Console Wars

by Blake J. Harris

  One year after conceding the market to Nintendo, Sega returned to the party in a snazzy new outfit. Under the direction of Hideki Sato, the head of R&D, a team of engineers were successfully able to condense the technology inside Sega’s arcade boards to fit into a sleek black box. Amazingly, Sega had created the world’s first 16-bit console, but Nakayama and Rosen were torn on how to proceed. Should they jump back in the ring and try to knock out Nintendo, or play it safe and license the technology to another company? After their previous console debacle, they opted for the latter, leading Rosen to approach several prominent companies, but only one seemed foolish enough to think they could actually beat Nintendo: Atari. He met with the head of their videogame division, Michael Katz, who quickly became convinced that Sega’s 16-bit system could be the key piece in Atari’s resurgence to the top. Rosen and Katz excitedly prepared a presentation for Atari’s president, Jack Tramiel, who took one look at the thing and passed. Though Atari wouldn’t be launching the 16-bit console, Michael Katz would: Rosen hired Katz to become Sega of America’s second president and release this new console that Rosen had named Genesis, in the hopes that it truly would represent a new beginning for the company.

  As before, Rosen was content to supervise from the sidelines, but Nakayama wasn’t particularly impressed with this hire. Katz may have been clever and experienced, but he didn’t know how to manage people. He was too lax, too indecisive, and too predictable. He also shied away from office politics in the worst way possible: he nobly thought that he was above it. Worst of all, Katz was a videogame journeyman at a time when Sega needed fresh blood. As head of the parent company, Nakayama could have nixed Katz at any time, but he didn’t want to undermine Rosen—at least, not directly. Instead of throwing Katz off the cliff, he decided to clip his wings and then see if he could still fly. If Katz wanted to internally develop a certain kind of game, then maybe he’d be told it wasn’t Sega’s forte. If he found an outside developer who could do the game he wanted, then maybe Japan would scoff at the cost, or chastise him for seeking outside help when Sega was perfectly capable of doing it themselves. Further adding to Katz’s hornet nest was the reverse-engineering situation with Electronic Arts. The night before the 1990 Summer CES, Trip Hawkins had met with Rosen and Nakayama to let them know that EA had reverse-engineered the Genesis. Not only that, but EA had supposedly set aside ten million dollars to fight any potential litigation. Nakayama was furious, as was Rosen, but as the cooler-headed of the two he was able to turn a potential shouting match into a more cordial negotiation that would last several months. This would eventually lead to a mutually beneficial arrangement, but for the time being it was just another headache for Michael Katz. Rosen would try to support him, but even that became a double-edged sword. Because Katz was his guy, Rosen was less willing to allow him to take risks—like when Katz wanted to hire a new ad agency and Rosen nixed the idea because their current firm, Bozell, was located nearby in Los Angeles and, even if they weren’t the best, their work was reliable. Through no fault of his own, Katz became embroiled in something of a philosophical chess game between Nakayama and Rosen.

  To keep tabs on Sega of America’s new president, Nakayama relied on a tenacious young manager he had hired one month earlier: Shinobu Toyoda, who up until this point had served as chief lieutenant to SOA’s interim president, Dai Sakarai. Coming from the Aerospace Division of the prestigious Japanese conglomerate Mitsubishi, Toyoda knew nothing about videogames but learned quickly from Sega’s American president. Katz taught him what made for a good game and, more important, the value to Sega in offering a matrix of diverse titles (i.e., sports, puzzles, role-playing games). Toyoda was thankful for the tutelage, but gratitude didn’t prevent him from agreeing with Nakayama. Six months into the job, Toyoda strongly urged Nakayama to find a replacement for Katz, preferably someone who could more smoothly manage internal conflicts and external relations.

  Without notifying Rosen, Nakayama traveled to Hawaii and tracked down Kalinske. Throughout the courting process, Nakayama consistently asked Kalinske not to interact with Rosen. This seemed odd to Kalinske until he better understood their bizarre relationship: puppeteers who fought for control of their marionettes. Or at least that’s how it appeared. Nevertheless, Kalinske took the job, Rosen appeared thrilled to have him on board, and now less than two years later, Sega began cutting into Nintendo’s lead. Nearly forty years of drama, comedy, and innovation had led to this moment, with all of them in a ballroom in Las Vegas, celebrating past, present, and future.

