The NES and Famicom may have reinvigorated the console game industry, but it was a different story for third-party developers on the console.
That includesCapcom, who weren’t exactly the industry powerhouse at the time that they are now.
Yoshiki Okamoto, who designed and produced several games during his time there, includingStreet Fighter IIand Final Fight, took toYouTube(translated byAutomaton) to describe the financial difficulties faced by the company releasing games on Nintendo’s console at the time.
Thanks to Nintendo’s steep licensing fees, intended to be a form of quality control,it was incredibly difficult for third-party developers to turn any profit launching games on the Famicom.
The Price Of Cartridge-Based Games
As far as Okamoto knows, no companies producing and selling Famicom cartridges, aside from Nintendo itself, barely made any profit at all, even the retailers.
This is in spite of the massive game market at the time, and some 60 million cartridges sold for the console.
“Let’s say a Famicom cartridge sold for 10,000 yen at retail,” Okamoto explains. “Out of that, 3,000 yen went to the retailer. 4,000 yen went to the software developer, like Capcom, and 3,000 yen went to Nintendo. Out of Nintendo’s 3,000 yen share, about 1,500 went to manufacturing contractors.”
Since Nintendo got paid up front for the exact number of copies, manufactured the cartridges, and delivered them, what happened after didn’t matter to them. In other words, only Nintendo had a guaranteed profit. – Yoshiki Okamoto
That upfront 3,000 yen per cartridge was where the issues came up, particularly for relative newcomers to the industry like Capcom, who didn’t have that kind of money to throw around, and it would take a long time for them to see any kind of return on their investment, so their only option was to take out bank loans.
After Capcom paid Nintendo for the cartridges, they would typically take 1.5-3 months to deliver. Then, Capcom would send the cartridges and invoices to distributors, who would then send back promissory notes, which could only be cashed in three months after the sale.
The delay leading to 6 months of interest on their loans, which, combined with marketing and development costs, along with other expenses, Capcom would be left with barely any profits.
And that’s to say nothing about unsold copies, since all the delays in production forced them to order above their sales estimates, so the per-unit upfront cost to Nintendo for those cartridges ate into profits even more.
Then the original PlayStation came around, using CDs for its games, which were famously mucheasier and cheaper to produce than cartridges, not to mention theirmuch higher capacity at the time.
Select Switch 2 Cartridges May Be Playable On The Original Switch
According to statements in a recent publisher FAQ, some Switch 2 games appear to be backward compatible with the original.
According to Okamoto, when this happened, profits “skyrocketed” for Capcom, also thanks in large part to how Sony handled returns.
Let’s say Capcom paid Sony 1,800 yen per disc. The manufacturing cost of the CD was 200 yen, and the remaining 1,600 yen was Sony’s share. – Yoshiki Okamoto
But, unlike with Nintendo, when Capcom returned any unsold discs, Sony would return their 1,600 share, and the 200-yen manufacturing cost was a much easier loss for developers to absorb.
Sony was also much faster to deliver ordered copies, taking just a week instead of multiple months, which allowed developers to respond more easily to market demand and their games’ popularity, which also helped profits.
All that being said, despite the lack of profits from NES and SNES games, those consoles were still vital for Capcom to build a fanbase and establish itself within the console games industry.
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