Nintendo vs. Video Game Rentals – Gaming Historian
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Nintendo vs. Video Game Rentals – Gaming Historian

August 25, 2019

“When you rent videos during the week, you have five more nights to catch up on all the movies you might have missed. Isn’t that a nice reward for working like a dog?” Back in the 80s and 90s, brick and mortar video rental stores were a multi-billion dollar industry. In this pre-Netflix, pre-Hulu, pre-Amazon Prime era, everyone – and I mean everyone – went to their local video rental store for movie night. In 1988 alone, video rental revenue was more than $5 billion. A figure which topped that year’s box office revenue by $500 million. But just when it seemed that the rental business couldn’t get any more profitable, it suddenly did. Thanks to video games! Rental stores like Blockbuster make a killing off of video game rentals. And gamers were thrilled to try out a game at a fraction of its retail cost. But, not everyone was happy…. In fact, one company in particular was livid about the whole situation. They worried gamers would rent video games instead of buying them. And they felt cheated out of potential profits. So, publicly and privately, through lawsuits, legislation and strict company policies, Nintendo fought the rental industry every step of the way. This is the story of Nintendo’s hard-fought battle against video game rentals. And it all began… in Japan… In 1980, in the Mitaka area of Tokyo, a group of university students opened the very first music rental shop. The concept was unheard of, but quickly became popular. For just 10% of an album’s retail cost, customers could rent it for a few days. The shop even sold blank tapes, which allowed people to make a copy of the recording at home. The business model was a huge success. Computer stores took notice and soon they began offering software and video game rentals. Instead of renting the original copy, however, they made copies for customers to rent. Some stores even sold cracking software, which allowed customers to get around copy protection and make a copy for themselves. In just a few years, media rental became rampant. And it was all perfectly legal. Japanese copyright law had no provisions for renting and lending. Companies were furious and demanded laws that would protect their copyrights. In 1984, several companies, including the Recording Industry Association of Japan, successfully lobbied to have the law changed. Japanese copyright law was amended to include a new provision: the right of lending. Under this new law, the owner of the copyright had the legal authority to choose how their media would be distributued. The film industry made a lot of money at the box office, so they chose to allow video rentals, but they charged video rental shops up to four times the market price of a movie in order to cover the cost of royalties. The music industry was in a different situation. The Japanese government recognized that record rental stores were everywhere, and this new law would potentially wipe out that business. Along with that came pressure from the electronics industry, which was making a ton of money selling tape recorders and blank tapes for copying purposes. Therefore, music lending was given a time delay. Music rental stores would have to wait about 1-3 weeks after an album was released before getting a copy. They would also have to regularly pay royalties to the record companies. But for all the compromising going on, the software and video game industry wouldn’t budge. They deemed the rental industry a huge threat to their business. From that point on, video game and software rentals were essentially banned in Japan, unless the copyright holder gave permission. The law is still in effect to this day. In the United States, though, things were different. And Nintendo was ready to change that. Music rentals were banned in the United States, but the video rental business was booming. By 1988, annual revenues from video rental stores surpassed $5 billion, overtaking box office revenue of more than $4.5 billion. While most of this revenue was from movie rentals, a small but growing percentage came from another form of entertainment: video games. The Nintendo Entertainment System launched in 1985, and, by 1989, sales were through the roof. In 1988 alone, Nintendo sold more than 7 million consoles and 33 million game cartridges. One out of every four households had a Nintendo Entertainment System. Video rental stores created video game sections to meet the growing demand. This was great for the consumer. It allowed customers to try a game before buying it, at around the same price of renting a movie. Nintendo, however, wasn’t so pleased. “Video game rental is nothing less than commercial rape. I can spend thousands of hours and millions of dollars creating a game. I expect, therefore, to be compensated every time the thing sells. All of a sudden, out of the blue, comes a system that distributes my game to thousands of people and I get no royalty. The guy who developed the game and Nintendo gets screwed.” Howard Lincoln, Vice President, Nintendo of America. To be fair, the video game industry wasn’t getting the same deal as the movie industry. A film usually stayed in theaters for at least six months before going to video, which gave it plenty of time to rack up profit. But video games didn’t have that grace period. Meaning that on the day a video game was released, video rental stores could purchase as many copies as they wanted and immediately rent them out to customers. Nintendo wanted desperately to change the status quo, and they saw their opportunity in a bill that