Console Wars (2015)

PART THREE

THE NEXT LEVEL

29.

AFTER THE BLACKOUT, BUT
BEFORE THE SURGE

Shit.

Kalinske tried hard to think of any word besides this, but it was no use. The world had gone dark right in the middle of Sega’s most important presentation. Shit, shit. After the momentary shock wore off and he realized that this was a power outage, he turned to John Sullivan, whose eyebrow was ominously raised. Shit, shit, shit.

“Well,” Kalinske said, mining for some kind of silver lining, “I guess Sega has become so darn powerful that even the state of Florida can’t handle us.”

“Hey, if they’re looking at the same sales figures that I have,” Sullivan said, slapping Kalinske on the shoulder, “then I wouldn’t be surprised.” It was then that Kalinske realized Sullivan’s eyebrow had arched not with condemnation but with curiosity. And he was not alone. There was a wide range of reactions from audience members, including shock, disbelief, and incredulity, but no evident annoyance. If anything, they seemed pleasantly surprised by the turn of events, and happy to have a story to spread around back at the office. “To be completely honest, Tom,” Sullivan said with another slap to the shoulder, “I figured this was all part of the show. You guys are kind of crazy like that. Good crazy.”

Good crazy. Kalinske liked the sound of that, and gained a further appreciation for the description as Sullivan continued to explain while the club’s staff ushered them out of the ballroom and through an equally unlit hallway. “There’s a kamikaze-like aggressiveness to everything you guys do. You’re not afraid to shake things up,” Sullivan said as he, Kalinske, and hundreds of other retailers were led out into the parking lot.

“As long as we’re helping to put money in your pocket,” Kalinske said, “then I’m a happy man.”

“You are,” Sullivan said. “Believe me, you are.” They continued walking beneath the zealous sun until they found a comfortable spot in the shade where they could continue the conversation. “Can I trust you with a story?”

Kalinske nodded and took a half step closer. He had a feeling this would be good.

“Okay,” Sullivan started. “Coming out of this past holiday season, we’d sold a ton of goods. You know this already, I know, but the point is that we sell out of almost everything except some older 8-bit stuff. We ask you to mark down the goods, you guys oblige.”

“Of course,” Kalinske said. “We don’t want that stuff taking up your shelf space.”

“And I thank you for that sentiment. As I did with Electronic Arts when they agreed to mark down some excess inventory we had on hand. But I’m sure you can guess who didn’t feel the same way.”

“It’s their policy,” Kalinske said, rolling his eyes. “They don’t mark down.”

“Yup,” Sullivan continued. “So sometime in January, I’m walking through one of our stores with Charles. Well, there are all these unsold games piled up, and he’s not a happy camper. I mean, the man is seventy years old—he’s our founder, for God’s sake—but Charles Lazarus loves selling more than anything else, so this gets him up in arms. He picks up one of our inventory scanners, checks the SKU, and out pops the sell-through information with the vendor’s name: Nintendo. He tells me that I need to get them to budge, and I try, but it’s no use.”

“Not good,” Kalinske said. “When Charles wants something done—”

“Believe me, I know. But they’re steadfast in saying that it was our problem for not selling the inventory. They refuse to take it back and refund what we paid, and they refuse to let us discount the goods. So what am I supposed to do?”

“You’re supposed to ask how high,” Kalinske said, “when Nintendo says jump.”

“I keep talking to Peter Main and Randy Peretzman, telling these guys that something needs to give. Finally, they agree to come out, and they say they’re going to bring Arakawa. I take that as a good sign, since he doesn’t travel much. So it’s Charles, myself, and Howard Moore, and then Peter, Randy, and Arakawa.”

“Wow,” Kalinske said. “Everyone’s bringing out the big guns.”

“A good old-fashioned Mexican standoff, right?” Sullivan said. “But they’re not Mexican, they’re Japanese. Or Arakawa is, at least. So I warn Charles in advance that dealing with them is a little different than he’s used to. When the Japanese say yes, it means ‘Yes, I understand,’ not ‘Yes, I agree.’ So if you tell Mr. Arakawa you want markdown money, he will say yes, but that doesn’t mean he’s going to give you any dough.”

“The quirks of Japanese business!” Kalinske belted. “It is slowly becoming the story of my life. And, my friend, it’s a horror story if ever there was one.”

