The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World

by Steven Kent

  They [Nintendo] always claim that there was a time after the launch when they pulled ahead of us, but our research said that there wasn’t. They had a phenomenal initial launch. If you mean in terms of a month, I’m sure there was a month when they outsold us. You know, I’m sure they outsold us for a few months.

  —Tom Kalinske

  The fact is that the home video game market is made up of three categories, and having a good year in one category does not give you the right to claim overall superiority.1

  —Peter Main, vice president of marketing, Nintendo of America

  Going into 1992, Sega had several advantages over Nintendo, including a much lower sales price and a larger library of games. Nintendo was slow in getting games to market, and some of the early Super NES games such as U.N. Squadron and Bill Laimbeer’s Combat Basketball were not particularly fun. There were too many golf games early on, and the anticipated third-party titles, such as Konami’s Contra 3: The Alien Wars, were slow in coming. Sega had ten games for every game on Super NES, and Sega’s internally produced titles were getting better and better. Sega had a long line of arcade hits to draw from and several licensed contracts with Disney, as well as with such sports stars as Joe Montana and David Robinson. Capcom may have released only a Super NES version of Final Fight, but one of Sega’s internal development teams created Streets of Rage, a similar side-scrolling gang-fighting game with bigger levels, tougher enemies, and amazing original music.

  Not only were there more games for Genesis, but Sega also continued to produce titles at a faster pace. The market seemed to stop and take note every time Shigeru Miyamoto released a new Mario or Zelda game, but those games generally arrived at the rate of one per year. Sega released several anticipated games like Streets of Rage and ToeJam & Earl throughout the year. These games may not have been as widely anticipated as a Mario game, but they often had an edgy irreverence about them that helped shape the way people perceived Sega. More important, they gave Genesis owners something to look forward to buying in the near future, while Super NES owners had to wait for the Christmas season.

  Every week we would have an executive review of the games we had in progress. And the meeting would involve anybody who wanted to join…. marketing, manufacturing executives would be there, producers, etc. We would review the games in a conference room that was called the Loony Bin. It was kind of funny.

  When you watch the television commercials, they’re very irreverent, very cutting edge, and this kind of … this attitude pervades throughout the entire company. When we had these meetings with Tom Kalinske and all the executive VPs in the room, you could say anything you wanted to. It was very interesting because people were swearing in the meetings and making off-color remarks. But it was all accepted. It was just part of the company culture, people could say anything about the game. They’d say things like, “That thing really sucked.” Or, “That character really blows,” and the executives were right there, taking it all in and very serious about it.

  —Terry Huang, former public relations manager, Sega of America

  Sega’s advertising continued to evolve as well. While Nintendo’s advertising seemed stuck in a Mario-esque world of cute images appealing to preteen kids, Sega turned to a noisy underground image. Sega commercials always ended with the “Sega Scream”: some character screamed “Sega” into the camera. This new marketing approach, combined with an emphasis on sports games, Sonic The Hedgehog, and new lines of edgy games, changed some basic market demographics. Sega was becoming cool to high-school students, and the cooler Sega became, the less people were ready to admit that they liked Nintendo. When a Sony marketing team ran focus groups, they found that teenage boys who owned a Super NES console would not admit it.

  I saw that our primary audience was over eighteen years of age. Nintendo tended to focus on younger kids. We attempted to focus on an older crowd. Forty percent of our business is over eighteen years old. Teenage and college-age kids have adopted the Sega Scream. I was backstage at a rap concert, and I watched rappers who did not know who I was meet each other with the Sega Scream.

  —Tom Kalinske

  As the year progressed, Nintendo sought to eliminate one of Sega’s advantages by lowering the price of the Super NES console from $179 to $149. Nintendo of America vice president of marketing, Peter Main, would later comment that he wished they had gone with a $149 price tag from the start. “I could have sold an extra million,” said Main. Sega responded to the Nintendo price drop by reducing the price of Genesis to $129.