was making its way through Congress. It was called the Computer Software Rental Amendments Act. The Software Publishers Association, along with computer companies like Microsoft, pushed for legislation that would effectively ban computer software rentals. Piracy was becoming a problem in the industry, and they viewed this legislation as the best way to curtail it. The music industry was protected from rentals, thanks to the Record Rental Amendment Act of 1984. Software companies wanted the same considerations. Nintendo argued that they should be included in the bill, since video games can be considered software. But the Video Software Dealers Association, the lobby group that represented rental stores, said otherwise. They promised to do everything in their power to defeat the bill if video games were included. Software companies and the Software Publishers Association eventually gave in and added an exemption to the bill which stated that the rental agreement would exclude quote: Their reasoning? Copying video games, like Nintendo cartridges, was nearly impossible, unlike standard computer software. Their argument won out, and President George Bush signed the bill into law on December 1, 1990. Meanwhile, down but not out, Nintendo pushed for a compromise bill. Introduced by Representative Joe Barton of Texas, it was known as the Computer Software Protection Act. The bill would allow rental shops to rent out a game one year after its release date. But that bill never made it through the House Judiciary Committee. Renting video games remained completely legal. But Nintendo wasn’t ready to give up. When legislation failed them, they took a new tactic, one that pitted them against the king of the rental industry: Blockbuster. If Nintendo couldn’t legally ban video game rentals, they could at least make the process a lot harder. And that’s exactly what they did. Nintendo refused to sell their products directly to rental stores. This tactic may have inconvenienced the rental industry, but it didn’t really hurt them. Since Nintendo refused to sell them their products directly, rental store employees would just buy up large quantities of games from retail stores and then rent them out. Nintendo had to do something. In June of 1989, Nintendo sent a memo to a small video game kiosk company named Trisoft. The memo outlined a policy that would limit customers to only purchase two pieces of Nintendo product, including hardware and software. Nintendo warned that if Trisoft failed to follow the policy, allocations to them would be severly reduced. But these interactions with small to medium video game stores were just side chatter. In the battle against the rental industry, there was one company that Nintendo wanted to go after more than any other: Blockbuster Entertainment. With more than 650 stores across the United States, Blockbuster was the country’s largest video rental company. Its revenue in 1989 alone was $664 million. About $20 million of that revenue came strictly from video games. Since Nintendo couldn’t bring Blockbuster to court over perfectly legal video game rentals, they had to find another way. And… they did. When Blockbuster rented a game, they would usually include the original manual. However, customers tended to lose them or forget to return them. So, Blockbuster would photocopy the original manual just in case. Nintendo claimed that photocopying their manuals was in violation of copyright law, and on August 4, 1989, filed a suit against Blockbuster Entertainment in federal court. Said Nintendo spokesman Richard Lindner, One newspaper columnist agreed. “More is at stake here than the duplicating of original instruction manuals ruined by peanut butter sandwiches, soft drinks and fast food drippings. Right now, Blockbuster fails to see the importance of copyright protection, but let’s put that belief to the test. Open up a video store called ‘Blockbuster Two’ and see how long it takes for these fellows to yell ‘copyright infringement.'” Jack Nease, Sun Sentinel Blockbuster lashed out at Nintendo, calling the lawsuit, quote: Nintendo sought a preliminary injunction, asking Blockbuster to immediately cease photocopying Nintendo manuals. Blockbuster agreed and looked for alternatives. Some companies were selling their own versions of Nintendo manuals. But Blockbuster ultimately decided to just write their own instructions. The case would eventually be settled out of court for an undisclosed amount. But the lawsuit was clearly an effort by Nintendo to slow down the business of video game rentals and intimidate smaller rental shops. This story is a rare example of Nintendo throwing its weight around and not getting its way. In fact, Nintendo did more than just lose the battle: they actually helped their competition. As Blockbuster dealt with the expense and hassle of the Nintendo lawsuit, a much less well known, a much less established company approached them about a marketing deal. And that company was Sega. Eventually, Nintendo just gave up. It seemed the video game rental market was here to stay, and no amount of strict policies or legal action could stop it. But, over time, the rental industry would face a new, more powerful opponent: the Internet. and with it, digital distribution. This effectively killed off the brick and mortar rental store. At its peak, Blockbuster had over 9,000 stores globally. Today, there are only 51. But video game rentals still live on in the form of Redbox kiosks, GameFly, and even digital rentals, such as Playstation Now. That’s all for this episode of Gaming Historian. Thanks for watching. Funding for Gaming Historian is provided in part by supporters on Patreon. Thank you.

