Gamers bought the games, distributors earned the price difference, and Capcom's financial statements saw a historic surge.
Sega not only reaped generous profits from contract manufacturing but also used this opportunity to demonstrate its powerful industrial scheduling capabilities to the entire industry.
In the video game industry of 1996, this model of cooperation was so advanced that it felt out of place.
Traditional hardware manufacturers often used production lines as a weapon to leverage third-party developers, forcing them to sign exclusivity agreements.
Both Sony and Nintendo played this game. Although Sony's behavior was slightly more refined, it was only to a limited extent. After all, Sony held the patents for optical discs and needed to maintain a far greater number of disc production lines than Sega.
Sega did the opposite.
You make your games, and I earn my manufacturing fees.
If you want to release on my console, you are welcome.
If you want to release on another console, as long as you use my factories for disc pressing, I will still provide the best service.
Hisao Oguchi looked at the manufacturing settlement statement sent by the finance department.
The profit margin on this rush order of 300,000 units from Capcom was quite substantial.
"What does Capcom say about the follow-up long-tail orders?" Hisao Oguchi asked the channel manager.
"They've freed up capacity in their own factories. They plan to slowly press the subsequent routine restocking orders themselves," the channel manager replied.
Hisao Oguchi nodded.
This made perfect business sense.
When you need urgent help, you go to Sega. For everyday operations, you use your own kitchen to save money.
"It doesn't matter," Hisao Oguchi said as he put the settlement statement into a drawer. "With this deal, we didn't just earn money; we earned Capcom's trust."
Kenzo Tsujimoto was a pragmatic businessman.
Through this cooperation, he would clearly realize that at the table of next-generation consoles, Sega was not only a powerful platform holder but also a reliable logistics support base.
This kind of trust, based on mutual interests, was more solid than any verbal strategic cooperation agreement.
Minato Ward, Tokyo. Sony Headquarters Building.
Ken Kutaragi looked at the North American market weekly report on his desk.
That zombie game from Capcom was sold out.
The data coming back from the North American market was staggering.
In three days, the first batch of 100,000 discs pressed had been completely sold out.
Retail stores in Los Angeles even saw incidents where gamers got into physical altercations while scrambling for the last few game discs.
The assistant opposite him kept his head down as he reported the latest situation: "Capcom has handed their subsequent rush order of 300,000 units to Sega's Tijuana factory. Our DADC factory's schedule was full, so we couldn't take on this order."
Ken Kutaragi rubbed his temples.
Full production capacity meant PlayStation games were selling well.
But pushing a major company like Capcom into Sega's manufacturing system was embarrassing, no matter how you looked at it.
"Contact Osaka," Ken Kutaragi said, standing up. "I'll go see Kenzo Tsujimoto myself."
The assistant hesitated. "General Manager, you're scheduled to preside over the architecture evaluation meeting for the next-generation console tomorrow afternoon."
"Postpone it. The new console isn't urgent right now," Ken Kutaragi said, grabbing his jacket. "If Resident Evil boosts Jupiter's sales again, our future battles will be very difficult to fight. It must be ported to the PlayStation."
The assistant went to arrange the itinerary.
Ken Kutaragi walked out of his office to head to the top floor and report to the higher-ups.
The elevator went up.
Ken Kutaragi was calculating the current situation among Sony's top management in his head.
He was the only executive left running around for PlayStation.
In the past, Nobuyuki Idei had helped with the business side of things.
Things changed after Nobuyuki Idei was promoted to President of Sony last year.
Idei had poured all his energy into the power struggle with Chairman Norio Ohga.
Since hitting a wall with Enix, Idei hadn't intervened in the specific operations of the Electronic Entertainment Division.
Idei's methods were seasoned and ruthless.
Regarding the DVD format unification war at the end of last year, if it had been handled in Norio Ohga's style, Sony would undoubtedly have gone it alone.
Instead, Idei bypassed Ohga and personally negotiated with Toshiba and Matsushita, making technical compromises in exchange for a unified DVD standard.
This move greatly increased Idei's prestige within the group, but it also infuriated Norio Ohga.
Immediately after, Idei lit his second fire.
Michael Schulhof, President and CEO of Sony Corporation of America, was fired.
Schulhof was a trusted aide handpicked by Norio Ohga, but he was also directly responsible for the massive losses at Columbia Pictures.
Nobuyuki Idei, under the pretext of restructuring US operations, directly removed this thorn in his side planted by Norio Oga.
Now, these two were locked in a power struggle within the board of directors.
Idei focused on internal group affairs, consolidating his power.
Oga sat back calmly, waiting for an opportunity to strike back.
As for Ryoji Nakabachi, another executive who strongly supported the video game business, he was even less reliable.
Nakabachi was a "hands-on" man through and through.
He believed that reports could never replace personal experience, spending his days immersed in production lines, R&D laboratories, and retail stores across various locations.
In Nakabachi's own words, only by personally feeling the atmosphere on the front lines could one understand the employees' thoughts and the extent to which policies were being implemented.
The upper management was all busy with their own agendas.
Ken Kutaragi, a division manager with a technical background, was forced to become a full-time diplomat.
He was not skilled in business negotiations and had a straightforward, blunt temper.
To meet a president of Kenzo Tsujimoto's caliber, if you just sent a department manager, the other party wouldn't even open the door.
If the rank wasn't high enough, it showed a lack of sincerity.
And without that, there was no way to talk about committing resources.
In the chairman's office at the top.
After listening to Ken Kutaragi's report, Norio Oga put down his fountain pen.
"Sega's OEM business is overreaching," Oga Norio said, leaning back in his leather chair. "Thirty thousand rush orders, and they just took them on without hesitation. Takuya Nakayama is using the North American market as a testing ground."
"So we can't just stand by and watch Capcom lean entirely toward Sega," Ken Kutaragi stated, pointing out the stakes. "The potential for Resident Evil is huge. Western players love zombie themes. I need authorization to offer Capcom sufficiently attractive porting terms."
Oga Norio pondered for a moment.
"Go negotiate," Oga Norio finalized, setting the bottom line. "Royalties are negotiable, and we can make concessions on the disc pressing fees. Open up Sony's distribution channels in Europe to them completely. Capcom doesn't have a deep foundation in Europe; that's a bargaining chip they won't be able to refuse."
The heavy mahogany door closed behind him.
Ken Kutaragi stood in the carpeted hallway and let out a long, weary breath.
Getting the Chairman's verbal promise was only the first step in a long journey.
In today's Sony Group, just walking into the Finance Department with Oga Norio's "Imperial Sword" to ask for money would very likely get him bogged down in all sorts of tedious approval processes.
Real power had long since shifted to someone else.
He walked to the elevator and pressed the button for the floor where the President's Office was located.
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