The Nintendo Seal of Quality:
How Nintendo Established a Monopoly and Got Away With It
“Fuck with us and we will destroy you.”
According to one lawyer acquainted with the man, this was the personal motto of Howard Lincoln, former senior vice president and chairman of Nintendo of America (the North American branch of the Japanese video game company.) As a provider of family friendly fun for decades, Nintendo’s array of popular characters, including the (alleged) plumber Mario and the totes adorbs Pikachu, have touched the hearts of people all over the world, myself included. As a kid, when I picked up a game that wore the Nintendo Seal of Quality, I knew that I was in for a type of fun that you couldn’t get on any other company’s video game console. There’s this pervading sense of innocence present in all of their games. This feeling is so strong that it’s tempting to forget that behind the games, lies a business. A business that not only has set out to make money, but has become frighteningly skilled at it. So, imagine my surprise when I picked up a copy of David Sheff’s non-fiction book Game Over, and learned what really went into making Nintendo the trusted brand that it is today: a dash of ingenuity, a pinch of luck, and, true to Howard Lincoln’s motto, a whole lot of ruthlessness.
In 1983, a multitude of factors led to the complete crash of the home video game market in North America. Thanks to the runaway success of the Atari 2600 system, the popularity of games had been on the rise and everybody wanted a piece of the pie. Unfortunately, this led to an extreme proliferation of new games in the market, many of which were just plain awful (there was no time for quality control if you had any hope of cashing in on the latest crazes.) Customer confidence in Atari and their games took a nosedive in 1982 with the release of their version of Pac-Man, which simply couldn’t compare to its arcade counterpart in any way (seriously, compare this to this and tell me you wouldn’t be disappointed.) Unwilling to rest on their laurels, Atari geared up to capitalize on the popularity of Steven Spielberg’s E.T. the Extra-Terrestrial by prepping a game based upon the film for release in time for Christmas. To meet this strict deadline, the game’s programmer was given the assuredly pleasant task of preparing the game, from start to finish, in a little over five weeks. Needless to say, the game was awful, and Atari’s fate (and that of everybody else in the industry) was effectively sealed.
In a 1986 newspaper interview, former Nintendo president Hiroshi Yamauchi claimed that “Atari collapsed because they gave too much freedom to third-party developers and the market was swamped with rubbish games.” As such, when Nintendo began to explore the possibility of releasing its Family Computer (known as the Nintendo Entertainment System, or NES, outside of Japan) in the North American market, they were keenly aware that they could not allow history to repeat itself- they wanted complete control of what games would be available to consumers.
Clinging to the ideal of total control, Nintendo enacted a number of restrictions that would apply to all licensees, without exception. Every NES sold was equipped with a special security chip that acted as a sort of “lock”. Unless your game cartridge had the corresponding “key” chip, it could not be played on the NES. While this did indeed help to stave off a flood of awful games (Nintendo limited licensees to releasing five games per year, so there was strong incentive to make them good), it had the side effect of making Nintendo a lot of moolah. You see, if you wanted to release a game for the NES, you had to go through them and play by their rules, as they were the only ones who knew how to produce the required chip. To avoid leaking this secret, Nintendo took on the responsibility of manufacturing all NES cartridges, and you can be sure that they happily charged their licensees for this “service”.
Soon enough, the 1983 video game crash was a distant memory and Nintendo was completely dominant. By 1990, an estimated one third of all United States homes had an NES. Companies were scrambling to stay on Nintendo’s good side, as by this time the market was far too big to ignore. If they didn’t learn to suck up to Nintendo, they couldn’t profit off of Nintendo’s massive install base. Nintendo’s rules were stern and uncompromising- in addition to the aforementioned yearly game limit, they both determined how many game cartridges of your game would be produced and prevented you from releasing your games on any competing consoles for two years. This meant that you were either with Nintendo or against them, and you didn’t want to be against them. While some companies, such as Atari’s new brand Tengen did manage to produce unauthorized cartridges (this is actually a really fascinating story on its own, if you have the time to spare), these were released to limited success. Retailers were threatened by Nintendo to avoid stocking these games, a risk that most were not willing to take. And thus, the Seal of Quality remained supreme.
Eventually Nintendo was investigated by the Federal Trade Commission for violating antitrust laws, but even this worked out in their favor. They ended up somewhat easing their restrictions, allowing select companies to manufacture their own cartridges. Of course, they would still have to purchase the security chips from Nintendo, meaning that from Nintendo’s perspective, there was essentially no difference in their profits. More amusingly, Nintendo was required to mail a $5 coupon, good for any Nintendo merchandise, to anybody who bought an NES between June 1988 and December 1990. Nintendo had monopolized an entire industry, and its only real “punishment” was being forced to mail millions of their customers a fantastic reason to go out and buy more Nintendo games. I couldn’t make this stuff up.
Things are different in today’s video game market. Nintendo isn’t the only big name player in town anymore, and their restrictions are significantly looser (forced Nintendo exclusivity, for instance, would not fly in today’s gaming climate.) Still, it is questionable as to whether or not video games would be where they are today without Nintendo’s hard line practices. Nintendo had been told that trying to sell video games after the 1983 crash would be akin to selling “Popsicles in the Arctic”, and yet they somehow managed to revitalize an entire industry. While I may find myself calling the morality of Nintendo’s former business restrictions into question, video games are such a huge part of my life that I don’t think I can bring myself to regret how things turned out.
