Rebirth of America, this is my era

Chapter 36: Cash, No Cows

"What?"

This fact surprised Ethan.

"Why?"

Ethan didn't understand.

And the frown on his face looked as if anyone who stopped me from making money would have to die!

Such an excited performance made Nolan laugh and put out his cigarette, "Okay~Okay~Ethan~Don't get excited~"

He pressed his hands down and said, “Ethan, to be honest, if possible, I would also like to sell the goods for as long as possible, but this is impossible, because if we go further east, the cost of selling the goods will be greater than the profit of the product itself.”

"You should know Ray Kroc, right? He's the father of McDonald's! He created a standardized kitchen! He developed a food supply chain system! But even so, they still need to find multiple suppliers in North America to provide standardized products for their restaurants."

"No matter what kind of company you are, if you want to do business all over the country, you must have multiple factories all over the country, because factories in a single area cannot deliver goods all over the country."

At this point, Nolan paused, pointed to the map behind him and said, "But we, Atari, only have one factory. In other words, so far only Sega and MILOVA are two game companies that have multiple branches in the United States."

"This will cause trouble. Take the route you took before as an example. Starting from California, the trip to Houston and Austin in Texas is about 1,800 miles. A round trip would take a week."

"We don't even count the gas money. A round trip of 200 gallons of gas is only a few hundred dollars. The personnel expenses are also negligible. Even if each of us gets ten dollars a day for food and lodging, it's only a little over two hundred dollars a week for three people."

“But I have to calculate the labor costs of the production staff.”

Nolan Bushnell looked at Ethan with a smile and pointed outside his office with his left thumb.

"We have more than a hundred employees at Atari. It is because of them that we can continuously produce circuit boards. Their weekly salary is twelve thousand dollars. That is to say, when you take more than a hundred or even two hundred circuit boards to Texas, your profit can only offset the normal personnel expenses of Atari. At the same time, the sales revenue of me and Tang is the real source of our share."

“Why not set up other branch factories?”

At this point, Nolan paused.

There was helplessness on his face.

"Ethan, I don't think I need to answer this, right?"

"Everyone in the industry knows that arcade machines really don't make a lot of money."

"If we can really make crazy profits and compensate Milova in full, how could Professor Ralph Bell agree to a settlement? The professor actually knows, or everyone knows, that arcade machines are just a good name!"

“Because the ones who really make money in this industry are actually the merchants who buy arcade machines!”

Nolan Bushnell's little calculation made Ethan feel a little emotional.

In his previous life, video games were recognized worldwide as a cash cow. Every time a global financial crisis came, anyone who made video games would survive.

Zhuchang has relied on games to survive from the era of the three major portals to 2023. Tencent has also relied on electronic games to make all its BAs fall behind, and Mihoyo has sucked out tens of billions of cash flow. As for Nintendo and Sony, there is no need to mention them. The former has always been a blue chip stock held by the National Pension Fund for many years, and the latter has been rumored to be bankrupt every year, but was still pulled back by games.

However, just because video games make money doesn’t mean that video arcade machines make money.

The electronic arcade industry is a one-time business. Game companies sell arcade machines to various merchants and earn a meager profit, while the merchants are the real income kings because they make money from the players.

When the channel for game companies to collect money directly from players is opened, the electronic game industry actually seems glamorous.

How to open up this channel?
Professor Ralph Bell has actually told the whole world.

That is to make a home console.

Only by selling video games to real players can video games become cash cows!

But the host is something like this...

Personal computers just came out~
When Ethan thought about all this, he put away his resentment and laughed, "Nolan, I understand what you mean, it's the principle of cost-effectiveness~"

At the same time, he also asked: "But if we don't sell, will we lose the market in the east? You know, people in New York, Chicago, and Boston are very rich!"

"Bring Snake Game over there, and you'll make at least another two million!"

"Oh~ Ethan~ That's actually what I wanted to tell you next!" Nolan Bushnell rubbed his hands eagerly and said with a smile: "In fact, in the past week or so, game manufacturers in the central and eastern United States have been looking for me, wanting to reach a cooperation with us Atari."

"I think this cooperation is feasible, but the content..."

Nolan didn't finish his words, but took out a document from the drawer and pushed it in front of Ethan.

Ethan opened it and saw that the first page was filled with the names of the companies and their cooperation plans.

A New York game company proposed to obtain the production license for "Snake Game".

To do this, they are willing to pay an 8% commission on the net profit of each machine.

A game company in Miami said they wanted the game motherboard license for Snake Game.

In return, they would pay Atari a fixed fee of ten dollars for every game motherboard sold.

Since Ethan directly handed over the authorization of "Snake Game" to Atari for one year when signing the contract, if he followed the normal process, Nolan Bushnell would not have to show him this kind of thing.

Because no matter how Nolan sold Snake Game to the East Coast, no matter which partner Nolan chose and what kind of cooperation contract Nolan signed, Ethan would take a commission based on Atari's selling price and the final shipment volume. Even if other companies sold it for $1,000, he would still take a commission based on $1,200. But this offer made him realize how much people in this era look down on creativity. "Eight percent of the profit of each machine, and you want to get the license with a quote of ten dollars a piece?"

Ethan threw the document directly on the table and said, "These people are really ugly but have beautiful dreams!"

