit.

After all, our business is entertainment.

We believe that everything connected with Nintendo,

even customer relations, should be fun.

- By the late '80s, Nintendo was the king

in the video game world.

There was no one who could touch them,

but they weren't as open

to having other developers

and publishers

publish games for their system.

narrator: By 1988 Nintendo, had conquered the U.S. market,

and in doing so created a landscape

where every game released seemed to Sell like hotcakes.

Video games were back,

and the former captain of the industry,

the company that started it all,

came knocking at their door.

- J Have you played Atari today f

- You started to see all of the companies

that had prematurely abandoned video games

decide that they wanted to get back in on that action

but then find that the gaming market has been really just,

like, locked down.

Not just anybody could make games

for the Nintendo Entertainment System.

- While "Pong" was--you know, there was copies made of it,

I'm not sure anybody

actually did copyright infringement on it

because I'm not sure anybody really understood yet

how the video game could be copyrighted

just as well as a movie.

- So with Nintendo's business practices

with third-party publishers,

it was a tough time, and | say that because, one,

Nintendo really wanted to maintain quality,

and number two,

things got so big so quickly in the late '80s,

there truly was a chip shortage.

We couldn't make the games fast enough.

- They didn't allow anyone else to manufacture their games.

They wanted a complete hold on the market,

and the original reason for that was they wanted

to control--you know, keep bad games from coming out.

- | really think it was all about quality

and how--how are we gonna ensure

that you didn't see what happened during--

you know, during the crash of the early '80s with--

of the video game market.

- It felt like we were right out in front

of the whole industry

on developing this strategy for stopping the counterfeits.

- One of the things that just

the third-party developers hated

is that they had to buy the cartridges from Nintendo

before they were sold,

and so it wasn't even like a royalty on what you sold.

You had to take actual physical risk.

- And this got a lot of people worried in the game industry.

Your game had to be a cartridge,

so those cost at least $10 to manufacture,

and then they were tacking on another $10 license fee.

So now instead of your cost of manufacturing being pennies,

it's gonna be $20,

and you're gonna have to buy quantities of half a million?

That's $10 million, so hardly anybody could

even really afford to make these cartridge games,

and it was terribly, terribly risky,

and your merchants were really at the service of Nintendo.

They were gonna make a lot of money.

You were probably not gonna make a lot of money,

so really virtually all of the game companies in America

did not make games for the eight-bit Nintendo,

and | didn't want to either.

| mean, they would-- they would have third-party licensees

but mainly to help Nintendo make more money,

and that's really the history of it.

| don't mean to sound like I'm picking on Nintendo,

but if you just look at the financial fortunes

of their third-party licensees,

it's not really a very pretty picture

of the entire history of it.

It's--it's been, you know, more helpful to Nintendo.

This was the mood in the industry,

and we're all kinda hoping they're not gonna make it,

and we're hoping that something else is gonna jump beyond it,

and that's when | first heard about Tengen.

[dramatic music]

- So Nintendo put a security chip into the NES

with proprietary software

that had to be matched with a similar security chip

that was on the cartridge board

of every single NES game,

and a lot of companies were totally fine with this

even though you had to go through this whole process

and even though Nintendo would tell you, like,

"You can release this game but you can't release that game."

Atari, Atari Games initially starts playing ball.

They establish a subsidiary called Tengen,

and they start working with Nintendo,

and they released "Pac-Man,"

"Gauntlet," and "R.B.1/. Baseball,"

and they also planned to release,

as a licensed Nintendo product,

a version of "Tetris,"

which they had secured the rights to.

They planned to release this as a licensed Nintendo product.

Before Atari could release "Tetris" as a-- as a licensed product,

they actually decided to go their own way,

and what Atari did was a crazy, crazy stunt

that would eventually land them in some pretty hot water.

- What Tengen found is that they could simply short out

a couple of the leads on the chip

and effectively bypass that security,

and then they could release any game that they wanted,

and they started doing that.

- | was talking with Ron Judy one day about the counterfeits,

and he said,

"Well, you know, it's the greatest form of flattery.

"You know, and you know you've made it

when you've got counterfeits."

- Let me put it to you this way.

If the folks who manufacture compact disc players

in the United States said when you bought them,

you could only play Bing Crosby records on them,

you wouldn't buy a compact disc.

Nintendo right now is saying, "You can buy our machine,

but you'll only play our games."

- Tengen just, like, took Nintendo's code.

They didn't reverse engineer.

