That's very interesting. I know nothing about him, but I'm very intrigued to hear more about his ruthless business practices.
Nowadays there's less stigma attached to the idea of being a ruthless businessman. In fact, it's often considered meritous. So I don't think it would be disrespectful to highlight some of the things he's done. After all, it's a testament to what it took to build a company of the caliber of Nintendo.
Well for example the shelve management of the cartride game systems. If you would want to produce a game for the SNES, to actually distribute it you would have to put it on a cartridge and sell it.
But the design and specifications of these cartridges was protected by Nintendo, so the only way to distribute a game was to ask Nintendo for cartridges. Because Nintendo would only allow quality games on its shelves, it would test your game before allowing you any cartridges, so your game basically had to be nearly finished before you could ask Nintendo for cartridges. Of course if you were refused at this point you would have already invested tons of money so it would be pretty ruinous.
Besides the go/no-go signal, Nintendo also controlled the _amount_ of cartridges you would get. If Nintendo decided (much like Apple did in recent years) that your game was more valuable if it had limited copies, then you wouldn't get many copies, regardless if that would leave you with not enough revenue to make a profit.
Reasons for refusal of cartridges were both fair and rather unfair. For example you could be refused for lack of quality, but you could also be refused because another game in your genre already had shelve space and they didn't want to endanger its dominance. Basically you were at the complete mercy of how Nintendo wanted to make maximum profit for it self.
I have heard, though I don't know for sure (maybe someone could check it :P) that Atari eventually went bankrupt because it decided to make a Nintendo game (as a last resort perhaps), got into a conflict with Nintendo, sued them, and lost..
I disagree. The quality control system of the major video game console manufacturers (not only Nintendo is doing this) is what keeps the amount of bugs and major game design flaws they contain at the release time in control (i.e. low) until today. It is the reason for that I still rather buy a just-released console title than a just-released PC game. Everybody who is watching the PC game industry will have come across release disasters that made the games simply unplayable. I'd also rather pay a little more for titles that I can keep in the attic, and where I know that they still work after 20 years, when the patches are not available online anymore (our Master System games still work perfectly).
If some major new-to-the-console-gaming-market company had gotten the point about this in the mid 2000's and wouldn't have allowed the game manufacturers to make major bug fixes to their titles after release, we still would have mostly bug-free console titles on every major system.
Atari is relevant here for a different reason, since their Atari 2600 partly failed because they did not have good quality control schemes, and because low-quality buggy third-party titles flooded the market (famous examples: PacMan, E.T. - The Extraterrestrial). Consumers simply lost interest in spending money for titles that didn't work (something I would like to see in the PC market today). A couple of years later, the Nintendo Entertainment System won the customers back partly because they controlled their market.
Actually, both Pac-Man and E.T. were developed and published by Atari itself. That's not to say that third-party garbage wasn't a major (and probably the primary) problem.
I actually owned and played both those games on the 2600 when I was a kid. As it turns out, they were very buggy (and for me to recognize this as a child says something). Not refuting your point, just an anecdotal comment.
The GP wasn't saying that exercising quality control as a platform holder is a bad idea, just that Nintendo engaged in some ethically dubious practices at the time. The most obvious evidence: Nintendo did excellently in Japan while exerting significantly less pressure than they did on companies that wished to produce games for the American market. The Famicom had no lockout chip. Nintendo did not impose a strict 3 game per-year limit in the Japanese market like they did in America. Third parties were allowed to manufacture their own game cartridges; there is direct physical evidence of this fact in the varying shapes and vibrant colors of the cartridges themselves[1], and the existence of customs ICs and discrete mapper designs common in Famicom cartriges. In addition to slimming margins for third party developers, this also made supply and demand problems very difficult to deal with, as tinco mentioned. Remember how Nintendo infamously forbade third party devs from publishing games for competing platforms in America? Didn't happen in Japan, and so a fair amount of early Famicom games received ports to the MSX and other Japanese computers.
The Famicom did have some amount of Atari 2600-goldrush-esque crappy games (some licensed, some not), but it didn't stop the console from being a huge success. This suggests to me that Nintendo's reasoning was only part "Americans will flood the market with shitty games again if we don't do something about it," with pure monopolistic greed being the other part.
With all due respect to Hiroshi Yamauchi, I don't think their business practices during this era should be considered at all admirable, and I don't think it's right to credit their monopolistic practices for "saving the medium."
Thanks, great summary but Apple doesn't determine the price of apps on the App Store. On the other hand Amazon does do that on their Android app store.
There's an ars technica article [1] that dives deep into the early industry of video games and how Nintendo held such a tight -- almost monopolistic -- rein over its third parties. A very good read, and I found it very interesting how Nintendo did things then that there's no way would work in today's business.
It's fake, but a few years ago there was a story about a meeting between him and Steve Ballmer. Google for "HEY, BALLMER, WHY DON'T YOU SUCK MY TINY YELLOW BALLS?"
Nowadays there's less stigma attached to the idea of being a ruthless businessman. In fact, it's often considered meritous. So I don't think it would be disrespectful to highlight some of the things he's done. After all, it's a testament to what it took to build a company of the caliber of Nintendo.
What sort of strategies did he employ?