GS: In terms of new IP and things like Rengoku: The Tower of Purgatory and what not, are you looking to develop new properties internally?
JG: With mobile, we can take smaller bets. But, you are also not going to have a revolution based on a mobile game. I don't think it's ever been done. Has anything come out first on mobile and been brought over systems?
GS: It has happened, Asphalt: Urban GT from Gameloft did, Deep Labyrinth from Interactive Brains. Atlus brought it out here…that one didn't do that well, but there have been instances of it. But specifically I mean how important do you see new IP being for the company?
JG: Very, very, very important. That is the root of it. If you cannot create new IP you can’t move forward. You are always stuck in the retro. You definitely don't want to do that. You become obsolete. We think it's vitally important on every system and across the company as well.
GS: So you mentioned earlier, and I would like to touch on it, the decline of Hudson financially over the difficult years.
JG: Business has its ups and downs. I think when you say decline, you’re talking about the peak years of our console business. At that time Hudson was 450 million dollar company. A lot of that was unbelievably was not through the customer but through NEC.
were getting such huge royalties on everything. It was all our stuff.
Every HuCard that was sold we got a royalty for. Brilliant move by Mr.
Kudo to attach himself to other companies. Companies that are much
bigger than Hudson. We’ve done it a number of times, with incredible
success. With Nintendo, with NEC, with NTT DoCoMo. So that’s a great
strategy. But overall, when you look at the companies that are able to
rise above the rest - how do you stay in business for 35 years? You
need to have that innovation. That is just a key driver.
Going back to creating new IP. A lot of companies don't want to take those bets. They think, "Hey, I know my game over here that I brought out 12 times is a money maker." And certainly Bomberman would be a good example of that. So stick with that. Of course you stick with that. But how else can you pump out new product? How else can you get consumers, and create the next IP. You have to gamble.
But sorry, I mixed up two questions there.
GS: I was asking about the decline of Hudson financially.
JG: Right - what really happened was we went from that high point to the Asian financial crisis. I don't if you know anything about that or remember it. The bank that broke Japan was Takushoku Bank, which is a Hokkaido-based bank. It was Hudson's sole bank at the time. And it was a very strong bank. It was one of the five major banks in Japan.
Well, strong but hiding many skeletons in the closet. There are books out, and if you are interested I can recommend some. It was a very interesting time in that the bubble had begun to burst. In fact it had burst a few years before that. I’m talking about the Japanese stock market and real estate bubble. All these bad loans became obvious, and good companies like Hudson were pulled into that because we have to take out loans to make games. Everybody does. You don't have a ton of cash that you are sitting on in most cases.
So those loans came calling when the bank fell. We had to have a stock offering at that time. They quickly organized that in the throes of the United States stock market crash in late 2000. Takushoku bank crashed in 1997 I think. By 2000 the government had been dealing with it enough to force solutions on everybody, and that’s what happened. We had an IPO, a successful IPO, of 50 million dollars that they raised for the company. That paid off all the loans.
Then, what happened was they needed more money in order to invest in new products. Because obviously we went through a couple of years of tight squeezing. Finish that problem, now what do we do? Then Konami came to the forefront and said “Yeah, we’ll invest in your company.” They made a very wise investment of another 50 million through which they purchased 46 percent of the company, I believe. That allowed us to invest in a lot more product and to get the company jump started again.
Since then, Konami invested more but because Konami are listed on the New York Stock Exchange, they needed to clear all the bad loans on the books. There was no money owed, but there are things because we are a private company. We had a building, and the building was never recognized. They had to recognize a lot of money that was on the books. They did that, about a year and half ago. They recognized about 70 million dollars. That came from all this owed debt plus everything that they had current on their books. They could write that off and take one big write off. So now the company is well positioned, healthy, profitable, and running strong. Every company is going to run through good and bad times. The key is to survive.
GS: It is actually kind of interesting that Konami was the one who helped, since they were not a huge PC Engine supporter.
JG: It’s true, they weren't. They did some games but not many.
GS: Ok, I guess I’ll ask some of my nerdy questions now. Such as, are there any internal Hudson or other titles that you know of for the PC Engine that didn't make it out?
JG: I get asked this question a lot. It's funny. It's been so long. I know there are some amazing forums that are on the net that talk about this. Jason, one of John's guys sometimes hooks me up. "Hey what about this, what about this?" The older you get the less memory you have.
I know there were a lot of games that I wanted to see. Including the real Kato and Ken. That broke my heart. That kind of game would have given the Turbo Grafx such a big word of mouth boost. It would have caused this little conspiracy that would have really sky rocketed the product. But they’re NEC and they didn't want to spoil their name by having people fart on each other.
I can’t really answer the question because I don’t remember enough. If I had a big list in front of me, I could point them out, but I think it’s been too long.
GS: Do you know what happened with Tengai Makyou for PC-FX, and why that never came to market?
JG: No idea really, but I can probably tell you it was over budget.
GS: Any comments about what happened with the PC-FX [which focused on anime and full motion video] in general?
JG: I think it was too expensive. It was more expensive, and I think NEC was a company who really wanted the business to be successful. They saw that as a chance, as Sony does now, to be in people’s home entertainment system. To be in front of all these kids and their entertainment so they’d purchase other NEC products when they grew up because they knew that when they were kids, their favorite machine was the PC Engine.
So I think that was the rationale behind NEC doing that. I think it was a good idea, but you have to have complete, total dedication to the gaming world, and I think that’s what they didn’t realize.
JL: It’s a real consistent pattern through gaming, even with Microsoft – if you don’t start off knowing gaming, you wind up making some bad moves before you succeed. Even Nokia, with their N-Gage system, after two of them they still didn’t quite get it right. It takes a couple of years, really.
JG: Yeah, Microsoft’s a good example, because look at the 180 turn, and how much they get this market now. And the reason they got it is because they put gamers in key positions. That’s how you do it. You don’t have finance guys doing your marketing, you have gamers, who actually understand the market and audience.