Console Wars (2015)





Big Bang Beat flooded the Alexis Park Hotel’s echo-friendly Parthenon Ballroom with an energetic smorgasbord of rock, soul, disco, and swing. The twelve-piece party band played hits from the sixties, seventies, and eighties with such shimmering gusto that it felt like a bar mitzvah, graduation party, and wedding all rolled into one. This was Sega’s opening-night party at the 1992 winter Consumer Electronics Show, and in many ways it was all of those things. It represented an unofficial coming-of-age ceremony, a graduation to the major leagues, and an irreversible marriage into the videogame industry’s royal family. This was everything Kalinske had been waiting for.

In an elegant sport coat and playful Sonic The Hedgehog tie, Kalinske danced under the high ceilings of the gold-paneled ballroom. He normally didn’t like to get up and dance, but tonight the auditory ecstasy was contagious. It was as if the music exploded out of the band’s oversized instruments, zigzagged around the crowded room, and latched on to the wrists, hips, and ankles of the guests, pulling them to the dance floor. The music captured Kalinske, his employees, and even the jet-lagged representatives of SOJ. It infected members of the press, third-party developers, and Sega’s corporate partners. The music even managed to seduce the retailers, an old-school breed of businessmen who rarely unleashed their embarrassing array of dance moves.

Van Buskirk was dancing beside Kalinske and Adair. “I take it you’re enjoying your first CES?” Kalinske asked her.

“Sorry,” Van Buskirk said, looking around the room to see which of the dancers looked most ridiculous. “Mental photography session in progress. I wish I had a real camera with me—I can’t believe how uncoordinated some of these guys are!”

“And you?” Kalinske asked Adair.

“Considering that a couple of hours ago I thought I was fired,” Adair said, “I would say that I’m having a grand old time.”

“Fired? What? Why?”

To the sounds of a high-energy rendition of “I Will Survive,” Adair relayed the details of her afternoon. She had been in the middle of taking buyers through the upcoming titles for Game Gear at Sega’s booth when someone came by with an ominous-sounding message slip for her: Nakayama was in town for the occasion and wanted her to come up to his suite immediately. After instantly going pale, she excused herself and went to Nakayama’s room as instructed, believing that she was about to be canned six weeks into her stint at Sega.

When she got to his suite, Nakayama quizzed her on a multitude of topics. Why had Nintendo been successful? Why did she want to join Sega? What were her parents like? After the lightning round ended, Nakayama nodded and congratulated her on a job well done. Before he could dismiss her, though, faint tremors from a small earthquake shook the room. Adair brushed off the jolt, but Nakayama immediately dove headfirst underneath a nearby conference table. Adair bundled together all the strength she’d gathered from her adult life, thanked Nakayama for his time, and ran back to Sega’s booth, cackling all the way. Even now, two hours later, she couldn’t help giggling at the memory.

“No way,” Kalinske said. “Just no way.”

“Yes way!” Adair said. “And if you’re imaging what it looked like, the answer is yes, his combover did get all ruffled in the process.”

“Now it’s really too bad you didn’t have a camera with you.”

“I know!”

“Where is our mutual friend?” Kalinske said, scanning the ballroom. “I haven’t seen him this evening.”

“Oh, God,” Adair said. “You can’t tell him that I told you. Please. I know I should have prefaced the story with that, but please don’t tell him.”

“Of course not. We’re a team,” Kalinske said. She smiled with relief, and they went back to dancing alongside Rioux, Toyoda, Schroeder, and Nilsen, whose giant public smile kept being interrupted by a sly private one whenever he thought about an incident that had occurred earlier in the day. He had been walking through Caesars Palace with Ken Balthaser and Clyde Grossman, normal as a day at a Vegas casino can be, until someone noticed the three of them were wearing Sega jackets. After it was discovered that they worked at Sega, they were instantly treated liked celebrities; someone even offered to comp their gambling if they were willing to reveal Sonic game tips while playing cards.

