Not too bullish on their chances!
Video games are in a healthy place these days, but that wasn’t necessarily the case in 1996. Mega Drive Shock has published a new English translation of a Japanese newspaper article from that year which sheds light on a more turbulent time in the hobby’s history. In the article, it’s revealed that Nintendo (along with Sega, Konami, and Capcom) experienced big losses during 1995. The impact of these losses was so great, it led to some in the industry predicting a crash as bad as the “1982 Atari Shock”. See the following excerpt to get an idea of just how bad things were.
In the fiscal period ending in March 1995, Konami took an extraordinary loss of ¥11.6 billion due to clearing out unsold inventory. During the same period, Capcom took a loss of ¥7.5 billion after writing down the value of its American subsidiary, and in the mid-year period ending in September 1995, Nintendo also took a loss of ¥9.8 billion after doing the same with its American subsidiary. This fiscal year, Sega is taking an extraordinary loss of ¥26 billion due to the downsizing of its American and European subsidiaries and due to the disposal of unsold inventory.
9.8 billion yen is certainly nothing to sneeze at. So what caused this loss in profits? Well, for one thing, 1995 marked the release of Nintendo’s experimental Virtual Boy console, which was ultimately deemed a failure. Beyond that, 1995 was also the first full year for Sony’s brand new Playstation console, which was a runaway success worldwide, introducing gamers to many new types of gaming experiences. It seems that it was very difficult for companies to compete with their 16-bit consoles quickly becoming outdated.
“It’s true that 16-bit consoles sold quite well and we were able to sell off a good portion of our inventory, but the games did not sell at all,” said Sega director Shunichi Nakamura. The best-selling game charts for the past few weeks in North America reveal that almost all of the top titles are for Sony’s PlayStation console. Games for Nintendo’s SNES console, which has sold over 30 million units—far more than the PlayStation—have disappeared from the best-selling charts.
“The market has been flooded with low-quality software,” said Nintendo president Hiroshi Yamauchi. Consumers in North America who want to buy 16-bit games are rapidly disappearing.
Fortunately, we all know what happened next: The N64 was released, Nintendo remained competitive, and everything is still chugging along today (with some hurdles along the way, of course). It’s fascinating to look back now and think about how uncertain things were then, as video games were still such a new technology. Gaming continues to evolve, but with any luck, the competition can remain strong and the market can stay healthy for years to come.
To get more insight into this period, click over to Mega Drive Shock, where you can read the new translation of this article in full.