by Steven Kent
By the time Nintendo launched Nintendo 64 (N64), Miyamoto had been creating games for nearly twenty years. He had witnessed and aided the evolution of the business, software, and technology of video gaming. His first game, Donkey Kong, was created by a five-man team and contained approximately 20K of code. Now, as he made the flagship game for N64, his team had swollen to more than fifty members. Instead of 20K, he and his team would write 8 megabytes of code—more than 400 times more code than in Donkey Kong. Instead of designing game levels that fit on a single screen, they created enormous 3D landscapes complete with trees, castles, and dinosaurs. Adapting to this new challenge, Miyamoto created a new philosophy. While most game designers were coming up with features, then building their games around them, Miyamoto worked on creating expressive landscapes, then created ways to use them.
One thing that was different with Super Mario 64 was [that] we wanted to make some snow mountain, a really big one. That came first, and afterward we asked [each other] for the ideas about how to make use of this mountain.
It was as if we were building up an amusement park. We first found our location. We purchased the mountain, and afterward, we thought of some interesting things we wanted to implement on the mountain.
—Shigeru Miyamoto, game designer, Nintendo Co., Ltd.
Super Mario 64, Miyamoto’s lead game for N64, did a better job of bringing a two-dimensional side-scrolling game into the world of 3D than any game before it. To accomplish this, Miyamoto’s team used all of the old characters and objects made popular in earlier Mario games, then incorporated new devices that could only occur in the 3D environment. The big end battles, for instance, pitted Mario against a much larger foe on a huge 3D platform. The only way for Mario to win was to circle around the enemy.
Building from Miyamoto’s amusement park analogy, Super Mario 64 included huge slides and other kinds of activities that brought true variety to the game. Everybody at Nintendo recognized the game as a masterpiece; the only problem was that Miyamoto was taking too long to build it. According to Hiroshi Imanishi, Nintendo president Hiroshi Yamauchi’s right-hand man, the release of N64 was delayed until Miyamoto was satisfied with Super Mario 64. The delay would have been even longer, but Yamauchi finally told Miyamoto that the game was good enough.
Another Battle at E3
There may have been an agreement. I certainly wasn’t a part of these conference calls that they had. Quite frankly, they have a CEO roundtable, and they weren’t going to let lowly executive vice presidents on these panels.
—Jim Whims, former executive vice president, Sony Computer Entertainment America
Concentrating on Saturn proved to be a tactical mistake that cost Sega millions, if not billions, of dollars at the end of 1995. According to TRST data released in 1997, 32-bit products made up less than 20 percent of 1995 video game sales, while 16-bit sales accounted for approximately 64 percent of the market. With only a few hundred thousand people owning Saturn, the market for Saturn software was tiny compared to the Super NES and Genesis markets. Nintendo concentrated on its 16-bit sales that Christmas and had the most lucrative holiday season of any game manufacturer. Cash-starved Sega did not have the inventory or new games to capitalize on Genesis.
Sega was also lagging in the 32-bit arena. In March, Sony sent out a press release announcing that it had shipped more than 1 million PlayStations into North America. By September, that figure would grow to 2.3 million units in North America and more than 8 million units worldwide.
Going into the 1996 Electronic Entertainment Expo, Nintendo looked strong, based on the glowing reviews N64 had received at Shoshinkai, an annual trade show Nintendo held in Japan. Sony also looked strong, having shipped more than 5 million PlayStations worldwide.
As they did during the days of the Consumer Electronics Show, Nintendo executives held a major press conference the day before E3 began. During this conference, held in the Biltmore Hotel, Nintendo chairman Howard Lincoln officially presented the N64 to the American press, and Nintendo spokespeople Ken Lobb and Isaac Marshall demonstrated Super Mario 64 and Pilotwings. Lincoln announced that Nintendo 64 would be launched on September 30, at a retail price of $250.
