Console Wars Page 3

  As the automotive extension of Nakayama’s personality cruised through narrow streets, Nakayama and Kalinske drank whiskey and argued the merits of karaoke. Like most Japanese, Nakayama held enormous respect for the activity and considered it an art, and like most Americans, Kalinske thought it was a cheesy thing to do that seemed like a good idea when drunk but usually ended with regret. These men may have been from two different worlds, but at least they could both appreciate fine whiskey. They refilled their glasses, agreed to table the karaoke discussion, and downed their drinks.

  Kalinske finished a nice long sip. “I have a question.”

  “Perhaps I have an answer.”

  Kalinske leaned forward. “What about Katz?”

  “What about him?”

  “What happens to him?”

  “To Katz?”

  Kalinske shook his head. He had been waiting for the right time to ask about Katz, which was starting to feel like never, but if he was even going to consider taking the job and replacing a friend, they needed to have the conversation. “Oh, don’t play it like that. You know we have a history. You had to know I was going to ask about him at some point. So, yes: what about Katz?”

  Katz, of course, was Michael Katz, a no-nonsense pragmatist who was already something of a journeyman in the nascent videogame industry. His experience stretched all the way back to 1977, when he had served as the marketing director for Mattel’s brand-new line of LED handheld games. After growing the new product line into a $500 million business, Katz moved on to Coleco for their short-lived console venture. After that, he became president of a small, unprofitable computer game company called Epyx, before moving on to Atari in 1985, which by that time was a shell of its former self. Katz had experienced the highs and the lows, and his year as Sega of America’s president could probably most accurately be described as somewhere right in the middle.

  After a series of gimmicky electronic game systems (like the frigidly named SG-1000, which was cheaply built with spare, off-the-shelf parts), Sega’s first real foray into the wide world of home videogames came with the release of the Master System. This was their own NES-like 8-bit console, intended to rival the staggering success of Nintendo. But it was not exactly the triumph they had in mind. The Master System was released first in Japan in 1985, and then in North America in 1986, but in less than two years it was clear that Sega wasn’t going to be able to make a dent on the force that was Nintendo. Nakayama decided that if they couldn’t win the battle on 8-bit terrain, then they would move the location of the war, and this time at least have the advantage of being there first. They quickly and unceremoniously retired their Master System and shifted their attention to the next generation of videogames: 16 bits, twice as powerful as the NES. Again, they created and released their cutting-edge 16-bit system first in Japan, where it was called the Mega Drive, and next in North America, where they dubbed their technological dynamo Genesis.

  In October 1989, Katz was hired to make the Genesis a smash hit in America. In Japan, the Mega Drive had achieved mild success with its initial release, and this gave the powers that be high hopes for their American counterparts. So high, in fact, that Nakayama came up with the rallying cry “Hyakumandai!” (one million units). Despite the shadow of Nintendo, Nakayama fully expected that Katz would be able to sell more than a million Genesis systems by the end of his first year on the job. Katz had tried his best to reach this goal and make a name for the Genesis, but after that year was up he had sold only about 350,000 units and Sega still lacked an identity. Not great results, but not terrible, either. The problem was that Nakayama just didn’t think he was the right man for the job. He had good ideas, but he lacked follow-through and the grace to get things done. Big talk, that’s what he was, and nothing personified this better than the ad campaign he had chosen: “Genesis Does What Nintendon’t.” Not only did this bother Nakayama-san because competitive advertising was frowned upon in Japan, but even more so because it was just an empty promise. Genesis does what Nintendon’t? What, not make money? Katz knew what Sega was not, but Nakayama believed that Kalinske knew what Sega could, should, and would be.

  “Katz had his chance.”

  Kalinske raised an eyebrow. “His chance? A year?”

  “He was only hired for the job until the right person came along.”

  “Still . . . one year?”

  “He thinks he’s running a movie studio, not a videogame company. He spends my money like a madman and then calls it an investment. He thinks everything is an investment.” Katz had spent a lot of money to secure deals with celebrities, highlighted by $1.7 million for Joe Montana and, most recently, boxer James “Buster” Douglas, the current heavyweight champion of the world. “He has no vision for the company. No identity. So all he does is go out and try to buy one.”

