Namco

History

Origins and acquisition of Atari Japan (1955–1977)

On June 1, 1955, Japanese businessman Masaya Nakamura founded Nakamura Seisakusho Co., Ltd., in Ikegami, Tokyo. The son of a shotgun repair business owner, Nakamura proved unable to find work in his chosen profession of ship building in the struggling post-World War II economy. Nakamura established his own company after his father's business saw success with producing pop cork guns. Beginning with only ¥300,000 (US$12,000), Nakamura spent the money on two hand-cranked rocking horses that he installed on the roof garden of a Matsuya department store in Yokohama.

The horses were loved by children and turned a decent profit for Nakamura, who began expanding his business to cover other smaller locations. A 1959 business reorganization renamed the company Nakamura Seisakusho Company, Ltd. The Mitsukoshi department store chain noticed his success in 1963, and approached him with the idea of constructing a rooftop amusement space for its store in Nihonbashi, Tokyo. It consisted of horse rides, a picture viewing machine, and a goldfish scooping pond, with the centerpiece being a moving train named Roadaway Race. The space was a hit and led to Mitsukoshi requesting rooftop amusement parks for all of its stores.

Along with Taito, Rosen Enterprises, and Nihon Goraku Bussan, Nakamura Seisakusho became one of Japan's leading amusement companies. As the business grew in size, it used its clout to purchase amusement machines in bulk from other manufacturers at a discount, and then sell them to smaller outlets at full price. While its machines sold well, Nakamura Seisakusho lacked the manufacturing lines and distribution networks of its competitors, which made the production of them longer and more expensive.

The company was unable to place its machines inside stores because other manufacturers already had exclusive rights to these locations. In response, Nakamura Seisakusho opened a production plant in February 1966, moving its corporate office to a four-story building in Ōta, Tokyo. The company secured a deal with Walt Disney Productions to produce children's rides in the likenesses of its characters, in addition to those using popular anime characters like Q-Taro; this move allowed the business to further expand its operations and become a driving force in the Japanese coin-op market.

Though the manufacturing facility was largely reserved for its Disney and anime rides, Nakamura also used it to construct larger, more elaborate electro-mechanical games. The first of these was Torpedo Launcher (1965), a submarine warfare shooting gallery later titled Periscope. Its other products included Ultraman-themed gun games and pinball-like games branded with Osomatsu-kun characters.

Galaxian, Pac-Man, and arcade success (1977–1984)

Nakamura Seisakusho changed its corporate name to Namco in June 1977. It opened a division in Hong Kong named Namco Enterprises Asia, which maintained video arcades and amusement centers. As Namco's presence in Japan was steadily rising, Nakajima suggested to Nakamura that he open a division in the United States to increase worldwide brand awareness. Nakamura agreed to the proposal, and on September 1, 1978, established Namco-America in Sunnyvale, California. With Nakajima as its president and Satashi Bhutani as vice president, Namco-America's aim was to import games and license them to companies such as Atari and Bally Manufacturing. Namco-America would release a few non-video arcade games itself, such as Shoot Away (1977).

As the video game industry prospered in Japan during the 1970s with the release of Taito's Space Invaders, Namco turned its attention towards making its own video games. While its licensed Atari games were still profitable, sales were decreasing and the quality of the hardware used began deteriorating. Per the recommendation of company engineer Shigekazu Ishimura, the company retrofitted its Ōta manufacturing facility into a small game division and purchased old stock computers from NEC for employees to study.

Namco released Gee Bee, its first original game, in October 1978. Designed by new hire Toru Iwatani, it is a video pinball game that incorporates elements from Breakout and similar "block breaker" clones. Though Gee Bee fell short of the company's sales expectations and was unable to compete with games such as Space Invaders, it allowed Namco to gain a stronger foothold in the video game market.

In 1979, Namco published its first major hit Galaxian, one of the first video games to incorporate RGB color graphics, score bonuses, and a tilemap hardware model. Galaxian is considered historically important for these innovations, and for its mechanics building off those in Space Invaders. It was released in North America by Midway Manufacturing, the video game division of Bally, where it became one of its best-selling games and formed a relationship between Midway and Namco.

The space shooter genre became ubiquitous by the end of the decade, with games such as Galaxian and Space Invaders becoming commonplace in Japanese amusement centers. As video games often depicted the killing of enemies and shooting of targets, the industry possessed a predominately male playerbase. Toru Iwatani began work on a maze video game that was targeted primarily towards women, with simplistic gameplay and recognizable characters. Alongside a small team, he created a game named Puck Man, where players controlled a character that had to eat dots in an enclosed maze while avoiding four ghosts that pursued them.

