Console Wars Read online

  “But don’t just take my word for it,” Nilsen said, pulling out a brochure called The Nintendo Guide to Choosing a Videogame System. “Listen to my very intelligent competitor, who specifically suggests buying the console that has the most games. So I encourage everyone to take Nintendo’s advice and buy the Sega Genesis.”

  Over the next few hours, word began to spread. As Nilsen read passages from Nintendo’s brochure with near-religious conviction, visitors came from across the trade floor to witness Sega’s coronation. They wanted to see the charming blue hedgehog, get a look at the 16-bit system that cost $50 less than the Super NES, and see what else was on the horizon from the company that had stolen at least some of Nintendo’s thunder.

  Like a baseball team whose pitcher was throwing a no-hitter, the Sega employees tried not to talk about what they were witnessing, to keep it all business as usual. But they had waited so long for this to happen, never being sure that it actually would, that many were guilty of a private smile, fist pump, or high-five from time to time.

  It was Kalinske’s job to act like this was exactly what he had always expected, but even he couldn’t hide the hints of laughter on his face. Feeling good, he walked tall to the reception area at the center of Nintendo’s booth, where he asked to speak with Arakawa. Not to gloat, but to show his opponent that he meant no disrespect. Unfortunately, he was deprived of a friendly all’s-fair-in-love-and-war conversation due to Arakawa’s busy schedule.

  “Is he available sometime later today?” Kalinske asked hopefully.

  “Um, no, he’s booked solid,” the receptionist said, knowing exactly who he was. “Sorry.”

  Kalinske tried for the next day, the day after, two months from now in Seattle. No, sorry, Mr. Arakawa was a very busy man. Kalinske nodded, realizing who and what he was actually up against. He thanked the receptionist and looked around Nintendo’s colossal booth, scanning for Arakawa. He had to be there somewhere, lurking amongst the consumers who had excitedly come out to get their first look the perhaps-not-so-super Super Nintendo.

  Eventually Kalinske gave up and walked away. As he moved past Nintendo’s already obsolete monument to itself, he had the wonderful revelation that Sega actually, legitimately, inconceivably stood a fighting chance. Hide behind those consumers while you can, Kalinske thought, because sooner or later I’m going to steal them all.

  18.

  THE UNDERDOG DAYS OF

  SUMMER

  “I’d love to sit here and promise you the world,” Kalinske said, addressing a conference room full of employees readying for battle. “Because, in my opinion, that’s what you each deserve for all the hard work you’ve put in. But the truth is that I can’t even promise you that a year from now Sega is still going to be making consoles.”

  Now that Nintendo’s 16-bit machine had a release date (August 23, 1991), Sega was preparing to make the most of every minute before then. During this critical period, which they called the “Sixteen Weeks of Summer,” Kaliske, Rioux, and Toyoda would authorize a series of unorthodox hirings, promotions, and marketing strategies to blunt the impact of the SNES.

  “Unfortunately,” Kalinske continued, “there’s not much I can promise in this room today. But I’ll tell you one thing I know for sure: we have this summer to give ourselves a chance at actually competing against Nintendo, and I can’t even begin to imagine what this group would be capable of accomplishing with such an opportunity.” Kalinske paused and in one swift look around the room seemed to make individual eye contact with everyone. It was time for the summer games to begin.

  Week 1: Radio Killed the Video(game) Star

  Nintendo’s Peter Main and Bill White ushered in the warm weather by announcing a three-month $25 million marketing blitz to promote the upcoming SNES. Because Sega’s advertising budget for the entire year was less than what Nintendo had allocated for a single quarter, Sega’s strikes had to be more strategic, and their missiles more heat-seeking. In this case, the heat that Sega sought was the older, wiser, and more wiseass-ey crowd of teens, college kids, and rebellious adults. As Sega continued to define its image, this demographic was no longer simply an economic necessity but had become an audience that helped sell a narrative vision for Sega: a technologically superior company whose advanced, offbeat products could be appreciated only by those mature enough to handle its power. Sega aspired to be not just the name on a product but the secretly whispered password of coconspirators involved in a revolution.