“Not getting along with Nakayama-san?”

“Of course I am. It just takes way more time and energy than it ought to.”

“That sounds about right,” Sullivan said. “So they come in and we go through all the usual pleasantries. I think we even exchange gifts with Arakawa, each giving the other some trinket destined for the garbage someday. Anyway, we get down to business. Charles lays out the importance of a partnership, then cuts to the chase. For this relationship to keep functioning at a high level, things need to start changing around here. There’s a long silence, and all eyes go to Arakawa, who finally nods and says yes. But Charles remembers what I told him earlier, and so he says, ‘Yes? What kind of yes? Yes, we’re going to work together on this, or yes, you understand, but you don’t care?’ ”

“Can I interrupt for a moment?” Kalinske asked. “I just want to tell you that I don’t even care how this story ends. You’ve already made my day.”

“Just wait,” Sullivan said with noticeable excitement. “After another long silence, Arakawa once again does that nod and says yes. Charles is starting to get cranky and keeps asking what that’s supposed to mean, until Peter finally pipes up and says that it means that what we want is not going to happen.”

“For the record, you’ve now made my week.”

Sullivan rolled his eyes and continued. “So Charles has had enough. He stands up and says, ‘In my mind, this is a partnership. Now you can either try to meet us halfway, or this meeting is over.’ Charles stomps out of the room and doesn’t come back. As you might imagine, there is a pretty big awkward silence there. So we fill the void by going back and forth with niceties. I mean, it’s a couple million dollars we’re talking about here. That’s a lot, but not the end of the world. We don’t want to make enemies, so we talk about the wife and kids and send them back to Redmond.”

“I apologize for interrupting again,” Kalinske said. “But I would like to amend the record to let you know that you’ve now made my year.”

“Oh, yeah?” Sullivan said. “Then I’m about to make your life. After I walk out of the meeting, Charles comes up to me and asks if they changed their mind. Of course not, I tell him. So he says, ‘Fine. Even if they’re not going to give us the money, I want you to do the markdown anyway.’ I tell him that’s silly. Now we’re not only going to lose money, but we’re going to piss them off and remove any incentive they might have to change their mind. But Charles doesn’t care. ‘Look,’ he says. ‘We’re going to play a chess game. You might be right and they may not give us the money. But if we mark down their products, there isn’t going to be a single retailer in the marketplace who doesn’t think that Nintendo gave us the money to do it.’ So I do exactly what he wants, and the next day I get a call from Peter and he’s flipping out. I explain that we’re doing the markdown anyway and that Charles has a message he’d like to pass along: ‘We’ll take the loss this time, but we won’t ever forget that we did.’ Well, not long after that, Nintendo agrees to give us the money, and they start a corporate markdown program.”

“Wow,” Kalinske said. “Wow, wow, and wow. I don’t know what to say.”

“Say ‘You’re welcome,’ ” Sullivan replied, “and I’ll say ‘Thanks.’ Because, I tell you, that game of chicken doesn’t turn out the way it did without Sega in the mix. So thank you, Mr. Kalinske. From myself and Charles. Since the day you took over, it’s been clear to me that Sega wants nothing more than to beat the crap out of Nintendo. And so far, you and your team are doing a damn fine job.”

“Thanks, John,” Kalinske said, genuinely touched. He was overjoyed to hear such unfiltered thoughts. Before today, he had assumed that everything he’d just heard from Sullivan was in fact reality, but there was nothing better than having that perception confirmed straight from the source. And for Kalinske, the best part was Sullivan’s acknowledgment of the work done by his team. Almost all of them had been handpicked by Kalinske, Rioux, or Toyoda and thrust into a job they’d never had before. By hook or by crook (but never by the book), they got the job done, and the industry was taking notice.

Kalinske looked around the parking lot, now flooded with a mixture of his employees, retailers, and perplexed members of the Boca Raton Club wondering who’d turned out the lights. Even in this bizarre moment, he could see that his guys were finally getting the respect they deserved. Nilsen was being congratulated like he’d just delivered a nation-changing inaugural address, Adair was being treated with the same kindness she always showed to everyone else, and Van Buskirk was telling a story about the Sega LPGA Tour event and naturally drawing in anyone who happened to catch a word. “After a month of trying to coordinate this thing I realize that I’m stuck in the middle between Sega of Japan and the LPGA,” she recounted. “Only problem is, due to the time difference, whenever Japan’s in the office, the LPGA isn’t, and vice versa. So I cut through the bureaucracy and call the tour myself. We get the thing done in a matter of days. Great, right? Or not,” Van Buskirk said, and paused briefly to shake her head.