Success with home consoles (1984–1989)

In July 1983, Nintendo released the Family Computer, a video game console that utilized interchangeable cartridges to play games. The console's launch came with ports of some of Nintendo's popular arcade games, like Donkey Kong, which at the time were considered high quality. Though Namco recognized the system's potential to allow consumers to play accurate versions of its games, the company chose to hold off on the idea after its ports for platforms such as the Sord M5 flopped. Nakamura suggested that his son-in-law, Shigeichi Ishimura, work with a team to reverse-engineer and study the Famicom's hardware in the meantime.

His team created a conversion of Galaxian with their newfound knowledge of the console's capabilities, which exceeded the quality of previous home releases. The port was presented to Nintendo president Hiroshi Yamauchi alongside notification that Namco intended to release it with or without Nintendo's approval. Namco's demonstration was the impetus for Nintendo's decision to create a licensing program for the console. Namco signed a five-year royalties contract that included several preferential terms, such as the ability to produce its own cartridges.

A subsidiary named Namcot was established in 1984 to act as Namco's console game division. According to former Namco video game music composer Norio Nakagata, "T" means "Tomorrow" and was capitalised for emphasis. Tomorrow was derived from EPCOT (Experimental Prototype Community of Tomorrow). It released its first four games in September: Galaxian, Pac-Man, Xevious, and Mappy. Xevious sold over 1.5 million copies and became the Famicom's first "killer app". Namcot also began releasing games for the MSX, a popular Japanese computer. Namco's arcade game ports were considered high-quality and helped increase sales of the console.

Namcot was financially successful and became an important pillar within the company; when Namco moved its headquarters to Ōta, Tokyo in 1985, it used the profits generated from the Famicom conversion of Xevious to fund its construction (the building was nicknamed "Xevious" as a result). The Talking Aid, a speech impairment device, was part of the company's attempts in venturing into other markets.

By the time the video game crash of 1983 concluded in 1985 with the release of the Nintendo Entertainment System (NES), Atari had effectively collapsed. After enduring numerous financial difficulties and losing its control in the industry, parent Warner Communications sold the company's personal computer and home console divisions to Commodore International founder Jack Tramiel, who renamed his company Tramel Technology to Atari Corporation. Warner was left with Atari's arcade game and computer software divisions, which it renamed Atari Games. Namco America purchased a 60% stake in Atari Games on February 4, 1985, through its AT Games subsidiary, with Warner holding the remaining 40%. The acquisition gave Namco the exclusive rights to distribute Atari games in Japan.

Expansion into other markets (1989–1994)

Namco saw continued success in the consumer game market as a result of the "Famicom boom" in the late 1980s. By 1989, sales of games for the Famicom and NES accounted for 40% of its annual revenue. During the same time frame, the company's licensing contract with Nintendo expired; when Namco attempted to renew its license, Nintendo chose to revoke many of the preferential terms it originally possessed. Hiroshi Yamauchi insisted that all companies, including Namco, had to follow the same guidelines.

The revocation of Namco's terms enraged Nakamura, who announced the company would abandon Nintendo hardware and focus on production of games for competing systems such as the PC Engine. Executives resisted the idea, fearing it would severely impact the company financially. Against Nakamura's protest, Namco signed Nintendo's new licensee contract anyway. While it continued to produce games for Nintendo hardware, most of Namco's quality releases came from the PC Engine and Mega Drive.

In 1989, it was reported that Namco was underway with developing its own video game console to compete against companies such as Nintendo and NEC. Electronic Gaming Monthly claimed that the system, which was nearing completion, featured hardware comparable to the then-upcoming Nintendo Super Famicom. According to company engineer Yutaka Isokawa, it was produced to compete against the Mega Drive, a 16-bit console by Namco's arcade rival Sega. With the console industry being crowded by other competing systems, publications were unsure how well it would perform in the market. While the console was never released, it allowed Namco to familiarize itself with designing home video game hardware.

Tadashi Manabe replaced Nakamura as president of Namco on May 2, 1990. Manabe, who had been the company's representative director since 1981, was tasked with strengthening relationships and teamwork ethics of management. Two months later, the company dissolved its remaining connections with Atari Games when Time Warner reacquired Namco America's remaining 40% stake in Atari Games. In return, Namco America was given Atari's video arcade management division, Atari Operations, allowing the company to operate video arcades across the United States. Namco began distributing games in North America directly from its US office, rather than through Atari.

