Few in the video game industry are aware of a rift that formed between Nintendo and partner Silicon Graphics, Inc. just as their jointly-developed 64-bit game console rolled off production lines. Already beginning to feel financial strains due to changing market conditions for their high-end graphics workstations, Silicon Graphics found itself arguing over component profits with notoriously tight-fisted Nintendo as the systems American launch MSRP was lowered at the last minute before release. Although the companies maintained their working relationship, the decidedly traditional and hard-lined management at Nintendo had taken offense, and no longer considered SGI a lock for development of Nintendos post-N64 game console.
Then several important events took place during 1997 inside of Nintendo, SGI and one of their former competitors. Weak Japanese sales of the N64 and its software lowered the companys confidence in the N64 platform, and American sales were projected to fall off as key internal software titles were continuing to miss release targets by entire seasons. Demonstrably strong sales of PlayStation games in the inexpensive CD format had weakened the appeal of Nintendos third-party development contracts, and Nintendo started to believe that it was in the companys immediate interest to prepare a new console for release as soon as Fall of 1999. At the same time, a number of Silicon Graphics key Nintendo 64 engineers left the company to form the new firm ArtX, with the express intention to win a development contract for Nintendos next hardware by offering Nintendo the same talent pool sans SGIs manufacturing and management teams.
As it turns out, most of the industrys top 3D chip experts have been lured away from smaller firms by accelerator developers NVidia, 3Dfx and NEC, so Nintendos pool of potential partners was already shrinking when it began to shop around for a new console design team. Enter CagEnt, a division of consumer electronics manufacturer Samsung, and heres where the confusion begins: CagEnt was formerly owned by 3DO, where it operated under the name 3DO Systems and developed the M2 technology that was sold to Panasonic for $100 Million some time ago. When 3DO decided to exit the hardware business, it sold off the 3DO Systems division to Samsung, which named it CagEnt and gave it roughly two years to turn a profit. CagEnt owned three key technologies: a DVD playback system, a realtime MPEG encoding system called MPEG Xpress, and a completed game console with a brand new set of console-ready chip designs called the MX. Adrian Sfarti, who had formerly developed the graphics architecture design for SGIs Indy workstation, was the head of the MX project.
The MX chipset was a dramatically enhanced version of the M2 chipset sold to Panasonic and Matsushita, now capable of a 100 million pixel per second fillrate and utilizing two PowerPC 602 chips at its core. (CagEnts executives also boasted of a four million triangle per second peak draw rate, though the quality of those tiny triangles would of course have been limited). Nintendo executives Howard Lincoln and Genyo Takeda were among a group of visiting dignitaries to tour CagEnts facilities, culminating in late 1997 or early 1998 with a formal offer from Nintendo to acquire CagEnt outright. At this point, Nintendo had terminated its development contract with SGI (see SGI/MIPS Loses Nintendo Business).
As purchase negotiations continued, Nintendo worked with CagEnt engineers on preliminary plans to redesign the MX architecture around a MIPS CPU, as Nintendos manufacturing partner NEC has a MIPS development license but none to produce the PowerPC 602. Nintendo and CagEnt flip-flopped on whether the finished machine would include a built-in CD-ROM or DVD-ROM as its primary storage medium, with Nintendo apparently continuing to insist that ROM cartridges would remain at the core of its new game system. Yet as DVD and MPEG technologies would have been part of the CagEnt acquisition, Nintendo would probably have found some reasonable use for those patents eventually. The MX-based machine was to be ready for sale in Japan in fall 1999 -- in other words, development of games for the new console would begin within literally months, starting with the shipment of dev kits to key teams at Rare and Nintendos Japanese headquarters.
Although the asking price for CagEnt was extremely low by industry standards, talks unexpectedly broke off in early 1998 when Samsung and Nintendo apparently disagreed on final terms of CagEnts ownership, leaving Samsungs management desperate for a suitor to buy the company. CagEnt aggressively shopped itself around to other major industry players. SGIs MIPS division, reeling from the loss of its N64 engineers to ArtX, allegedly considered acquiring CagEnt as a means to offer Nintendo the technology it had already decided it liked. Sega, 3Dfx and other companies toured CagEnts facilities and finally CagEnt found a suitor.
In early April, Microsofts WebTV division ultimately acquired all of the assets of CagEnt and hired on most of its key personnel. WebTV and Microsoft apparently intend to use the MX technology at the core of their next WebTV device, which as might be guessed from the graphics technology, will no longer be limited to simple web browsing and E-mailing functionality. The next generation WebTV box will be Microsofts low-cost entry into the world of game consoles, melding the functionality of a low-end computer with a television set-top box and game-playing abilities. Having worked with Sega behind the scenes since 1993 or 1994, Microsoft has been quietly gathering the knowledge it needs to market and develop games for such a device, and now it has the hardware that even Nintendo would once have wanted for itself.