Ultra & LJN: The Loophole

Article by Jeremy Signor? | Posted October 28, 2010

The crash of 1983 nearly destroyed the U.S. videogame industry. The rampant bandwagoning onto the new craze resulted in an avalanche of bad games, seemingly cementing the medium’s status as a fad. Miraculously, Nintendo brought them back from the brink with the NES, which made them the only sheriff in town for a while. Their stranglehold of the industry had a profound effect on third-party publishers, forcing more creative release methods.

Nintendo was not about to repeat the mistakes of the past. They knew they needed to open up the system to third parties, but they also had no reason to trust that the flood of crap wouldn’t return as a result. So they came up with a compromise: limit the number of games a licensee could publish in a year. To do this, Nintendo implemented a standard cartridge design fitted with a special integral lockout chip, the 10NES.

Both the NES and the chip would generate a security code. If the two digits didn’t match, then the game wouldn’t boot up. Nintendo themselves would be the only company that could manufacture the chips, meaning third-party publishers would need to go through them for all releases. The limit of five titles per year was intended to encourage publishers to put their best foot forward. Since they’d only have five releases per year, the thinking went, they’d want to put out their five best games, keeping the game quality high.

Response to this policy was varied. Some cried antitrust and took Nintendo to court. Others, such as Tengen and Color Dreams, found workarounds and produced unlicensed software. But the most interesting method some publishers used was perhaps the most laughably obvious: All publishers needed to do was have a separate corporate entity under their umbrella to double their output without breaking any rules. These secondary publishers were given some autonomy in how they ran their company, weakening the perceived link between parent and child. Transparent as this loophole was, the measures taken were enough to not raise the ire of Nintendo, the 800-lb. gorilla of late ’80s home entertainment.

For some, it was simply a matter of purchasing an existing game publisher. This is the route Acclaim took when they purchased LJN from MCA, a shrewd business move considering LJN was a toy manufacturer which Acclaim retrofitted into a Nintendo licensee. All Acclaim had to do was gut out the toy manufacturing division, put its focus on games, and reap the profits.

This fast cash grab had unfortunate consequences, though. LJN went from a little-known maker of crappy cash-ins to one of the most notorious. Its Back to the Future games are considered among the worst games of the NES era, and no one remembers their WWF titles fondly. But given that LJN was purely about licenses, this was hardly the point. It didn’t matter if the games were fun so long as they sold, seemingly proving Nintendo was right to limit third parties.

Not all companies wanted to merely weasel out more profit, however. Japanese publishers were caught between a rock and a hard place with the limitations in place. This was especially true for Konami. After all, they had both their own games and Western games to publish, putting their total game output far over the limit. Because of this, most of their games from Japan would be unable to make the trip overseas.

So, Konami utilized the same loophole to get more games published. But they didn’t have to buy another company. They did something even more ridiculously simple: They pulled a new company out of thin air. Ultra Games came into being as a subsidiary of Konami of America and was initially used to localize games that the main publishing entity couldn’t. Their very first release was the NES version of Metal Gear, launching one of gaming’s most beloved franchises in the US. However, it wasn’t long before Ultra began publishing domestic games, as their second release was the NES port of Skate or Die. Konami continued releasing games under the Ultra moniker until 1992, notable ones including the sub-par NES Teenage Mutant Ninja Turtles game, the superior port of the arcade sequel, and the console release of Gyruss.

The average quality of releases was about the same that of as every other third-party publisher. However, it far outshone that of fellow loophole company LJN.

In a sense, LJN and Ultra represented two potential futures for the video game industry. LJN echoed the industry-crashing, profit-mongering atmosphere seen in the dying days of the Atari era. LJN “classics” like A Nightmare on Elm Street and The Incredible Crash Dummies echoed game crash flops like E.T. The Extra Terrestrial. Had there been an influx of companies like this making games for the NES, it would have spelled disaster for Nintendo, making them regret not closing up the loophole when they had the chance. And then you had Ultra, proof that third parties could act responsibly and create a high number of solid games for the platform. Even without the annual limit, Konami already had enough of these games to justify breaking through Nintendo’s ceiling. Simply put, they forecast a future where game companies actually gave a damn about the quality of their games.

The 10NES was eventually phased out of use near the end of the life cycle of the NES. Later game cartridges weren’t required to have the chip, and a re-release of the NES removed the security check, ensuring all NES games worked. But while draconian security measures would only be used for preventing piracy from then on, they arguably steered the industry in a positive direction. The licensing limitations of the NES era was the birth of quality control for games. Every official NES game had the “Nintendo Seal of Quality” on the box to indicate that the game was the very best the publishers had to offer. After the 10NES was abandoned, they rethought their approach, implementing an assessment process for approval or rejection that the entire industry adopted.

Third parties no longer have such stringent limitations on game releases. A certain level of cautious trust has been built up over the years. But this was only made possible because of the growing pains of the NES era. Trust had to be built on both sides, and while some reaffirmed Nintendo’s worst fears, others proved that quality standards for games can and should exist.

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