Namco Hometek was established as the home console game division of Namco America; the latter's relations with Atari Games and Tengen made the company ineligible to become a Nintendo third-party licensee, instead relying on publishers such as Bandai to release its games in North America. In Japan, Namco developed two theme park attractions, which were demonstrated at the 1990 International Garden and Greenery Exposition (Expo '90): Galaxian3: Project Dragoon, a 3D rail shooter that supported 28 players, and a dark ride based on The Tower of Druaga.

Relationship with Sony (1994–1998)

In October 1993, Sony announced establishing of its video game & entertainment division Sony Computer Entertainment (now Sony Interactive Entertainment) in November of that year

In early 1994, Sony announced that it was developing its own video game console, the 32-bit PlayStation. The console began as a collaboration between Nintendo and Sony to create a CD-based peripheral for the Super Nintendo Entertainment System in 1988. Fearing that Sony would assume control of the entire project, Nintendo silently scrapped the add-on. Sony chose to refocus its efforts in designing the PlayStation in-house as its own console.

As it lacked the resources to produce its own games, Sony called for the support of third-party companies to develop PlayStation software. Namco, frustrated with Nintendo and Sega's licensing conditions for its consoles, agreed to support the PlayStation and became its first third-party developer. The company began work on a conversion of Ridge Racer, its most-popular arcade game at the time.

The PlayStation was released in Japan on December 3, 1994, with Ridge Racer as one of its launch titles. 100,000 units of the game were sold on launch day alone; publications credited Ridge Racer as key to the PlayStation's early success, giving it an edge over its competitor, the Sega Saturn. For a time, it was the best-selling PlayStation game in Japan.

Namco formerly used the "Namcot" brand for its home video games. The Namcot brand was consolidated into Namco in 1995; its final game was a PlayStation port of Tekken, published in March in Japan and in November worldwide. Tekken was designed for Namco's System 11 arcade system board, which was based on raw PlayStation hardware; this allowed the home version to be a near-perfect rendition of its arcade counterpart. Tekken became the first PlayStation game to sell one million copies and played a vital role in the console's mainstream success.

Sony recognized Namco's commitment to the console, leading to Namco receiving special treatment from Sony and early promotional material adopting the tagline "PlayStation: Powered by Namco". Namco was also given the rights to produce controllers, such as the NeGcon, which it designed with the knowledge it gained through developing its cancelled console. Though it had signed contracts to produce games for systems such as the Saturn and 3DO, Namco concentrated its consumer software efforts on PlayStation for the remainder of the decade.

Financial decline and restructuring (1998–2005)

Namco began experiencing decline in its consumer software sales by 1998 as a result of the Japanese recession, which affected the demand for video games as consumers had less time to play them. Namco's arcade game Tekken 3, launched in March 1997, had been well-received, and the console version of its arcade game Tekken 2 also became a hit selling over three million units. The company's arcade division had similar struggles, having slumped by 21% at the end of its fiscal year ending March 1998. Namco's US subsidiary Namco Cybertainment filed for Chapter 11 bankruptcy protection on January 29, 1998, citing reduced mall traffic, though it planned to close fewer than 50 of its 370 mall locations during the bankruptcy reorganization and even open new locations. In its 1998 annual report, Namco reported a 26.3% drop in net sales, which it partly blamed on low consumer spending.

A further 55% drop was reported in November 1999 when its home console game output decreased. As a means to diversify itself from its arcade and consumer game markets, Namco entered the mobile phone game market with the Namco Station, a marketplace for i-Mode cellular devices that featured ports of its arcade games like Pac-Man and Galaxian.

In October 1999, the company teamed up with former Square alum Tetsuya Takahashi to establish a development studio called Monolith Soft, which later become an action role-playing game developer best known for creating & developing the Xenosaga series with Namco provided funding for the new franchise and majority-acquired the new development studio turning it as a subsidiary within Namco. It continued introducing novel concepts for arcades to help attract players, such as the Cyber Lead II, an arcade cabinet that features PlayStation and Dreamcast VMU memory card slots.

Namco's financial losses worsened in the 2000s. In October 2000, the Japanese newspaper Nihon Keizai Shimbun reported that the company projected a loss of ¥2.1 billion ($19.3M) for the fiscal year ending March 2001. Namco had previously hinted at this during an event with industry analysts, blaming its struggles on the depressed Japanese economy and dwindling arcade game market. The company closed its Wonder Eggs park on December 31, 2000, which by that point saw an attendance number of six million visitors, in addition to shuttering many of its video arcades that returned substandard profits.