  According to the TRST data, sales information recorded by the industry-tracking NPD Group, Nintendo sold 5.6 million Super NES consoles in 1992, edging out Sega by 10 percent. Sega still had a larger install base and sold more software, but the momentum seemed to be moving in Nintendo’s direction.

  As Nintendo and Sega squared off for top honors in the 16-bit arena, NEC officially pulled out of the market, turning the sales of TurboGrafx over to a newly created company called Turbo Technologies Inc. that it formed with Hudson Soft. The writing was on the wall for TurboGrafx and had been since before the release of Super NES. The system had developed a cult following but it would never have a genuine hit game in the United States. Even Bonk, its mascot game, was almost unknown to the general consumer. (By comparison, a 1993 study showed that more American kids recognized Mario and Sonic than Mickey Mouse.) Turbo Technologies continued marketing various versions of the TurboGrafx into 1994, then closed shop as Atari and 3DO entered the market.*

  The ROM Race

  In what may have been the oddest race in video game history, Sega and Nintendo began developing devices for a new storage format called CD-ROM and raced to deliver CD-ROM peripherals to retail. In truth, CD-ROM was anything but new. Computer companies had been using them as a method of mass storage for years prior to Nintendo and Sega making their discoveries, and NEC beat them by two years with TurboGrafx-CD. Sega announced plans for the Mega-CD, the Japanese version of the CD-ROM, drive in early 1991. The plan was to release the unit in Japan by late 1991, then in United States the following year.

  Around Sega of America, the general reaction to the Mega-CD announcement was euphoric. The drive was seen as a way of turning the technological tables in Sega’s favor and driving yet another nail into Nintendo’s coffin. Sega of Japan and its partner on the project, Sony, handled all of the design work, shutting out Sega of America executives until the project was completed. As late as mid-1991, Japanese executives continued to keep the unit hidden from Sega of America, finally sending a crippled “dummy” drive to the U.S. that summer to show them what it looked like.

  When you work at a multinational company, there are things that go well and there are things that don’t. They didn’t want to send us working Sega CD units.** They wanted to send us dummies and not send us the working CD units until the last minute because they were concerned about what we would do with it and if it would leak out. It was very frustrating.

  Somehow they had sent some ROMs, or we had procured ROMs somehow, and we had a dummy unit that was missing its ROM. I always liked to work late at night, and so did Shinobu Toyoda,* so it was like one in the morning and he came to me with this chip and with the Sega CD and the ROMs and said, “Can you actually make this work?”

  I thought, “Yeah, I probably could.” So, I put the chip in. There were a couple of other things that were unhooked, but we fixed it and plugged it in. So Shinobu and I were the first people in the U.S. to see the Sega CD boot up. Our take on it was one of wonder from the product development side, but as soon as we started to program for it, I think … I think the wonder went away quickly.

  It was literally a mass storage extension of the Genesis. It wasn’t a new system, and that was always the confusion internally. The internal people believed it to be a completely new system with new abilities. It did have small expansion abilities, but they were not significant.

  —Michael Latham, former executive producer, Sega of America

&
nbsp; Although Mega-CD, which would arrive in the United States in 1992 as Sega CD, had a more powerful processor and handled more colors than the Genesis processor, the single-spin CD-ROM drive was meant only to expand the size of games. Genesis and Super NES cartridges generally ranged in size from 8 to 16 megabits, but a single CD-ROM could hold 640 megabytes—320 times more data. With over 600 megabytes of storage, Sega CD could play games with digitized video. Before the company could launch the new medium, however, Sega would need games to support it. As luck would have it, several suitable games already existed.

  The Nintendo Play Station

  Nintendo also announced plans to manufacture a CD-ROM drive. Like Sega, Nintendo turned to Sony Corporation as a partner. At the Winter Consumer Electronics Show in January 1992, Nintendo claimed that it could manufacture and distribute the drive within the year. The problem was that Sony was proving to be a very dangerous partner. Sony executives had already revealed plans to release their own CD-based video game system called the Play Station, and Nintendo executives wondered about the wisdom in giving them access to Nintendo’s system by having Sony make a Super NES–compatible CD drive.