  Once again, Kalinske waved at Sega’s masters of destiny, who this time took notice and gestured for him to join them. After a sequence of smiles, handshakes, and pats on the back all around, Kalinske took a seat beside Rosen and Nakayama. He allowed himself a moment to imagine Nakayama diving under a table in slow motion, then forced himself to push the image out of his mind.

  “Pretty amazing, isn’t it?” Kalinske asked.

  “I am certainly amazed,” Rosen said, “but certainly not surprised.”

  “And this is only the beginning!” Nakayama proclaimed.

  “Well, now, let’s not get ahead of ourselves,” Rosen said. “I feel good about where we’re headed, but for now we ought to just soak it all in.”

  “Yes, of course,” Nakayama replied. “All I’m saying is just that this is tiny compared to where we are going.”

  Rosen rolled his eyes, which prompted Nakayama to do the same. Kalinske wondered how many times this kind of exchange had occurred before. For a moment, none of them said anything, and they simply looked out onto the dance floor at what they had built together.

  “All right now, that’s enough,” Rosen finally said to Kalinske, using a paternal tone that he rarely invoked. “Don’t waste another moment with us fossils. This is your moment. Go have some fun.”

  “Stop it,” Kalinske said. “I could sit here for hours.”

  “Well, you’d be sitting alone, then,” Rosen said, standing. “Hayao, you can stay if you want, but I’m going to retire to my room and see what’s playing on the television.”

  “This is a good idea,” Nakayama said, sporting a grin fit for a Bond villain. “I’ve got some other business to attend to.”

  They said their goodbyes and left Kalinske alone at the table, where he remained for some time. With a peaceful sigh, he gazed back out onto the dance floor to take in the wonderful sight of his employees letting loose. It was rare for him to see them and them not to see him; usually it was the reverse. Kalinske was used to being in the spotlight and liked it that way, but tonight was a monument to Sega’s success, which couldn’t have been accomplished without them. No matter how big or small their contributions, every single one of them was a necessary part of the equation.

  “Pretty amazing, isn’t it?” someone asked, snapping Kalinske out of his trance. It was Emil Heidkamp, senior vice president at Konami of America. Heidkamp was a kindhearted, thoughtful salesman, who had been with Konami since 1986, from the very first day they started making home videogames. He’d been responsible for the launch and success of some of Nintendo’s best-selling titles, like Castlevania, Contra, and Teenage Mutant Ninja Turtles. Under Heidkamp’s leadership, Konami had made Nintendo wealthy, and vice versa. As a result, he’d grown close to Nintendo’s top brass, fostering a relationship that he’d recently put on the line by agreeing to make games for Sega.

  “I am certainly amazed,” Kalinske said, echoing Rosen’s words from earlier, “but certainly not surprised.”

  “Nor should you be,” Heidkamp said, gently patting Kalinske on the shoulder. “You and your team do good work. I have nothing but respect for the guys in Redmond, but I’m glad that Sega managed to enter the picture while I was still here.”

  “Still here? Why? Do you have plans to go somewhere?”

  “Not at the moment. But I think that my time is coming to an end.”

  “Emil, is everything okay?” Kalinske asked with sudden and genuine concern.


  “Oh, no, nothing dire,” Heidkamp said, realizing how ominous he had sounded. “Did I never tell you about the deal I made with Mr. Kozuki?” he asked, referring to Takuya Kozuki, the president of Konami.

  Kalinske shook his head.

  “It was shortly after I joined Konami,” Heidkamp said, squinting a little as he reached back for the details. “I found the Lord and became a born-again Christian. I said to Kozuki-san that there had to be a certain kind of purity to our games. I didn’t want us going down the road of lowest common denominator with blood, nudity, and debauchery. After all, we’re in the business of selling entertainment to kids. We have a certain responsibility, don’t we?”

  Kalinske nodded, captivated. Heidkamp’s story put words to a collection of tiny doubts that had been building up in the back of his mind. He hadn’t been able to put his finger on the nature of these barnacles of dread until now. “What was the agreement?”