They sort of illicitly did it,

and so that is when Tengen got sued by Nintendo.

-/n a matter of three or four months

they were able to,

one by one, contact all major retailers

and convince them or intimidate them

or induce them not to handle Tengen products.

- Mr. Arakawa always had the opinion that,

basically, we would fight everything.

- Tengen felt that they could re-engineer around the patents,

and they did, and they ultimately lost the lawsuit.

- They basically violated their license agreement.

They didn't do the reverse engineering

clean room correctly.

They violated the patent.

| mean, it's-- it kinda lit up the scoreboard.

narrator: Fast-forward to 1992.

The Federal Trade Commission cleared both companies of their charges,

and nothing much came of the whole ordeal,

except we now know

how the court feels about reverse engineering.

- The thing | loved about it is a lot of people don't know

that Tengen is actually the center point of a Go board,

and so they were giving a nod a little bit to Atari,

which was a Go word as well.

- Put on a Walkman and see the world in a whole new light.

- Listen to Panasonic Platinum Plus three-piece...

- Get the fun of outdoors indoors

with Panasonic Omnivision.

- Would you rather have a calculator or a watch?

With the Casio Calculator Watch you have both.

[pensive music]

id

narrator: Gunpei Yokoi,

the Nintendo tinkerer-turned-inventor

who took Nintendo from trading cards to toys

and eventually into video games,

was relentless in pursuing a single idea,

a portable system

with interchangeable game cartridges,

A Nintendo for your pocket.

[game music playing]

id

- Context is so important here.

Go all the way back to the '80s.

There are video game arcades all over the place,

and we want to carry games with us everywhere we go,

and you can't really do that.

- Official "Donkey Kong," the arcade game

you can take home with you from Coleco.

- | remember my cousin having multiple

Nintendo Game & Watch games,

but they were super rudimentary.

When the Game Boy comes out, now you have what's,

in all practical experience,

a portable arcade console.

- | remember when the Game Boy came out and we got that.

It was So crazy,

this novelty of holding this little game in your hand,

and you could play games like "Tetris"

that you were playing on your big screen.

We had, like, Game Boy clubs in school.

Like, that's how excited we were about these little things.

- | think one of the fondest memories of Game Boy

was when | first got a game, the cartridge "Pokemon,"

and | looked at the graphics, and | thought,

"No one's gonna want to play this.

This is crazy,"

and then | stayed up all night playing it

‘cause it was just-- it just grabbed you

and sucked you into that game.

It was incredibly addictive.

- The Game Boy holds such a place in my heart.

| saved up for this thing for months.

| obsessed over that thing.

- [speaking Japanese]

- The idea that you could hook a cable up

and play "Tetris" against each other,

and that gameplay was so compelling and so awesome.

You didn't care almost that it was black and white.

Even the form factor was awesome.

It fit in your pocket.

- Introducing Game Boy.

It's portable, it's in stereo,

and its games are interchangeable.

- Now, you two are playing a game

called "Tetris," correct?

- We're going to in just a sec, yeah.

- You're going to? You're ahead.

He's not there. - Yeah, started.

| have to have an-- | have to have an advantage.

- | think it's really important for parents to realize that,

that anytime in anyone's life,

they need to have entertainment,

and this is part of it, and it's portable.

[exciting music]

id

- When they were launching the Game Boy,

they knew they wanted a puzzle game

because the graphics were gonna be small,

and it's not as dependent on a cute character.

So Nintendo went to the Soviet Union

in order to buy the rights to "Tetris."

In an adjoining hotel suite,

there was someone from one branch of Atari

trying to legally buy the rights.

In another hotel suite is another branch of Atari

trying to buy the rights.

And Nintendo ends up winning because they agree to pay

for the rights over and above anyone else,

and this goes back to why Nintendo is so profitable

and so successful as a company.

id

- It was a game that literally

anybody could pick up and play.

It wasn't gender-specific or age-specific,

and it was addictive,

and | think that was the key reason

why Game Boy took off the way it did.

- They're the ones that came out with "Tetris."

This is the best-selling game in history,

and how many "Tetris" clones are out there?

-In'87 lama kid

on "Star Trek: the Next Generation,"

and | am traveling around the country

every weekend to do promotional events

to promote the show ‘cause it's still brand-new,

and the only way that | think | got through all of that

was having my Game Boy with me on the plane

and playing thousands of hours of "Tetris."

- If "Tetris" wouldn't have been for Game Boy, who knows?