“Oh, man!” someone said—just a random club member cheerfully eavesdropping.

“This guy knows what I’m talking about,” Van Buskirk said with a wink. “Anyway, I fly down to this fabulous event with John Carlucci, who helped put this whole deal together and, by the way, runs the best sports marketing company in the business. So shortly after we arrive, SOJ’s best and brightest arrive and we get summoned to an inquisition. I had no idea what was coming. I don’t know if anyone else knew it was coming. But man, we got taken down. We were asked to stand in front of the table. We were not asked to discuss anything. We just got a verbal barrage: ‘You really messed up, you embarrassed us, and this is an abomination to how we do business.’ We both walked out with our eyes as big as the moon. I’ve heard of these meetings where the guy in the center is so full of authority. We left the room shaking. Literally shaking, I swear. But it wasn’t twenty-four hours later, at some dinner event, that the same people—the same guy in the center and all of his lieutenants—line up to get their photos taken with me because I’m tall and blond.” Van Buskirk playfully ran a hand through her hair. “By the end, it occurs to me that I’m just a blow-up doll to them. Knock me down, deflate me—heck, even use me to ride in the carpool lane—and then just blow me back up when you need something.”

Van Buskirk had the crowd surrounding her in stitches, including Kalinske and Sullivan. “She’s a keeper,” Sullivan said.

“Yup,” Kalinske added, watching Van Buskirk transition into another anecdote. Even when the power went out, the presentation was halted, and the script had to be tossed out the window, the show went on at Sega. “But the thing is, John,” Kalinske said, “they’re all keepers. Otherwise they wouldn’t be here, and neither would I.”

About ten minutes later, the power came back on, and the parking lot broke out in applause. Kalinske, his employees, and the retailers made their way back into the ballroom to finish the presentation. After everyone took a moment to feast on the glorious invincibility that only air-conditioning can provide, there was an overwhelming sense that maybe it would be better to skip the rest of Nilsen’s speech and trade in business casual for swimwear. Nilsen could sense this, and knew he’d have to work to get them to listen to him.

“Greetings,” Nilsen said, readjusting to the stage. “Thank you for bearing with us through that pesky disturbance. Unfortunately, we’ll never know what caused the blackout, but I can’t help think twice now about those rumors that Luigi was spotted earlier today hanging out by one of the generators.”

The audience laughed, but wasn’t yet convinced to sit back down.

“He claimed to be working on the plumbing,” Nilsen explained, “but with the recent popularity of Sonic, I wouldn’t be surprised if he and his brother were looking into other lines of work. Though it seems electrician might not be the best fit for his skill set.”

This time more laughter, and some started to take a seat.

“Now, it occurs to me,” Nilsen said, “that we were just out under that big yellow sun, and some of you might prefer to be there rather than here. Particularly those of you from the artic tundra of Minneapolis,” he said, glancing at the contingent from Target. “And I will be the first to admit that I can’t compete with tropical weather. So if you would prefer to sit around by the pool with a cold piña colada in your hand instead of sitting around here and listening to me yap away, then I encourage you to do so.” He paused to allow the flock of retailers a momentary thought of paradise. “But if you decide to leave now, you’re going to miss learning about the most important event in the history of videogames.”

Kalinske loved it, the way Nilsen and all of his employees ran through obstacle courses with a smile on their face, no matter how difficult or peculiar the challenges were. This was what Sullivan had been talking about, the good kind of crazy, and Sega personified it through and through.

“So the choice is yours,” Nilsen declared. “And to those of you who are going out by the pool, save me a piña colada!” But there would be no tropical drinks, because everyone returned to their seats excited to hear about the next big thing. “Wonderful,” Nilsen said, and then took up where he had left off. “Crooks beware!” he proclaimed, describing the Home Alone game due out in November. “Kevin’s back, and he’s got a houseful of clever tactics to defend the entire neighborhood, keep the robbers on the run, and keep the gamers hollering for me.”

