"General Manager Kutaragi, welcome to Osaka." Kenzo Tsujimoto stood up and pointed to the guest seating area nearby.
The two sat down on the sofa.
The secretary served two cups of green tea and then withdrew.
"Capcom has been very busy lately," Ken Kutaragi said, looking at the report on the table. "Resident Evil is selling very well in North America."
"Thanks to the European and American players' love for zombies," Kenzo Tsujimoto said, picking up his teacup, "The distributors in North America are demanding shipments every day. The machines at the factory haven't stopped for twenty-four hours."
Ken Kutaragi didn't beat around the bush.
He wasn't good at beating around the bush to begin with.
"Sony hopes that 'Resident Evil' can come to the PlayStation," Ken Kutaragi went straight to the point, "This game shouldn't be limited to just one platform."
Kenzo Tsujimoto put down his teacup.
The china hit the glass coffee table with a crisp sound.
"The Sega Jupiter platform currently has an install base of nearly ten million," Kenzo Tsujimoto stated the facts, "Moreover, when we were out of stock in North America, Sega's Tijuana factory helped Capcom a lot. The 300,000 discs they rush-pressed solved our urgent need. The industry has all seen Sega's service attitude and industrial capability."
Ken Kutaragi understood the subtext.
The other party was raising their asking price, and also testing Sony's leverage.
"PlayStation's sales in Europe and America are also growing steadily," Ken Kutaragi took out a prepared document and pushed it to the middle of the coffee table, "Regarding the port, Sony has prepared a concrete cooperation plan."
Kenzo Tsujimoto opened the document.
"Item one, royalties," Ken Kutaragi began to explain. "Sony will implement a tiered reduction. Once sales reach 500,000 units, the royalty rate will be reduced by two percentage points. Once they reach one million, it will be reduced by another three percentage points."
Kenzo Tsujimoto looked at the numbers on the paper.
This was a significant concession.
Sony had previously charged third parties a high, fixed royalty fee. Now, in order to poach games, they were starting to lower their posture.
"Item two, disc manufacturing costs," Kutaragi continued. "Sony's DADC factory will provide Capcom with the best possible discount. The price will be five percent lower than Sega's standard quote."
Tsujimoto closed the file.
"These terms are very sincere," Tsujimoto evaluated. "However, Capcom's distribution networks in North America and Japan are already very mature. Offering only discounts on royalties and manufacturing costs is not a sufficient reason to convince the board to launch a major porting project."
Kutaragi reached into his pocket and felt the sticky note.
The trump card given by Norio Ohga had already been played.
Next were the conditions from Nobuyuki Idei.
"What about the European market?" Kutaragi threw out his core bargaining chip. "Capcom's distribution channels in Europe have always been a weak point. Relying on local distributors means most of the profit is eaten away."
Tsujimoto remained silent, waiting for him to continue.
"Sony can fully open up its European promotional channels to Capcom," Ken Kutaragi explained in detail. "Columbia Pictures has a massive network of offline audiovisual stores and theater advertising resources in Europe. PlayStation also has dedicated display areas in European home appliance retail stores. The European version of Resident Evil can enter Sony's direct-operated system, bypassing middlemen to reach end consumers directly."
This was an offer that couldn't be refused.
The European market had long been carved up by Nintendo and Sega, and Capcom had always wanted to break in, but it suffered from a lack of its own channels.
"What are the strings attached?" Kenzo Tsujimoto asked. There was no such thing as a free lunch.
"Promotional expenses," Ken Kutaragi replied, following Nobuyuki Idei's instructions. "Sony provides the channels, and Capcom covers half of the actual promotional expenses. The profit will be split 60/40, with Capcom taking the 60."
"60/40."
Kenzo Tsujimoto did the math quickly in his head.
Covering half the costs while gaining access to Sony's entire European channel network, and still getting the lion's share of the profits.
This deal was extremely cost-effective.
Nobuyuki Idei had crunched the numbers very precisely; Sony was simultaneously revitalizing idle resources, sharing costs, and securing a blockbuster game.
"Agreed," Kenzo Tsujimoto answered readily.
Ken Kutaragi was momentarily stunned.
He had originally expected a few more rounds of tug-of-war.
Kenzo Tsujimoto leaned back against the sofa, watching the Sony executive opposite him.
Ken Kutaragi, with his background as an engineer, viewed business negotiations as simple addition and subtraction.
But in the eyes of a business operator, the numbers behind the negotiation represented a gamble on the industry ecosystem.
Capcom had chosen Sega's Jupiter for the initial release of Resident Evil because of Jupiter's large installed base, which guaranteed launch sales.
Sega's manufacturing system was indeed easy to use.
However, in the arcade sector, Capcom and Sega were bitter, irreconcilable rivals.
Sega's Virtua Fighter and The King of Fighters were locked in a bloody battle with Capcom's Street Fighter for every coin dropped in arcade cabinets.
Capcom's arcade boards, the CPS series, and Sega's Model series were constantly at odds.
To tie their home console business completely to Sega's chariot would be to hand over their own throat to a competitor.
A deeper reason was the fear of platform monopolies.
Back in the Famicom era, Nintendo was at the zenith of its power.
Hiroshi Yamauchi's "royalty system" and the "Shoshin-kai" distribution network had squeezed third-party manufacturers to the limit.
They were only allowed to release three games a year, cartridges had to be manufactured by Nintendo, and the exorbitant manufacturing fees combined with forced inventory backlogs made life miserable for third-party developers.
Capcom had tasted that bitterness before.
Currently, Sega's Jupiter is showing dominant potential.
Jupiter's install base has left PlayStation far behind.
Even though Sega's current policies are lenient and their contract manufacturing services are well-executed.
But capital is profit-driven.
Once Sega completely eliminates its competitors and monopolizes the market, who can guarantee that Takuya Nakayama, or the next president of Sega, won't become the next Hiroshi Yamauchi?
Supporting a capable competitor to maintain market balance is the only way for third-party manufacturers to survive.
Sony has money and resources across the entire industrial chain, and Sony doesn't operate in the arcade business, so there is no direct conflict of interest with Capcom.
Porting "Resident Evil" to PlayStation to keep Sony alive is essentially Capcom leaving a backup plan for itself.
"The porting project will start next week," Kenzo Tsujimoto gave a definite schedule. "Capcom will allocate core personnel to optimize for PlayStation's hardware specifications and prepare multi-language support for the European market. For the European publishing, I will send someone to Tokyo to coordinate with the people at Columbia Pictures."
Ken Kutaragi stood up and reached out his hand.
"Pleasure doing business with you."
Kenzo Tsujimoto shook his hand.
"Pleasure doing business with you. I hope PlayStation can bring a different experience to players."
A few days later, Sony officially announced the news of "Resident Evil" landing on PlayStation.
Gaming media followed up with reports.
It sparked a significant wave of discussion among the gaming community.
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