Next, Peter Main, Nintendo of America vice president of marketing, described the future of the market as he saw it. Sony, he said, currently controlled 80 percent of the 32/64-bit market. Even calculating in the September release of N64, Main conceded that Sony would control 50 percent of the market in 1996, with Nintendo wresting 34 percent of the market away from Sega and Sony. By Main’s figures, Sega was not much of a threat. He predicted that Sega would control only 16 percent of the market in 1996. And that 16 percent, he predicted, would drop to 8 percent in 1997, as Nintendo once again became the industry leader and claimed 53 percent of the market share, leaving Sony with only 39 percent. That night, Nintendo threw a lavish party in which Cirque Du Soleil performed. As far as Nintendo was concerned, the show had started perfectly. But Nintendo had no idea what Sony had planned.
As his predecessor had done the year before, Sony executive vice president Jim Whims decided to start the show “right” by making a momentous announcement during his keynote address. Though Sony could barely keep up with the demand for the PlayStation at $299, he announced that the company had decided to drop the price of the console to $199. The announcement caught Nintendo and Sega flatfooted. It was later revealed that there had been a gentleman’s agreement barring price announcements at the show.
Last year, Steve [Race] got up and said, “$299,” and the place went crazy. So dropping to $199, this had been part of our plans for a long time. If we had to hire a streaker to run across the stage with a sign that said $199, we would have done it. This was part of our legacy now: don’t miss the keynote address if Sony’s up there.
—Jim Whims
Whims’s announcement sent shockwaves through the show. Sega had fought against dropping the price of Saturn to $299. Saturn hardware was more expensive to manufacture than PlayStation, and Sega did not have Sony’s deep pockets to help absorb the costs of giving away hardware and profiting from software. Executives at Nintendo and Sega were not prepared to respond, but both companies eventually dropped their prices to match Sony’s. Through Jim Whims’s calculated game of chicken, Sony flexed its marketing muscle and proved itself to be the industry leader.
Sony’s leadership came with a certain amount of arrogance. On the third day of the show, Sega spokeswoman Angela Edwards brought signs saying, “Saturn, now only $299.” As she stood outside the show, waiting for help carrying the signs, an employee of Sony approached her, looked at the signs, and said, “You’re pathetic!”
Sega was in a bad position. Long known for its sports simulations, Sega did not have a football game ready for the 1996 fall season, and Electronic Arts did not release a 32-bit version of Madden NFL ’96, meaning there was no football game on Saturn. Sony, on the other hand, produced an excellent game called NFL GameDay and took leadership of the sports category.
Sega had squandered its five-month lead to market, releasing only one new game all summer long. By 1996, Sony had a much larger library than Sega, and Sega’s only hope at E3 would be new games. The company’s hottest prospect was NiGHTS, a game created by Yuji Naka, who also designed Sonic The Hedgehog.
Naka may have established his reputation as a great designer with Sonic, but with NiGHTS he demonstrated his versatility. The game revolved around two young children who, in their dreams, gracefully flew through a surrealistic world and faced personal demons. Always the perfectionist, Naka, the main programmer on the NiGHTS project, fretted over every detail in the game.
NiGHTS was a difficult game to make…. Very difficult. It wasn’t just the 3D aspects, it was more the actual game itself, the worlds and the way the characters interacted. If the game was missing one important element, it was going to be a complete failure and everybody would look at it and say, “This is really a disappointment.”
—Yuji Naka, leade
r of Sonic Team, Sega Enterprises
NiGHTS showed the strengths and weaknesses of Saturn. The game’s atmosphere and design were exceptional; but while the game had a free-flowing 3D feel, most of it actually took place in two dimensions. Although Nintendo and Sony had true 3D game machines, Sega had a 2D console that did a good job with 3D objects but wasn’t optimized for 3D environments.
Interestingly, NiGHTS became part of a new kinder, gentler image that Sega tried to evoke in 1996. The Sega scream disappeared from the company’s advertising and Sega held press events for educators and gave Internet-ready Saturns to schools. Things were closing in on Sega. The company that had once proved that the market was big enough for two competitors was now demonstrating that it wasn’t big enough for three.