  Kalinske considered this. “Well, Nintendo has Mario. So naturally you guys should have your own mascot character, someone to crush that little plumber.”

  “See! You get it, Tom!” Nakayama said, so thrilled that someone else saw the world the same way. “I have tasked our most loyal employees with coming up with our own Mario. You will be astounded by their work, I assure you,” he said, his voice vibrating with excitement. “Katz doesn’t understand. He just likes to spend money.”

  While Nakayama’s accusation that Katz had spent a lot of money was true, the insinuation wasn’t exactly fair. Katz knew that the secret formula to selling a million units lay in making popular games. If people craved the software, then they would undoubtedly buy the hardware. This had been Nintendo’s approach: dazzle the market with much-talked-about hits like Super Mario Bros., The Legend of Zelda, and Teenage Mutant Ninja Turtles, and as a result, seduce an entire generation into buying the NES. Unfortunately, this approach presented a problem for Katz because Nintendo held an iron grip on software developers. If game designers wanted their game on the NES, then Nintendo had them sign an exclusive agreement with a stringent noncompete clause. So if Nintendo got a game, there was no way that Sega could offer it on their system, and given Nintendo’s monstrous success, why would anyone choose Sega over Nintendo? Katz’s solution was to hitch Sega’s wagon to household names, believing the association between Sega and the likes of Joe Montana and Buster Douglas would bring about a certain level of respect and legitimacy.

  “You know Katz, though. He’s a builder,” Kalinske said. As much as he understood where Nakayama was coming from, he had a soft spot for Katz. They had become buddies at Mattel, they played tennis together, and their wives got along. “Katz is slow and steady. I thought that’s what wins the race, no?”

  “This is not a fable, Tom.” Nakayama shook his head. “I want you to take his job because you will be able to do it better.”

  “Again, I appreciate the flattery, but I don’t know the first thing about videogames. I know toys. I’m a toy guy.”

  “No, Tom. You are a salesman.”

  Kalinske thought about this as Nakayama refilled his glass and the Cadillac de Ville continued along, turning heads on the streets of Tokyo.

  They were dropped off in front of Sega headquarters, which Kalinske was surprised to find was bland and innocuous. It looked almost like a college dorm complex, openly nondescript and painted in a crusty, faded-looking yellow-white. The only difference here was that at the top of this humble ten-story building, the name SEGA was emblazoned in blue capital letters.

  Nakayama led Kalinske into the building, which somehow turned out to be even more unspectacular on the inside: drab lighting, crowded workstations, and uninspiring windowless conference rooms. As Nakayama introduced his great white hope to the most senior of the hundred or so employees, Kalinske was already having second thoughts.

  They made their way into a boxy gray elevator, where Nakayama attempted to reassure his now-skeptical guest. “It gets better.”

  “No, no, it’s fine,” Kalinske said.

  The elevator stopped on the third floor and Nakayama led Kalinske into w
hat he considered the crown jewel of Sega’s operation: the top-secret R&D lab, where long tables were overrun by large computers, unrecognizable mechanical tools, and several televisions that had been taken apart. Kalinske felt like he had entered an evil scientist’s lair—that is, if the evil scientist in question had planned to take over the world by means of videogame domination.

  Nakayama proudly escorted Kalinske around the room, introducing him to all sorts of gadgets and gizmos that seemed too small and sophisticated to actually exist. With marvelous graphics moving at racecar speed, these seemed less like games than they did playable dreams. This stuff was light-years ahead of what Kalinske remembered from his days at Mattel.