  After reconsidering the situation, Nintendo executives allowed Sony to announce plans for the drive at the Consumer Electronics Show, then appeared the next day to say that they had struck up a deal with Philips N.V., the Dutch conglomerate, instead. Sony executives were shut out and humiliated. Ken Kutaragi, the young engineer whom Sony had placed at the head of the Nintendo project, went to Sony CEO Norio Ohga to plead for permission to keep the Play Station project alive, stating that the system could be built into a stand-alone unit. He proposed looking ahead to the next generation of game hardware and creating something that would immediately render Super NES obsolete.

  Having just been humiliated by Nintendo, Ohga accepted Kutaragi’s suggestion and brought it to the company board. The general reaction was unfavorable. Nintendo clearly had too much control over the market, and attempting to break in would be too risky. An internal battle ensued, with Ohga almost alone in his support of the venture. In the end, he decided to gamble on Kutaragi and approved the project.

  As Kutaragi quietly started work on his project, Nintendo executives began looking for suitable games. One of the first projects to catch their eye was The 7th Guest, a breakthrough puzzle game that was being developed by a Medford, Oregon, company called Trilobyte.

  We got a call one day from a guy working with Don James’s group at Nintendo. They were trying to find games that would be appropriate for their CD-ROM drive that was eventually going to happen, and he gave me a call and said, “Do you have any CD-ROM titles that you’re working on that we should have a look at?”

  I said, “Oh, wow, I’ve got something that you’ve got to see. It’s called The 7th Guest.” So he flew down probably about a week and a half later and was given the tour of the company and shown the product. He said that he was very excited. Within a couple of days later, his boss Don James came down and took a look, and from there, they started negotiating a deal to purchase the rights to The 7th Guest for the Nintendo CD-ROM player. A deal was eventually struck, and Nintendo got all CD-ROM game console rights to the product and Virgin (the game’s publisher) was paid, I believe, $1 million up front.

  —Seth Mendelsohn, former senior game designer, Virgin Interactive Entertainment

  Nintendo never released its CD-ROM drive. Nintendo first announced delays and then claimed that the unit would be ready by August 1993. Behind the scenes, Nintendo was slowly closing down the project. By 1995, Nintendo would be the only major video game company that did not have a CD-based game system.

  The Birth of Digital Pictures

  With the collapse of the Nemo project, which he had begun in conjunction with Hasbro, Tom Zito had placed his live-action video games, along with office equipment and other supplies, in a Rhode Island warehouse and largely forgotten about them. What he did not know was that Sega and Nintendo had a new medium with enough storage space to handle his games and that a desperate search for games with digital video was underway.

  Ken Melville was working at this company and happened to have a prototype copy of Sewer Shark in its original version on videotape. So he calls me up and says, “The weirdest thing happened today. Mickey Schulhof and Peter Guber were in here the other day. They saw Sewer Shark; they were blown away by it. I think they’re trying to buy this company because they believe that this company owns Sewer Shark and has technology to do products like Sewer Shark.”

  Now Guber was the head of Columbia Pictures, which was owned by Sony, and Schulhof was the chairman of Sony U.S.A. It just so happened that my younger brother, Bob Zito, was Mickey Schulhof’s PR guy.

  I called my brother on the phone and told him the story and he said, “That doesn’t sound at all possible.”

  “I really can’t believe that’s true.” He said, “I’m gonna be with Mickey two weeks from now. If the opportunity comes up, I’ll ask him. I’ll get back to you.”

  About two hours later, my phone rang and it was my brother. He said, “Is this thing set in sewers?” I said, “Yeah,” and he said, “You shoot at rats and bats?”

  I said, “Yes.”

  He said, “And you own rights to this?”

  I said, “Yeah.”

