“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.