  Nakayama pulled him over to a small station and handed him a little black device. “This is called the Game Gear. It will come out here in October and then sometime next year in America.” The Game Gear felt great in Kalinske’s hands, and as Nakayama turned it on, the screen flooded with graphics that seemed too good to be true. Kalinske didn’t know much about Nintendo’s home console, but he was familiar with their handheld device, the Game Boy. Like most everyone else, he had been caught up in the whirlwind of Tetris, the addictive puzzle game that came with the Game Boy. The Game Gear featured a similar game called Columns, which seemed to Kalinske to be equally as addictive, yet instead of staring at the dull-yellow coloring of the Game Boy, he was playing a game with vivid, glorious colors. Nakayama wanted to show him more, but Kalinske couldn’t stop fixating on the Game Gear. “You take it,” Nakayama said with a nudge. “You take it and show it to your daughters. They will love it so much.”

  Eventually Nakayama pried him away and dazzled him with more glimpses of tomorrow: a CD-based device that played games with near movie-quality graphics, a pair of 3-D glasses that could be worn to bring certain games to life, and some kind of hefty virtual-reality headset. Finally, the tour concluded in front of Nakayama’s crown jewel: the Sega Genesis. Kalinske stared at this beautiful black beast. It was sleek and seductive, with graphics and gameplay that blew what little he knew about Nintendo out of the water. He wondered how the hell Katz had struggled to sell this.

  Nakayama watched Kalinske’s eyes widen like a kid who not only was inside a wondrous candy shop but had just been told that he now owned it. “You like?”

  Kalinske took a moment to compose himself. “It’s okay.”

  “Ah, yes, sure it is,” Nakayama said. “Shall we go somewhere more private to continue our discussion?”

  Kalinske put down the controller he had been inspecting. He couldn’t get over how comfortably everything fit into his hands; it was as if they were designed specifically for him. He left with Nakayama, trying his best to hide his boyish enthusiasm. He didn’t know exactly where they were headed, but for the first time in a while he felt excited about whatever would come next.

  3.

  THE STORY OF TOM KALINSKE

  Nakayama took Kalinske to a popular hostess bar downtown. Despite the sizable crowd of businessmen, their sporadic drunken chuckles, and the constant flirtatious giggling of the pale-faced women dressed as naive schoolgirls, the place offered a certain level of solitude. Perhaps it was the dim lighting, or maybe it was the collective sentiment that everyone there seemed to want nothing more than a moment of privacy and had no interest in getting entangled in the business of anyone else.

  “What exactly are your concerns?” Nakayama asked, as one of the bar’s geisha girls strolled over to him and Kalinske with small glasses of sake.

  “For starters, I’m not too thrilled about the idea of uprooting my family.” Sega of America’s headquarters were in San Francisco, and Kalinske would have to move his family there from Los Angeles.

  “Northern California is the place to be. That’s where things happen. What else?”

  Kalinske sipped his sake. “What else? A lot of things.”

  Nakayama skeptically squinted his eyes. “I think that beneath ‘a lot of things’ is just one thing. So tell me, what is the problem?”

  Perhaps Nakayama was right. Perhaps the stresses that came to mind were just tiny planets of anxiety that were all orbiting a single sun. “Okay,” Kalinske said, gathering his concerns. “I don’t want to put in everything I have only to watch the carpet get pulled out from under me. I want to be able to try things. I want to be able to fail. I want to be able to make this exactly what I think it ought to be and not have to explain myself every step of the way. Basically, I don’t want Mattel to happen again.”

  Kalinske abruptly finished, realizing that he’d struck a nerve that had been buried for years. Nakayama finished his glass of sake. “Okay, fine,” he said. “You come work for me and I let you do things your way. This is the deal. No tricks.”

  These were the magic words that Kalinske had been waiting for, but when they finally came he was momentarily distracted by something unusual across the bar.

  “Do you have an answer?” Nakayama asked.

  Kalinske heard the words, but his mind was locked on a well-dressed man sitting at a table about twenty feet away. This man, whose elegant outfit screamed success, was surrounded by beautiful women, scheming friends, and copious amounts of alcohol. Yet despite these temptations, the well-dressed man was completely entranced by only one thing: a Game Boy. As his fingers jabbed the buttons of Nintendo’s handheld console, nothing else in the world mattered.

  “Tom?” Nakayama asked, trying not to sound too curious.

