[originally from the defunct Next Generation Online website, circa 1998.
deals with Nintendo, 3DO, 3DO's remnants, and Microsoft]
extremely interesting IMO.
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"Although experts acknowledge that the video games business is
surprisingly
incestuous by even Jerry Springer's standards, recent developments taking
place within two of Seattle's biggest corporations have made that fact
clear
for the whole world to see. Next Generation Online exclusively reports on
how Nintendo and Microsoft wound up eyeing the same company's chipset for
the year 2000's biggest game console.
Few in the video game industry are aware of a rift that formed between
Nintendo and partner Silicon Graphics, Inc. just as their
jointly-developed
64-bit game console rolled off production lines. Already beginning to feel
financial strains due to changing market conditions for their high-end
graphics workstations, Silicon Graphics found itself arguing over
component
profits with notoriously tight-fisted Nintendo as the system's American
launch MSRP was lowered at the last minute before release. Although the
companies maintained their working relationship, the decidedly traditional
and hard- lined management at Nintendo had taken offense, and no longer
considered SGI a lock for development of Nintendo's post-N64 game console.
Then several important events took place during 1997 inside of Nintendo,
SGI
and one of their former competitors. Weak Japanese sales of the N64 and
its
software lowered the company's confidence in the N64 platform, and
American
sales were projected to fall off as key internal software titles were
continuing to miss release targets by entire seasons. Demonstrably strong
sales of PlayStation games in the inexpensive CD format had weakened the
appeal of Nintendo's third-party development contracts, and Nintendo
started
to believe that it was in the company's immediate interest to prepare a
new
console for release as soon as Fall of 1999. At the same time, a number of
Silicon Graphics key Nintendo 64 engineers left the company to form the
new
firm ArtX, with the express intention to win a development contract for
Nintendo's next hardware by offering Nintendo the same talent pool sans
SGI's manufacturing and management teams.
As it turns out, most of the industry's top 3D chip experts have been
lured
away from smaller firms by accelerator developers NVidia, 3Dfx and NEC, so
Nintendo's pool of potential partners was already shrinking when it began
to
shop around for a new console design team. Enter CagEnt, a division of
consumer electronics manufacturer Samsung, and here's where the confusion
begins: CagEnt was formerly owned by 3DO, where it operated under the name
3DO Systems and developed the M2 technology that was sold to Panasonic for
$100 Million some time ago. When 3DO decided to exit the hardware
business,
it sold off the 3DO Systems division to Samsung, which named it CagEnt and
gave it roughly two years to turn a profit. CagEnt owned three key
technologies: a DVD playback system, a realtime MPEG encoding system
called
MPEG Xpress, and a completed game console with a brand new set of
console-ready chip designs called the MX. Adrian Sfarti, who had formerly
developed the graphics architecture design for SGI's Indy workstation, was
the head of the MX project.
The MX chipset was a dramatically enhanced version of the M2 chipset sold
to
Panasonic and Matsushita, now capable of a 100 million pixel per second
fillrate and utilizing two PowerPC 602 chips at its core. (CagEnt's
executives also boasted of a four million triangle per second peak draw
rate, though the quality of those tiny triangles would of course have been
limited). Nintendo executives Howard Lincoln and Genyo Takeda were among a
group of visiting dignitaries to tour CagEnt's facilities, culminating in
late 1997 or early 1998 with a formal offer from Nintendo to acquire
CagEnt
outright. At this point, Nintendo had terminated its development contract
with SGI (see SGI/MIPS Loses Nintendo Business).
As purchase negotiations continued, Nintendo worked with CagEnt engineers
on
preliminary plans to redesign the MX architecture around a MIPS CPU, as
Nintendo's manufacturing partner NEC has a MIPS development license but
none
to produce the PowerPC 602. Nintendo and CagEnt flip-flopped on whether
the
finished machine would include a built-in CD-ROM or DVD-ROM as its primary
storage medium, with Nintendo apparently continuing to insist that ROM
cartridges would remain at the core of its new game system. Yet as DVD and
MPEG technologies would have been part of the CagEnt acquisition, Nintendo
would probably have found some reasonable use for those patents
eventually.