Kalinske proudly watched Nilsen get back in the groove, introducing The Little Mermaid (“The whole family will fall hook, line, and sinker for Ariel and, as a result, you’ll be reeling in the profits”), X-Men (“Disaster, riddles, muscle, and endless play arrive in November as the top-selling comic book comes to the Genesis”), and Streets of Rage 2 (“This isn’t some wimpy imitation. The characters are 25 percent bigger and 100 percent tougher”). The longer Nilsen spoke, the more Kalinske realized that he had been wrong earlier. There was no need to pitch a perfect game. Sega had already pitched a perfect game these past two years, and now it was just about continuing to throw hard.

The retailers furiously scribbled notes as Nilsen took them further and further behind the curtain, their anticipation growing for what he’d called “the most important event in the history of videogames.” Nilsen could see their minds salivating, but Nilsen continued to expertly stretch out their anticipation. “This next product needs to remain so top-secret that we can’t even show you what it looks like,” he began, introducing NFL Sports Talk Football Starring Joe Montana. “The cast is off, and in October he’ll be back on the playing field. The Genesis playing field, that is!”

After that, Nilsen finally arrived at the moment they had all been waiting for. “Here we are, folks,” he said, adopting a hushed tone. “I have the pleasure of giving you a preview of a game we’re really excited about. It won’t be out until 1993, but we’re so proud of the graphics, sound, and control that we wanted to give you a sneak peek at the next generation of Genesis games.”

Kalinske noticed retailers leaning forward in their chairs, hoping as much as he did that Sega had the goods to keep going after Nintendo. He studied Sullivan, who looked like a child about to unwrap an unexpected Christmas gift. “It’s an adventure game set in the not so distant past, filled with puzzles, unforgettable science fiction elements, and a quest to restore order in your civilization. No, I’m not talking about a Zelda knockoff. This is something completely different.”

Nilsen stepped off the stage and walked into the audience, his passion so overwhelming that he wanted them to see it firsthand. “Even if you don’t like to play videogames, I urge you to pick up the control pad and try out this game, Dolphin, when I’m finished speaking.” This was the game that Ed Annunziata had fantasized about more than a year ago, over their Italian meal during CES. “The feel of controlling this magnificent mammal,” Nilsen continued, “is unlike anything you’ve ever experienced before. This game is the next step in videogaming.” At that, he returned to the stage and played a short clip of the game. It really was unlike anything that had ever been done before, a game as smooth and beautiful as a book or album. Maybe it wouldn’t be the most important event in the history of videogames, but it was certainly proof that Sega had no intention of remaining second-best.

When the clip finished, the retailers appeared noticeably impressed, which made what was about to happen that much more fun. “Hey, Al,” Kalinske said, loud enough for all to hear. “Don’t make them wait any longer. Show them the big thing already!”

Nilsen smiled. “Sure thing, boss.” The performance wasn’t over, which surprised the audience almost as much as the blackout had. “But wait, there’s more,” Nilsen said, clicking on the next slide. “Peripherals, an important part of your profit picture!” Following a collective groan, he raced through descriptions of an innovative wireless remote (the Cordless Elite), an intimidating plastic bazooka (the Menacer), and a Sega Genesis cleaning system headed to stores in September. “And that,” Nilsen said, sticking his notes into a folder, “is all I have to tell you today.”

Just then, through the ballroom doors, Sonic The Hedgehog himself entered, accompanied by Schroeder. “Okay, Sonic,” Nilsen said with a pinch of feigned exasperation. “I’m sorry. I’ll tell the whole world about your new game. But would you mind if I brought Madeline up here to help explain why Sonic 2 is going to be the number one game of 1992 and the most important event in the history of videogames?”

This was the moment that Nilsen had been waiting for, where he got to finally reveal Sega’s big plans for Sonic 2. But he’d have to wait a moment longer, because as he opened his mouth, Sonic received a thunderous standing ovation. The retailers were on their feet, all of them, shaking the room and causing a tiny earthquake. These people weren’t even cheering for Sega’s sequel plans, since Nilsen had yet to reveal the X’s and O’s. No, they were simply cheering for Sonic; the character, the icon, the emblem of the war against Nintendo. And after this week, the army would be much bigger and stronger, especially after what Nilsen and Schroeder had to say next.