  “I need to think about it,” Kalinske replied, and then he pulled out the Game Gear he had received earlier as if this might somehow hold the answer. Could he seriously see himself jumping into the videogame industry? Did he actually believe he had what it took to topple Nintendo? And, for that matter, did anyone? As he considered these questions and thought more about the well-dressed man, the machine came alive in his hands and Tom Kalinske’s life flashed before his eyes.

  Suddenly his mind was flooded with the sights, sounds, and feelings of being a little boy, racing a red die-cast toy car up and down his legs in the backseat of the family’s station wagon, wedged uncomfortably between his brother and sister, as his family moved from Iowa to Chicago. The family had moved a lot during his childhood, which was difficult on a small boy, but he remembered it being a little easier because he always had that toy car by his side. He loved it not only because it was always there for him but because he had built it from a kit and painted it the exact color he wanted. He’d savored so much being the creator of something.

  He remembered liking Chicago, mostly because he was only five years old, liked life, and thought that life was Chicago. But then his father got a new job at a water treatment facility in Tucson, Arizona, and the family moved again. Tom had been nervous, but he had his toy car, which he felt kept him safe from everything changing around him.

  His family stayed in Tucson for good, and that allowed Tom to dive headfirst into the thick desert heat and become many things: a Boy Scout, an athlete, a baseball card collector. When he was twelve years old, his mother convinced him that he had a beautiful singing voice and dragged him down to the so-called Temple of Music and Art. There he auditioned for and was accepted into the prestigious Tucson Boys Chorus, whose past members included George Chakiris and John Denver. He soon discovered that he really was good at singing, which filled him with red-hot ambition. Within nine months, Tom was promoted to the chorus’s traveling group. Over the next five years, he toured the entire country, sang on The Ed Sullivan Show, performed at the White House, and traveled through Australia, Mexico, and Canada while cutting albums for Capitol Records.

  That period of his life had moved fast—it was still a whirl in his mind all these years later—but the velocity had served him well. He returned home full-time to Arizona for his junior year of high school and made heads turn with his blazing speed. He joined the track team and earned a scholarship to the University of Wisconsin but lost it junior year when he got injured in a car accident. Even now, so many years later, he could
still viscerally feel not just fragments of the pain, emotional as well as physical, but also how his now-or-nothing persona had emerged at that time. Without the scholarship, he needed to make money in order to pay for classes and graduate, so at twenty-two, with his back up against the wall, that red-hot ambition returned, steering him toward marketing.

  Tom Kalinske and his friend Jonathan Pelligrin had both recently taken an advertising class and decided that male students were a very hard demographic to reach. So Kalinske and Pelligrin decided to start a magazine, called Wisconsin Man, that was specifically designed to reach male students. The magazine would feature stories about sports, cars, women, and how to do things like ski, barbecue, or interview for jobs. Local and national advertisers recognized the value in targeting the readers of Wisconsin Man and paid handsomely for space in the magazine.

  This experience proved to Tom that he was capable of bigger things, so he enrolled in business school at the University of Arizona to study marketing. This time, to pay for school, he wrote and sold ads for a local company that owned radio and television stations. In 1968, his writing, résumé, and colorful life experiences earned him a job with J. Walter Thompson, the renowned New York advertising firm. His responsibility was to come up with new product lines for existing customers. Within a couple of months, Kalinske made a name for himself with the work he did on the Miles Laboratory account.

  Miles Laboratory was a health products company that had risen to prominence in the 1940s with their One A Day multivitamins. In the 1960s, they wanted to expand their business to children, and developed Chocks, the first chewable vitamin. Though parents liked the idea of providing supplemental nutrition to their children, kids avoided the vitamins because they seemed to be too much like medicine. To change the minds of this fickle demographic, Kalinske suggested that the vitamins be shaped like characters that kids liked, and arranged for the licensing rights to a recently syndicated cartoon from the animation company Hanna-Barbera. This deal resulted in the creation of a successful new product called Flintstones Chewable Vitamins.