With the upcoming release of the Nintendo Switch, Nintendo seems to be on the upswing after a very troubling period. It is hard to remember that in the late ’80s and throughout the ’90s, Nintendo was on top of the world. It was seemingly indomitable. They could crush any competitors, and they often did. Yet, in Nintendo’s early days, they met an opponent that was backed by some of the largest companies in the world and had a near-infinite amount of power and capital behind them. This corporate entity tried to crush the fledgling Nintendo. Nintendo would show that it might be a small fry in comparison with this behemoth, but it had quite a bite. This is the story of how Hollywood tried to smash Nintendo, and how Nintendo won.
To understand the circumstances that brought Hollywood to Nintendo’s door, we have to briefly look at Nintendo’s creation of its first hit, Donkey Kong.
Donkey Kong was a creation of absolute desperation. Nintendo has been seeing modest success in Japan and was eager to spread to the vast market that was America. Hiroshi Yamauchi (山内溥), then president of Nintendo, was aching to break big into the American market. Yamauchi tapped his son-in-law, Minoru Arakawa (荒川實), to head Nintendo of America (NOA).
The Nintendo-produced game Radar Scope had been a big hit in Japan, so Yamauchi ordered 2,000 units shipped to America. Yamauchi was sure that this would be Nintendo’s big break… except it wasn’t. Radar Scope was a tremendous flop. NOA was in dire straits, they were hemorrhaging cash at a devastating rate, and could not afford to send the worthless arcade cabinets back to Japan.
So, Yamauchi ordered a young Shigeru Miyamoto (宮本茂) to create a new game that would run on the Radar Scope motherboard. The idea being, they would simply replace the motherboards in the cabinets and repaint them, and then try to resell them.
Miyamoto was under tremendous pressure, he had very little time and severe limits of what he could do with the software and hardware available. And under such pressure, he created a gaming legend; Donkey Kong.
Donkey Kong was an almost immediate success. The game single-handedly saved NOA, who was at the time teetering on bankruptcy and could not pay their monthly storage rental fees. The landlord, Mario Segale, let them slide for a few months. That is why the main character in Donkey Kong, who was formerly known simply as “Jumpman” was christened “Mario.”
Donkey Kong became a cultural icon! Within a year of release, the Nintendo licensing machine was putting the great ape’s likeness on anything you could imagine. There were DK bed sheets, lunch boxes, toys, and even a TV show. In 1982, Nintendo started to negotiate to bring DK out of the arcades and into the homes of kids across the nation.
During this time, it was still the high point of the first home console boom. The two great competitors in this market (the Sony and Microsoft of their times if you will) were Atari and Coleco. Coleco made a deal to bring DK to its newest console, the ColecoVision. This would have been monumental for both companies. DK was the biggest game of the year and could guarantee a top spot in these early console wars. It was also a big deal for Nintendo because it would capture an entirely new and lucrative section of the video game market.
But this thundering success proved to be too tempting a target for a big Hollywood studio who looked at Donkey Kong with dollar bills in their eyes.
Six months after the deal between Coleco and Nintendo was inked, Universal Studios’ president, Sid Sheinberg, was made aware of Donkey Kong. The studio’s lawyers looked at Donkey Kong. He was a big ape that stood on top of a structure causing havoc and kidnapping women. There were definite resemblances between the pixelated beast and the classic movie monster King Kong. Hollywood, never known for being non-litigious, immediately contacted Arnold Greenberg, president of Coleco. They insinuated they were interested in investing in the company.
Once they met, Universal revealed its true colors. What then commenced was basically a classic gang style protection racket. Universal said that Donkey Kong was obviously a rip-off of King Kong and that Coleco had to pay royalties. They threatened to take Coleco to court. Coleco was struggling and needed the ColecoVision to do well or they would go under. Universal, on the other hand, had hundreds of lawyers at their bid and call, and near-limitless resources. It was a classic, “This is a nice window, it’d be a real shame if someone came along and broke it,” type of situation. Coleco to pay Universal.
Universal tracked Donkey Kong back to Nintendo and redid their attack on the fledgling camping company. One author writing for The Escapist magazine puts it best:
“Now that Donkey Kong was on their radar, Universal traced the game all the way back to Nintendo. The same demands made to Coleco were issued to the Japanese company. They were ordered to cease all marketing of Donkey Kong products, destroy all Donkey Kong inventory and produce a full statement of profits made from the franchise within 48 hours. Nintendo were as baffled as they were irate.”
Try to put yourself in Nintendo’s shoes here for a second. You are still a tiny company and you only have one really successful product. Then this giant of a company starts threatening to sue you. You have two choices: (1) Play ball. You can agree with everything like Coleco did, but this is going to cost nearly everything you have made, and part of any further profits are going to go to this company. Or (2) fight it in court. If you lose this battle, it basically means the end of your company.
Nintendo would choose the latter.