Sega Game Gear, Atari Lynx

might have had a little more success,

but "Tetris" really took the Game Boy over the top.

- Nintendo always made a lot of money on the fact

that they weren't top-of-the-line.

Their hardware and their software

was always a couple years behind the bend,

and when the Game Boy came out, it was monochrome.

It was the creamed spinach color,

as a competitor called it,

and one by one, all of these competitors

came out with full-color machines

that looked great, and their games were good,

and then 2 1/2 hours later the batteries died.

- | was in love with the Game Boy.

The idea of a portable game player was really fun,

and there were several games that were very addictive.

- The Game Boy and then the DS

were really the first ways

where you could take entertainment with you

anywhere you wanted to go.

- And it inspired a generation of designers

to make portable games

that were as rich and as compelling

and as meaningful as the biggest computer games

that we had available to us at the time.

- Descendants of the Game Boy are around almost 30 years now.

- And in some ways it ushered in the gameplay on the iPhone.

- | don't think that we would have handheld gaming

on our phones if it wasn't for the Game Boy.

- Portable power.

[chime]

[gentle music]

id

- Mr. Gorbachev, tear down this wall.

[cheers and applause]

narrator: While the Cold War was wrapping up,

another conflict was brewing,

but the stakes in this battle

were not only hearts and minds but dollars.

Big dollars.

[dramatic music]

id

Nintendo sat atop a mountain, a mountain they had built

that up to this point had been mostly unchallenged.

Originally known as Service Games,

a new competitor, also with roots in Japan,

saw what Nintendo had done in America and wanted in.

Minoru Arakawa and Mr. Yamauchi

had a four-letter problem that wasn't going away.

- f Sega f

- And here we have a retail display from 1991

that you can switch between five different games

and play in store a different title.

- Let's get ready to rumble!

- The new 16-bit game machines from Sega

are challenging Nintendo.

- You get better graphics, better animation on the screen,

just more fun to play.

- Sega!

[exciting music]

id

- Genesis, a revolutionary 16-bit system

that improves graphics, memory, and sound.

- It's called the console wars era,

and it was a really interesting time

because it was very much the first time

that you had these two major companies

just absolutely going at each other's throats

and trading barbs back and forth,

and it made-- it made the Atari versus Intellivision

comparisons of the late '70s and early '80s

seem like a friendly game of Horseshoes.

- So when Mattel Electronics asked me

to compare their Intellivision games with Atari,

| gave it a try.

| compared Atari "Baseball" with Intellivision

and found Intellivision played much more like real baseball.

- Power corrupts, and absolute power corrupts absolutely.

| think that Nintendo,

they were a little bit drunk on their own success

and felt that they, you know, had the divine right of kings

to do-- [chuckles]

to do as they wished, not understanding

that they were hollowing out their underbelly.

- Welcome to my man cave, lots of memories from the past.

Here's some drawings of Barbie fashions on the--on the wall.

[gentle piano music]

id

One of the things that the Academy of Art did,

in San Francisco, they did this picture of me.

| guess they did this 30 years ago.

| was obviously a lot younger, and so memories of my past,

Flintstones vitamins.

- f Yabba, dabba doo, yabba, dabba doo f

J Flintstones vitamins are good to chew f

~ Yabba, dabba doo, they're good to chew f

- Whoa, I'm slipping! - Barbie.

both: Hot news.

- J Ultra Vette's the coolest way to cruise f

- Slime. - Yuck.

- The Slime Monster Game comes complete

with slime compound, new from Mattel.

- All Mattel stuff, and then, of course, Sega.

Well, | went on vacation with my family,

and | was in Hawaii, and all of a sudden Hayao Nakayama,

the CEO of Sega, shows up.

So he literally tracked me down

when | was on vacation in Hawaii,

and here | am on the beach with my daughters in Maui,

and Hayao Nakayama shows up in a suit and tie

and says, "Tom, I've been looking for you.

| think you're gonna really like 16-bit technology

for video games,

and | think you should come back to Japan with me

and take a look at it," and | said,

"You're blocking the sun. I'm on the beach here."

And so | went back to Tokyo, left my vacation

and went to Tokyo, and he was right.

When | saw 16-bit technology, it blew my mind.

I'd never seen anything like this.

This was such a jump forward,

so much better than Intellivision, Atari,

and so much better than eight-bit NES.

- During the eight-bit era, | mean, there was Nintendo,

which controlled 90% of the market share

for video games in the U.S.,

and then there was everybody else.