  He said, “I think you better take a red-eye to New York.”

  —Tom Zito, founder, Digital Pictures

  As Nemo collapsed, Zito had purchased the rights to the video-based games that he had helped create for it, thinking they might some day be useable. With clear rights of ownership in hand, he met with Schulhof, who signed him up to create games for the Nintendo Play Station. Zito then formed a company called Digital Pictures. He spent the next year reworking two of the games that had been created for Nemo—Night Trap and Sewer Shark—so that they would run on the ill-fated Play Station. When the Sony/Nintendo partnership failed, Zito turned to Sega.

  So then, in the meantime, Sony had gone off and started off with a Play Station of its own. And we started doing all this stuff for Sega CD; and the rest, as they say, is history. And meanwhile, I met Shinobu Toyoda at Sega and was aware that Sega was coming out with a CD system. When Sony went away, we sort of changed the focus of our development afterwards and started doing stuff for Sega CD rather than for Sony.

  The incredible irony of it was that the video we plugged into the Super Nintendo was just terrific because Super NES could display 256 colors at once. Sega CD could only put up 32 colors at a time, so you had this horrible grainy look to the images.

  —Tom Zito

  Sega CD was released in the United States on October 15, 1992; it retailed for $299 and Zito’s game, Sewer Shark, came packed in the box. Digital Pictures became one of Sega’s most important partners, creating several original games for Sega CD.

  Tom Zito, CEO of tiny Digital Pictures, is one of the first to take advantage of the technology. Zito, who used to write for the New Yorker and Rolling Stone, spends some $2 million filming real actors for his CD-based interactive games. Corey Haim (The Lost Boys) and Debbie Harry (Hairspray) are among the performers who have starred in his miniproductions. His most interesting title this Christmas is Prize Fighter, directed by Ron Stein, who choreographed some boxing sequences in the 1980 Martin Scorsese classic Raging Bull. Besides trying to knock out a series of actors portraying boxers, you, the game player, become part of a story. In this case, a crippled boy on the sidelines cheers for you.2

  PCs Get Game

  Sega and Nintendo found themselves facing a new and increasingly more dangerous opponent in the early 1990s—PC computers. Just as the Commodore computer had caught up to Atari and Coleco a decade earlier, personal computers threatened to eclipse the new generation of video game manufacturers as the era of multimedia began.

  The evolution to multimedia began as sound became more common on computers. Companies such as Roland and Turtle Beach had long offered sound cards that could handle audio files, and even most
of the early PCs came with cheap speakers built in. But few people owned early sound cards and the sound that streamed through PC speakers was tinny at best.

  In 1989, a company called Creative Labs, founded by a Singaporean entrepreneur named Sim Wong Hoo, introduced a reasonably priced PC sound card called Sound Blaster. The card, which featured an 11-voice FM synthesizer, input/output jacks, and a MIDI/joystick port, became the top-selling add-on card in the PC market. Sound Blaster was not the first sound card; it was not even Creative Labs’ first sound card, but it was the first sound card to see this kind of success, and Sound Blaster compatibility became a standard throughout the industry.* Soon companies such as MediaVision and Gravis released their own Sound Blaster–compatible cards.

  With the advent of Sound Blaster, PC game companies became very aggressive about adding audio to their games. Origin Systems, a company with a well-earned reputation for making technically superior games that would only run on the latest and most powerful personal computers, published a game called Wing Commander that began with a virtual conductor directing a symphony.

  The next big move toward multimedia came in the form of CD-ROM drives. Soon companies such as Viacom New Media, Hyperbole Studios, and ICOM were flooding the market with “interactive movies” that featured bad scripts, amateurish acting, and minimal interactivity. Sanctuary Woods, a software publisher that would eventually produce a few impressive products before going bankrupt, released a series of interactive comics called Victor Vector and Yondo. CD-ROMs had provided the entertainment industry with a new frontier, and a wave of entrepreneurs rushed to take advantage of it.