When Hiroshi Yamauchi dropped out of college in 1948, to replace his grandfather as the president of the Kyoto-based hanafuda playing-card manufacturer Nintendo Koppai, the company, founded in 1889, had seen only moderate success. By 1991, fourteen years after the company launched the plainly named “Color TV Game 6,” Nintendo had supplanted Toyota as Japan’s most successful company, earning around $1.5 million per year per employee; in the early nineteen-nineties, the company’s earnings exceeded that of all the American movie studios combined, consistently posting more than a billion dollars in pre-tax profits each year.
Beyond the numbers, Yamauchi, who died this week at the age of eighty-five, was both the architect and the savior of the video-game industry as we know it today. With the Nintendo Famicom—known outside Japan as the Nintendo Entertainment System—and the famed Nintendo Seal of Approval, which assured wary consumers that its games would be functionally sound (unlike many of those released during the Atari boom) and enjoyable, his company restored public trust in video games following the American market’s grim crash in the early nineteen-eighties.
Despite playing only a handful of his company’s products himself (he fumbled with the Famicom’s controller the first time he picked one up to play a digital version of Go, eventually passing it to a junior staff member in frustration), Yamauchi’s philosophy was that creativity, not technological advancement, was the key to the medium’s development. “We cannot guarantee interesting video games just through the use of better technology,” he once said. For Yamauchi and his lieutenants—including the Super Mario creator Shigeru Miyamoto, who was Profiled by Nick Paumgarten in the magazine, and the late Gunpei Yokoi, the designer of the Game Boy—eliciting the joy of discovery and surprise in a player was video gaming’s great purpose. In this way, Nintendo and its games have continued to redefine the way humans play for more than three decades.
Henk Rogers, the man who brought Tetris out of the Soviet Union and secured the rights for Nintendo, was one of only a handful of Westerners to befriend Yamauchi. The pair would regularly discuss the state of the industry over a game of Go; Yamauchi was a master player with the advanced rank of sixth dan. Rogers once likened his friend to the fictional mobster Don Corleone. “He was tough as nails and quick to reach a decision,” he said. “When he did, everybody fell in line. He was a difficult man to please. If you publicly disagreed with him, your days were numbered.”
Yamauchi’s reputation as a callous businessman was forged early on. After suffering a severe stroke, his grandfather, Sekiro Yamauchi, offered the twenty-one-year-old the presidency of Nintendo from his hospital bed. (Yamauchi’s father had left when Yamauchi was just five years old; unable to cope as a single parent, his mother, Kimi, gave her son up to her parents, putting him next in line to run the family business.) The young man agreed to quit his law degree on the condition that he be the only family member working at the company. Regretfully, Sekiro fired his grandson’s cousin, a longtime employee, and in 1949 Yamauchi was appointed the third president of Nintendo. Company employees, many of whom had worked at Nintendo for their entire careers, resented Yamauchi’s youth and inexperience. His first act was to fire these dissenters en masse.
While Nintendo had no direct links to organized crime, in those early years the company benefited from its patronage nevertheless. The yakuza operated high-stakes games with hanafuda cards in casino-like parlors. Professional players would begin each game with a fresh deck, greatly increasing demand for Nintendo’s product. In 1951, Yamauchi changed the name of the company to Nintendo Karuta—Nintendo Playing Cards. His first business breakthrough came in 1959, when he brokered a licensing arrangement with Walt Disney to print images of Mickey Mouse and other Disney characters on the backs of playing cards. With distribution to toy stores, Nintendo sold an unprecedented six hundred thousand packs of cards that year.
Eager to expand further, Yamauchi dropped “Karuta” from the company name and rebranded as Nintendo Company, Ltd. However, forays into selling instant rice and managing love hotels, which provide rooms at an hourly rate, typically for trysts, failed to meet his high expectations—though Yamauchi himself was reportedly one of the most reliable customers.
In the mid-nineteen-sixties, Yamauchi charged Gunpei Yokoi, a technician hired to maintain the hanafuda assembly-line machines, with designing a toy in time for Christmas. Yokoi, a keen amateur inventor, showed Yamauchi one of his latest creations, an extendable mechanical arm with a clasping hand on one end. Yamauchi immediately ordered production the Ultra Hand, Nintendo’s first toy, which sold over 1.2 million units. Yokoi established Nintendo’s first research-and-development group, dubbed simply “Games,” in a warehouse in the Kyoto suburb of Uji in 1969. More creative toys followed: the Ultra Machine, a mechanical ball pitcher; the Love Tester, a machine that measured the “current” between a hand-holding couple and offered a pseudo-scientific readout of their attraction; and a series of Beam Gun games, in which players shot beams of light at targets in an amusement arcade and watched as bottles appeared to explode.
