Signing the Contract

Chapter 27 Signing the Contract (Please continue reading)

"Yay! Cheers!"

Two hours later, cheerful sounds filled the Atari office.

At this moment, all three people present had happy smiles on their faces.

Nolan Bushnell was very satisfied because just as Milrova imposed an innovation ban on Atari, Atari found a new way to expand its business. It was like finding a way out of a seemingly hopeless situation.

Wishing your new game great success!

Don Valentine was also delighted. As an investor in Atari, he had poured $600,000 into the company. If Atari were to be shut down by Milrova, his $600,000 savings would be wiped out.

At this time, he was not yet the investment tycoon he would become later. The $600,000 was all earned through his hard work. No one would casually give up their hard work, so Atari had to find a way out.

Now, a way out has been found.

"It's a pleasure working with you!"

Ethan raised his glass and clinked it with Nolan Bushnell's.

As the crisp sound rang out, the orange-yellow liquid swayed and leaped up.

After Ethan gave them a way out, the cooperation between the two sides was discussed very quickly.

As for the contents of the contract, they naturally satisfied Ethan.

The contract stipulated that Ethan Jones and Evelyn Jensen would license the game "Snake" to Atari for one year. In return, Atari would pay a licensing fee of $6,000 and promise to manufacture and sell at least 1,000 "Snake" game consoles in the coming year.

From a modern perspective, this contract seems like a trivial agreement. Compared to video games that can easily sell millions of copies, a thousand arcade machines is far too few.

But this is 1975! Not the era of mobile internet!

It's worth noting that Pong, which was renowned throughout the United States, only sold 2,500 units a year after its release! By 1974, when Atari was sued by Mirova, the court verified that the total number of Pong arcade machines shipped was only 8,000!

Even so, the price of $1,000 per unit still brought Atari eight million dollars in revenue!

Therefore, in Ethan's view, stipulating in the contract that a minimum of one thousand units would be a very good start.

After all, it's the first pot of gold...

Earning it is a victory!

The most important thing is to make a name for yourself!

As for the profit sharing, it's very simple: 15% of the selling price.

Although Ethan wanted to go even higher, hoping to reach the level of Apple in later generations, the cost of arcade machines in this era was simply incomparable to that of the iPhone.

A TV-like screen costs at least $75 on the cheapest laptop, the material cost of a gaming motherboard is $150, and when you add in the sub-board and other miscellaneous components, such as built-in speakers and custom joysticks, the total cost of a complete machine is basically no less than $600.

When the gross profit margin was only 40%, allowing Ethan to take 15% was already Atari's limit.

Because after deducting other expenses, Atari's founders and investors only receive about 70% or 80%.

Of course, arcade game sales were not the main source of revenue for video games in this era.

The real source of profit is actually the sale of gaming motherboards.

Atari provides arcade motherboard replacement services, priced at $400 per order. After deducting material, labor, and transportation costs, the net profit per order is as high as $150.

Therefore, Ethan's asking price for this item was quite high. He initially wanted to take 30% of the selling price, which was $120, but Nolan Bushnell and Don Valentine refused to agree.

He stated that the motherboard replacement service is actually Atari's upgrade of its existing products, belonging to Atari's existing market. Ethan wants to take 80% of the net profit? He might as well just kill them!

But negotiation is all about asking for the moon and then settling for a bargain.

After a period of back-and-forth, the figure was cut to 18 percent.

In other words, Ethan would receive $72 for every Snake game motherboard Atari sold.

It's roughly half of the net profit.

Although this number seems small, but...

Other things weren't expensive back then either!

Ethan downed the whiskey in one gulp, the spiciness of which he found somewhat unbearable.

His worried and distressed appearance was also seen by everyone.

"Hey, Ethan, your alcohol tolerance is terrible."

With the contract signed, the rivalry was over. Nolan Bushnell joked, "When I was your age, I was already a force to be reckoned with in nightclubs!"

"Yeah, Ethan, you need to work on your drinking capacity."

Don Valentine, founder of Sequoia Capital, chuckled and said, "If you wait until you're a millionaire to start practicing, it'll be too late. By then, tons of beautiful girls will be throwing themselves at you! They'll want to get you drunk! They'll want to spend a wonderful and enjoyable night with you!"

The two's back-and-forth banter heated up the atmosphere.

Ethan waved his hand and said, "I can hold my liquor, I just drank too fast."

"Hahaha~" The two laughed.

"real!"

"We understand! We understand! We all understand!"

That stubborn look only made them laugh even harder.

After chatting, the group didn't forget their business. Nolan Bushnell took out a stack of checks from his office drawer, intending to pay Ethan a $6,000 licensing fee, but he stopped just as he was about to write them down.

"Ethan, would you like one check or two?"

Now that a cooperation agreement had been reached, Ethan naturally wouldn't hide the copyright issue and directly produced the document authorizing Evelyn Jensen's full authorization; otherwise, they wouldn't have been able to sign the contract.