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  1. I remember those days. Game rentals were a great way to find out if you wanted to purchase them or not. Most games were either crap, or could be won in just a couple hours. Back then, I never owned a game I didn't like. Of course, now I use "Let's Plays" to the same effect. Nice Documentary!

  2. A good reason for why I pirate most of my Nintendo games and jailbreak all of my Nintendo consoles lol. Fuck them!!

  3. Nothing but retardation in the comment section. "Wow, Nintendo so greedy." They were getting fucking robbed. Rental chains like Blockbuster made money hand over fist because they didn't have to pay a cent in royalties, not to Nintendo, not to anyone. If Nintendo were a music company making music, they would've been legally entitled to royalties any time their IP was used, but they were making video games so they were not protected. They did not have the same rights as other creators and they were fighting to change that. What Blockbuster did was legal piracy. For the price of renting a storefront and staffing it with minimum-wagers, they stole from game developers. "Oh but renting games is so awesome, it helped me decide what I wanted to buy!" And you still would've been able to rent them with Nintendo getting royalties. And you know what? If they didn't want a game being rented out, they should've been able to deny rental stores from doing so. After all, if you own a TV station, you don't get to make money broadcasting Ghostbusters just because you happen to have a copy of the tape.

    tl;dr Game devs were getting raped by the rental stores and if you can't see how fighting that is the right thing to do as a God damn business, let alone the injustice that was being done, you're a spoiled little child, you think free video games is a human right spelled out in the Constitution, and you have no business holding much less expressing an opinion on any subject aside from your favorite Fortnite dance or Minecraft mod.

  4. Old video showing up in my feed, i hadda leave a comment to necro the thread. Nintendo has always been half anti-consumer, as well as sometimes fucking over their own costumers even in 2019 with somewhat poor customer service support. If you're confused by that statement, you can easily look it up online with how they treat customers with the Switch's battery-bloating issues, grille issues, and joycon issues. Them also being anti-consumer is clearly shown by how they don't understand fair use against content creators in YouTube. Their failed YouTube partnership with content creators that pretty much took more than half of the revenue from content creators on their videos – and that content creators have to follow a "guideline" in what to say and do as a partner that literally means: "if you want to keep making videos about us and our games, give us our share of your revenue and not talk bad about our games – and we have to approve them first, too".

  5. From a gaming companies perspective I TOTALLY get it.

    I'd fucking hate game rentals.

    Some fucking company making billions off my intellectual property?

    But as a consumer, I loved it so damn much.

  6. So basically Nintendo used a loop hole through the instruction manual to get a piece of the pie of every game rented through Blockbuster. Genius

  7. anyone else remembering having to take back a game like Zelda 2 knowing your saved progress was gonna get deleted. Or going to the video store on a Friday only to find out the game you wanted was rented out.😭😄

  8. 1:41 I actually live in this area of Tokyo and walk past that street every day and drink in that HUB a lot >.<

  9. how stupid, once you own a copy of something its yours to do whatever you want with it, resale, rent whatever…..

  10. Anyone remember Mr Movies? God I loved the early internet though I miss companies like Egghead Software, where I got Mechwarriors 2.

  11. Im surprised Blockbuster used to be able to rent out game consoles too, i used to rent out N64s all the time

  12. 1: It's hilarious that the Sun Sentinel reporter (10:56) confused copyright infringement with trademark infringement. 2: No. Not everyone rented VHS tapes back then, youngster. Tens of millions didn't have a VCR and/or had no interest in renting one. People like me had no interest in dealing with damaged tape rentals plus late fees and simply purchased the movies we wanted. Just like now. Thirdly, software piracy was not "starting to become a problem" in 1984. Ask anyone who received Bill Gates anti-piracy nastygram back in 1976. I think it's great that you are trying to document history. It's unfortunate that you're not more aware of the history you are covering. You should have someone twice your age edit your script.

  13. I actually don't know how blockbuster is gone, like Netflix is actually ass, at least with blockbuster they had the movies you actually wanted to watch, now there's all these streaming services fighting over exclusive rights to shows but realized nobody wants to buy 5 different service just to watch their shit, on the side note Nintendo has barely managed to make a comeback, it's not going to sell more than wii just stop and they're still gay for shutting down all emulation sites and going after people who mod their old games and give it a new life, everyone keeps saying oh the ds/game boy sold so much: yeah because they were cheap and kids broke them/lost them/got them stolen so parents would buy them replacements plus they keep milking them for like a decade so it'''s really not that impressive the switch has like 5 good games nintendo hasn't been relevant since sony demolished their fortress in the 90s ps4 just reached a new record and they WILL sell a lot more ps4s when FF7 remake/the last of us 2 comes.

  14. "Open up a video store called blockbuster II"

    LOL Jack Nease really needs to learn to logic, that's a glaringly obvious false equivalency fallacy.

  15. It has always been great to rent before a buy for video games exspecaily since the industry puts out broken and partially games that are not finished.

  16. i really fucking miss spending 45 mins picking from a selection of like 10 games at block buster… lmao the good ol days

  17. OK so that's why they created all these extra technology so you didn't have to go to block buster therefore in the end Nintendo won because they put movie rental companies out of business so that they can make more money.