  To reach this audience, and to do so with a fraction of Nintendo’s budget, Sega kicked off the summer with a pair of ambitious marketing campaigns in June. The first was “Graduate to Genesis,” which aimed to hammer home the concept of Sega representing the next phase of videogame evolution while also catering to a time of year filled with graduation ceremonies. Though “Graduate to Genesis” presented another opportunity to define Sega, the real goal was to further cut into Nintendo’s hold over third-party software developers. The promo offered a free third-party title (produced by one of nine companies including EA and Namco) upon the purchase of a Genesis. By doing this, Sega was able to reward the third parties who had taken a chance on them and demonstrate to other game makers that perhaps it was time to consider defecting from Nintendo.

  With a campaign in place that aimed to chisel away at Nintendo’s strength, Kalinske wanted another that exploited their weaknesses. One place where Nintendo had little presence was on the radio, so that’s where Sega struck next. Nilsen put together a list of radio stations that best exemplified Sega’s desired cool, in-your-face identity. He zeroed in on Los Angeles’s 102.7 KIIS-FM and partnered with them to do an LA-wide “Sixteen Weeks of Summer” campaign with round-the-clock promos, giveaways, and updates from the Sega-verse. In addition, the station would help expand Sega’s visibility by setting up playable Genesis displays during the station’s on-location events at beaches, concerts, and hot spots around the city. Similarly named and equally invasive assaults were launched in Chicago and New York. In addition to dominating a medium that Nintendo had ignored, there was an unexpected benefit to the radio maneuver: Cheryl Quiroz, the senior account executive at KIIS-FM, was so smitten with Sega’s products that she reached out to Blockbuster Video about bringing them into the mix. At the time, Blockbuster was in the midst of a lawsuit with Nintendo, who had taken a harsh stance against videogame rentals, and so they were eager to help out. Blockbuster would gladly set up in-store displays, tout Sega’s latest games, and hold gaming contests all summer long (though they wanted to dub the promotion something that honored 102.7 KIIS-FM). Sega was gladly willing to forgo the semantics, birthing “102 Days of Summer.”

  Whether it was sixteen weeks or 102 days, the summer would undoubtedly be long and stressful. Luckily, around this time, Kalinske felt incredibly rejuvenated. After nearly a year apart, his wife and three daughters were finally moving up to live with him in the Bay Area. Things appeared to be finally coming together.

  Week 2: Mr. Extremely Dangerous

  While Kalinske and his family searched for a dream home in the Bay Area, Sega began aggressively putting together a dream team of new employees. Like the brand they were cultivating and the hedgehog they had helped create, Kalinske, Rioux, and Toyoda searched for people with a distinct Sega-ness: sharp, scrappy go-getters who craved long odds and last-second victories.

  As Kalinske continued to look for ways to embody the tone depicted in that Reebok “Extremely Dangerous” bungee-jump ad, he went straight to the source: Reebok’s marketing manager, Steve Race. “We’re building a team to go to war against Nintendo,” Kalinske said. “We’re going to take over the videogame market. Will you join us?”

  Race was a clever, foul-mouthed prankster who used his boisterous personality to hide the fact that he was a brilliant marketing strategist. An impossible challenge? Shit, of course he was in. But Race wasn’t yet ready to jump feet-first into the pool, and for the time being he wanted to run Sega’s marketing department as a consultant. I
f that was what it took, then Kalinske was okay with it.

  “Just one question,” Race said. “What the hell is a videogame?”

  Kalinske’s eyes went wide. Even he had known more than this going in.

  “Kidding,” Race said with a cheeky smile. Not only did Race know what a videogame was, but upon joing Sega he’d immediately become the company’s most senior expert. Back in the early eighties, he had been the vice president of marketing and communications for Atari’s International Division (selling in territories where, notably, no crash had been caused) before cofounding Worlds of Wonder, the toy company that first nationally distributed the NES. “Don’t worry about me,” Race explained. “I was selling videogames back when you were pimping out plastic dolls.”

  Week 3: The Electronics Expert

  Sega was adamantly focused on positioning their products as being more than just a simple toy, unlike Nintendo’s; they were consumer electronics and should be marketed and sold as such. To make inroads into that realm of retail, Sega’s executives targeted Richard Burns, a VP of sales at Sony who moved and spoke with the quiet but powerful demeanor of an assassin.

