Console Wars (2015)

PART FOUR

CIVIL WAR

41.

FUGU

“What the heck is wrong with Sega of Japan?” Tom Kalinske asked with a slow but determined shake of the head. “Seriously, what is it with those guys?”

Kalinske was in Japan, having breakfast at Tokyo’s Le Meridien Pacific hotel with his favorite inside source at SOJ: Mike Fischer, one of the few, and certainly the highest-ranking, of the Americans working at Sega of Japan. Although Fischer was only twenty-seven years old, he had impressed Nakayama with his sitcom-style wit, unpretentious intellectualism, and infectious enthusiasm. Personality-wise, he had a lot in common with a young Tom Kalinske, but where Kalinske used those gifts publicly to sway the masses, Fischer preferred to operate behind the scenes. That’s part of the reason he loved these off-the-books meetings with Sega of America’s president. Normally, the two of them swapped pieces of information with the excitement of kids trading baseball cards. And that was how it had started today, until Kalinske interrupted the typical haggling session by asking for Fischer’s most valuable card.

“What’s wrong with Sega of Japan?” Fischer repeated to himself. For a moment, he politely tried to avoid laughing at the inquiry, but ultimately couldn’t stop himself from cracking up. “Jeez, Tom!” he replied, rogue giggles slipping out between his words. “How on earth were you able to sneak such a loaded question past those goons at airport security?”

“All right,” Kalinske admitted, “I suppose I could have toned it down a notch or two. But then again, isn’t the whole beauty of our breakfasts together supposed to be that we get to stop playing politics for fifteen minutes?”

“This is true,” Fischer replied with a nod so earnest it made the cup of coffee in his hand bob. “Plus for me there’s the added joy of, you know, actually getting to speak in my native tongue. Oh, English, how I’ve missed thee.”

Fischer had been missing the idiosyncrasies of English since 1988. After graduating from a small engineering college, he yearned for something bigger, so he sold his Honda scooter and Cannondale mountain bike to buy a one-way ticket to Japan. For two years he bounced around the country teaching English before getting a job in Sega’s expanding consumer department. The company was becoming serious about growing their business abroad, so Nakayama wanted to bring in a crop of young non-Japanese go-getters to help facilitate that growth. After proving himself to be the most capable of these new recruits, Fischer was promoted to manage communications between the parent company and Sega’s subsidiary in America. Like many of his colleagues at SOJ, Fischer didn’t have particularly high hopes for SOA, but his barometer was reset when Tom Kalinske took over a few months later.

Few outside the toy industry had ever heard of Kalinske, but by a strange stroke of coincidence Mike Fischer happened to be in this exclusive minority. In college, Fischer had written his thesis on the econometrics of the modern toy industry, which basically meant he spent his senior year studying the innovative strategies of Stephen Hassenfeld (Hasbro), Bruce L. Stein (Kenner), and of course Tom Kalinske (Mattel). Through this research, Fischer knew better than anyone what Sega was getting in Kalinske, and from that moment forward, made a commitment to ensure that Sega of America’s new CEO was given every opportunity to succeed. Make no mistake, he was first and foremost loyal to Sega of Japan, but he sincerely believed that what was best for SOA was best for SOJ, and so he had no reservations about stacking the deck when necessary. Sometimes that meant dropping hints about games in development, sometimes that meant simply warning SOA when Nakayama was in a bad mood, and other times, like today, it meant meeting Kalinske for breakfast to make sure that he entered the apiary with the right kind of bee suit.

“Fine, fine,” Fischer replied playfully. “Let’s have an honest discussion. Rid yourself of the weight of that golden crown and I’ll set aside this pesky jester’s hat. What is it, specifically, that you’d like to know?”

“Mike, I’ve been with Sega for over two years now,” Kalinske said. “I honestly could not be happier with the work that our team has done—we’ve really started to turn this thing around. But I get the strange feeling that the more successful we are in America, the less pleased they are in Japan.”