"Pfft!" Nolan Bushnell burst out laughing.

He shrugged and said, "There's nothing we can do. If it weren't for the fact that after we reached a settlement with Miluohua, Miluohua sued all the plagiarists on the market, they would probably continue to plagiarize."

Yes, if Milova had not transformed himself into Disney and vowed to give all infringers a severe blow, the sales of "Snake Game" would definitely not be as smooth as it is now.

Only when the iron fist hits these plagiarists, will they know what pain is!

But getting beaten doesn’t mean they have become sensible!

After making a quick buck, who would really want to pay licensing fees?
"So, you don't want to discuss this with me?"

Ethan knocked on the table and asked, "To be honest, after reading the conditions above, I feel my blood pressure has risen."

"Yeah, brother, I feel the same as you, I think these guys are very funny!" Nolan complained.

Then he changed the subject and said, "However, among so many companies, there are still two that are sincere."

“One is Midway Games, and the other is Chicago Coin.”

Nolan picked up the document that Ethan threw to him, flipped through it briefly, and pushed the information of the two families in front of him.

With a quick glance, Ethan also understood the relevant information.

Midway Games was founded in 1958, and Chicago Coin was founded in 1932. They both previously made traditional coin-operated arcade machines, had abundant market channels, and had certain experience in the production of electronic arcade machines.

As for experience, how did Atari know about it?
Very simple!
Both companies have made imitations of table tennis games and are currently sitting in the dock of Milova!
With Mi Luohua's endorsement, everyone knows that they have made money!
Perhaps because the two companies are both in Chicago and have had certain connections before, their cooperation plan was jointly proposed. They are willing to jointly obtain the distribution rights of "Snake" in 32 states in the eastern and central United States that Atari is unwilling to involve. For the whole machine, they can pay a commission of 10% of the selling price of each unit, and for the game motherboard, they are willing to pay a fixed fee of US$30 for each game motherboard.

If that were all, Nolan wouldn't say they were sincere.

What really surprised Ethan was that they wrote the calculation criteria for commission and fixed fees.

The two companies said that because the Snake Game arcade machine cannot be used for gambling and does not overlap with the traditional businesses of the two companies, their existing customers will not treat them in the same way as emerging electronics companies.

In order to seize the market, they set the price of a game console at $800 when they released the copycat version of "Pong", which was lower than Atari's price of $1,000. So when it was difficult to raise the price, charging them $80 for a whole machine was already their limit. If they raised the price further, they would not even be able to pay the workers' wages.

The situation with the game motherboards was the same. They wanted to take over "Snkae Game" because they wanted to encroach on the market share of electronic arcade machines, so they only sold replacement motherboards for $240. With material costs of $150 and replacement costs of $30, their gross profit was only $60. They gave $30 to Atari, and the remaining $30 was enough to cover the company's normal expenses.

So, they knew that their offer might not meet Atari's expectations, but they still hoped to get the license.

To be honest, Ethan didn't actually believe what they said.

Aren’t capitalists profit-seeking?

Are you doing charity here?
But this kind of detailed plan made him feel very comfortable.

how to say?

It feels like someone is telling you from the bottom of their heart, I know your product is good, please let me make it if possible.

The desire revealed between the lines made Ethan secretly happy.

Of course.

After having fun, he didn't express his opinion.

He threw the file back and said with a smile, "Nolan, Atari is yours."

“This is your company.”

"As a partner in a single project, I will only perform my obligations under the contract. How could I interfere with the operation of your company?"

"You know, I'm only interested in this now..."

Ethan raised his right hand and rubbed his thumb, index finger and middle finger together.

"Okay! Okay! Okay!" Ethan's suggestion made Nolan laugh.

"Share it, right? I understand!"

"Give me two weeks, and I will transfer the first phase's share to you."

"What about the reward for changing the board?" Ethan asked with a smile.

This inquiry made Nolan smile and shake his head.

He pulled the company checkbook out of the drawer and wrote a check for $5124.

"Here! Here you go!"

Note: ① The world's first commercial home game console, Odyssey, has no CPU. It is the charm of pure physical photoelectric reaction. I don't know how Ralph Baer used a machine to simulate the photoelectric feedback of more than a dozen games and it is only the size of a briefcase. The US Patent Office has his patent drawings. I can't understand them, but I am shocked. ② Midway Games is a very powerful company. It is the one who made Mortal Kombat. ③ The electronic arcade industry is the worst industry in the entire electronic game field. This view is recognized by the industry. The most famous one is actually Nintendo. Nintendo's then president Yamauchi Hiroshi once thought about making arcade machines and selling and distributing them by himself, but he gave up after less than two years because electronic arcades are real estate art. The real customers are those merchants who open entertainment venues. Game companies can't make money from players at all. So when Yamauchi Hiroshi found this situation, he directly gave up the arcade market. He would rather authorize others to produce than pile up labor, and then transferred the R&D line to the development of home game consoles. Not only that, Sega and Atari have also tried to occupy the arcade field, but in the end they were isolated and became marketing centers. It is precisely because they cannot make money that real game companies are crazy about home consoles. No one is willing to give up the bulk of profits to middlemen. At the same time, this is also the reason why Ralph Baer is respected in the game circle. He could have made arcades at the beginning, but he didn't because he found that this was not a sustainable business model.

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(End of this chapter)