  “We don’t just want you, Richard,” Kalinske said. “We need you.”

  Burns scratched his forehead, intrigued by the idea of moving from bleak New England to sunny California, but concerned about entering a business that overlapped with the pesky terrain of the toy world. “Why me?” he asked. “What I know about videogames could sit on the end of your finger.”

  Kalinske nodded. “Good. You’ll be perfect.”

  Burns agreed to take the leap and run the sales department, thus beginning the mission to position the Genesis (and videogames as a whole) as consumer electronics, no different from the stereos, VCRs, or camcorders he’d sold during his days at Sony. Burns had been around long enough to feel confident in his ice-to-Eskimos sales skills, but he quickly discovered that getting retailers to take Sega seriously was only half of the challenge. The bigger problem was that his predecessor had either had terrible organizational skills or was an outright anarchist. A lack of any sort of filing system was merely a nuisance, but not having a formalized sales structure was just plain leaving money on the table. There were limited records of which systems and games retailers had ordered from Sega, and almost no information about what had sold through, what had been marked down, and what had been returned. In an environment where it took about eight months to develop a game and two months to produce and ship it, knowing these kinds of things wasn’t just helpful but mandatory.

  Week 4: Tiny Billboards

  The sheer speed of Sonic The Hedgehog was bound to make it a hit, but that wasn’t the only goal here—not even close. Kalinske wanted Sonic to become an instantly recognizable cultural icon who could define the decade and eventually grow into a multibillion-dollar intellectual property that would continue to pump money into Sega for decades even after he’d left the company. This was why Sega of America had been so protective of Sonic. They didn’t want him to join that long list of videogame characters whose innovative gameplay had made them celebrities but whose lack of dimension had caused them to fade away. They had to make sure that Sonic would find a better fate than one-hit wonders like Dig-Dug, Frogger, or even Mr. & Mrs. Pac-Man, all of which had aged with the ungraceful gawkiness of a former child star.

  Grand aspirations were certainly admirable, but without proper execution they were nothing more than delusions of grandeur. Transforming a 16-bit critter into the next Mickey Mouse, however, presented the same problem as marketing against the Super Nintendo: money. Without a war chest full of financial resources, Sega relied on the kindness of strangers. Or, more specifically, writers from the most popular gaming magazines of the era: GamePro, VideoGames & Computer Entertainment (VG&CE), and Electronic Gaming Monthly (EGM), which had been created to fill the growing appetite for videogame previews, reviews, and rumors. Though they differed in subtle ways (GamePro slanted younger, VG&CE skewed older, and EGM swung for mainstream), the editors at each all had one thing in common: a distaste for Nintendo. To Nintendo’s credit, Nintendo Power editor in chief Gail Tilden consistently churned out a colorfully brilliant issue each month. But they kept the best content for themselves, and so it was exceptionally difficult for the other magazines to adequately cover the industry when the already close-lipped company who dominated over 90 percent of the market felt little incentive to share information.

  Up until now, Kalinske’s formula for success had always been to rely on his charm, wit, and facility with public speaking, but he was quickly discovering that none of those talents could compare to the power of harnessing the hatred for his competitor. In the same way that Blockbuster had been eager to rain on Nintendo’s parade, Sega hoped that the scorned magazines could help advance their agenda. Kalinske knew that the gaming magazines typically appealed to only the most hard-core fans, but it wasn’t just them he wanted to reach. The magazines’ greatest asset wasn’t the readership but rather the physical space they occupied. With wide circulations, these magazines populated newsstands, kiosks, and drugstores around the country, which made each cover almost like a tiny billboard. So maybe John Doe didn’t care at all about videogames, but when buying his paper each morning, he would inadvertently notice the bright game magazine covers and a small imprint would be created. It would be only seconds each day, but they would add up.