“That’s ridiculous!” Fischer exclaimed.

“Is it?” Kalinske asked sincerely.

“No, it’s not ridiculous,” Fischer admitted, “but it should be ridiculous!”

“I know!” Kalinske said, shaking his head. A sad, strange silence followed, which both men chose to fill by picking at their omelets.

“So what’s the problem here?” Kalinske said finally. “Is it jealousy? We have 50 percent of the market and they have less than 15 percent?”

“I’d like to pause for a moment to remind you that I am one of the ‘they.’ ”

“Yes,” Kalinske said, “but whatever this attitude is, I feel it from you too.”

Fischer considered. “I don’t think ‘jealousy’ is the right word.”

“Then tell me what the right word is.”

The younger man thought about this for a little while. “When I was a kid,” he began, “there were a few times when I wanted to do something, something that seemed completely harmless, but for whatever reason my parents wouldn’t let me do it. I would ask them why not—why couldn’t I go play football with the neighbors, or why couldn’t I sleep over at this friend’s house—and the only explanation they provided was, ‘Because I’m the parent and you’re the child.’ ”

“My parents used to say the same thing,” Kalinske added.

“So you understand, then.”

“No, I still don’t. Because even though my parents said that, they never arbitrarily changed the date of Sonic 2sday! Nor did they ignore faxes, fail to return phone calls, and turn up their nose at my marketing plans even though their own were simply not working.”

“Your parents had marketing plans?” Fischer joked.

Kalinske sighed and glanced toward the lobby for any sign of Nilsen or Toyoda. They had flown with him to Japan, Nilsen as part of his new job responsibilities and Toyoda to help Kalinske pitch the joint hardware venture with Sony. They’d head over to SOJ together, but Nilsen and Toyoda must still have been upstairs getting ready.

“Who came with you?” Fischer asked. “Shinobu and Paul?”

Kalinske shook his head. “Shinobu and Al.”

“Ah, Al. How is he enjoying the promotion?”

“Too early to say,” Kalinske answered. Following the success of Sonic 2sday, Nilsen became SOA’s group director of global marketing, a new position created for the dual purposes of allowing him to continue to think big (but now on a global scale) and encouraging him to serve as something of a marketing liaison between America, Europe, and Japan. Plus, in light of the growing fragility in relations between America and Japan, it seemed like a critical time to have someone Kalinske trusted carrying the world on his shoulders. With Nilsen now bouncing from country to country, Diane Adair was promoted to take over marketing for the Genesis. The timing of this shake-up also fit nicely with SOA’s plans to double in size by the end of 1993. Although Nilsen had done an excellent job managing his team for Sonic 2sday, there was no denying the unique physics of Nilsen’s approach to marketing, and Kalinske wanted him to keep thinking bigger and not sweating the small stuff. Which worked out nicely, because Adair’s meticulous style and teacher-like sensibility were well suited to reorganize the marketing department and bring new blood into the fold. And while Kalinske knew that it would be weird not to have Nilsen around the office as much as before, the potential of his replicating the magic of Sonic 2sday was too great to ignore. It was time to take the genie out of the bottle. “We’ll see,” Kalinske said. “But I’m sincerely hoping that Al can teach Japan’s marketing team a thing or two about what a goldmine Sonic can be for them.”

“He better,” Fischer replied. “We need the money to pay the sea people, don’t we?”

“Don’t even get me started,” Kalinske said, with a roll of the eye. One of Goodby’s latest ads, which satirized those grainy Jacques Costeau films, looked and felt like all those ocean explorer videos, except in the Sega commercial everyone on the crew was crammed in a room playing Ecco the Dolphin. It was a great spot: it totally captured the Sega spirit but also captured the attention of the Cousteau Society, which was suing Sega and Goodby for three million dollars. “I hope they use the money to buy a sense of humor,” Kalinske said with a cadence indicating he was just about ready to leave.

“Hey,” Fischer said, suddenly smiling at some kind of memory. “Did I ever tell you where the idea of the hedgehog came from?”