The Launch of Nintendo 64
In mid-June 1996, Nintendo shipped 300,000 N64 consoles for the June 23 Japanese launch date. Only three games were ready on the day that the console launched: Super Mario 64, PilotWings 64, and a Japanese chess game called Shogi. In what may have been the most orderly launch of a highly anticipated console ever, Nintendo sold all 300,000 consoles, plus 300,000 copies of Super Mario 64 and nearly 200,000 copies of PilotWings 64.
Judging by the quiet Sunday morning launch, observers might have misjudged how excited people were over Nintendo 64. A Japanese fast food chain started serving “Mario milkshakes” and a new television game show based on Nintendo 64 appeared on television. Nintendo planned to ship more than 1 million more consoles by the end of the summer, but the euphoria did not last. Instead of shipping more consoles, Nintendo needed to ship more games.
In the meantime, Nintendo executives steadfastly tried to explain to the press why it was actually advantageous to launch after Sega and Sony.
It has always been the contention of Nintendo that among the criteria for success, “first” is pretty far down the list. The three factors that most motivate our customers—and those of our competitors—remain constant, no matter how the technology advances. First, is the “content” or entertainment made possible by the technology. Second, does the new technology actually deliver performance which is immediately and palpably better than what they already own? And third, and perhaps most important, can they afford it?3
Milestones
By the spring of 1996, the industry was rife with rumors that Tom Kalinske was leaving Sega. People assumed he was going to work for Disney when he was seen having lunch with Disney CEO Michael Eisner. Indications hinted that Kalinske was ready to leave. Mike Ribero, a former hotel executive hired by Sega, was rumored to have told people that he was replacing Kalinske. Moreover, there were stories about Kalinske falling asleep during company meetings and reports that he didn’t seem as intense as he had been in earlier years.
He [Tom] would fall asleep on occasion in meetings. That is true. These were nine-hour meetings. Sega had a thing for meetings. You’d get there at 8:00 A.M. and then you’d get out of the meeting at, like, 4:00 P.M., so he wasn’t the only person.
—Michael Latham, former head of Omega Team, Sega of America
Saturn continued to do well in Japan, and Sega’s Japanese executives blamed their American affiliate for any problems in the U.S. market. Hayao Nakayama made frequent trips to Sega of America’s Redwood City headquarters, and the Japanese team seized more and more control of how the company was run.
According to some people who worked with him, Kalinske seemed less interested in the work. People talked about walking into his office and seeing him staring out his window at nearby Oracle Headquarters. He didn’t seem as ready to fight Japan on decisions he knew were incorrect, and when his marketing team sent out a poorly conceived advertisement, he replied with a surly memo that said simply, “Have we lost our collective minds?”
It wasn’t the failure of Saturn that made him lose interest; it was the inability to do something about it. He was not allowed to do anything. The U.S. side was basically no longer in control.
—Michael Latham
On July 15, Sega announced that Kalinske had tendered his resignation. Within the week, Sega cofounder David Rosen resigned as chairman of Sega Enterprises and Hayao Nakayama resigned as CEO. Shortly after leaving Sega, Kalinske reemerged at Learning Technologies, a company founded by Oracle chief Larry Ellison and famed stock trader Michael Milken, both personal friends of Kalinske. Nakayama and Rosen remained with Sega, with Rosen acting as senior advisor.
One week after Kalinske left Sega, Sony Computer Entertainment of America announced that Jim Whims had resigned. For the next six months, Sony executive Shigeo Maruyama would fill in as chairman, commuting from Japan on a weekly basis.
Mr. Maruyama came in to become the chairman, and he did the infamous commute. He commuted between Tokyo and Foster City every week for six months. He would start the week on Monday, work in Japan Monday and half a day on Tuesday, then he’d get on a plane that would get him here Tuesday morning. He would work in Foster City Tuesday through Thursday, and then he’d catch a plane on Friday, which got him back to Tokyo on Saturday in the afternoon.