Having experienced the commercial potential of games, and after watching the video-game market emerge in America in the late nineteen-seventies, Yamauchi negotiated a license to manufacture and sell the Magnavox Odyssey, one of the first American home-video-game systems, in Japan. Nintendo’s own systems, which played variations of Atari’s Pong, followed, but Yamauchi pressured his engineers to find a new way of designing games—ones not based around tennis. “We must look in different directions,” he said. “Throw away all your old ideas in order to come up with something new.” Yokoi had the solution: a pocket-calculator-sized series of handheld systems called Game & Watch, which each played a single game and could be mass-produced for a relative pittance. Introduced in 1980, Nintendo sold tens of millions of units over the game’s eleven-year lifespan.
Flushed with this success, Yamauchi turned his attention to a more substantial home console, one that could play multiple games via slot-in cartridges. In contrast to Atari’s 2600, with its wood-panelled face and black-plastic-rimmed hood that lifted up to reveal a panel of orange knobs and levers, Yamauchi wanted Nintendo’s console to look like a toy, so that it would appeal to the entire family—a family computer, he instructed: a Famicom. The heart of the machine, based on a Motorola 6502 chip derivative, was nothing unusual, though the system’s controllers, which were hardwired to the console, featured a unique cross-shaped directional pad whose design offered both elegance and functionality. (Three decades later, “d-pads” remain a staple of video-game controllers.)
The Famicom’s real innovation, however, was its business model. In May, 1983, Yamauchi addressed the Shoshin-kai, a Japanese wholesalers group, and told them that Famicom retailers should not expect to see large profits from system sales. His reasoning would change the gaming industry. “Forgo profits on the hardware,” he said. “It is just a tool to sell software. This is where we shall make our money.”
Nintendo’s new system launched on July 15, 1983, and sold for fourteen thousand eight hundred yen, around half the cost of its rivals. Within two months, the system had sold over half a million units. Within six, disaster struck: a faulty chip in the original manufacturing caused certain games to crash. Yamauchi, with typical flourish, recalled every system Nintendo had sold, missing a crucial sales window during the Japanese New Year holiday but protecting the company’s name as a consumer-centric manufacturer.
Yamauchi soon learned that software sold hardware, not vice versa, and appointed Shigeru Miyamoto, then a young artist and the designer of Nintendo’s first global arcade hit, Donkey Kong, to head a new game-design research group called R&D4. Yamauchi recognized that artists, not technicians, made the best games, and filled R&D4 with likeminded creative people. The internal-software division soon established itself as Nintendo’s most successful department, launching Mario Brothers and The Legend of Zelda, successes buoyed by Yokoi’s R&D1 group, which released similarly well-regarded titles such as Metroid, Kid Icarus, and Excitebike.
But success only seemed to isolate Yamauchi. “As I grew to know him more, he seemed to become more isolated, even from his own family,” said Rogers, who tried and failed to convince Yamauchi to attend his own granddaughter’s wedding a few years ago. Nevertheless, the elder statesman of video games maintained a laconic sense of humor. Rogers once shared a flight with Yamauchi on the airline Northwest. “I had no idea he was on the plane,” he recalls. “We met in an aisle when he was stretching his legs, and he complained to me about the service he’d received in first class. He called the airline ‘Northworst.’ ”
Yamauchi retired from his position as president of Nintendo in 2002, but his influence and philosophy continued to be keenly felt; he remained as the chairman of Nintendo’s American board of directors until 2005. He refused to draw a pension from the company, saying that Nintendo could put it to better use—as Japan’s thirteenth richest man, he had a net worth of $2.1 billion.
While Yamauchi maintained that being a non-player gave him an advantageous perspective on the industry, this assertion was only half true, perhaps to maintain the illusion that his business decisions came from his head, not from his heart. “After the release of Tetris on the Game Boy, I’m told he played the game extensively,” said Rogers. “He would call staff members, sometimes in the middle of the night, to ask them questions about the game.”
When Yamauchi left Nintendo entirely, in 2005, the company was a year away from launching Wii, the best-selling console of the so-called Last Generation of video-game hardware. Today, it’s in a somewhat precarious position: its latest console, the Wii-U, is underperforming, and in 2012 the company lost 36.4 billion yen ($366 million), its second consecutive annual loss. But the erstwhile president’s belief in the power of invention, of “throwing away your old ideas,” still characterizes the company’s products, which over the past decade have continued to sidestep the technological arms race that defines the products of its rivals, Sony and Microsoft, in favor of playfulness and novelty. It is a philosophy that, over seven decades, brought Yamauchi and the company he inherited a great deal of success, even if that playfulness, if it was ever within him, rarely made itself known from behind the carapace, one that seems to have been formed in childhood and tempered in business.