“I thought it was the mascot contest,” Kalinske guessed.

“Well, yes, but where the idea for the contest came from.”

“I don’t believe so.”

Fischer leaned in. “This is one of my favorite stories. Naka-san gets all the credit, because he designed the game and, you know, he’s this powerful personality, but because of that I think Oshima-san gets lost in the shuffle. So one time I went up to him and asked Sonic’s true creator where that spark of an idea had come from. He’s really shy, this unassuming kid, and I expected him to say something like ‘It was a team effort,’ or ‘It was just one of those things,’ but he smiles really small and he says: ‘I just put Felix the Cat on the body of Mickey Mouse.’ ”

“Oh, come on,” Kalinske said, “that can’t be true.”

“It is, I swear,” Fischer chortled. “And as shocked as you are to find this out, Oshima-san is more shocked that nobody ever called him out on this.”

After the two men laughed about how their lives had changed because of a twice-plagiarized creation, Fischer looked at his watch and adopted a less frivolous tone. “Look, I don’t think that consistently being wrong inherently makes someone right. But I’m curious why you are asking me this now. The examples you mentioned, Sonic 2sday aside, have been the case for some time, no?”

It was a good question, and Kalinske could choose to answer it with varying degrees of frankness. “I’m asking,” Kalinske said, with some coyness, “because I want to ask SOJ to do something, and I need them to say yes.”

Fischer nodded. “I assume that if you wanted to give me any more information you would have, so I won’t ask, but it’s hard for me to advise you on this without knowing what you have in mind.”

Kalinske looked across the table and considered how much to reveal. It seemed only fair to fill him in, since Fischer had been so forthcoming over the years. After all, Fischer had been the one who would tell him what Nakayama had to say about SOA after Kalinske left the room, and also the one who told him which days Nakayama was angry and carrying a golf club around the office like Al Capone with a baseball bat. “I want us to work with Sony,” Kalinske said quietly, “on a next-generation console.”

Fischer was momentarily taken aback, but very quickly the idea sank in. It made a lot of sense. “How far along is this?”

“The guys who did the hardware for that failed Nintendo venture are working out of Sony Music now. With assistance from Olaf and Mickey, we seem to have their approval. Now it’s our turn.”

“What does Joe Miller have to say about the specs?”

“Nothing yet,” Kalinske said with a wave of his hand. “We’re keeping this one close to the vest until it becomes real.”

Fischer nodded, his cheeks flush with enthusiasm. “This could be huge, Tom.”

“Exactly.”

“We split the R&D,” Fischer said, speaking softly to himself, “use their manufacturing capabilities, combine our distribution networks, and—”

“Crush Nintendo,” Kalinske finished in a whisper.

“That seems highly likely,” Fischer agreed. “And I have to imagine that my colleagues over here will see this as our best chance of finally getting a bigger share of the Japanese market.”

“Yes, well, I’d like to do more than imagine,” Kalinske said. “I want to make sure that politics don’t get in the way of this.”

“Me too,” Fischer agreed, racking his brain for suggestions. “Well, as you know, Sato’s team has already made great strides on a 32-bit system. So whether it’s true or not, make sure that Sato doesn’t feel like he’s wasted his time. You know, tell him that Sony wants to defer to Sega’s expertise. It might also be worth appealing to the arcade guys, so they can keep R&D excited on the software front.”

“Got it,” Kalinske said, mentally revising his plans for the day. “But what about Nakayama-san? Do you think he understands everything that we’re doing in America? I hope he doesn’t think we’re too crazy.”

“Are you serious?” Fischer asked, practically doing a double take. Kalinske was so intuitive in so many ways, but for some reason he failed to see how Nakayama really felt about him. “Tom, Nakayama trusts you more than he trusts his own staff.”

Kalinske shook his head. “That can’t be right.”

“Wait, you really didn’t know that?”

“We have a good relationship, I suppose. But I never quite know where I stand.”

