CH27 - Contract

"Cheers!"

Two hours later, the atmosphere in the Atari office echoed with cheerful voices.

At this moment, the three people present had joyful smiles on their faces.

Nolan Bushnell was quite satisfied because when Magnavox had just imposed the innovation ban on Atari, they had already found a new path for business expansion. It was like finding a way out of a difficult situation, and the future seemed brighter.

"To the success of the new game!"

Don Valentine was also delighted. As an investor in Atari, he had invested six hundred thousand dollars in the company. If Magnavox had directly crushed Atari, his six hundred thousand dollars would have been wiped out.

At this moment, he was not yet the investment mogul he would become later, and the six hundred thousand dollars were hard-earned money. No one would casually discard their hard work, so Atari had to find a way out.

And now, they had found it.

"Pleasure doing business!"

Ethan raised his glass and clinked with Nolan Bushnell and the others.

As the crisp sound echoed, the orange liquid in the glasses swayed.

After Ethan skillfully negotiated an exit strategy, the collaboration between the two parties proceeded swiftly.

As for the contract terms, Ethan found them satisfactory.

The contract stipulated that Ethan Jones and Evelyn Johnson would license the game "Snake" to Atari for distribution. The duration of the agreement was one year, and Atari was required to pay a licensing fee of six thousand dollars. Additionally, Atari committed to manufacturing and selling at least one thousand units of the "Snake" game console in the coming year.

From a modern perspective, this contract seemed like a child's play compared to the millions of copies sold in the electronic game era. Selling one thousand game arcade units was a relatively small number.

However, it was 1975, not the era of mobile internet. It's worth noting that the highly acclaimed "Pong," after a year of release, had only sold two thousand five hundred units! By 1974, when Atari was sued by Magnavox, the total shipments of "Pong" arcade machines confirmed by the court were only eight thousand units!

Nevertheless, at a price of one thousand dollars per unit, Atari still generated eight million dollars in revenue!

So, in Ethan's view, setting a minimum production of one thousand units in the contract was a good start.

After all, the first bucket of gold...

Earning it is a victory!

Most importantly, it helps build a reputation!

As for the profit-sharing, it was simple: fifteen percent of the selling price.

Although Ethan wanted more, ideally reaching the heights of future Apple deals, the cost structure of arcade machines in this era was incomparable to iPhones.

A screen the size of a television, the cheapest basic product cost seventy-five dollars. The material cost of the game board was one hundred and fifty dollars, and adding additional components like built-in speakers and customized joysticks, the total cost of one unit would not be less than six hundred dollars.

With a profit margin of only forty percent, allowing Ethan to take fifteen percent was already Atari's limit.

After deducting other expenses, Atari's founder and investors could only take about seventy-eight percent.

Of course, the real profit from the sale of game arcade units was not the main source of income for electronic games in this era.

The actual profit came from the sale of game boards.

Atari's game arcade board replacement service, with a quote of four hundred dollars per order, yielded a net profit of as much as one hundred and fifty dollars after deducting material, labour, and transportation costs.

Therefore, for this part, Ethan's asking price was quite high. Initially, he wanted to take thirty percent of the selling price, that is, one hundred and twenty dollars. But Nolan Bushnell and Don Valentine adamantly disagreed.

They argued that the board replacement service was actually an upgrade for already sold products, belonging to Atari's existing market. Ethan wanted to take eighty percent of the net profit? They might as well cut ties with him!

But negotiations were all about making high demands and eventually compromising.

After a round of back-and-forth, the figure was reduced to eighteen percent.

In other words, for every "Snake" game board sold by Atari, Ethan could pocket seventy-two dollars.

It was almost a fifty-fifty split of the net profit.

Although this number seemed small, in this era...

Other things weren't expensive either!

Finishing the whisky in his cup in one gulp, Ethan couldn't help but feel the spicy sensation.

His troubled expression did not escape the notice of everyone.

"Hey, Ethan, your tolerance for alcohol is really lacking."

The contract was already signed, and the confrontational situation had disappeared. Nolan Bushnell teased, "When I was your age, I was already tearing up the nightclubs!"

"Yeah! Ethan, you need to practice your drinking skills more."

Don Valentine, the founder of Sequoia Capital, also laughed, "If you wait until you become a millionaire to practice, it'll be too late. By then, many beautiful girls will be throwing themselves at you! They'll want to get you drunk! They'll want to spend a beautiful and joyful night with you!"

The banter between the two made the atmosphere lively.

Ethan waved his hand, saying, "My alcohol tolerance is fine; I just drank too quickly."

"Hahaha~" The two laughed.

"Really!"

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

His seemingly stubborn appearance made them laugh even more.

After some small talk, the group didn't forget about the main business. Nolan Bushnell took out a stack of checks from the office drawer, intending to pay Ethan the six thousand dollars licensing fee. However, just as he was about to write it, he paused.

