by Steven Kent
—Trip Hawkins
Electronic Arts’ relationship with Sega produced significant rewards for both companies. Genesis quickly became a lucrative new outlet for Electronic Arts, and Sega benefited from having a line of sophisticated games that appealed to an older audience more than most games on the NES.
Nintendo approached Electronic Arts about making games for the NES in the mid-1980s, long before Sega announced Genesis. But Hawkins did not want to make games for the eight-bit console. He and many other Electronic Arts board members felt that the NES was not powerful enough to run their computer games and they did not want to downgrade their games to run on it. Like many people at the time, Hawkins was openly disdainful of console games and critical of Nintendo’s chances of success. The difference was that Hawkins waited too long to change his mind. By the time he realized that Nintendo was going to succeed, Electronic Arts’ stock was tumbling and the eight-bit market showed signs of aging.
We decided that Genesis would do really well and that we had very appropriate content for it. We did not want to be in this business the way it was currently being run, the way Nintendo did it with that one-sided licensing agreement, and Sega was trying to clone almost everything about Nintendo. I thought, look at what Atari is doing. They have reverse engineered the machine and are selling their own games. If Atari wins that lawsuit, that will open up the market and you won’t need to have one of those oppressive licensing agreements.
—Trip Hawkins
In 1989, Electronic Arts’ technicians successfully reverse engineered both the NES and Genesis. Though the NES market was considerably larger and his company eventually released a few games for it, Hawkins felt that Genesis was a better fit for his company’s goals. Electronic Arts’ programmers were familiar with its 16-bit 68000 processor, having worked with it while making games for the Atari ST, Commodore Amiga, and Apple Macintosh computers. Converting games to work on Genesis also required less work since the most popular computers had 16-bit processors at that time. Only one obstacle remained: waiting to make sure that Sega did not change the architecture of its game console before releasing it in the United States. (Hawkins was aware of the security chip Nintendo added to the Famicom before shipping it to the United States as the NES.) When Genesis proved nearly identical to Mega-Drive, he decided to move ahead with his plans.
We decided to go ahead and publish our own stuff on Genesis. Then, before we did that, we went to Sega and said, “Look, before we embark on this path, maybe there’s a way for us to work out a more reasonable arrangement.”
So in June of 1990, we signed a very unusual and much more enlightened license agreement with Sega. Among other things, we had the right to make as many titles as we wanted. We could approve our own titles; there was not this sort of oppressive restriction on our rights of expression, and, of course, the royalty rates were a lot more reasonable. We also had more direct control over manufacturing.
—Trip Hawkins
Electronic Arts’ first two Genesis games, Populous and Budokan: The Martial Spirit, were released in June 1990. In August, Electronic Arts released a miniature golf simulation called Zany Golf and that fall released the first Genesis version of John Madden Football.
At that time, we would be pretty happy if we released a computer game that sold 50,000 units. That was considered to be a significant milestone of success. We thought, Well, what would it take for us to sell 50,000 on the Sega Genesis? We decided that if they had an installed base of 500,000 units, we would be able to sell 50,000.
After Madden came out, they probably reached 500,000 machines in North America, and by that time we had probably sold well over 100,000 units. That was pretty healthy penetration, and it just got better and better after that.
—Trip Hawkins
TurboGrafx
I started at NEC in 1987, and within about two months I got this call, and they said, “Hey, NEC’s doing this new project in Japan that’s a video game system. We want you to check it out and think about whether you could introduce it in the U.S.” It was ironic because I didn’t go there having any thought of NEC doing anything in the video game space, and yet almost right away they started doing video games.
—Ken Wirt, former vice president and general manager, NEC Technologies
Sega was not the only company to release a new video game console in the United States in 1989. NEC, one of Japan’s leading computer manufacturers, and Hudson Soft, a leading video game publisher, teamed up to enter the market with a system called TurboGrafx-16 (TurboGrafx).
Hudson and NEC designed PC Engine, but a lot of it was Hudson’s game experience because they were one of the top developers for the Nintendo Famicom. Hudson was a very colorful company. It was started by two brothers named the Kudo Brothers. They were eccentric software entrepreneurs, and they grew up kind of next to the railroad tracks on the island of Hokkaido, which is the northern island of Japan.
—Ken Wirt
In the very beginning, TurboGrafx had a few small advantages over Genesis. NEC had a good reputation as a computer company and strong name recognition among PC owners. TurboGrafx was also older than Genesis. NEC released it in Japan as the PC Engine a full year before announcing plans to ship it to the United States, and the launch was tremendously successful. More Japanese consumers purchased PC Engines in 1988 than Famicoms, and a small core group of U.S. video game enthusiasts had bought imported PC Engines for prices averaging approximately $500. American game magazines such as Electronic Gaming Monthly and Video Games and Computer Entertainment mentioned the console. In May 1989, NEC announced plans to release the system in the United States.
NEC had some distinct disadvantages, too. Sega was an established arcade company, and American consumers knew the Sega name from the Master System and arcade games. Some people even remembered the tabletop games and ColecoVision cartridges from the early 1980s. Sega also had a stronger following among game enthusiasts. By the time Mega-Drive was released in Japan, it was much bigger news in the U.S. press than PC Engine.