Bandai takeover and dissolution (2005–2006)

In early 2005, Namco began merger talks with Bandai, a manufacturing toy and anime production company. The two discussed a year prior about a possible business alliance after Namco collaborated with Bandai subsidiary Banpresto to create and develop an arcade & PS2 game called Mobile Suit Gundam: One Year War based on Mobile Suit Gundam. Bandai showed interest in Namco's game development skills and believed combining this with its wide library of profitable characters and franchises, such as Sailor Moon and Tamagotchi, could increase their competitiveness in the industry.

Nakamura and Namco's content development division advisors pushed against the idea, as they felt Bandai's corporate model would not blend well with Namco's more agricultural work environment. Namco's advisors were also critical of Bandai for focusing on promotion and marketing over quality. As Namco's financial state continued to deteriorate, Ishimura pressured Nakamura into supporting the merger. Bandai's offer was accepted on May 2, with both companies stating in a joint statement their financial difficulties were the reason for the merger.

The business takeover, where Bandai acquired Namco for ¥175.3 billion ($1.7bn), was finalized on September 29. An entertainment conglomerate named Namco Bandai Holdings was established the same day; while their executive departments merged, Bandai and Namco became independently-operating subsidiaries of the new umbrella holding company. Kyushiro Takagi, Namco's vice chairman, was appointed chairman and director of Namco Bandai Holdings. The combined revenues of the new company were estimated to be ¥458 billion ($4.34bn), making Namco Bandai the third-largest Japanese game company after Nintendo and Sega Sammy Holdings.

As its parent company was preparing for a full business integration, Namco continued its normal operations, such as releasing Ridge Racer 6 as a launch game for the newly unveiled Xbox 360 in October and collaborating with Nintendo to produce the arcade game Mario Kart Arcade GP. The company honored the 25th anniversary of its Pac-Man series with Pac-Pix, a puzzle game for the Nintendo DS, and entered the massively multiplayer online game market with Tales of Eternia Online, an action role-playing game based on its Tales franchise.

On January 4, 2006, Namco's American game developing division Namco Hometek was merged with Bandai's American consumer game division Bandai Games to create Namco Bandai Games America Inc., absorbing Namco America's subsidiaries and completing Namco and Bandai's merge in North America and was housed within Namco Hometek's former premises. Namco's console game, business program, mobile phone, and research facility divisions were merged with Bandai's console division to create a new company, Namco Bandai Games, on March 31, as Namco was effectively dissolved.

Legacy

Namco was one of the world's largest producers of arcade games, having published over 300 since 1978. Many are considered some of the greatest games of all time, including Pac-Man, Galaga, Xevious, Ridge Racer, Tekken 3, and Katamari Damacy.

Pac-Man is considered one of the most important video games ever made, having helped encourage originality and creative thinking within the industry. Namco was recognized for the game's worldwide success in 2005 by Guinness World Records; by that timeframe, Pac-Man sold over 300,000 arcade units and grossed over $1 billion in quarters globally. In an obituary for Masaya Nakamura in 2017, Nintendo Life's Damien McFerran wrote: "without Namco and Pac-Man, the video game arena would be very different today."

Namco's corporate philosophy and innovation have received recognition from publications. In a 1994 retrospective on the company, a writer for Edge described Namco as being "among the true pioneers of the coin-op business", a developer with a catalog of well-received and historically significant games. The writer believed that Namco's success lay in its forward-thinking and firmness on quality, which they argued made it stand out from other developers. A staff member of Edge's sister publication, Next Generation, wrote in 1998: "In a world where today's stars almost always become tomorrow's has-beens, Namco has produced consistently excellent games throughout most of its history." The writer credited the company's connections with its players and its influential releases, namely Pac-Man, Xevious, and Winning Run, as the keys to its success in a rapidly changing industry.

Publications and industry journalists have identified Namco's importance to the industry. Hirokazu Hamamura, chief editor of Famitsu, credited the company's quality releases to the rise in popularity of video game consoles, and, in turn, the entirety of Japan's video game industry. Writers for Ultimate Future Games and Official UK PlayStation Magazine have credited the company and its games to the early success of the PlayStation, one of the most iconic entertainment brands worldwide. In addition, Official UK PlayStation Magazine wrote that Namco serves as "the godfather of game developers", and one of the most important video game developers in history.

Staff for IGN in 1997 claimed that Namco represents the industry as a whole, with games like Pac-Man and Galaga associated with and representing video games. They wrote: "Tracing the history of Namco is like tracing the history of the industry itself. From its humble beginnings on the roof of a Yokohama department store, to the impending release of Tekken 3 for the PlayStation, Namco has always stayed ahead of the pack." In 2012, IGN listed Namco among the greatest video game companies of all time, writing that many of its games—including Galaga, Pac-Man, Dig Dug, and Ridge Racer—were of consistent quality and helped define the industry as a whole.