"Ethan, do you want one check or two?"

Since the collaboration had been established, Ethan naturally wouldn't hide any copyright issues. He directly presented the document fully authorizing Evelyn Johnson. Otherwise, they couldn't sign the contract.

As for issuing the checks, Ethan naturally wanted to issue two of them. After all, from the beginning, he had agreed with Evelyn that the income from "Snake" would always be split in half. However, in terms of the amount, he had some ideas.

"One for three thousand, one for two thousand, and then give me a thousand in cash."

"I think that should be fine?"

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

He wrote two checks for Ethan and then took out a neat stack of twenty-dollar bills from the office safe.

Counting out half of it, he handed it to Ethan, asking him to verify.

With confirmation, Ethan smiled and said, "So, I'll wait for the game to be released?"

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

Nolan Bushnell thought for a moment and said, "By then, we will invite our previous partners to experience the machines at the company. If you're interested, you can come and take a look. We'll let you know in advance."

"Okay, goodbye."

"Goodbye."

With everything settled, Ethan bid farewell and, as he was leaving, Steve Jobs, who had been waiting outside for the results, also took the initiative to see him off.

Ethan did not refuse the courtesy of the future head of Apple.

After leaving the factory gate, Ethan waved to the old Steve waiting outside, indicating him to walk with him for a while. After the Atari factory completely disappeared from view, he handed over the 50 twenty-dollar bills he had just requested to the old man.

"What is this..." Steve Jobs was very puzzled.

"Your reward," Ethan Jones smiled and said, "If it weren't for you, I might not have been able to reach such a straightforward cooperation with Atari. You deserve this, take it."

"But... this is too much."

Steve Jobs hesitated a bit, but at the same time, he did not express refusal.

"Oh! Brother! The information you provided me is worth more than a thousand dollars!"

Ethan raised his voice and directly stuffed the money into Steve Jobs' hands.

"And, this money is not just for you to take for nothing! Just now, Nolan told me that when the 'Snake Game' machines are ready, they will invite partners to come and inspect them. I'm interested in that, so remember to come to my house and inform me."

"Also, for our first cooperation, I don't know how good Atari's salespeople are, but I think your sales skills should be excellent. So, I'll trouble you to help out when the time comes."

With Ethan saying so, Steve Jobs did not stand on ceremony.

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

"That's the spirit, brother!" Ethan raised his eyebrows, patted his shoulder with his hand.

Jobs pocketed the money, "Did you call me over just for this?"

"Of course."

"..." Ethan's answer made Jobs pause for a moment, then he smiled and said, "Then, shall I go?"

"Hmm~" Ethan waved his hand, gesturing for him to leave quickly.

This performance made Jobs turn around and leave.

However, after a while, he ran back.

This situation puzzled Ethan.

But when Jobs gasping for breath told him that Nolan Bushnell had asked him to go to the exhibition, arranged a cooperation, and gave him a reward of five hundred, looking at the figure waving goodbye again, Ethan smiled.

If he felt Steve Jobs' presence was somewhat unreal before this, now, he dared to affirm that the person in front of him was undoubtedly the authentic Steve Jobs.

Because in his memory, Steve Jobs was very short of money at this time.

Short of money to the point where he embezzled all the prize money from "Breakout."

Ethan admitted that he wanted to get in touch with Steve Jobs. He was greedy for Steve Jobs' body... Oops! He was greedy for Apple's body! So, he gave Steve Jobs a reward of one thousand dollars.

And now...

"This guy is quite honest, huh?"

Watching the bouncing Apple walking on the street, Ethan smiled at the corner of his eye.

TL Note:

The story about Jobs embezzling the reward for "Breakout" is as follows: Nolan asked Jobs to create the game "Breakout" and promised to reward him one hundred dollars for every transistor he used less. At that time, the costliest component of the game's motherboard was transistors. The fewer transistors used, the lower the cost of the game's motherboard. Jobs gave the task to Wozniak, and the genius used only forty-four electronic components to create the game's motherboard. As a result, Nolan gave Jobs a reward of five thousand dollars and another nine hundred dollars for making the game. 

However, Jobs only gave Wozniak four hundred and fifty dollars, keeping the remaining five thousand all to himself. Decades later, in an interview, Wozniak said that he didn't care about the five thousand dollars; he just felt that Jobs had deceived him, and he was sad. At the same time, he also said that he could understand Jobs' actions because at that time, Jobs was very poor, and his adoptive parents had spent almost all their savings to send him to college. 

Another thing to note is that the "Breakout" made by Wozniak was not the one released by Atari later. Atari's engineers at that time did not understand how Wozniak had created the game with only forty-four transistors. Even if they were given the circuit board, they could not reproduce it. Therefore, Nolan's money was essentially wasted.