PlayStation’s 15th: Rebounds and rebuses

This is the first in our series of a look back at the PlayStation brand over it’s 15 years in gaming.

Of the major gaming brands, there is constant debate among enthusiasts as to which is the best. Factors such as graphics, games libraries, and even sex appeal come into play as arguments rage. But of the brands that endure to this day, it is generally clear which is most widely recognized and accepted the world over.

However, there was a time when gaming’s biggest brand was almost not a brand at all, but simply a hardware accessory to another one. But oftentimes, change is an inevitability, and what was once an additional toy has become a lifestyle brand to kids and adults alike.

This is a story of betrayal, and corporate subterfuge. This is a story of a scrappy team changing the face of their business, and how they set the home entertainment world on fire. This is the story of the PlayStation.

The Nintendo Play Station

The year was 1986. In the video game world, Nintendo was the undisputed king of the marketplace. Even though the Famicom was still relatively new, and the Nintendo Entertainment System was in its infancy in the U.S., it was already becoming clear that this generation belonged to the folks in Kyoto.

Nintendo had been working on disk-based technology for their Famicom system, but the medium had its problems, most notably their potential for erasure due to their magnetic nature. The disks were also a copyright hazard, since they were easily copied and distributed. So when a new CD-ROM format started making waves, with the ability to combine compressed audio, video and data allowing simultaneous access, Nintendo was all ears.

The format was being developed jointly by Sony and Phillips, and Nintendo approached Sony to develop a CD-ROM add-on for the successor to the Famicom, to be known as the “SNES-CD.” Why Sony? Because Ken Kutaragi – later the man behind the PlayStation – had originally sold Nintendo on using Sony’s sound chips for the Super Famicom’s eight-channel sound synthesizer previously.

So in 1988, a contract was signed, and work on the project began.

Sony would develop an add-on for the Super Famicom and Super Nintendo Entertainment System, as well as a stand-alone SNES with the CD-ROM drive built-in, as a sort of lifestyle/home entertainment machine.

All was going well until three years later when Nintendo chief Hiroshi Yamauchi actually read the contract, and found that the 1988 contract gave Sony complete control over any and all titles written on the SNES CD-ROM format. To Yamauchi, this was unacceptable. In secret, he scrapped all agreements with Sony and sent Nintendo of America chairman Howard Lincoln and president Minoru Arakawa to Europe, to hammer out a deal with Phillips instead, that would give Nintendo control over its licenses.

The day the SNES-CD was to be announced at the 1991 Consumer Electronics Show, Howard Lincoln stepped onstage and announced the Phillips agreement, and that they had abandoned everything they’d done with Sony to that point.

Sony was furious, most notably president Norio Ohga, who demanded that the project continue. After a meeting that July to discuss potential litigation against Nintendo, he famously declared “We will never withdraw from this business. Keep going.”

Though it seemed sudden, tensions were boiling under the surface between the two companies for some time. Not only were the licenses an issue to Nintendo, but the collection of revenue was a sticking point. Sony had proposed to take the money made from CD sales while Nintendo took the money from cartridge sales, and that they’d work out royalties later on. But Nintendo just could not agree to this and things came apart.

So it was that Kutaragi put together a team of engineers, formerly from broadcast and professional real-time 3D backgrounds, who’d been working on a graphics engine called System-G. System-G was a system designed to allow broadcasters to augment live broadcasts with 3D images in real-time.

“Technologically, that’s not really a million miles away from videogames, but this was a super high-end workstation. And Ken’s big vision was to take that, apply it in high volume and bring it into the home,” explains former PlayStation worldwide boss Phil Harrison to Edge Magazine.

However the coopration with Nintendo wasn’t quite over. Kyoto had proposed that Sony could remain involved in “nongame” aspects of the project. Critics speculate that the move was simply to delay Sony’s entry into the games market, as well as stave off the legal ramifications coming from Nintendo’s breach of contract.

As time wore on, support within Sony began to wane. The project’s focus began to dissipate. And the Play Station project appeared to face real peril.

And then came May, 1992.

Charting their own course

Sony ceased negotiations in May of that year, and moved to make their final decision at a meeting July 24th. Kutaragi pressed forward, but Sony executives were keen to shelve the project.

