As
we discussed with Dave Stubben yesterday,
I am to remove myself from any further
involvement with the Nintendo project
... and Dave has indicated that you
are the one to take it over.
I have
provided you with a copy of my file
containing my previous memos on the
subject (with corrections); the approach
letter from Nintendo; all of the schematics
and mechanical drawings of the Nintendo
machine which we have received to date;
and Ed Levy's mechanical drawings which
attempt to fit the Nintendo machine
into the 2100 plastic.
We spent
the latter part of the afternoon yesterday
discussing the history of this deal
and what needs to be done next by both
sides. Let me review those points here
and expand upon them for your reference.
Mr. Henricks
received a letter from Mr. Arakawa and
Mr. Lincoln of Nintendo of America on
April 4, 1983. In that letter, Nintendo
provided us with some preliminary specifications
on their new home video game machine.
A couple of days later they came to
meet with Mr. Kassar to explore whether
Atari had any interest in this product.
In addition to Messers Arakawa, Lincoln,
Henricks, and Kassar; Messers Groth,
Malloy, Moone, Bruehl, Ruckert, and
myself were invited to attend. Mr. Malloy
and I framed some of the initial questions
which needed to be answered about the
capabilities of the machine; and Mr.
Lincoln promised to get the answers
to me within a few days. Those answers
were sufficiently intriquing to Mr.
Groth that Alan Henricks, Dave Remson,
and I were asked to travel to Kyoto
immediately to see their TTL emulator
in action and get more details about
the final product.
On the
11th of April, 1983, we met with Nintendo
at their headquarters in Kyoto. By happenstance
(fortunate or unfortunate), a large
contingent of Atari executives were
in the Far East for other reasons ....
and they all decided to come to Kyoto
to have a look, too. In attendance from
Atari were Messers. Bruehl, Moone, Malloy,
Lynch, Hennick, Mitoh, Henricks, Remson,
and myself. Attending on Nintendo's
behalf were Messers. Yamauchi (President),
Takeda (Manager of R&D, Coin-Op),
Arakawa (Pres. Nintendo America), Lincoln
(internal attorney for Nintendo America),
Uemura (Manager of R&D, Consumer
Products), Todori (Export Manager),
and two of their electrical engineers.
We were
shown working (but not complete) versions
of Donkey Kong Junior and Popeye running
with only minor display glitches on
their TTL emulator. A VHS video tape
(without sound) of that demo is attached
to this memo. Please keep in mind that
the actual TV image is significantly
better than could be captured on tape.
In fact, there is a noticable difference
when viewing the composite video output
on a monitor as opposed to the RF output
on a standard TV receiver.
At that
time, Nintendo had only just received
their 1st pass silicon (with some bugs)
and were not able to show us a fully
assembled and working prototype. My
memo of 4.16.83 (with corrections) describes
what we saw and were told in that meeting.
On 4.15.83,
Messers Kassar, Groth, Moone, Bruehl,
Paul, Henricks, Remson, and myself met
in Mr. Groth's office to view the videotape
and discuss what we had learned from
the meeting on the 11th and what we
knew to-date on the MARIA chip being
developed by General Computer Corporation.
As both systems were seen as being in
the same price range with graphics capabilities
superior to the 2600 and comparable
(and in some features, superior) to
the 5200, it was felt that we needed
to see what could be done with both
machines for an intermediate priced
game machine ... the 3600.
I was asked to become as completely
informed about the MARIA chip as possible
so that a reasoned choice could be made
between the two machines. To that end,
I have spoken with the folks at General
Computer Corporation several times by
telephone and have made two trips to
their offices in Cambridge, Massachusetts.
It appears to be a superior machine,
but the MARIA chip is not yet finished.
First silicon is not expected until
mid-July (if there are no further schedule
delays). Also, since this chip is a
VTI device there is some question as
to the manufacturability/ testability/cost
of the chip. In other words, it will
not be until mid-July (mid-August if
the first silicon is faulty) that we
will be able to make a fully informed
choice between the Nintendo and the
MARIA machines. Therefore, it was decided
by Executive Management that in any
negotiations with Nintendo we would
need to string out the signing until
at least mid-July.
We were
committed to respond quickly to Nintendo,
however, as to whether we were interested
or not. So, Alan Henricks did contact
Nintendo with the word that we were
interested in continuing the discussions;
and the next negotiating meeting was
arranged for May 17th in Kyoto. Skip,
Paul and Alan Henricks were to represent
Atari. Two or three days before that
meeting, Nintendo informed Mr. Henricks
that they would be having their senior
engineering managers present in the
negotiations, and Nintendo requested
my attendance as well.
