Which brings us back to that June morning in Las Vegas, when Howard Lincoln took the stage and very publicly smashed - or so he thought - Sony's aspirations in the gaming space. Much has been made of Nintendo's actions at CES that year. It was depicted in Japan as a complete betrayal, not least because it was outrageous to the Japanese business community that one Japanese company could dump another at the altar, in favour of a European rival. Moreover, in subsequent years, it has been portrayed as Nintendo's greatest error - since in dropping Sony, the firm essentially created its own greatest rival and sealed the fate that would see it confined to second place in the industry for at least a decade.
For Nintendo's incredibly outspoken and honest boss, Hiroshi Yamauchi, neither of those things mattered. He believed - and he was probably correct - that the deal that had been signed with Sony was completely catastrophic for Nintendo. Under the terms of the contract, Sony - which had created the technology for the CD-based games - would actually control the SNES-CD format. It alone would have its hands on the reins of this format, essentially removing Nintendo's control over releases on one of its own consoles. To Yamauchi, whose fierce sense of independence continues to thrive at Nintendo to this day, the idea of handing away control of software to a third party was unthinkable. He sent Lincoln and Nintendo of America president Minoru Arakawa to Europe to negotiate a deal with Philips at the eleventh hour - one which would give Nintendo control over all of its licensed software on the system.
The intricacies of the contract, however, probably didn't matter much to Ken Kutaragi that morning. His project had just been killed by Nintendo in the most public and embarrassing way possible. Sony, dipping a cautious toe into the videogames market, had just been dumped at the altar by the company whose alliance he had sought out and championed. This time, surely, the bosses at Sony who had opposed his efforts would have the last laugh; after gaining a reputation as a hatchet-man who brought down his own superiors, Kutaragi would finally be felled by executives who would be delighted to see him go.
It's interesting to wonder how the videogames industry would look now if that had happened - but Kutaragi was saved, once again, by Norio Ohga. If this were a Grimm brothers tale, Ohga would almost certainly appear with a wand, wings, and a remarkable ability to turn Kutaragi's pumpkin into a fine chariot; his regard for the engineer, coupled with a distinct feeling within Sony that Nintendo should be "punished" in some way for stinging the firm in this manner, led to him defending Kutaragi and the firm's videogame efforts.
Sony decided to push forward with its gaming ambitions regardless of Nintendo's "betrayal", and while the SNES-CD was shelved, the Play Station lived on. Nintendo was caught wrong-footed by Sony's decision; it's clear that the firm believed that Sony would never continue with a games system without Nintendo on board. Concerned at the idea of Sony launching SNES-compatible systems, Nintendo resorted to litigation to prevent the Play Station hitting the market - but an injunction claiming that the Play Station name belonged to Nintendo failed, and Sony was free to bring the system to market in 1991.
Nintendo shouldn't have worried - at least, not yet. The first Play Station was a disaster; industry lore suggests that only 200 of the consoles, sporting a SNES-CD drive (for which no games were produced), were ever produced. By 1992, Sony had worked out a deal with Nintendo which would see it producing consoles with SNES cartridge ports, but with Nintendo still making all the profit from the games. This, of course, was pointless; videogame hardware is traditionally sold either at a loss or a tiny profit margin, and the money comes from sales of licensed software.
Kutaragi saw this - and with the SNES hardware growing increasingly outdated, he finally had an opportunity to ditch Nintendo's "withered technology" and strike out to create something more powerful and cutting edge. By 1993, he was heading up a project at Sony to create an entirely new, CD-based console with powerful 3D capabilities. It would be called the "PlayStation" (note the dropped space between the two words), and would no longer have any ties to the SNES.
Climbing the Ladder
In late 1994, the PlayStation launched in Japan. In September 1995, it arrived in the USA and Europe. We all know the rest of the story, at least as far as PlayStation is concerned. Nintendo's rival console, the N64, was the last home system to use cartridges for software, as PlayStation pushed the advantages of its CD-based software and the infinitely cooler Sony brand to their fullest extent. PlayStation became the console that defined a generation, that opened up gaming to the wider world, and unsurprisingly, was the first console to sell 100 million units - a milestone it reached in 2005.
The success of the PlayStation made Kutaragi's position at Sony unassailable, for the first time. His mentor, champion and guardian, Norio Ohga, was by now CEO and Chairman of Sony Corporation, and had approved the creation of a whole new group within Sony to handle the PlayStation - Sony Computer Entertainment, or SCEI. Kutaragi was placed in charge of the division.
The stunning success of the PlayStation allowed Ken Kutaragi to build an empire at SCEI. US and European divisions - SCEA and SCEE respectively - opened up, staffing numbers swelled, marketing budgets went through the roof, more and more production facilities were brought on stream, development deals were signed and studios opened. Money was pouring in; the PlayStation rapidly became the shining jewel in Sony's tarnished crown. Sitting atop this empire was Kutaragi himself, the rogue engineer who was now turning around the fortunes of the corporation.
As early as 1997, Kutaragi was tipped as Sony's next boss. Despite being a maverick within the company, Norio Ohga's faith in him had paid off; SCEI was the most important business within Sony. It seems certain that Kutaragi was keenly aware of the speculation that he might be a future leader of the company, and it's almost as certain that he desired the position. He had strong views on how Sony's business should be run, and moreover, the idea of going from being an outspoken maverick to the head of the corporation would have appealed to him - not least because of Norio Ohga's own remarkable climb up the ladder.
In 2000, Sony launched its second console - the PlayStation 2 - into a market which was still reeling from the firm's unexpected dominance of the previous generation. SEGA, whose CD-based Saturn console had been a complete flop in the face of competition from the PlayStation, launched a new system called DreamCast to rival the PS2 - but a combination of Sony's better-known brand, stronger software support and inspired decision to support the burgeoning DVD disc format meant that the DreamCast was obliterated within months.
Microsoft, which would later launch the Xbox, still hadn't announced any plans to enter the console space; Nintendo was struggling manfully onwards with the N64, and wouldn't launch the GameCube for a number of years. The PS2, unopposed in the market and riding on a wave of popularity unseen by any game system before or since, outstripped sales of its predecessor. Kutaragi's star continued in the ascendant, as his risky gamble on the system - a research and development investment of around $2.5 billion - turned into an immense payout, with SCEI rolling in revenues of around $10 billion a year.
One major change at Sony, however, was less fortuitous for Kutaragi. Norio Ohga had named Nobuyuki Idei, formerly a director at Nestlé and General Motors, as Sony's next president - and in 1999, Idei became CEO of the company, taking the position of Executive Chairman from the semi-retired Ohga in 2000, and eventually becoming CEO and Chairman in 2003. Kutaragi had lost his oldest and most senior ally at the company, but with his personal empire at SCEI continuing its rapid growth and widely seen as Sony's strongest division, his position still seemed as secure as he could have hoped.