Arakawa was incredibly nervous about the Universal situation, but NOA’s lawyer, Howard Lincoln, was less so. He knew they were safe from Coleco’s capitulation because of a very savvy contract Lincoln had made, putting any legal problems squarely on Coleco’s shoulders. But he also had been very careful to make sure that Donkey Kong did not breach any copyright deals. His research showed that while Nintendo was fine, Universal was claiming clear copyright violations. Lincoln asked Universal for a chain of title, a document that proves ownership of intellectual property. Think of it like a store receipt. If you try to take back a pair of pants that are too small but you don’t have the receipt, you’re up the creek without a paddle.
When Universal did not produce a chain of title, Lincoln encouraged Nintendo to take Universal to court. Once again, just try to imagine this, it’s like a big school bully who has a few friends backing him up, threatening you for your lunch money. What Lincoln was recommending was for Nintendo to do what would basically be the equivalent of putting up your fists and saying, “Bring it!” Try to imagine what Arakawa must be feeling, your father-in-law put you in this position, he trusted you. If you make a bad decision here that wrecks the company, you will have to go back home to Japan in total shame. You have several employees who depend on you for their livelihoods, so a bad decision here will hurt them as well. But Arakawa trusted Lincoln, followed his advice, and plunged into the dark. Spanner once again puts it best here:
“In a similar move to Sheinberg’s meeting with Arnold Greenberg, Nintendo of America arranged to meet with the Universal president, insinuating they were ready to make a deal. When Arakawa and Lincoln came face to face with Sheinberg and told him they were not prepared to pay Universal a penny, his temper apparently got the better of him. He warned them to start saving for their lawyer’s fees, as his legal department ‘even turned a profit!’ There was no turning back now. The bridges were burned and a court case was inevitable.”
Lincoln brought on John Kirby to litigate the case. And on June 29th, 1982, Universal sued Nintendo. They were demanding pretty much everything. The future of Nintendo, even possibly the future of video games as a whole, rested on John Kirby’s shoulders. Once the court opened and everything got underway, Kirby dropped a bombshell that would vaporize Universal’s entire case. Universal Studios did not own King Kong.
The original King Kong movie was made by RKO Pictures and debuted in 1933. In 1976, Universal wanted to make a big-budget remake, so they sued RKO arguing that because the film was over 40 years old, King Kong fell into public domain. Universal would win the case meaning that they didn’t have to pay RKO royalties, but it also meant, argued John Kirby, that Universal Studios did not own the character either. They had been lying to companies and threatening them just to shake them down for a little cash.
This, I think, quite gives the perfect example of the absolute spanking that Universal received from John Kirby:
“Coupled with Universal being unable to convince the court there would be any confusion between Donkey Kong and King Kong, Sheinberg’s reiterated comments about his legal department being able to turn a profit (which did not impress the Judge one bit) and the subsequent scare tactics used against Nintendo’s licensees, Judge Sweet ruled in favor of the Japanese.”
The court ruled in favor of Nintendo, and later, Nintendo would bring a countersuit to Universal for the trouble they had been put through – absolutely humiliating Universal Studios and rocketing Nintendo to fame that they had not known before. Bringing it back to the analogy of the schoolyard bully before, you managed with a single, well-placed punch to totally lay out the big bully. You are then taken up on the shoulders of an adoring school for fleeing the tormentor.
Nintendo would thank John Kirby for his service by naming one of their newest characters after him, the pink amorphous Kirby of the ongoing Kirby franchise. (So next time you play as Kirby in Super Smash Bros., try to drop that knowledge bomb on your friends.) Nintendo would also give him a 500-thousand-dollar sailboat. It’s hard to say which he enjoyed more.
I think that it was the decision by Arakawa and Lincoln to stick to their guns and fight that really created the Nintendo that we would all come to know and love. I don’t think that Yamauchi would have done it. This experience taught NOA that they, despite being small, could play hardball just as well as any giant corporation. This attitude would create the resurgent American home console market and the gaming market that we still enjoy today. Once again, Spanner puts it best in talking about these lessons which helped Nintendo overcome the seeming death of the home console market:
“But Nintendo had already proven its mettle in overcoming seemingly hopeless odds, and was not about to let the industry it had strived to conquer disappear on account of the public’s refusal to buy games. Digging its heels in and marching headlong into an arctic blizzard of consumer apathy, Nintendo of America set its iron resolve to rebuilding the industry it loved after the fatal market crash of 1984. There are few people capable of facing such overwhelming odds for a third time, but this was a company built on a fearless and unswerving belief in its products, and though rough times were ahead, there was no better collective of dedicated individuals to accept the challenge than those at Nintendo of America.”
While in the future that same attitude would eventually cause the downfall of the company from the meteoric highs it had in its younger days, it still established the gaming corporate culture that exists today. If you play and enjoy video games, you have this incident to thank.