  18. The most suprising part of the entire video is learning there still actually are Blockbusters open, out there in the world.
    Wow. :0

  19. Nintendo vs Customers, Third Parties, Internet, Monopoly Accusation.

    Piracy is the Divine Punishment for shady companies like the red N.

  20. My mates dad used to copy Ps2 games for us so every Friday we would go to blockbuster and rent a game. Had over 200 disks in the end. Crazy days. But we were poor kids. These days I pay for all my games, I have a switch and use steam for most purchases.

  21. I get why Nintendo was upset, a lot of those earlier games could be played through and beaten in a few hours. Why buy a game full price when you can get it for a fraction of the cost and still beat it? I used to rent games and do just that back in the day…

  22. Nintendo basically had the last laugh. Nintendo has the top selling console today and Blockbuster is D E A D. This was a battle Blockbuster, GameStop and others were never going to win. Their business models and leaders simply were not visionary enough to adjust to the future. And people really should think Microsoft for this great Digital revolution we have. It was the X Box that brought gaming and the Internet together. Once that happened, it was basically the death sentence that was anything brick and mortar. Period.

  23. I really enjoyed the video! Blockbuster themselves were fought with lower priced video chains like Family Video, and my local store Movie Mania.These stores rented out movies and games for half the price that Blockbuster was charging. The last thing I remember is Blockbuster charging $5 for rentals, which was insane because the movie itself was $20 new. Keep the great videos coming!

  24. I would say red box is what killed it. I guess the internet had something to do with it but the internet was around while blockbuster was still booming.

  25. The local video rental had so many cult classic movies I watched for the first time that I wouldn't have otherwise seen (internet was very small back then). When they decided to close business they had a huge sale a month before where every video in the store was just $1 to buy… I bought all my favorites and have a huge collection of classic movies (and surprisingly a lot of classic anime xD).
    But honestly, I would give it all up for the feeling of walking into a rental shop, picking out a movie, getting a large pizza and going home to watch it with my parents and siblings.

  26. In the end Nintendo and its competitors did win out. Netflix wasn't really competition to rental stores; some people did use the mail rental system and streaming onto a PC was an option but generally people were still hitting the brick and mortar buildings for weekends or family nights. The Nintendo Wii, Sony PS3, and Xbox 1 all had Netflix, and later other streaming companies, as an optional app on their consoles. Consoles that often sat in living rooms/dens and allowed people to stream movies and TV shows on that big screen in front of the couch. That's what ended the necessity to actually go to a rental store and that's what finished off (mostly) Blockbuster and the other stores.

  27. Anyone else thinking digital rentals is bullshit?
    If I'm looking for a particularly old movie and maybe less popular movie, I have to filter through like 3-4 services before I can find it, and then its something ridiculous like a $10 rental.
    Then I realize torrent is free…

  28. As much as I love Nintendo they are notoriously anti consumer. Reading Console War actually made me wish Sega had won that battle.

  29. Man y’all remember when blockbuster would give you a discount for rentals if you had good grades? Sheesh i used to love when I got my report card back

  30. How was the Xbox and PlayStation problem working out for you Nintendo maybe you should’ve been nicer to other companies along with your consumers who you left in the Dark maybe if Nintendo put out better product there sales wouldn’t suck

  31. Blockbuster's peak was in 2004 with 58,500 US employees and 25,800 in other countries (84,300 in total), along with 9,094 stores, more than 4,500 of which were in the USA. The company has been defunct since November 6, 2013, but one store remains open, in Bend, Oregon.

  32. I'm 33 now but back in 2007 I managed a blockbuster when they all closed down and saw first hand how desperate the corporation was to keep customers.

  33. i miss these times, I remember my first Nintendo rental too. Mischief makers ❤ shake shake will be forever embedded in my head

  34. The Family Video rental stores are still around to this day in the Midwest. They're essentially the same thing as blockbuster. You shoulda did some research into that rather than saying they're all gone which is false. There's like 5 around me alone. Goggle Family Video if you don't believe me.

  35. Try a game before you buy it, sounds like pirate bay to me. i use pirate bay like that i download a game and if i like it i will buy and if not i wont complete it and i will get rid of it honestly. i do this because i believe we should all be able to try a game like a demo before we buy it, steam allows you 3 hours of game play max and after that you cant get a refund if you dont like it, so i give myself 3 hours on it.

  36. ahh the good old days. My 1st job was at blockbuster. Also Nintendo spent all that money for nothing. goto redbox and you can get games still

  37. "… let's see how long it takes these people to yell 'copyright infringement.'" Well, I mean, that would be trademark infringement, not copyright, so…. quite a while most likely? 😀

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