Kutaragi explained that they were on the way to developing a proprietary CD-ROM capable of handling realtime 3D meant exclusively for gaming. When Chairman Ohga asked what kind of chip it’d need, Kutaragi answered that such a chip would require 1,000,000 gate arrays. Ohga scoffed, knowing that Sony’s production at the time could only handle up to 100,000. But when Kutaragi asked if he would “sit back and accept what Nintendo did to us,” Ohga was again enraged and declared that Sony would set its own course.

Part of this involved removing Kutaragi from Sony. The widespread internal opposition was immense, much of the old guard did not feel that their venerable old brand should not delve into the market of something they felt was simply for children.

“That changed a bit after we delivered 90 per cent of the company’s profit for a few years,” Harrison said.

Early renderings of the PlayStation logo

Kutaragi and nine others were moved to Sony Music, a subsidiary of the main company, to cultivate and grow their project. It was a blessing in disguise, because it was there that they learned from the music group how to attract and grow outside talent, as well as how to manufacture and supply music discs, knowledge that would come in handy in the CD-ROM market. Their branch would grow into what would become Sony Computer Entertainment International, with Terry Tokunaka who would become its president.

It was Tokunaka whose vision for third party relations arguably shaped the brand and gave it its legs, in that there was a drive to be the creative choice for developers, and the business choice for publishers. They strove to make the process as easy and painless as possible, set against the draconian measures of licensing involved with Nintendo and Sega during that period. With cartridge costs approaching USD$40 and up, publishing on the 16 bit cartridge platforms was expensive and risky.

And it was working. Publishers were signing up in droves, even before royalty agreements were in place, so enthralled were they by the hardware, but also because Japanese publishers were reaching a breaking point when it came to developing cartridge-based software. Facing 10-12 week lead times in manufacturing, it was difficult to gauge demand, resulting in loads of unsold product. Sony offered an order system with a turnaround time of 7-10 days. The economics of the business had totally changed thanks to Sony, and the business happily responded.

And it was fortunate, because Sony did not have its own internal development studios until early 1994. This weakness meant a complete reliance on third party studios, though it was an advantage to those third parties as they saw it, because it meant less competition.

But as the launch date drew nearer, regardless of the competition, the third parties had a lot of work to do.

urnote

A few weeks before the December 3 launch, Phil Harrison visited Namco’s Yokohama tech center, to get a look at the latest build of the original Ridge Racer. While there, one of the demonstrators asked if he’d like to see another game they were working on, as an afterthought. Harrison shrugged and said “Yeah, sure. What’s it called?”

“It’s called Tekken,” the demonstrator replied.

That game would be one of the lynchpins that would determine the console’s early success, and a franchise that endures to this day.

100,000 units were made for the Japanese launch, and sold out entirely. Another 200,000 sold out within the console’s first 30 days, at a cost of ¥39,800 – which at the time translated to $390, or £245. It absolutely ate Sega’s lunch, who’d launched their Saturn a month earlier at ¥44,800. In the United States, the Saturn was launched as a surprise at E3 in May of 1995. Sony’s press conference was shortly afterward, in which Steve Race, president of Sony Computer Entertainment America was brought up to share an “important piece of information.” Walking up to the microphone, Race simply said “299,” and sat back down. The room erupted in chaos.

Though, the price was a heated issue at Sony since, against tradition, the system would be sold at a loss. Kutaragi had predicted that memory prices would go down, but  in actuality they’d gone up and stayed up until the end of 1995. He maintaned that prices would eventually go down, and that it was a non-issue due to the fact that the PlayStation business wasn’t like the rest of Sony’s conventional appliance business, which depended on direct hardware profits, instead of the PlayStation’s reliance on software sales. Still, upper management would not budge until Kutaragi dropped certain hardware features, such as the originally planned S-video port.

By the end of the 2007, Sony had shipped 102 million units. Sony had covered Asia, North America, and Europe with their consoles, demonstrating the strength of the market in all three areas. And it was a new market, transformed by Sony’s new business model, and the legitimacy of a well-respected and international brand like Sony entering the space.

Certainly, a lot of the console’s success was the right place and the right time kind of happenstance, but ultimately it was the galvanization of Sony’s various hardware, software and entertainment divisions, focused by Kutaragi toward a unified goal.

On March 23, 2006, Sony ceased production of the original PlayStation. But its legacy lives on in its successors, and the millions of gamers around the world who play them.

Next on PlayStation’s 15 Anniversary retrospective: Real Emotion?