As for the check, Ethan naturally wanted to issue two, since he had already agreed with Evelyn from the beginning that the revenue from "Snake" would always be split in half. However, he had his own ideas about the amount.

"One bill is three thousand, one bill is two thousand, and then give me another thousand in cash."

"I think this should be fine, right?"

This proposal puzzled Nolan Bushnell, but he still granted Ethan's request.

He wrote two checks to Ethan, then took a neat stack of twenty dollars from the office safe.

He counted out half and handed it to Ethan to count.

After confirming everything was correct, Ethan smiled and said, "Then, I'll just wait for the game to be released?"

"Hmm, we'll have the first batch of machines ready in at least fifteen days, and at most a month."

Nolan Bushnell thought for a moment and said, "We will invite our previous partners to the company to experience the machine. If you are interested, you can come and take a look. We will call you in advance."

"Okay, see you later."

"goodbye."

Once everything was done, Ethan got up to leave, and Steve Jobs, who was waiting outside for the results, saw him off.

Ethan did not refuse the future Steve Jobs's politeness.

As Ethan exited the factory gate, he waved to Old Joe, who had come to see him off, signaling him to walk with him a little longer. Only after the Atari factory had completely disappeared did he hand over the fifty twenty-dollar bills he had just asked for.

"This is..." Steve Jobs asked, puzzled.

"Your payment," Ethan Jones said with a smile. "If it weren't for you, I probably wouldn't have been able to reach such a smooth cooperation agreement with Atari. You deserve it, so take it."

"But... this is too much."

Steve Jobs hesitated for a moment, but at the same time, he did not show any refusal.

"Oh! Bro! The information you gave me is worth more than a thousand dollars!"

Ethan Jones raised his voice and shoved the money directly into his hand.

"Besides, this money isn't for nothing! Nolan just told me that once the 'Snake Game' machines are finished, he'll invite our partners over to test them. I'm really interested in that, so remember to call me when you get there."

"Also, since this is our first collaboration, I don't know how eloquent Atari's sales staff are, but I think your sales skills must be excellent, so I'll need your help later."

After Ethan said that, Steve Jobs didn't hold back.

His eyes flickered as he glanced at the US dollar in his hand, smiled, and said, "Okay, then I'll take it."

"That's more like it, bro!" Ethan raised his eyebrows and patted him on the shoulder.

Jobs put the money in his pocket. "You didn't call me here just for this, did you?"

"certainly."

"..." Ethan's answer surprised Jobs for a moment, then he smiled and said, "So, I'm leaving?"

"Hmm~" Ethan waved his hand, signaling him to get lost.

This behavior caused Steve Jobs to turn and leave.

However, a short while later, he came running back.

This situation puzzled Ethan greatly.

But when Jobs, panting heavily, told him that Nolan Bushnell had actually sent him to the trade fair that day with a bounty of five hundred dollars to secure a partnership... Ethan laughed as he watched the figure wave goodbye and leave again.

If he had previously felt that Steve Jobs' appearance was somewhat unreal, then now he was certain that the person in front of him was indeed the real Steve Jobs.

Because in his memory, Steve Jobs was in dire need of money at that time.

So desperate for money that one person embezzled all the prize money from the "Brick Breaker" competition.

Ethan admitted that he just wanted to get in touch with Steve Jobs; he was lusting after Steve Jobs' body... oops! He was lusting after Apple's body! That's why he gave Steve Jobs a thousand dollars.

And now...

"This guy's actually pretty honest, huh?"

Ethan smiled as he watched the apple bouncing and hopping along the road.

Note: ① The reason Steve Jobs kept his payment for "Breakout" was as follows: Nolan asked Jobs to make the game and promised him a $100 bonus for each transistor he used less of. At that time, the most expensive component of a game motherboard was the transistor; the fewer transistors used, the lower the cost. Jobs then gave the project to Steve Wozniak, who used only 44 electronic components to create the motherboard. Nolan then gave Jobs a $5,000 bonus and $900 for making the game. However, Jobs only gave Wozniak $450, pocketing the remaining $5,000. Decades later, in an interview, Wozniak stated that he didn't care about the $5,000; he just felt cheated and was very upset. However, he also said he understood Jobs' actions because Jobs was very poor at the time, and his adoptive parents had spent almost all their savings to send him to college. Then there's another thing: Wozniak's *Breakout* wasn't the *Breakout* released by Atari later. Atari's engineers couldn't understand how Wozniak managed to create the game using only 44 transistors. Even if they had the circuit boards, they couldn't replicate it. So, Nolan's money was essentially wasted. ② Regarding the price of *Pong*, I calculated it myself. Baidu says it's $100 per unit, while Nolan himself said the screen cost $75 and the motherboard nearly $200—they don't match at all.

(End of this chapter)