The same motion capture technology, the same transition to full 3D. The facial textures of rookies like Kobe Bryant and Allen Iverson were incorporated into the game. Two retired NBA stars were invited to the stage, holding controllers and playing an exhibition match. David and Paul whispered to each other.
This American business model was simple and direct. There was no need to educate players to accept complex systems; just move real sports events onto the screen, slap on an official licensing label, and millions in sales would be easily within reach. After the presentation of the two main sports games ended, Larry walked to the center of the stage.
"In addition to console platforms, EA has always been committed to providing high-quality entertainment content for PC users." On the screen behind Larry, a group of bikers riding heavy motorcycles appeared. The roar of engines filled the air. "Road Rash." This game, which landed on the Sega Genesis platform in 1991, with its rough-and-tumble gameplay of ignoring traffic rules and beating opponents with chains and baseball bats while speeding, had once been highly acclaimed in the North American market.
Now, EA announced that it would remaster and port this game to the PC platform. David looked at the high-resolution optimized graphics on the screen, turned to Paul and said, "A five-year-old game, just slapping on some high-definition textures to sell to PC players. When it comes to squeezing the residual value out of games, nobody beats EA."
Paul adjusted his glasses: "The PC platform doesn't have console manufacturers holding them by the throat. Every copy sold, the profit goes straight into their own pockets. Larry dreams of getting rid of the royalty system of Sega and Nintendo. Just do the math and you'll understand." Paul wrote a few numbers in his notebook.
"A retail game cartridge for consoles costs sixty dollars. Retailers take thirty percent of the channel profit. Sega or Nintendo, as the platform holders, charge twenty to thirty percent in royalties, plus the hard cost of manufacturing the cartridges. In the end, EA gets less than twenty dollars. That's before deducting R&D, marketing, and licensing fees. But on the PC platform, the pressing cost of a CD-ROM is less than one dollar, and there's no platform cut, so the profit margin doubles."
Royalties, the cornerstone of the home video game industry. For every game cartridge or disc produced, third-party software companies have to pay a licensing fee to the console manufacturer.
Nintendo amassed staggering wealth during the Famicom era thanks to this system, and Sega soon followed suit, establishing its own licensing regime.
Royalties were not merely a tool for profit distribution, but the core barrier that allowed console manufacturers to maintain a closed platform ecosystem. By controlling distribution channels, hardware manufacturers held the power of life and death over software developers
. For North American software giants accustomed to freely releasing games on early computer platforms, this fee was essentially cutting the choicest piece of meat right off their profit margins.
EA founder Trip Hawkins publicly criticized the monopolistic practices of console manufacturers. He argued that EA invested huge sums of capital into game development and bore all the market risks, yet console manufacturers, by merely providing a hardware platform, were reaping the lion's share of the profits without effort—a violation of the principles of fair commerce. In a previous life, EA had once launched a heart-stopping commercial ultimatum against Sega. In 1988, Sega launched the 16-bit Mega Drive console in Japan.
The following year, this console arrived in the North American market under the name Genesis. Trip Hawkins keenly sensed the market potential of 16-bit consoles, but he refused to accept Sega's harsh royalty terms.
Hawkins assembled a top-tier technical team and launched a confidential project internally called "Reverse Engineering." Its goal was to directly target the underlying hardware of the Genesis console. Early Genesis consoles had a fatal flaw. In order to control costs, Sega did not follow Nintendo's practice of installing complex security lockout chips on the motherboard when designing the hardware.
Nintendo's NES console used a handshake verification process between two CIC chips—one in the cartridge and one on the motherboard—and the game would only run if the passwords on both ends matched. Sega, however, relied solely on software-level checksums to identify games.
The EA technical team spent nearly a year dismantling the components of the Genesis motherboard one by one. They used oscilloscopes to intercept signal levels during communication between the cartridge and the console, and logic analyzers to record every hexadecimal instruction on the data bus.
After months of tedious comparison, they successfully cracked the Genesis system code. Based on these data, EA developed a set of development tools that allowed games to run on the Genesis without official authorization from Sega. To emphasize their independence, they even abandoned the official black Sega cartridge casing and designed their own elongated yellow cartridge.
Legally speaking, EA adopted the "clean room design" principle—one group of engineers was responsible for analyzing Sega's code and writing specifications, while another group, without ever seeing the original Sega code, rewrote compatible code based on those specifications.
This approach perfectly circumvented the computer software copyright laws of the time. Sega could not accuse EA of misappropriating the underlying code. In June 1990, on the eve of the Summer Consumer Electronics Show in Chicago.
Hawkins walked into the conference room of Sega of America with several self-developed Genesis games he had already completed. He slammed the yellow cartridges onto the table and frankly told the Sega of America executives at the time: "Before we push these games to market, we can sit down and discuss the terms of cooperation more rationally." These games included the original "Road Rash." Sega's senior management was enraged by what was essentially blackmail.
They strongly threatened Hawkins: "We will modify subsequent North American consoles to block software loopholes, turning your software into useless plastic. We will also mobilize our entire legal department to sue you for infringement." Hawkins did not back down. He understood Sega's pain point in the market. In 1990, Sega was in a critical period of expansion in the North American market, and with Nintendo's SFC yet to be released, it was the golden window to seize market share.
However, Sega's own game development capacity was ultimately limited, and it was in urgent need of high-quality third-party software to bolster its lineup. EA held the copyrights to numerous popular sports events, which were precisely the types of games most favored by North American players. Hawkins revealed his trump card: EA not only possessed the technology to bypass authorization, but it was also legally watertight.
If Sega were to forcibly modify its hardware to prevent EA games from running, EA would unite with major media outlets to sue Sega in antitrust court, accusing it of leveraging its hardware dominance to stifle software innovation. Faced with unprecedented market pressure and public relations risks, the Sega of that timeline compromised.
The two sides signed an exceptionally favorable agreement, rare in the entire history of console development. EA not only gained the right to manufacture Genesis cartridges independently but also enjoyed a 60% discount on royalties.
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