- In any space you're gonna want different companies

pushing each other to innovate,

to kind of challenge each other to do better.

- In Japan, Sega had actually released

its first gaming system

on the same day as the Nintendo Famicom.

- Master System. - Sega!

- When Sega Master System came out,

they were laughable.

It was not as good as the eight-bit Nintendo.

- Sega challenges you with the ultimate video games,

games that'll blow you away,

like "Alex Kidd in Miracle World,"

and coming soon, "Monopoly."

- At some point in the early '80s,

everything went to hell.

Intellivision crashed, along with Atari,

so the video game industry literally crashed,

and it was a disaster in retail,

so | had a very bad feeling about the video game industry

at that point in time.

Atari was down,

Intellivision was down, and along all of a sudden,

as | was--about the time when | was leaving Mattel,

along comes Nintendo

and restarts the video game business.

- Sales of video games show no sign of slowing down

as the industry heads into the '90s.

narrator: Great slogans,

high-octane advertising campaigns,

and bombastic new 16-bit games

put Sega on equal footing with Nintendo.

But they still needed something more

to score a knockout punch.

- The Sega Genesis by no means was--

you know, lit the world on fire when it first came out.

What sold the Sega Genesis was a year later

with "Sonic the Hedgehog."

- Last Christmas, the world felt its first sonic boom

when "Sonic the Hedgehog 1"

sold more than 1 million copies.

- Right.

- You know, at one point we thought that Alex Kidd

was gonna be a great mascot character to take on Mario.

So before there was Sonic the Hedgehog,

we were relying on Alex the Kidd

to be the spokesperson character for Sega.

Well, he just wasn't-- it wasn't popular enough.

Although it's a very good game, it just didn't work

to take on-- to take on Nintendo,

and of course-- of course Sonic the Hedgehog did.

[theme music plays]

id

- | think it's pretty cool. - Yeah.

- And then | get to see Genesis and all,

and I'm looking to buy it soon.

- The thing that Sega's always had going for it is Sonic.

"Sonic" is such a cool game, it's such a cool character,

and that character and that game, | believe,

is the sole reason there was

a console war in the first place.

- Their franchise character, Sonic the Hedgehog,

he had an edge.

He had spiky hair. He had the funky shoes.

He would get bored if you sat there

and didn't play the game, where he'd start tapping

his shoes and look at you like, "Come on, let's do this."

- Sonic the Hedgehog was something that was everywhere,

you know, and the idea that moving that fast,

you know, | mean, it was, like,

hard to even keep track of him.

- Sonic the Hedgehog was really Sega's

very strong answer to Mario.

Sonic was very fast, and there was, you know,

a very quick pace to the game.

It just seemed like more of an adrenaline push,

as opposed to Nintendo games,

which were more slow, contemplative.

- We didn't have a strong character to take on Mario.

So when | first came to Sega,

| said, "All right, so where's our Mario?"

and they drew up--

brought out some drawings of different characters.

One looked like a big egg,

and another one looked like a very ferocious--

I'm not sure what it looked like,

but it was Mr. Needlenose,

and he became Sonic the Hedgehog.

- When Sonic came out, a lot of people don't realize this,

but Sonic the Hedgehog became the number-one icon

in the world, surpassing Mickey Mouse.

You look at the sales of the Sega Genesis

before you got Sonic,

and it was like, "Yeah, ‘Altered Beast,’ whatever,"

and then Sonic, boom.

Now Nintendo had a real competitor on their hands.

id

- Here's the challenge.

Super Nintendo, brand-new competitor of ours,

16 bits, we challenge them.

We think we're better than them,

but it's up to you to decide.

- It's Sega's Genesis versus Nintendo.

Sega's hitting malls across the country

with an elaborate setup of home video games.

- Sega was also definitely friendly

to the developer community, and the developer community

is actually where most of the innovation comes from.

- When it was just Nintendo,

they didn't have any competition,

they did what they did,

but now that Sega was starting to get talented developers,

people were developing games on the Genesis first

because the tools were easier.

They were more familiar with it.

- | jumped a generation ahead and figured out

that the Sega Genesis was gonna come to market

before the 16-bit Nintendo by two years,

and guess what.

It used that Motorola MC68000 processor,

a processor that I'd already built a lot of games for

that were on the Mac, that were on the Amiga,

that were on the Atari ST.

All these machines had that processor.