It really was a night to remember, with nobody able to resist the silky allure of the music.

Except for Nakayama. It appeared that no amount of corporate success could coerce his feet into dance steps. Yet it was clear from his shining eyes, judicious nods, and executioner’s grin that he was pleased by the world around him. He celebrated the occasion at a table in the corner of the ballroom, speaking passionately with a thick-jawed man in a sharp suit from a decade long gone. This was Nakayama’s friend and business partner, and Sega’s original founder, David Rosen.

Out of the corner of his eye, Kalinske saw Nakayama and Rosen seated together. He waved in their direction, but they did not wave back; they probably didn’t notice, he told himself, but a small part of him suspected that they had snubbed him as some kind of maneuver in their series of bizarre head games. Of all the business relationships that Kalinske had seen in his time, the one between Nakayama and Rosen easily qualified as one of the strangest. There was clearly a good deal of respect between the two men, but their opposite personalities, the geographic distance between them, and decades of drama made for an unusual dynamic between the two most important figures in Sega’s history: the man who had created the company and the man who had shaped it in his image.

Like most tangled relationships, the one between Nakayama and Rosen began years before the two ever even met. In 1949, David Rosen, then an eighteen-year-old ambitious pragmatist, enlisted in the United States Air Force. His unit was sent to Asia and stationed at various bases throughout the continent before, during, and after the Korean War. When his service ended in 1954, the Brooklyn-born entrepreneur remained in Japan and formed Rosen Enterprises, whose greatest success came in the photography business. At the time, the Japanese had a strong need for ID photos (to be used for anything from school applications to rice ration cards), but photographs were expensive and required a substantial amount of time, with the typical photo studio charging 250 yen and taking about three days. Rosen’s solution was to import coin-operated photo booths from America and set these up throughout Japan. By charging less and delivering photos instantly, the fully automated booths became an instant success. From there, Rosen Enterprises began importing all kinds of coin-operated products like jukeboxes and pinball machines.

In 1965, Rosen Enterprises merged with Nihon Goraku Bussan, a prominent Japanese jukebox company, which, most important, had a large manufacturing facility in Tokyo that was idle. Rosen was made chairman of the new venture, which was named after the English translation of Nihon Goraku Bussan, “Service Games”—hence SEGA Enterprises. A year later, Sega created its first original product, an electromechanical submarine game. Without the luxury of digital code, computer chips, and colorful screens, electromechanical games ran on a tightly rigged system of switches, relays, motors, and lights. In the evolutionary track of interactive entertainment, they were nothing but monkey business compared to the arcade videogames that would soon follow. But in 1966 Sega’s electromechanical contraption was leaps and bounds ahead of the pinball machines and skee-ball games of its era. Their original creation was a bulky red and gray machine that stretched to ten feet long and six feet wide, highlighted by an actual periscope in front. The game consisted of players peering into the viewfinder and swiveling a torpedo-shaped light to aim at enemy ships. Successful assaults were rewarded with flashing red lights and a gurgled explosion, while failures received nothing more than a dismal whoosh. Though it cost twice as much as any other game, Sega’s aptly titled Periscope was a major hit in Japan. In addition to providing cash flow, it turned out to be an undefined variable that allowed Rosen to flip the international business equation. Instead of importing games from America and selling them in Japan, Sega would now make their own games in Japan and export them to America.

