Game Informer – July 11

 Classic GI
 – by Matt Bertz
A  A  A

Reverse Engineering Success

It’s tough to imagine the game industry without Electronic Arts. From groundbreaking titles like The Sims to the yearly cash cow Madden, many of the company’s games have driven innovation and crossed over into mainstream pop culture. Just this year alone, the publishing juggernaut has released critically acclaimed titles Dead Space 2, Fight Night Champion, Bulletstorm, and Crysis 2. The void the company’s absence would create is considerable.

But EA wasn’t always a major player on home consoles, and it may never have been if a risky gambit to reverse engineer the Sega Genesis hadn’t succeeded.

A Midas Touch

The sun is piercing through the Red Rock Casino windows as I take a seat across from former Electronic Arts chief creative officer and current Kleiner, Perkins, Caufield, & Byers partner Bing Gordon. The previous evening at the DICE summit, the Academy of Interactive Arts & Sciences honored Gordon’s impressive career by giving him the Lifetime Achievement Award. Looking at his resume, it’s easy to see why he was up for the accolade. From his leadership role in growing the EA Sports brand to his integral involvement in driving investment for social games pioneer Zynga and mobile gaming company Ngmoco, he’s demonstrated an uncanny ability to bet on winners throughout his career. With Gordon beaming proudly and in a nostalgic mood, I took the opportunity to ask him about Electronic Arts’ cloak and dagger approach to breaking into the console market, a story we’ve heard mentioned vaguely over the years – but never from someone intimately involved with the operation.

“Electronic Arts missed cartridge video games,” Gordon openly admits. “We had this belief in Moore’s Law and we launched only on floppy discs even when computer games were mostly on cassette. We just believed that was the future and the future was going to win.”

For the most part, EA was winning. Founder Trip Hawkins started the company in 1982 with a unique strategy that strove to treat its development talent like artists and rock stars. With a willingness to market the talent behind the game, the company attracted many of the best and brightest in the business. EA splashed onto the scene with landmark games like Bill Budge’s Pinball Construction Set and The Bard’s Tale. Thanks to its forward-thinking marketing campaigns, strong relationships with retailers, and deep pool of executive and developmental talent, EA became a mainstay on the PC charts.

A Hitchhiker’s Guide To Consoles

When Nintendo brought the NES to North American shores in 1985, EA was skeptical of its chances for success. The video game market had just crashed in 1983, bankrupting many North American gaming companies and permanently scarring market leader Atari in the process. A quick recovery seemed unlikely, especially when the PC platform offered so much more computational power. Why take the chance on an inferior technology?

“Nintendo came out and we felt it was dirty and kind of a step backwards,” Gordon recalls. “We had mixed feelings in the company. There were some who said, ‘You don’t get it, this is way more fun.’ Middle school kids and suddenly presidents were playing games instead of just nerds.”

Instead of flopping, the NES exploded, making Mario a household name and earning the company the undying allegiance from a new generation of young gamers who saved their weekly allowances to buy the must-have console. Despite Nintendo’s newfound success, some EA executives still questioned the viability of publishing on the platform. “EA was in deep denial,” Gordon admits. A courtesy visit to the retailer Toys “R” Us in 1988 changed the hearts and minds of the remaining reluctant executives.

Behind closed doors, Toys “R” Us showed EA its monthly sales numbers for every product in the store. When they arrived at the games section, it wasn’t hard to see the breadth of Nintendo’s reach. Running down the list of the bestselling games, the first PC title didn’t show up until the third page. The rest were Nintendo games. “It was like, ‘Oh my god, this is data we can’t ignore,’” Gordon remembers.

After this rude awakening, EA knew it couldn’t ignore the home console’s earning potential. But when it approached Nintendo about obtaining a licensing agreement, it became clear that making money on the NES wouldn’t be easy thanks to the Japanese company’s unwavering approach to third parties.

“Nintendo was operating with near monopoly power,” Gordon says. “They had like a 95 percent share of the console business, and they had earned it because they took a huge risk.”

If a publisher wanted to get in bed with the NES, they had to fly to Japan, state its case for a development system, and if Nintendo deemed it worthy there was only one deal on the table. Nintendo would sell the company a dev kit for what Gordon calls “a ridiculous price,” and after a game was finished the publisher had to send it to Nintendo, which would ultimately decide whether our not it would be manufactured.

“Wait, we spend all this time and we build a game but we don’t know if we can bring it to market?” Gordon remembers asking. “They said, ‘That’s right, and if we decide to bring it to market, we manufacture it and we’ll tell you how many we’ll build. You pay us half the cost, and then we manufacture it when we feel like it. When it’s done in Japan you pay the second half of the cost and we release it and you figure out how you want to ship it.’”

By exerting near total control over any publisher who wanted to work on its platforms, Nintendo essentially operated like a legal extortionist under the guise of the license agreement. Even if you created a game that would fly off store shelves if given the opportunity, Nintendo could freeze you out of the market if didn’t like the game, decided it was too similar to one of its own games and thus cut into their profits, or felt the content didn’t fit with its vision of the console.

EA wasn’t interested in willingly participating in this punishing one-sided relationship, so it started looking for other options. Sega had just released a new 16-bit console called the Genesis and it would soon debut in North America. EA just happened to have several successful 16-bit titles from the Commodore, Amiga, and IBM PC that would be a natural fit.

