Part 1: The Businesses (1980s)
To fully appreciate the players in action, we’ll need to go at least a decade back to when the core people first broke into their home industries. Back when film and games were courting, but still very much separate.
The Original Hit Factory
Mark Cerny would not have been one of the most influential game designers if he wasn’t able to join the one place in America where games were the heart and soul – Atari. At this stage in its lifespan, not a single aspect of the game development process was standardized, nor were they represented by Hollywood unions. There was only the Activision settlement, when the “Gang of Four” who left Atari to develop third-party games with design credits and royalties agreed to pay Atari license fees for each title.
Cerny is famously tough to reach when he’s not in work mode, but he’s given enough talks and interviews over the decades to piece his story together. He joined Atari in 1982, the same year the tie-in for E.T.: The Extra-Terrestrial was being made. Through the ensuing crash, he kept employment in the coin-op division. His first solo game, Marble Madness, gained him early notoriety at a time when Atari was just starting to allow for designers to be credited.
Beyond that, our stopover with Atari must continue higher up the food chain.
The corporate hierarchy of Atari is well-documented but not really considered as interesting as the creative staff designing their games. It’s a true sentiment, but then again, you wouldn’t think much of the company’s general counsel as a vital piece of any story. That role was filled by Charles “Skip” Paul, a one-time Supreme Court clerk who joined in 1979 to little fanfare. Like Cerny, Paul isn’t a fan of the spotlight. However, his role at Atari meant that he was often the first point of contact for major deals with licensees, including studios other than their parent company, Warner Communications.
The most notable (and relevant) thing he did at Atari was to be the first point of contact for a deal with MCA/Universal Studios, to adapt Steven Spielberg‘s movie E.T.: The Extra-Terrestrial. In the book Master of the Game, Paul recounted, “I offered MCA $1 million and 7 percent of royalties, which was far more than Atari had ever paid before for a license. And I was thrown out of Sid’s office.” Sheinberg would eventually be one of Paul’s best friends, to the point that Paul personally praised him at his memorial service in 2019.
But out of that deal also came a relationship with Steven Spielberg. According to Fast Company, they met while Paul was attending a Summer CES, when Warner Communications president Steve Ross (who took over negotiations from Paul and made the infamous “weekend deal”) flew him back to meet Spielberg personally. Reportedly, they hit it off and became close friends.
Even as the reception of the E.T. game and others came back to bite Atari, Paul and Spielberg would continue to talk games. In 1984, Paul was briefly made the vice president of Atari’s coin-op division as the giant was being broken up and sold in pieces. Once the transition was well underway, he was approached by Sheinberg to hop ship to MCA.
Reviving Universal City
Universal was just a film marquee in the 1980s. The real name everybody spoke was MCA. Television was the big money-maker at Universal City, though it was close behind 20th Century Fox and Paramount in Hollywood’s blockbuster revival. Of course, they knew they had Spielberg to thank for that, but each facet of the company had its own journey to take.
Robert Biniaz was, according to the LA Times, “one of the toughest negotiators in the [record] industry” when he was lured away from his cushy job at CBS Records to join the scrappy MCA Records. Throughout the decade, MCA Records was accused of everything from warehouses full of unsold records gathering dust, to having shady deals with mafia dons. In any case, the record company was not doing well at all. The company’s president, Irving Azoff, leaned into the bad-boy reputation and eventually managed to turn the company around, but its reputation lingered.
Biniaz joined in 1988, right around the time that things started to change in both the record company and its parent. Two overlapping deals were being made between outside companies that would prove crucial to future arrangements.
First, according to the book The Operator, Azoff was lured out of his presidency by music mogul David Geffen, who had enough influence at Warner Communications to promise him his own new label at their WEA group. Once Azoff left, Geffen was allegedly free to talk to MCA directly to purchase his more successful record company, Geffen Records.
Second, MCA was looking for a buyer to make up for a massive expansion spree the company made throughout the ’80s. Universal Studios Hollywood was revamped, and they were in competition with Disney to create a studio-themed resort in Florida. They had perennial help from Spielberg, who began running his own Amblin production company at Universal City, but it wasn’t nearly enough.
With negotiations led by Skip Paul, they eventually found a buyer in the Japanese electronics giant Matsushita Electric. They were the company behind Panasonic, and one unwitting face of the conservative bogeyman that was the Japanese asset price bubble. A booming auto and electronics industry fueled the rush for Japanese companies to buy foreign stock and real estate as their prices skyrocketed. It was such a major fear in America that companies from Japan would wipe out both the Detroit auto industry and Silicon Valley, that it spawned a wave of anti-Asian sentiment which both cost the life of industrial draftsman Vincent Chin and created the backdrop for media like Die Hard.
But as it turned out, the purchase by Matsushita would be one of Japan’s last major deals across the Pacific before the bubble finally burst. We’ll get to that later, but the deal itself was considered mutually beneficial at the time. Matsushita’s rival Sony had early success buying Columbia Pictures in this wave of acquisitions, soon after the gut-punched studio was spun-off from Coca-Cola. Their moves into home media with the Betamax and CD formats coaxed some competition and similar unusual deals from those companies.
In fact, it wouldn’t be long before these companies set their sights on video games.