“Sonic’s back and he’s better than ever!” Nilsen proclaimed as the lingering applause quieted down. After that, he and Schroeder launched into one of their lightning-quick, Abbot-and-Costello-esque banter sessions.

“That’s right, Al. And this time he’s faster.”

“Yup, Mad. And he’s cooler!”

“He’s got more enemies!”

“More levels!”

“More attitude!”

On and on they went, ping-ponging superlatives, introducing Tails, and welcoming a costumed orange fox to join them onstage. But this was all an appetizer for the entrée, which was Sonic 2sday, the videogame world’s first-ever global launch.

“The entire marketing program,” Nilsen said, “is designed to build awareness for Sonic 2sday, the street date of Sonic 2.”

“And on that date,” Schroeder explained, “the game won’t just be available at retail in the U.S., but also in Europe, Japan, Australia, and the rest of the world!”

“Yup,” Nilsen confirmed. “We’re working to make Sonic 2sday the biggest international event since the fall of the Berlin Wall.”

To someone outside this room, the idea of a coordinated worldwide release might have seemed interesting but irrelevant. But the point of a global launch wasn’t to dazzle with concept; the point was that the concept created connection. Normally, with games released at different stores on different days, customers couldn’t help but feel like these things sort of fell out of thin air. But to know the exact date that something would be arriving, to have it circled on the calendar ahead of time, gave the gift of anticipation. For kids, there’s no feeling better than excitement, and for parents, there’s no feeling worse than bursting that bubble, which made it every family’s duty to celebrate Sonic 2sday. It was a marketing ploy, yes, but it worked in the same self-fulfilling way as a blockbuster film did. They’re not called “blockbusters” just because of their budgets; rather, it’s because of the event-like, don’t-be-left-out way that they are marketed, which makes people rush to the theater for the opening weekend, which then makes more people rush to the theater when they hear how big that opening weekend was. The art of the blockbuster is that it popularizes something before it ever even exists, and though Sonic 2 was still months away from completion, Sonic 2sday gave Kalinske and company an opportunity to unleash the biggest blockbuster the videogame world had ever seen.

“Anyway,” Schroeder said, “you probably want to know when Sonic 2sday is. Well, right now all I can tell you is that it’ll be one of the Tuesdays in November.”

“Oh, come on, Mad,” Nilsen pleaded. “Tell these nice buyers the date.”

“I can’t do that,” she explained. “Sonic won’t let me!”

Actually, Sonic’s creator wouldn’t let her, because he himself didn’t know. As the game neared completion, Naka’s notorious perfectionism became even more pronounced. The game had already been pushed from October to November, and Sega of America was desperately hoping it wouldn’t be postponed again. That would ruin Sonic 2sday, the Christmas season, and Sega’s plans for a new world order.

“When it comes to the challenge of leading the 16-bit revolution, we’re up to it,” Nilsen said as he neared the end of his presentation. “But we need your help.”

The retailers were the conduits to the consumer, which made them gardeners capable of planting the seed. So they had to decide whether this was a garden worth growing. Did they want to bet big on Sonic 2? Cover their windows with images of Sonic and Tails? Plaster posters everywhere and hang a giant sign out front with a countdown to the game? Presell the game, track those customers, and reward them with a promotional T-shirt (which would be free to buyers who preordered but would cost stores $2.50 each)? Most important, were they willing to alter their operational and financial procedures so that Sonic 2 could be shipped directly to each of their individual stores? This last proposition was unprecedented—Sega was asking Fortune 500 companies to bypass their long-standing distribution systems for what was literally a fly-by-night delivery. But this was the only way that Sega could ensure a coordinated global release. For this to work, it required a partnership with the people in this room. So it all boiled down to one question: were they in or out? Ultimately, this was what Nilsen’s presentation was asking, but the question wasn’t posed that simply. In the tradition of Sega’s “good crazy” spirit and the torrential pun-derstorm that was Sonic 2 (official tagline: “2fast, 2cool, 2day”), it was issued as a challenge.

“I have just one question for you,” Nilsen said slowly, measuring the full weight of his final words. “Are you up 2 it?”