A Modest Proposal

When EA inquired about publishing its games on the Genesis, the executives felt their proposal would be met with open arms. After all, Sega’s Master System floundered due to a shallow game catalog, garnering a mere three-percent market share. With EA’s developmental chops and library of proven games on board, the Genesis would have a fighting chance.

“We said, ‘You’re coming out with this system and you’re nowhere, but we have games,’” Gordon recalls. “’We’ll make a bunch of games, but you have to give us a different license than Nintendo because you’re nowhere. We’re your lone partner.’”

Instead of embracing the logic in EA’s proposal, Sega of America president Mike Katz had other ideas. Sega wanted to emulate the Nintendo licensing agreement system, leaving little to no negotiation room for third-party publishers.

“Sega said, ‘No. We’re going to be as important as Nintendo and we’re not going to back down,’” Gordon remembers.

Sega’s stingy response amazed EA. “You’re so stupid,” Gordon recalls thinking. “You can get to the majority of the market with third-party support. Change the rules or we can’t commit.”

The discussion went back and forth for nearly a year, until a Sega executive boldly told Gordon, “If you want a different deal you’re going to have to reverse engineer the system, aren’t you?”

“I didn’t say anything, but I went home and took notes in case of deposition – because it turned out that we had a few engineers,” Gordon says.

Sega had thrown down the gauntlet, and EA gladly picked it up. Under the guidance of its legal counsel, the company gave two of its most talented engineers the green light to attempt a clean room reverse engineering job on the Genesis.

“The way you do it is you have to have some engineers who do whatever they want with the system,” Gordon explains. “They can basically hack the system any way they want, try to figure out how it works, and then they’re now dirty. What they have to do is give instructions on how to work the system without giving away any proprietary information. They write it up and it’s got to go to a lawyer and say, ‘Write to this memory location,’ but it couldn’t show any of the proprietary stuff that was in the system.”

Once the lawyers receive the instructions, they double check the notes to make sure they don’t reveal any infringing information and hand them off to the clean set of engineers to build the systems. Since they didn’t have the official hardware blueprints, the clean engineers essentially started guessing at how it all tied together. Steve Hayes and Jim Nitchals (who tragically died of a brain hemorrhage in 1998 at the age of 36) worked diligently on the project to no avail for a few months, and then Nitchals had an epiphany. “He thought to himself, ‘If I was doing it maybe I’d do this memory location,’” Gordon remembers. It worked. Suddenly EA was in possession of a rogue Sega Genesis.

In the following weeks EA’s hardware group built several reverse engineered development systems. Unbeknownst to Sega, EA ramped up production on several Genesis games.

The Gambit

In preparation of the big reveal, EA booked a booth at the 1990 Consumer Electronics Show, with plans to showcase seven titles. In those pre-E3 years, CES was the go-to convention for gaming companies. Riding the success of its recent Game Boy launch and the NES’ dominant market share, Nintendo planned to show off the legendary title Super Mario Bros. 3. At the same time, Sega was planning a proper introduction to the Genesis, which had just launched in August, and NEC was touting its new TurboGrafx-16 console as a must-have device thanks to a new title called Bonk’s Adventure.

The night before the show began, Trip Hawkins met with Sega CEO Hayao Nakayama and informed him of his company’s bold feat. “We basically said, ‘We’re going to run our own licensing program unless you agree to our terms,’” Gordon says.

Sega was caught in an uncomfortable position. If EA went ahead with its licensing program, the console manufacturer would be losing a significant portion of the profit that traditionally comes with the territory. EA could essentially reach out to other publishers and offer better returns and cheaper manufacturing costs than Sega was willing to do. The meeting lasted through the night, and in the morning Sega acquiesced.

In exchange for agreeing to join Sega’s licensing program, EA would be allowed to manufacture its own Genesis cartridges, could make as many games as it wanted, and received a more favorable royalty rate. The next day at CES there was a wall of 16-bit Electronic Arts titles running on the Sega Genesis.

“When we announced the Sega deal, the stock went down because the market was so ignorant about what was going to happen,” Trip Hawkins later told Steven Kent in the book The Ultimate History of Video Games.

After the deal was in place and EA joined the licensing program, the engineers realized they dodged a major bullet. “What we didn’t know, and it turned out later, that we hadn’t figured out all the workarounds. Sega still had the ability to lock us out,” Gordon says. “It just would have been a public relations fiasco.”

In June of the same year, EA released its first two console titles for the Genesis, Peter Molyneux’s Populous and Budokan: The Martial Spirit. In the fall, John Madden Football debuted and changed sports games forever.

“It turned out that was the best thing that ever happened to Sega, because Madden became a killer app,” Gordon says. “Nintendo never needed thirdparty killer apps. Sega and the power of a slightly open platform vaulted the Genesis.”

Gordon was right. Objectively, EA’s gutsy gamble benefited both companies. EA carved a considerable niche in the console space with a slew of Genesis hits like Jungle Strike, Road Rash, and the popular titles under the EA Sports label. Thanks to these games, Sega’s new platform boasted an impressive library of games that could stand head to head with the best the Super Nintendo had to offer when it launched a year later.

“It was a stroke of brilliance from Jim Nitchals and then total go-for-it courage from Trip Hawkins,” Gordon proclaims.

The rest, as they say, is history.