R&D - GENESIS - Console Wars (2015)

Console Wars (2015)





Like a shark swimming by a school of fish, a hulking yellow Cadillac de Ville crept past awestruck motorists on Tokyo’s busy streets. Kalinske and Nakayama sat in the back of the chauffeured car, watching the people they passed instinctively try to peer through their tinted windows. Guppies.

Unlike most wealthy Japanese businessmen, who favored the comfort and grace of a limo, town car, or even an upscale Nissan, Nakayama had an entirely different opinion when it came to transportation. He had imported a big, bulky left-hand-drive Cadillac that was so large and exotic, it made other cars on the street appear to shrink in comparison. Wherever he went and whatever he did, Nakayama always stood out.

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 what 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.