That negotiating
session began with a statement from
Mr. Yamauchi as to the terms and conditions
which he demanded, namely:
1. that
Atari would purchase the assembled and
tested main pc board for the FCS from
Nintendo, for sale outside of Japan.
Nintendo would sell the FCS on its own
in Japan.
2. after
some minimum purchase of assembled and
tested pc boards, we would be able to
buy the 2 custom chips from Nintendo
without having to have Nintendo assemble
them into the final unit.
3. that
Nintendo would only disclose the electrical
specs for the PPU and CPU, the circuit
diagram of the FCS system, the test
programs, and the "cassette"
specs (meaning the ROM cartridge and
cartridge edge connector specs).
4. that
there would be no disclosure to Atari
of the programming specs for the PPU
and the CPU.
5. that
Nintendo would program titles of our
choice for the FCS system and would
sell us the assembled and tested, unlabeled
ROM cartridges at 1,500 Yen each FOB Japan
for retail sale by Atari. The minimum
quantity required by Nintendo per title
would be 100,000 units and at that level
there would be no fee for non-recurring
engineering/programming expenses.
6. that
Atari would hereby obtain a "right
of 1st refusal" on future Nintendo
coin-op titles for use worldwide (outside
of Japan) only for the Nintendo FCS
system ... again, by programming and
manufacturing those cartridges themselves
for sale to us.
7. that
the cost of the assembled and tested
main pc board would be higher than the
5,300 Yen quoted earlier to cover the
cost of FCC compatibility. Also, that
the resulting new pc board would not
fit into the plastic being used by Nintendo
for this unit in Japan.
By the
time we finished the negotiations on
that trip (5/17 - 5/20), the deal was
changed to be as follows:
A. Nintendo
would disclose all items called for
in my memo of 5.13.83 (to Henricks and
Paul) except for item 13., namely, the
LSI tapes for chip fabrication. This
disclosure would take place upon signing
of the deal. All items which are originally
in Japanese are to be furnished to us
both in Japanese and in English.
B. Upon
signing the deal, Nintendo would reassure
Atari about the source of supply of
the 2 custom chips.
C. Any
increases in the cost of the main pc
board due to FCC compliance will be
a straight cost pass through (no additional
profit to Nintendo).
D. Atari
and Nintendo would work together to
attempt to legal protect the CPU and
PPU designs.
E. Nintendo
would receive $5. Mil upon signing as
an advance against future payments.
F. Atari
would have to commit to a minimum purchase
of 2 million hardware units (some mixture
of assembled and tested pc boards and
CPU/PPU chip sets) over the term of
the contract.
G. The
term of the contract would be 4 years
with a 4 year option to renew.
H. Nintendo
would receive an additional $3.5 Mil
in a line of credit as an advance upon
future payments upon delivery of the
1st production-ready prototype of the
PAL West Germany version of the FCS
(no later than 1.1.84). Similarly, an
additional advance of $1.5 Mil for SECAM.
I. The
2 million unit commitment would be broken-up
into 1 million NTSC, 700,000 PAL, and
300,000 SECAM. If Atari goes over in
one catagory, it would directly reduce
our requirement in any other catagory
of our choice. As Skip Paul likes to
put it, "cross- collateralization
is the key!"
J. Nintendo
would commit to produce 100,000 units
of the assembled and tested pc board
by August 31st if the new pc design
(to include FCC and to fit whatever
plastic we choose) can be completed
by Nintendo and approved by Atari by
July 20th. In essence, unlimited quanities
(in excess of 1 million/month) thereafter
.... upon 3 months notice from Atari.
K. Atari
will have the right to program for this
system with the full assistance of Nintendo.
L. Nintendo
will, in the interests of expediency
for this Christmas season, program 4
Atari titles of our choice. Source and
object code which meets our satisfaction
(with respect to basic design, tuning,
and bug-free) to be delivered to us
no later than Sept. 1, 1983. The fee
would be $100,000 / title or no non-recurring
engineering fees would be charged as
long as we buy a minimum of 100,000
cartridges.
M. cartridges
would cost us 1,500 Yen/cart if in plastic
but unlabeled or 1,350 Yen if not in
plastic (F.O.B. Japan). Rate of production
would be max. 5,000 units / week / title. |