NEC did not have to search very far to find an executive to handle the introduction of its new game console. Ken Wirt, who joined NEC’s computer division a few months before the launch of PC Engine, had spent more than a year as a vice president in Atari’s consumer computer division. Recognizing the value of his past experience, executives at NEC headquarters in Japan sent Wirt their new console and some games and asked him to evaluate the system. His initial reaction was positive.
They sent over some PC Engines and I checked it out. The quality was great. At the time, we were comparing it to the Nintendo Famicom and the Sega Master System, and it did an awful lot better than either of those did. It played faster and the graphics were better and it had some interesting styling. And the game cartridges were those little IC cards. I mean, it had a lot of interesting things going for it.
—Ken Wirt
Technologically, TurboGrafx was a curious hybrid of 8- and 16-bit technology. NEC’s marketing department fiercely maintained that it had both a 16-bit custom graphics processing chip and a 16-bit central processor, but critics charged that both systems were built around 8-bit chips. TurboGrafx clearly lagged behind Genesis in overall power, though it could display far more colors on the screen.*
As I recall, TurboGrafx was a hybrid design of 8- and 16-bit technology. From a marketing standpoint, driving the idea that it was a 16-bit system was pretty important. From a marketing standpoint, that was a complicated story to tell.
Of course, the competition wanted to tell the 8-bit part of the story, and NEC wanted to drive the 16-bit component of the story. In hindsight, maybe it wasn’t a good idea to let that battle line be drawn because neither side was 100 percent right. Perhaps telling a more sophisticated story would have been of more value.
—Stephen Boogar, former vice president of sales, NEC Home Electronics
Instead of storing games in cartridges, NEC published its games on plastic cards that looked a lot like the cards used on the M
aster System. But NEC’s held a lot more data. The game that came packed with the system was a slow-paced, side-scrolling adventure called Keith Courage in Alpha Zones that highlighted TurboGrafx’s ability to display several colors. In the future, however, TurboGrafx games would have the potential to be much larger than Sega games. NEC announced that it would release a CD-ROM add-on device called the TurboGrafx-CD within a few months after the fall release of the main console. (CD-ROM disks could store nearly 260 times more data than TurboGrafx cards.) The console launched in New York and Los Angeles in late August, just two weeks after the launch of the Sega Genesis, and retailed for $199.
The video game business was hot at the time that we launched, and we had tons of orders from all the big retailers. Kmart, Wal-Mart, Babbages, everybody had these giant orders. We had a big introduction ceremony in New York in the original customs building. There must have been 200 press people at this thing, and it was covered on CNN, and there was a big media splash about the introduction.
—Ken Wirt
Unaffected and Overconfident
I thought Nintendo screwed up three different times. One was being so late bringing its 16-bit in to counteract Genesis. Number two was not making Game Boy a color system a lot quicker to counteract not only our Game Gear but also the Lynx. Number three was not taking care of mom and dad by making a downwardly compatible component that accepted 8-bit software on the Super NES. It didn’t have to enhance the software, just to accept it so mom and dad didn’t complain about tossing $500 out the door on little Johnny’s NES.
—Bob Harris, former director of creative services and advertising, Sega of America
The executive team at Nintendo greeted the news about Sega’s Genesis and NEC’s TurboGrafx with indifference. Looking back years later, several Nintendo employees have offered various explanations about why they did not take Genesis seriously. Some people said that the first Genesis games did not leave an overwhelming impression. Others said that Japanese Mega-Drive sales figures were so low that Genesis didn’t seem like much of a threat. Several people admitted that since Nintendo had a U.S. install base of over 20 million, Sega seemed like an upstart, an upstart that Nintendo had easily beaten a few years earlier.
The other failing was this blind faith that since they were Nintendo and they were successful, no one could ever defeat them. That they worked so hard and had done so many things right and were given such positive acclaim from people and had made so many people in the industry wealthy that you just couldn’t imagine them looking anywhere else because we’d made them so happy.
—Howard Phillips, former game master, Nintendo of America
At the same time, Nintendo had just passed new milestones, and the business continued to expand. Nintendo’s sales for the year topped $2.3 billion, and the company’s licensing program grew as well. Knowing that under the terms of their agreement, they could not publish more than five games per year, two licensees—Konami and Acclaim—asked for second licenses. This allowed Acclaim to publish five additional games as LJN, and Konami to publish its additional games as Ultra. Two of the first games that Konami published under the Ultra label were exceptionally successful—Teenage Mutant Ninja Turtles, a game based on comic-book heroes that became a cartoon show and a motion picture, and Metal Gear, a game about a soldier in a special forces operation.
The big news around Nintendo in 1989 was the pending release of a new handheld game system, the first handheld video game to use interchangeable cartridges since Milton Bradley released Microvision in 1979. Named Game Boy, the new unit was designed by Gumpei Yokoi and Nintendo’s Research and Development Team 1, the team that created Game & Watch and designed the hardware for Donkey Kong.