The MX-based machine was to be ready for sale in Japan in fall 1999 -- in
other words, development of games for the new console would begin within
literally months, starting with the shipment of dev kits to key teams at
Rare and Nintendo's Japanese headquarters.
Although the asking price for CagEnt was extremely low by industry
standards, talks unexpectedly broke off in early 1998 when Samsung and
Nintendo apparently disagreed on final terms of CagEnt's ownership,
leaving
Samsung's management desperate for a suitor to buy the company. CagEnt
aggressively shopped itself around to other major industry players. SGI's
MIPS division, reeling from the loss of its N64 engineers to ArtX,
allegedly
considered acquiring CagEnt as a means to offer Nintendo the technology it
had already decided it liked. Sega, 3Dfx and other companies toured
CagEnt's
facilities and finally CagEnt found a suitor.
In early April, Microsoft's WebTV division ultimately acquired all of the
assets of CagEnt and hired on most of its key personnel. WebTV and
Microsoft
apparently intend to use the MX technology at the core of their next WebTV
device, which as might be guessed from the graphics technology, will no
longer be limited to simple web browsing and E-mailing functionality. The
next generation WebTV box will be Microsoft's low-cost entry into the
world
of game consoles, melding the functionality of a low-end computer with a
television set-top box and game-playing abilities. Having worked with Sega
behind the scenes since 1993 or 1994, Microsoft has been quietly gathering
the knowledge it needs to market and develop games for such a device, and
now it has the hardware that even Nintendo would once have wanted for
itself.
As for Nintendo, all signs point to a very unpleasant near future for the
Japanese giant. Lacking internal hardware engineers with the necessary
expertise to develop the next high-end chipset, Nintendo is now all but
forced to either partner with ArtX, or one of the 3D accelerator makers
who
have been sucking the industry dry of all its most talented people, or
perhaps join with one of its other major rivals. The latest word has it
that
ArtX and Nintendo are in talks to work together, perhaps under
circumstances
similar to those under which Nintendo would have acquired CagEnt. Unlike
CagEnt, however, ArtX does not have a finished console or even
half-completed chip designs to sell Nintendo, and it would be unlikely
that
Nintendo would be able to scrape together a reasonable system by Christmas
2000 with ArtX's present limitations. Additionally, SGI's recent series of
strategic lawsuits against Nvidia and ArtX seem to be intended to serve as
garlic and crosses to stave off any Nintendo alliance with its tastiest
potential allies: Nintendo might well fear developing a new console only
to
find out that its core technologies or employees are depending upon
infringed patents, regardless of the merits of those patents or the
lawsuits.
Meanwhile, the company continues to harbor tremendous concerns for the
future of the Nintendo64 platform, which appears to be sinking deeper and
deeper in Japan by the day. Nintendo's negotiations with CagEnt shed light
upon the tremendous dependence the Japanese company now has upon Rare,
which
has been responsible for a number of the Nintendo 64's best-looking games
and at least two of the machine's most popular -- Diddy Kong Racing and
Goldeneye 007. As Nintendo's Japanese development teams have never been
known for their ability to stick to release schedules, the company's
third-party rosters have remained bare and its management has remained
dogmatically fixated upon silicon chips as its sole means of profit,
Nintendo's problems have set the stage for a truly interesting set of
negotiations come this E3.
To sum up, readers need to understand that decisions and relationships
made
early in the design process of a new console can dictate a company's
standing in the industry for the following five years. Ripple effects from
these decisions can be felt in a company's bottom line can be felt for
even
longer. Nintendo has found itself in the unenviable position of being
without an established partner and with the clock ticking down. If
Nintendo
should choose to go with ArtX (assuming it's able to fight off SGI's
lawsuit), it will need to complete a chip design is an extremely short
period of time. If it doesn't go with ArtX, Nintendo will have to find a
technology that is already suited to the console market or one that can
readily be changed to suit a similar purpose. Either way, at this point
the
chances of Nintendo hitting its desired 2000 release with a new system are
extremely slim."
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the events described above that took place in 1997-1998 basicly shaped
this
console cycle for Nintendo, as far as hardware goes.
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