“You should, you’re at the top!” Fischer replied. “I mean, just last week we were in the boardroom and the producers were presenting games to Nakayama-san. After every presentation his first question was ‘What does Tom think?’ He had no interest unless you had some interest.”

Kalinske didn’t respond, but Fischer could tell that he was rather flabbergasted (and Fischer was flabbergasted that Kalinske didn’t know this already). “Hey,” Fischer said, “remember how earlier I told you that my folks used to say, ‘We’re the parents and you’re the child’?”

“Yeah . . .”

“Well, now that I think about it a little more, I’m realizing that was the wrong parental analogy. The real problem is that Mom and Dad like you the best, and your siblings are a little sick of hearing about their favorite son.”

Fragments from the conversation with Fischer rattled around Kalinske’s mind as he, Nilsen, and Toyoda were given a tour of Sega’s Japanese R&D lab. This was always one of the best parts of visiting SOJ, the part that felt a bit like rushing toward a just-smashed piñata, but on recent trips there seemed to be fewer pieces of candy inside.

“Is it just me,” Kalinske whispered to Nilsen and Toyoda as their hosts stepped several paces ahead, “or are they showing us less and less these days?”

Toyoda shrugged, but Nilsen had an answer. “Both, actually.”

Kalinske looked puzzled at this response. “How can it be both?”

Nilsen quickly glanced over his shoulder and then explained that what SOJ presented changed with each visitor. So when the CEO of SOA was in town, they only wanted to show off the very best, hiding anything that might get nixed in its developmental phase.

Kalinske lightly shook his head. “Well that’s kind of dumb, don’t you think?”

“Don’t worry,” Nilsen added. “They’ll show me the real stuff later today, and I’ll report back to you guys.”

Before Kalinske could muster up what would surely be a sarcastic response, Nakayama arrived to greet the team from Sega of America. After trading formalities, they resumed the R&D team’s tour. As they did, Nakayama lingered a few steps behind the group from America, more interested in observing their reactions to the products than in the products themselves.

The item that Sega’s R&D team appeared to be most excited about landed somewhere on the spectrum between hardware and peripherals. It was a 32-bit upgrade for the Genesis, something that connected to the 16-bit console and made it twice as powerful. “Would it play the regular Genesis cartridges,” Kalinske wondered, “or would this require a different type of software?”

The R&D team proudly explained that it would require new and much more powerful software to play in 32 bits. But most important, Sega would be the first company to reach the next frontier, as they’d done with 16 bits. Rarely did Sega of Japan’s employees smile, but in this case they did, which made it that much more awkward when Kalinske, Nilsen, and Toyoda offered little more than a thanks-anyway smile. The idea of a supercharged add-on was fine—that’s essentially what the Sega CD was, after all—but if they were going to make a 32-bit system, then they might as well just make a new console and not just use the old one as little more than a battery. Kalinske could feel the waves of subtle resentment emanating from the SOJ research team, but better to endure that than head down a multimillion-dollar rabbit hole that would lead nowhere.

But that negative sentiment immediately evaporated when Kalinske was shown the Pico, a lunchbox-sized, plastic-coated portable device that would be released in Japan during the summer of 1993. The Pico looked like a colorful cross between a storybook, a Game Gear, and an Etch-a-Sketch. It came equipped with a “magic pen” that allowed children to enter the world of their entertainment. Much the way he’d felt when he first saw the Genesis, Kalinske was absolutely blown away by the potential of what this could become. It was the edutainment machine that Sega had been working on, a portable computer for kids that would demonstrate the educational power of videogames, while stealing away Nintendo’s youngest demographic in the process. It was a marvelous intersection of education, entertainment, technology, and storytelling, and for a moment Kalinske was tempted to say, Who cares about next-generation videogames? Let’s just do this and do it right! But then he remembered that he didn’t have to choose just one thing. He’d built a company with enough resources to let him do all these wonderful things at once, and so after congratulating Sega’s R&D team he made a comment that he hoped would be prophetic.