Periscope quickly became a major hit in the United States as well, generating so much demand that it became the first electronic game to dare to charge 25 cents per play. Sega followed up Periscope with a slew of similarly sophisticated games with equally uninspired titles, such as Basketball, Drivemobile, and Helicopter. With a reputation for quality, innovative technology, and a cross-continental distribution network, Sega became attractive to multinational corporations with an appetite for potential. In 1969, Rosen agreed to sell Sega to Gulf and Western on the condition that they kept him on as the company’s CEO. Under his command, Sega continued to find steady revenues with a succession of electromechanical games like Soccer, Sea Devil, and Lunar Rescue, but jumped to new heights of influence with the creation, popularization, and global sensation of arcade videogames. Following the success of Atari’s Pong in 1973, Sega manufactured their own unabashedly similar arcade game, Pong Tron. The game was a smash hit, prompting Sega to shift its focus to videogames and, very nearly, do more than just copy Atari. In 1976 Rosen negotiated with Nolan Bushnell for Sega to acquire Atari, but on the day that they were to draft the contract, Bushnell backed out because he learned that his company had successfully developed a new console that could play more than one game (through the innovation of cartridges). That became the Atari 2600 and led to untold riches, but Sega continued thrive in its own right as well. Rosen’s Sega spent the decade mastering the art of videogames, progressing from a me-too mentality (with games like Pong Tron 2 and Fonz) to an artistic devotion to the craft (with games like Blockade and Monaco GP). As Sega’s success grew, so did the constant problem of bootlegging, which led Rosen to cross paths with Nakayama.

In Japan’s highly stratified society, Hayao Nakayama aspired to rise to the top. But for someone with humble origins, an unremarkable family name, and a memorable rough-and-tumble personality, social elevation posed a major challenge. No matter where he went or what he did, it seemed that he’d always be walking around with the concrete blocks of his past tied around his ankles. But that didn’t stop him from trying. If the past would not afford him access to certain banks, restaurants, or other places of status, then Nakayama’s passport to the world would have to be his cunning resilience.

He attended college to become a doctor, but wound up dropping out midway through the process. To find the next rung in his ladder to the extraordinary, Nakayama skimmed the newspaper’s classified ads and pounced on the opportunity to become a salesman for a jukebox leasing company. As opposed to the fat cats upstairs who did little more than plan cushy vacations for themselves, Nakayama learned the amusement industry from inside the belly of the beast. With a preternatural talent for detecting failures, inefficiencies, and misgivings in others, he quickly discovered many ways that his company should change, and he particularly touted the need to get into the arcade business. His insights fell upon deaf ears, so he left to start his own arcade distribution company, called Esco Trading.

Nakayama lived vicariously through Esco Trading, which serviced and repaired arcade cabinets for companies like Sega. And with arcade fever sweeping the globe, life was good. But Nakayama wanted more than just good. He expanded Esco’s operations, first to buying and selling used equipment and eventually to bootlegging American arcade games. Consequently, Esco became a threat to Sega, which prompted Rosen to ask for a meeting with the bandit who was cutting into his business. Rosen was not predisposed to like what he found: a street-smart, business-savvy guy with a gluttonous appetite for risk. But Rosen also believed that Nakayama had a marvelous sense of what machines the market would accept, which convinced him to make Nakayama an offer instead of threatening him. In 1979, Sega Enterprises purchased Esco Trading and made Nakayama the head of its Japanese operations.

By joining forces, they could focus on keeping Sega ahead of the curve while also thwarting an array of copycats who had recently cropped up, looking to make a quick buck in the arcade business with a horde of derivative games, companies like Irem, Nichibutsu, and Nintendo. By the early 1980s, Sega was generating revenue of over $200 million per year with hit games like Astro Blaster, Head-On, and Zaxxon. To outsiders impressed with Sega’s success, it was easy to compartmentalize the credit and declare Nakayama the heart and Rosen the brains—the doer and the thinker, the yin and the yang. But the truth was that despite their very different personalities, they were kindred spirits, each with an unflinching hand on the Ouija board of success. Which made it all the more startling when Rosen retired in 1982, voicing concerns that the arcade business was headed for trouble. He turned over all control to Nakayama, then moved to California with his wife for their happily-ever-after.

Nakayama continued to expertly steer the ship in Japan, but the videogame crash of 1983 devastated the American business. With Sega reeling, Gulf and Western looked to unload the company. There were few suitors looking to get into the videogame business while everyone else was getting out, but Rosen still believed in what he had started, and so he formed a buyers group with Nakayama and Isao Okawa, whose company, CSK, put up most of the $38 million they paid to buy back Sega. Under the new arrangement, Nakayama would run the majority of Sega’s operations from Tokyo, Rosen would run the company’s small American subsidiary from Beverly Hills.