—Kazuo “Kaz” Hirai, president and COO, Sony Computer Entertainment America
Maruyama eventually brought in Kazuo “Kaz” Hirai to run the American side of the PlayStation business. Hirai, who had been with Sony Music Corporation since 1984, was an excellent choice. Tall and elegant, Hirai spoke flawless English, though he was originally from Japan. He projected the very image Sony wished to convey—educated, sophisticated, and confident. Under Hirai’s leadership, Sony Computer Entertainment America prepared for the launch of Nintendo 64.
These were busy months for Sony. On September 5, Sony released a game called Crash Bandicoot. The term bandicoot referred to a class of Southern Pacific marsupials that included Tasmanian devils. Hence, it surprised no one when the animal in Sony’s new game turned out to be a dim-witted brute with a spin attack. Critics charged that as a game, Crash Bandicoot was too derivative. Like Mario and Sonic, Crash ran around jumping on enemies and collecting things—mostly apples. But Crash was a character with a strong personality, and the people behind the game had a great eye for gameplay. Hence the character seemed destined to become Sony’s marsupial mascot. The character certainly took a step toward mascot status when an actor dressed in a Crash Bandicoot costume did a television commercial in which he visited Nintendo headquarters.
The commercial began with a quick glimpse of the sign outside Nintendo’s Redmond, Washington, headquarters. (Except for that initial shot, none of the filming was done at Nintendo.) In the commercial, the actor playing Crash stood in Nintendo’s parking lot, calling the “plumber boy” out for a showdown, until Nintendo security escorted him away. While Crash Bandicoot was Sony’s big game of 1996 and Crash became a popular character, Kaz Hirai and the rest of the Sony staff refused to acknowledge him as their mascot, though he would not have been Sony’s first spokes-cartoon. Around the time of the first E3, Sony briefly flirted with the idea of using a character called “Polygonman” as its spokesperson. Polygonman looked like a stained-glass version of a Simpsons character. After E3, Sony quickly abandoned him and company spokespeople claimed to have never heard of the character.
And if you take a look at Sony advertising, they never used any sort of celebrity or character endorsements. We never intended for Polygonman to be a character in a game. He was never going to be a Sonic or a Mario. He was always supposed to be something like the Master Game or something out there in the ether that was always challenging you. It was the challenge of video games that he was supposed to represent.
And the Japanese took it much more literally and thought that this was something that we were trying to do that was going to supplant Sony. We introduced Polygonman at E3. The Japanese saw it and went postal on us.
—Steve Race, former CEO, Sony Computer Entertainment America
Mario Returns
The American launch of Nintendo 64 was more phenomenal than the one in Japan. Nintendo made a press event of t
he shipping process by inviting a television crew to film pallets of consoles being loaded onto a plane. After more than a year of waiting for Nintendo to unveil the new game console, the media became a willing accomplice and the event made the national news. Nintendo originally announced that the release date would be Monday, September 30, then moved the launch up one day to the 29th. Having already presold their entire inventory, many stores started handing out their consoles on Friday the 27th, and all 500,000 units that Nintendo had shipped to the United States were gone by weekend’s close. Though the stated plan had long been to release a very limited number of Nintendo 64s in the United States in 1996, Nintendo executives recognized what a vital market they were dealing with and scrambled to find more.
To accommodate the red-hot U.S. market, Nintendo rerouted consoles earmarked for the Japanese and European markets. Rerouting Japanese consoles was of little consequence; demand for the unit had slowed by mid-July. The fact that Nintendo had plundered the few consoles targeted for Europe, however, offended certain European retailers and game publications.
Back in the United States, demand for N64 held strong, but a problem that plagued the Japanese market was becoming apparent in the United States as well. The predictions of gloom and doom appeared to have been correct. Due to the cartridge format, there simply were not enough games for the new console, and many games that came out were expensive or small. Super Mario 64 and Pilot Wings 64, the first games Nintendo released for N64, both came from Shigeru Miyamoto’s design team and received rave reviews. The next titles, however, did not fare as well. Cruis ’n USA, a Williams arcade game published under the Nintendo label, had a slow frame rate, causing the game’s motion to look jerky.