  “I made a deal with Mr. Kozuki that I would stick around and continue to take Konami to the top as long as we never did anything worse that cartoon violence. He didn’t hesitate for one second and agreed to the deal. Even more important, he backed up his words with actions. Right around that time we had a game out of Japan called Dracula Satanic Castle, and he let me rename it Castlevania and make other slight modifications. I consider Mr. Kozuki a great friend and I have no doubt that there is eternal truth to his words, but as I look around this industry that we’re all creating, I can’t help but realize it’s only a matter of time.”

  “It doesn’t have to be,” Kalinske said, shaking his head. He wasn’t sure if he disagreed with Heidkamp’s outlook or if he just didn’t want it to be true.

  “No, it doesn’t have to be, but likely it will,” Heidkamp said. “Have you seen what’s coming into the arcades these days? The most popular game is Street Fighter, where the entire purpose is to clobber your opponent. I’ll admit that beyond the premise the game itself is tame. But how long do you expect that to last? The world is full of slippery slopes, and once you start going down . . . well, there’s only one way to go from there.”

  “Right,” Kalinske said vaguely, looking like he’d seen a ghost.

  “Oh, Tom, I’m sorry. I didn’t mean to burden you with my personal woes,” Heidkamp said, shaking his head. “All I meant to do was come over here and congratulate you on a job well done. Don’t give another thought to this, okay?”

  Kalinske nodded, trying but failing to put it out of his mind.

  “Come on,” Heidkamp said, standing. “Let’s get back on the dance floor.”

  “Sure thing,” Kalinske said. “I’ll meet you out there in a couple minutes.”

  Heidkamp nodded and joined the swelling crowd on the dance floor. Kalinske watched from the table, trying to reconcile what he was seeing with what he had just heard. Had he been looking at this night all wrong? Was it not a celebration of passion, creativity, and hard work, but rather a villainous triumph of pulling the wool over the world’s eyes? At least when he’d sold toys and faced similar claims of impropriety, there was always the fallback consolation that in addition to entertainment he was helping to activate a child’s imagination. But that wasn’t quite the case with videogames, whose immediate feedback and preprogrammed outcomes could be seen as the opposite of imagination. Part of Kalinske wanted to laugh and discard such ridiculous thoughts, while another part wanted to dive under the table like Nakayama and hide from the world while he gave the nature of this business greater consideration. Back and forth the thoughts volleyed, playing out the struggle between heart and brain.

  Eventually Kalinske shook off the dueling thoughts and let the music woo him back to happiness. Big Bang Beat was playing a fast-paced version of “Celebrate,” which reminded Kalinske that tonight he could not be a man divided. Nor could he be one tomorrow, or any day after that. He owed it to himself, to make the most of this wonderful opportunity. He owed it to Nakayama, who had picked him to be his guy. And he owed it to all the people here tonight, people who meant a great deal to him, who worked harder every day, and who deserved everything they’d ever dreamed for themselves.

  Kalinske refused to let a petty case of conscience jeopardize everything that lay ahead. First they would need to pull even with Nintendo, and next they would take the lead. He didn’t know what would happen after that, but he vowed that it would be beautiful and extraordinary. Kalinske got up from the table and joined the bouncy, happy people on the dance floor. Tonight Sega had arrived, but as Nakayama had just said, it really, truly was only just the beginning.

  PHOTO SECTION

  After years of dynamic success at Mattel, Tom Kalinske was named CEO of the company at only thirty-eight years old. Internal politics, however, would eventually lead to his early departure.

  Photograph courtesy of Tom Kalinske

  While between jobs, Tom Kalinske and his family took a trip to Hawaii in 1990, but that vacation was cut short by an unexpected guest . . .

  Photograph courtesy of Tom Kalinske

  Hayao Nakayama, the president of Sega Enterprises, tracked down Kalinske in Hawaii and whisked him away to Japan to show off what his company had in the pipeline. Impressed, Kalinske agreed to become the CEO of Sega of America and take on mighty Nintendo, who controlled 95 percent of the videogame market.