While Nakayama and Rosen were busy putting the pieces back together at Sega, their progress was dwarfed by Nintendo’s success, which forever reconfigured the videogame landscape. In a few short years, Nintendo found viability in the once-barren handheld game market with its Game & Watch, conquered the arcade industry with Donkey Kong, and resurrected the home console business with the NES. What Nintendo managed to do in only a few short years made Sega’s decades of success look like a child’s artwork on the refrigerator of life: kind of pretty, but also kind of pitiful. Not only had Nintendo single-handedly revived videogames in the United States, but their utter domination transformed it from a niche industry into big business.

There was a janitor’s ring’s worth of keys to Nintendo’s success, but beyond the lucky alignment of people, places, and things, their invasion of America appeared to be the critical element. Success abroad changed the perception of Nintendo from a trendy gizmo company into a cross-cultural powerhouse. In addition to worldwide clout, Nintendo’s American pipeline tripled revenues, quadrupled the customer base, and immeasurably multiplied the reach of their soon-to-be iconic intellectual properties. Nakayama and Rosen couldn’t turn a blind eye to such scorching success, forcing them to play a game of follow-the-new-leader.

In 1985, two years after Nintendo’s Famicom launched in Japan, Sega released an 8-bit console of their own. In 1986, one year after Nintendo’s U.S. invasion, Sega set their sights on also infiltrating the American market. In an attempt to replicate their competitor’s staggering success, Rosen poached Nintendo’s VP of sales, Bruce Lowry, to become Sega of America’s first president. Lowry was handed the keys to the car, with Rosen supervising from the passenger seat as Sega of America’s chairman and CEO. They zipped off to a fast start in June 1986, selling 125,000 units of Sega’s Master System in the first four months. Even so, Sega could hardly compete with Nintendo, which had sold two million NES systems over the same period. In the coming months, Sega fell even further behind, and by 1987 Nintendo commanded 85 percent of the market. Unable to continue pouring money into a losing proposition, Sega threw in the red-white-and-blue towel and chose to focus on coin-operated arcade games. They granted all of the marketing and distribution rights for their Master System to the toy manufacturer Tonka, who had no experience in the videogame industry and over the next two years did little to change that reputation. Part of this was due to the fool’s errand it had become to compete against Nintendo, and the other part was due to Nakayama’s aggressively marking up Sega’s products to the point at which Tonka was left with almost no profit margin.

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.


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

Despite losing market share, Nintendo remained committed to its core values of making great family-friendly games. Here, Nintendo’s director of licensing, Tony Harman, proudly announces the release of Major League Baseball with Ken Griffey Junior.

Photograph courtesy of Tony Harman

Nintendo followed up its baseball game with the earth-shattering success of Donkey Kong Country. After selling more than seven million copies in only six months, Lincoln and Arakawa enjoy seeing the pendulum swing back in their favor.

Photograph courtesy of Howard Lincoln

While Nintendo fought back with great software, Kalinske focused on the next generation of hardware and tried to broker a deal with Olaf Olafsson, the head of Sony Electronic Publishing.

Photograph courtesy of Johann Pall Valdimarsson

Tom Kalinske, Shinobu Toyoda, and executive VP Paul Rioux dress up for a Sonic & Knuckles promotion. But behind the smiles, their wardrobe personifies the new dynamic between Sega of America and Sega of Japan.

Photograph courtesy of Shinobu Toyoda

The final blow to Sega came at the 1995 Entertainment Electronics Expo, when Sony’s Steve Race delivered the greatest (and shortest) speech of his career.

Photograph courtesy of Steve Race

Following the triumphant success of Nintendo’s N64, Howard Lincoln and Minoru Arakawa race for charity outside of the company’s office in Redmond, Washington.

Photograph courtesy of Howard Lincoln