Typical of Yokoi’s engineering, Game Boy was inexpensive, lightweight, and efficient. It was the same size as a calculator, had stereo sound, a black-and-white liquid crystal display (LCD) screen, and could run for ten hours on four AA batteries. Though Game Boy was designed around an eight-bit processor, it was not compatible with the Nintendo Entertainment System, and its cartridges were only slightly bigger than a book of matches.
Yokoi was not alone in his interest in handheld games. Unaware that Yokoi was creating Game Boy in Japan, Rare Ltd. cofounder Chris Stamper built a handheld game system that played NES cartridges. When he completed the project, Stamper and Joel Hochberg, Rare’s American partner, demonstrated the unit to Nintendo of America.
We had no idea that Nintendo was working on a portable system when I arranged a meeting with Mr. Arakawa and Howard Lincoln, to show them a portable system that we had developed that used NES carts. There were a number of problems, of course, such as battery life. It was cumbersome in comparison to what Game Boy in its final form actually looked like because it accepted a larger cartridge.
At my meeting with Howard and Mr. Arakawa, they took me into their confidence and told me about this Game Boy project and suggested that we forego any development of this project that we were working on.
—Joel Hochberg, cofounder, Rare and Coin-It
In a shrewd maneuver, Nintendo of America president Minoru Arakawa decided to use Tetris as the cartridge that came packed in with Game Boy. It was a perfect match. The puzzle game’s simple graphics lent themselves well to Game Boy’s LCD screen, and its style was ideal for travel and quick breaks. The Tetris cartridge also fit into advertising campaigns that Nintendo ran in later years, after discovering that Game Boy had a stronger appeal to adults than the NES did.
Nintendo originally released three cartridges—Baseball, Breakout, and Golf—that retailed for $20 at the time that Game Boy was launched. A few weeks later, Nintendo released the Game Boy cartridge Super Mario Land with a barrage of advertisements based on the science-fiction movies of the 1950s. Though it had the look and feel of other Mario games, Super Mario Land took the plumber in new directions. In this game he flew a spaceship and rode in a submarine. Shigeru Miyamoto had not overseen the creation of this game; Yokoi produced it himself specifically to support his Game Boy system.
Unlike the other hardware systems that came out in 1989, Game Boy was an immediate success. According to an article in Time magazine, the one million Game Boys sent to the United States in 1989 met only half the demand for the product.1 That allotment sold out in a matter of weeks. Game Boy was a juggernaut. Its sales did not slow down, even when it was confronted with a technologically superior product.
Atari Lynx
Jay Miner, the man most associated with the design of the Atari 2600, founded Amiga in 1982. In 1983, he hired a young programmer named RJ Mical* who had a fanatical passion for creating operating systems. Tall, athletically built, and openly goofy, Mical was the antithesis of the standard programmer. Working under Miner, Mical learned a new appreciation for the relationship between hardware and software.
Everything I learned at college and everything I learned until going to Amiga suggested that hardware was hardware and software was software, and the way things are done is that you invent a bunch of hardware and give it to the software guys. There’s a much better way of thinking that I learned at Amiga. For the first time, the hardware and the software were created together. There was a great flow of communication, a mutual design coming into existence at the same time.
—RJ Mical, operating system designer, Amiga
While working at Amiga, Mical struck up a friendship with a hardware guru named Dave Needle. Both men shared the same “Yin and Yang” philosophy about the interrelationship of hardware and software. They both left Amiga in 1985. Needle took a job with Apple Computer and Mical became an independent contractor. A few years later, however, while eating at a Mexican restaurant, they began discussing projects they could build together. The conversation turned to video game systems. Needle grabbed a napkin, and they sketched the basic plan for a handheld video game system with stereo sound and color graphics.
Mical and Needle originally planned to design their system around a 16-bit processing chip but decided it was
not a practical idea. The chips they looked at would have had heat problems, and when they evaluated the components needed to support the 16-bit processor, they decided the system would be bulky and heavy. They switched to an 8-bit 6502 chip from the same family of chips used in the NES and Atari 2600.
Mical and Needle did not have the money needed to build and market a game system, so they began searching for a company that would buy their idea. They contacted Epyx and demonstrated their idea toward the end of Michael Katz’s tenure as president of the company. They did not know that Katz had urged the company’s board of directors to accept the project. Over the next few months, they entered a lengthy and friendly negotiating process that ended with them accepting stock in Epyx and taking positions with the company. They called the project “Handy Game.”
Though Katz had managed to keep Epyx running, he was never able to completely solve its financial problems. The company, needing financial backing in order to bring out a new game system, invited several potential partners to view Handy Game while it was under development. In 1988, Nintendo sent Don James to have a look at it.
Someone from Epyx contacted us and said, “Hey, we’ve got this thing and do you guys want to look at it?” I don’t think they actually offered it to us, but we found out about it and I flew down and had a look.
I went down and they showed me what they were doing. It was really just a screen at that point. It was difficult to see the screen because it faded in and out if you moved it around. You had to have it just the right angle to see the screen really well. My personal thought was that, because of that and because it just chewed through batteries like crazy, it wouldn’t ever really catch on that well.