“If you can make this cheap enough to sell for a hundred dollars,” Kalinske declared, “then I promise you this will be the number one toy of the year.” The creators of the device blushed at these words, and Nakayama smiled like a truffle hunter whose pig had just sniffed out a big find.

As they all excitedly discussed constructive tweaks to the Pico, members of SOJ’s marketing team came to whisk Nilsen away. “Duty calls,” Nilsen explained, but on his way out he made sure to pass Kalinske and whisper prophetic words of his own. “We cannot bring over that 32-bit thing,” he cautioned. “It just can’t happen.”

“I know,” Kalinske said, bidding farewell to his new global marketing guru.

After Nilsen left, the rest of the day was spent in a series of meetings, more friendly than functional, until Kalinske and Toyoda finally discussed the Sony possibility with Nakayama and a few of his top lieutenants. Among that group was Hideki Sato, who had been Sega’s director and deputy general manager of R&D since 1989, when his team brilliantly refashioned Sega’s System 16 arcade board into the Mega Drive. Although Nakayama would have final approval on how Sega proceeded, it would be Sato’s reaction that would inform his decision. Knowing this, and following Fischer’s advice, Kalinske carefully proposed the idea of working with Sony in a complementary manner and highlighted that this would not sacrifice any of the great work that Sato’s team had already done on the next generation of hardware.

The reaction to the joint venture was mixed at best. Although those from Sega of Japan saw some business sense in a joint venture, they appeared to be fundamentally resistant to the idea. Whether this mentality was spurred by corporate pride (we don’t need them), creative ownership (we want to do this our way), or competitive skepticism (Sony just wants to see what we’ve got and steal it), Kalinske was not sure, but this certainly wasn’t shaping up to be the no-brainer that he’d been hoping it would be. But true to Fischer’s words, Nakayama seemed to trust Kalinske more than his own staff. Unlike in the boardroom two years ago, Kalinske wasn’t given carte blanche to run with this opportunity, but Nakayama wanted Sega to very seriously explore this option and form a review team to work with Sony over the next several months. If Kalinske was right and this was a golden opportunity, then that would become evident and a wonderful partnership would be formed. But if he was wrong, then Sega had no obligation to continue working with Sony and could continue forward on their own. Sato and the other members of R&D seemed to appreciate this resolution and harbored no noticeable ill will about moving forward in this fashion. For Kalinske, it wasn’t quite a win, but given the initial feedback, it was more than he’d been expecting. Plus he was rather certain that this really was a golden opportunity, so getting the win was just a matter of time.

To celebrate this and Sega’s other successes, Kalinske went out with Nakayama to the same geisha club that they had visited a couple of years earlier. Amongst the girlish giggles and swoops of sake, it was hard not to appreciate how far they had come together. And there was still so much further they could go together, a prospect that Kalinske was now more confident and excited after that day’s events. Between the Pico, the partnership with Sony, and Nilsen’s acceptance of a role as global marketing ambassador, Kalinske couldn’t help but feel a hint of guilt for ever doubting Nakayama and those at Sega of Japan. They had their differences and certainly their occasional doubts about each other, but at the end of the day they were all part of the same family, and mutual success would make that family a big happy one.

Kalinske had decided to stop wondering what was wrong with Sega of Japan, but now Nilsen couldn’t get the question out of his mind. Unlike his boss, Nilsen’s query wasn’t inspired by frustration so much as it was by genuine curiosity about why Sega of America and Sega of Japan had experienced such differing levels of success. They both had the same products, the same games, and the same blue hedgehog, yet with a smaller budget SOA had 50 percent of the American market whereas SOJ only had 15 percent of the Japanese market.

