One Decision Almost Killed PlayStation and Made Nintendo Miss The Most Lucrative Deal in the History of Gaming

Toni Koraza by Florian Gagnepain on Unsplash

Video games have taken the throne of the entertainment industry over the past decade.

The gaming world shows no signs of stopping any time soon. Other challengers like film and music are light years behind.

The gaming industry is set to reach $160 Billion in 2020. Sony and Nintendo are culprits behind the astonishing popularity of video games. The industry has seen an unprecedented boom that might reach $200 billion by 2025.

To put these numbers in perspective, both film and music can fit in global gaming revenue, with enough room left to start a private country.

The global film industry has reached $41 billion in box office sales, and the global music industry is comfortable with $20 billion. If you add the home entertainment revenue, the film industry balloons to 130 billion. Both industries combined are still $10 billion off the gaming craze. by Mike Meyers on Unsplash

Video Game Killed the Film Star

In the 80s and early 90s, Nintendo has the upper hand in the gaming world. The company is a synonym for console gaming. Game Boy, Super Nintendo, and NES consoles dominate the global markets.

Sony is a consumer electronic company at the time, fighting the transition to the digital age. The company produces television sets, cameras, and music technology, but has no experience with video games.

The key person here is Ken Kutaragi and his vision to build a 3D gaming revolution. Ken Kutaragi is a digital developer for Sony, but he understands that Nintendo has to be at the table if he’s serious about making his dream console. Sony by Toni Koraza

The Nintendo Move

Sony makes more money on Playstation alone than Nintendo makes as a company. The reason why you don’t think of Nintendo when playing Playstation hides in the gaming revolution of the 90s.

Nintendo has a terrible built-in sound in its consoles, and Sony comes aboard as the producer for the new audio chip. Do you remember the old Super Mario sound? Nintendo's sound is a terrible transgression against the eardrum.

Sony partners up with Nintendo to produce the new audio solution together with Playstation — a gaming console. The deal falls through over a contract clause. Nintendo makes the most revenue from selling video game cartridges as the sole producer of video games for Nintendo consoles. The model is called Razor & Blades, and Gillette first perfects this business strategy.

You make the most money by selling separate blades, instead of handles. The console is a razor handle in this case, and video games are blades.

The clause in the Sony-Nintendo contract gives Sony an opportunity to produce video games, shoulder to shoulder with Nintendo. The company backs up from the deal in 1991 and partners up with Phillips behind Sony’s back. Toni Koraza

PlayStation Revolution

You can say that Nintendo’s overreaction is not the smartest move in business history. Compact Dic Interactive or CD-i is the result of the Philips collaboration. The console never lives up to the hype and Sony doubles down on the entertainment world by acquiring Columbia Pictures.

The Sony company is ready to take the gaming world by storm. The first Playstation hits the markets and sparks the gaming revolution of the digital age. The games come in visually exciting 3D. The story mode grows beyond 2D jumping levels and endless shootouts with flying ducks.

The CD can hold much more information, and Sony entertainment systems enhance the sound and graphics experience. The first Playstation hits the market and sells over 103 million units in cumulative sales over the year. by Mike Meyers on Unsplash

One Bad Decision

The company has announced the fifth generation Playstation (PS5) for late 2020. Fueled by the recent political and health concerns, the global population is turning more to video games. Sony is making billions from the Playstation ecosystem. Roughly 100 million players are active in the Playstation world.

Ken Kutaragi becomes the chairmen of Sony Computer Entertainment and brings joy to billions around the world. Nintendo never reaches the planetary fame of Sony, even though the company still makes billion in yearly revenue.

The size of the Sony corporation dwarfs Nintendo in size and influence. And you can trace it all to one corporate overreaction to having another video game manufacturer on the block.

If Nintendo had stayed with Sony and disregarded corporate insecurities, Nintendo could be 10 times bigger today. And the players could play Mario, Zelda, and Pokemon games on Playstation consoles.

One bad decision can cost you a partnership, influence, and billions in revenue. Never underestimate the power of corporate insecurity.

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