  Photograph courtesy of Tom Kalinske

  Nintendo’s massive booth, often referred to as the “Deathstar,” at the 1989 Consumer Electronics Show.

  Photograph courtesy of Consumer Electronics Association

  To dethrone Nintendo, Kalinske relied heavily on his right-hand man, Shinobu Toyoda (center), and Sega’s marketing maestro, Al Nilsen (left).

  Photograph courtesy of Shinobu Toyoda

  Al Nilsen prepares for Sega’s innovative mall tour, which traveled around the country to pit Genesis against Super Nintendo . . . months before the SNES was even released.

  Photograph courtesy of Ellen Beth Van Buskirk

  Shinobu Toyoda poses with Joe Montana (center), who headlined one of Sega’s early hits, and David Rosen (left), who founded Sega back in 1965.

  Photograph courtesy of Shinobu Toyoda

  Shortly after Kalinske took over, Sonic mania swept through the nation. The blue blur’s cool-dude attitude quickly infected men, women, and children of all ages (including, of course, the entire Kalinske family).

  Photograph courtesy of Tom Kalinske

  Before dominating the videogame world, Nintendo of America was just a tiny arcade company run by brilliant visionary Minoru Arakawa.

  Photograph courtesy of Howard Phillips

  Howard Lincoln, an attorney in the Seattle area, helped Arakawa put out some early fires and then became Nintendo of America’s senior vice president.

  Photograph courtesy of Howard Phillips

  Throughout the early eighties, Arakawa and Lincoln led Nintendo to greatness with the help of hit arcade games like Donkey Kong, Punch-Out, and Mario Bros. (pictured).

  Photograph courtesy of Howard Phillips

  In 1984, Nintendo of America set out to launch an 8-bit home console called the Advanced Video System (AVS). But due to the videogame crash of 1983, retailers wanted nothing to do with Nintendo. As they explained, the videogame fad was over.

  Photograph courtesy of Howard Phillips

  One year later, the Nintendo Entertainment System (NES) was released in New York. To avoid the stigma from the crash of 1983, Nintendo used R.O.B. (Robotic Operating Buddy) to position its NES as much more than just a home console.

  Photograph courtesy of John Sakaley

  In 1988, Nintendo Power became the fastest magazine to reach one million paid subscribers and also personified Nintendo’s relentless commitment to providing an unparalleled user experience.

  Photograph courtesy of Howard Phillips

  Nintendo’s game master, Howard Phillips, the “man who played videogames for a living,” became so popular that in 1990, his Q-rating was higher than Madonna, Pee Wee Herman
, and the Incredible Hulk.

  Photograph courtesy of Howard Phillips

  Phillips became a celebrity, but not even his star power could compare to that of Michael Jackson, whose 16-bit game Moonwalker was an early hit for the Genesis. Here, the legendary King of Pop poses with Sega’s King of Marketing.

  Photograph courtesy of Al Nilsen

  After watching Kalinske’s group take a bite out of the market, Nintendo’s “main man,” executive vice president Peter Main, proudly coordinated the launch of the Super Nintendo (SNES) in 1991.

  Photograph courtesy of Peter Main

  To blunt the impact of Nintendo’s 16-bit SNES and further Sega’s entertainment revolution, Kalinske relied heavily on the dazzling PR work of Ellen Beth Van Buskirk.

  Photograph courtesy of Ellen Beth Van Buskirk

  Kalinske aspired for Sega to be more than just a game company and in 1992 established the Sega Youth Education Health Foundation.

  Photograph courtesy of Cheryl Quiroz

  Jeff Goodby (left center), Rich Silverstein (right center), and their innovative ad agency created Sega’s “Welcome to the Next Level” campaign, resulting in several iconic commercials (which all ended with the famous “Sega Scream”).

  Photograph courtesy of Jeff Goodby

  The relentless work of Diane Fornasier (left) on Game Gear and then the blast-processing Genesis insured that Sega’s marketing kept reaching the next level.

  Photograph courtesy of Diane Fornasier

  In 1993, Nintendo’s Bill White “switched sides” to join Sega, symbolizing a turning of the tide.

  Photograph courtesy of Bill White