- | can tell you when we did "Earthworm Jim,"

we would do the Genesis version first

and then upscale it to the Super Nintendo.

| honestly did respect Nintendo

for restarting the video game industry

and for doing high-quality video games.

| knew Howard Lincoln fairly well.

| did not now Arakawa very well,

and he was offended by us

making fun of Nintendo in advertising.

- What if you don't have blast processing?

- There is no Nintendo CD.

- Genesis does... - What Nintendon'tt.

- So when | would see him at E3,

he literally would turn and walk the other way.

We never had a-- had a good relationship at all.

- Nintendo, after having enjoyed

this tremendous worldwide success with the NES,

was getting beaten by the Sega Genesis,

and it put Nintendo back on its heels for the first time

in its experience in the video game industry.

- We proved to the world that there could be more

than one player in the video game industry,

and we also proved to the world

that all ages were interested in playing video games,

from very young children to 50, 60-year-old men.

- Because gaming is competitive,

| think there's a natural tendency

to try to pit companies or franchises against--

your platforms against each other,

and | get it, but in the end

there's kinda room in our heart

for both Sonic and Mario.

There's no doubt about that.

- The eight-bit market had gone so well for Nintendo,

they wanted to hang in there and milk that thing

for everything that they could get from it.

You go-- you go to a lot of trouble

to launch one of these consoles,

so it's really crucial for that platform

to have a long shelf life with each owner.

Sega, of course, didn't care about Nintendo's shelf life.

- The 16-bit system allowed for more graphically-intense

depictions of the action and on the screen.

- They upped the technology.

- The consumer told us they wanted better graphics,

better sound, and better action.

| think our Success was we did great games.

Some of the games that we did were right up there

at the top of any video game ever in history.

- They had some technology that was good,

and they were different as well,

and that really began to challenge us,

and | think we still always wanted to be the best.

- This could be the competitor's opportunity.

When Sega decided to enter the U.S. market,

first with the Sega Master System,

it really didn't compete very well with the NES.

- Nintendo used improved technology to lead

the resurgence of the home video market.

- And then they introduced the Genesis.

- And Sega, also in the market, sales once again--

- | love it.

- It's bigger. It has better graphics.

- And it really started heating up

and especially caught on with Sonic

when they did a great job marketing.

- The first video game character...

- Sonic the Hedgehog.

- To ever appear in this parade.

- Bigger than a sonic boom.

- Our whole philosophy is to lead technology.

- At the time that Sega came in,

it was the first really viable competitor we'd really had.

- People canceled vacations so they could be able to play

the game for the first time in the world.

-A revolutionary 16-bit system.

- It got our competitive spirit really going because every time

they'd make progress, frankly, it pissed us off.

- Sega is the world's number-one game maker.

- | think I'd rather play Genesis.

- And we were not gonna have it.

- Nintendo's new console

will produce brilliant, high-definition graphics.

- The new Super Nintendo System--

- Super Nintendo.

- Genesis is the most popular

game player in the United States.

- Twice as powerful, twice as fun.

-f Segal

- This Christmas could be Nintendo's last.

[upbeat music]

id

- You know what?

- When | was doing brand management,

people would call and want to make a Zelda movie.

You don't know--I can't even say how many people, every day,

"Hey, | have an idea. Let's make a Zelda movie,"

like it's such an original idea,

and | would have to go to him or his group and say,

"Someone called and wants to make a Zelda movie,"

and he started avoiding me at things like E3

so that | just couldn't ask anymore.

- Yeah, | didn't read it much, though.

- Okay, okay.

- | was in my 20s at time

and just didn't pay much attention to it.

| was too cool. - Yeah.

- Yeah, for a short time. - Yeah.

- That didn't last long.

- Nintendo had this hotline with a bunch of game counselors

who were masters who were basically just, like,

19-year-olds with a big leaflet over in, like, you know,

Seattle or Redmond or wherever they were at the time,

and you could call this number and just talk to them

and get advice on how to beat, you know,

Ganon in "Zelda" and things like that,

and | remember calling them on a regular basis,

to the point where | actually became friends with one.

| can't even remember this person's name,

but it was, like, my surrogate therapist

to 15-year-old Cliff at the time.

- And over here is a Singer sewing machine.

It came out around 2000, and it sold with--

the Game Boy Color came with it, and it had an adapter

to plug from the sewing machine right into the Game Boy,

and the reason it did that was it had a cartridge which had st--

It had a cartridge which had stitch patterns,

so the sewing machine could automatically

do these stitch patterns right from the Game Boy.

- Did it work?