  To make the math work, Kalinske relied on Nilsen. Ever since joining Sega in 1989, Nilsen had always made it a priority to build strong relationships with the press. He made it a personal policy to return every call, from anyone at any publication, and when doing so he would always have a memorable quote ready. He was all about going the extra mile, whether that entailed flying out to Los Angeles to have lunch with writers from VG&CE or trekking out to Lombard, Illinois, to meet new members of the EGM team. Nilsen took great pleasure in seducing the tastemakers, but what really made his tactics work was that they were not tactics at all. As he saw it, these people were devoting their lives to writing about what he did for a living; they made his life easier, and he wanted to return the favor. It was less about sneakily seeking competitive advantages and more about demonstrating good manners. And if his sentiment contrasted with that of Nintendo, then that was just the cherry on top.

  This all put Nilsen in a great position to ask for assistance when it came time to make Sonic a star. He coordinated a three-pronged attack of magazine covers, hitting EGM in May 1991 and then VG&CE and GamePro one month later. In addition, Sega released a sixteen-page promotional Sonic comic, which not only grabbed more eyeballs on newsstands but was Trojan-horsed inside other publications like Disney Adventures and an issue of Superman.

  As the warm days grew longer and Sega of Japan neared completion of Sonic The Hedgehog, Kalinske didn’t quite know what to expect. But he was feeling optimistic, and pleased that Nilsen had acquired so much tiny but omnipresent real estate.

  Week 5: Superstars Wanted

  In addition to attracting eyeballs, Kalinske also craved hands. More specifically, he wanted to get Sega products into the hands of people who personified verve and coolness. In a perfect world, Sega would have hired young celebrities to star in commercials. In a less perfect world, they would have at least run ads during shows that featured those young celebrities. In reality, however, money was tight, airtime was expensive, and networks weren’t in the business of granting discounts to unknown companies. Still, Kalinske knew that if Sega could only afford an ad buy during one primetime show, it was still worth the risk. They’d just better be damn sure they found the right show. ABC’s Full House? NBC’s Saved by the Bell? CBS’s Major Dad?

  But why pick only one when you can have them all? In the Sega spirit of killing a flock of birds with a single stone, Kalinske and his team developed a crafty solution. Instead of running an ad during a hit show, they would create a hit show of their own. Nilsen spearheaded a deal with producer Richard Rovsek to create a syndicated prime-time special
, shot at Universal Studios, in which young sitcom stars would compete against one another in a series of zany athletic events for their favorite charities. Sega financed the operation, and between naming the special and including challenges like hedgehog races and Game Gear duels, they benefited from a parade of product placement. It would have been easy to dismiss this as shameless promotion, but with such a bright constellation of trendsetting teenage stars, no one complained.

  They would all be there, the princes and princesses of the TV universe. Hunks and babes (like Saved by the Bell’s Mark-Paul Gosselaar and Tiffani Amber Thiessen), loving on-screen sisters (Full House’s Candace Cameron and Jodie Sweetin), squabbling on-screen brothers (Home Improvement’s Jonathan Taylor Thomas and Zachary Ty Bryan), and even a few second fiddles from Blossom, Growing Pains, and Who’s the Boss, each hoping to seize the spotlight. All of them had eagerly signed up to star in the Sega Star Kid Challenge, breaking free of laugh tracks and very special episodes to compete in raft races, obstacle courses, and tug-of-wars set above a pool of whipped cream.

  Though the show would not air until June, filming had taken place on April 18–19 at Universal Studios Hollywood. Kalinske and Nilsen had flown down to oversee the proceedings, along with an excited Toyoda, who brought his daughter to marvel at Sega’s intersection with glitz and glamour. As they had hoped, it turned out to be a wonderfully raucous event, tied together by host Scott Baio and his happy daze.

  Filming had gone off without a hitch, and now, two months later, they tuned in to see the fruits of their labor. The high ratings, coupled with a costumed Sonic The Hedgehog persistently lurking in the background of most scenes, indicated to Sega of America that things were looking rather peachy.

  The only foreseeable pit was running out of money. Even on a shoestring budget, their plans to launch Sonic (and, in effect, relaunch Genesis, the Sega name, and their own careers) were adding up very quickly to some serious cash. Still, Kalinske knew that now was not the time to back down. What’s another hundred thousand dollars today, he thought, to build a hundred-million-dollar property tomorrow? Nakayama, however, didn’t see things as clearly when Kalinske called seeking additional funds.