In the late 1990s and early 2000s, Tomonobu Itagaki was at the top of his game. The legendary Japanese game design leader of Team Ninja, known for his sunglasses and leather pants, was making top-selling games in the Dead or Alive and Ninja Gaiden fighting series.

Itagaki left Tecmo-Koei, the owner of Team Ninja, in mid-2008 and got into a bitter lawsuit with his former company over royalties. It was a wrenching separation, and Itagaki finally related his version of events yesterday at the DICE Summit in Las Vegas. Speaking through a translator on stage, he talked about what happened during a dark episode in his career and how he bounced back to create a new game development company, Valhalla Game Studios.

Itagaki said he originally wanted to be a novelist when he was in high school. He wanted to know the techniques to move people. Books and movies, he believed, were tools to move the thoughts and hearts of people. But he also spent a lot of time in gambling halls. To win, he said, you needed to control your rivals heart and emotions.

He read books such as The Red and the Black by Stendahl, The Stranger by Albert Camus, The Old Man the Sea by Ernest Hemingway, and the novels of Raymond Carver. When he was young, he didn’t quite grasp these books. But over time, they became relevant to his career in games.

In that career, he said he learned to focus on the “Happy Three.” This included the happiness of the audience, the happiness of creators, and the happiness of game publishers. Only two or three times in his game-making life did he achieve all three of these goals. For public companies, he said, the fourth requirement for happiness is shareholders.

“It is much more difficult to achieve the Happy Four than the Happy Three,” he said.

He managed to do that when he was creating the PlayStation 2 version of Dead or Alive. He created the game in part to help Tecmo go public. But the game production got started way too late to be a launch title for the PS 2. The game ran off schedule and a sales general manager came to him to borrow a copy of the game, which was still in development. Itagaki gave it to him. Then Itagaki said the disk was sent off to manufacturing for publication, even in its unfinished state. The company made huge profits and the IPO was a success.

“But I thought I would quit making games,” Itagaki said.”An incomplete game was released.”

Some coworkers didn’t mind that. But Itagaki became depressed. He stayed at home for several months. He drank alcohol from morning to night, “but no matter how much I drank I could never get drunk.” His wife suggested he watch movies and bought him a lot of DVDs.

“It was more like just looking at the screen than watching movies,” he said.

One DVD film touched his heart, the Armageddon action movie that starred Bruce Willis, directed by Michael Bay. Itagaki watched the movie over and over again. It had a song sung by Steven Tyler for his daughter Liv Tyler. Itagaki had a three-year-old daughter of his own. Finally, she told him she didn’t want to watch this movie anymore, because the father dies. The film brought tears to Itagaki’s eyes. He kept on drinking and crying. It was, Itagaki said, such as stupid life he was living.

“What a stupid decision I had made,” Itagaki said. “I died as a game developer without even making something for my daughter.”

He decided he had to stop hiding, fight for his family and friends, and returned to work.

“There were many people waiting for me,” he said.

Itagaki pushed to make a version of Dead or Alive for the Xbox, not Sony’s platform, because it was the most powerful platform. He used Steven Tyler songs in the games, because he thought that Aerosmith and Armageddon saved his life, family, and career.

He eventually left the job and became an independent game developer. There was a lawsuit and other controversy, and Itagaki did not directly address the details of his departure.

He is now making a game called The Devil’s Third for THQ. He only has to worry about the Happy Three for that game and is a stockholder himself. He urged game developers to make games that can personally inspire people to change their lives.

“Do whatever you want to do with all your passion, to make everyone happy,” he said. “Not just for your own satisfaction. Make something that can change the life of your audience. I believe video games have such power.”

Mark Cerny, a fellow game developer, said he was touched by Itagaki’s talk. He noted that while Itagaki looks tough on the outside, his talk in Japanese was genuine, polite and heartfelt.