The easiest conclusion to reach might be that SOJ’s personnel simply lacked the talent to execute, but Nilsen had spent enough time with them to know that such an assumption was heinously incorrect; the producers were virtuosos, the R&D team was relentless, and the executives were as sharp as anyone at SOA. The second-easiest conclusion to reach might be that they were just lazy, that they had the right people and the right products but simply didn’t care enough to go sweep a nation. But Nilsen knew this was also terribly false: everyone he knew at SOJ worked around the clock, paid attention to the tiniest of details, and bled Sega blue. So then what accounted for the large disparity between SOA and SOJ? Cultural tastes? Vastly different market conditions? Nintendo’s parent company in Japan was that much more formidable than Arakawa’s group in America?

Nilsen didn’t know the answer, but he was happy to stop thinking about it for a little while when he went out to dinner with some members from SOJ’s marketing team. Nilsen and about five junior executives, who in Japan are called salarymen, left the office together, happily sharing stories as they hit the streets. They walked for about five minutes toward a bustling alley with a hypnotic mix of neon signs and blinking electronic stores before the salarymen starting pointing and laughing at a restaurant on the second floor. Usually they spoke in English or tried their best to communicate with gestures, but Nilsen had no idea what was going until a few minutes later, when he was sitting on the floor of a private room in a dimly lit restaurant.

Nilsen began looking through the menu, until one of the salarymen pulled it away. They came here often, it seemed, and they would take care of all the details for their friend from America. After a long flight and a taxing day, Nilsen was more than happy to defer to his hosts for the evening, until he detected a few subtle scuffs of laughter when the food order was placed. Something was going on, and given the unusual delicacies of Japan, it was likely something weird. Octopus? Starfish? Bottlenose dolphin? Although none of these species got Nilsen’s mouth watering, he was an adventurous eater and a team player, so as long as whatever they ordered for him wasn’t breathing, he figured that he’d find a way to get it down. But when the food arrived, his suspicions were confirmed—there was more at stake here than just stomaching the unknown.

Fugu. That’s what they’d ordered for him, and only him. As the dish was placed in front of Nilsen, the salarymen explained that this was a Japanese pufferfish. But unlike other creatures in the sea, raw fugu was lethally poisonous due to its heightened levels of tetrodotoxin. For this reason, it could be prepared only by qualified chefs who had undergone rigorous training. Even so, it was not a perfect science, and eating fugu resulted in about fifty illnesses and ten deaths each year.

With thin, sashimi-style slices of this possibly toxic dish sitting in front of him, Nilsen joined in the titillation of laughter around the table. “How do you think my parents will feel,” Nilsen asked, “when they find out their son was killed by a pufferfish?”

The laughter reached a crescendo, but all eyes remained fixed on Nilsen. Did he have the courage to tempt fate and eat the fugu on his plate, or was he just another foolish gaijan passing through the land of the rising sun? The expression in their eyes told Nilsen that they were very much wishing for the latter, granting them license to laugh at him and not with him, but to their dismay he lifted a pair of chopsticks.

Then, without hesitation, Nilsen picked up a slice of the treacherous fish and took a bite. Not bad; not bad at all. Amidst gasps from the salarymen, he took another bite and then another one after that. “It’s actually very bland,” Nilsen said, but received no response because the men from Sega of Japan were speechless with shock.

After another bite, Nilsen pushed the plate forward and asked, “Who wants to try a piece?” He scanned the table, and as he made eye contact with each one they physically recoiled at the challenge, their laughter gone and replaced with sudden dread.

“Come on,” Nilsen implored, “there must be someone willing to take the risk.”

There were only ten deaths each year. Ten out of hundreds of thousands, and besides, there was a hospital down the street. Nothing bad was going to happen, so it was worth trying at least one bite, but the fear in their eyes said otherwise. And that’s when Nilsen finally realized the fundamental difference between Sega of America and Sega of Japan. They weren’t willing to take the risk, to race Sonic against Mario or welcome a generation to the Next Level. These people were highly talented and certainly not lazy, but deep down they weren’t as interested in winning as they were in not losing.

Without risk, there is no reward, and so Nilsen lifted his chopsticks and pulled the plate toward him, proudly eating every last piece of the pufferfish all by himself.