Console Wars (2015)

PART FOUR

CIVIL WAR

42.

BARBARIANS AT THE GATE

Going into Christmas 1992, Nintendo was experiencing the same problem facing many a gawky, pimple-populated teenager: they just weren’t cool. And like that dateless teenager, doing typically cool things (like trying out for the football team, or buying a baseball team) only seemed to make things worse. The primary reason for this was Sega, whose speedy, snarky “Welcome to the Next Level” campaign had, by contrast, branded Nintendo with the dreaded scarlet U (uncool, unhip, unfit for anyone older than ten). Given the prevalence of these ads and the pop-cultural chord they had struck, Nintendo’s employees were well aware of the tectonic shift in perception. But if any of them had been holding out hope that Sega was merely a passing fancy, that notion went out the window following a presentation from Market Data Corporation (MDC).

“Slowing growth,” the representative from MDC said, for what seemed like the hundredth time. “The recession, of course, accounts for some of that slowing growth, but our investigation reveals other factors at play.” Earlier in the year, when the tide had really begun to turn, NOA had commissioned MDC to study the changing landscape of the videogame industry. In the course of their research, they spent time with nearly eight hundred families, studying the habits of videogame players in much the same way that Goodby, Berlin & Silverstein’s account planners had done not too long ago. “Kids who own a Nintendo console still play a good deal,” the representative continued. “About 2.3 hours per day, actually, based on the individuals included in our sample, but among those we surveyed they described the interaction as ‘less involved.’ This increasing apathy can also be used to explain the—”

“Let me guess,” Peter Main interrupted. “Slowing growth?”

“Yes,” the representative answered over a chirping of chuckles, evidently unashamed of his apparent predictability. “And the response we kept hearing over and over, to explain the aforementioned sentiment of apathy, is that playing Nintendo is simply quote-unquote ‘not cool’ anymore.”

“Hey, I have an idea,” Bill White interjected. “Maybe we should throw in a pair of sunglasses with every Super Nintendo bundle.”

After another flurry of giggles, the representative continued. “We asked each of our interview subjects to rate each console currently available at retail in a variety of areas. Sega ranked highest in the majority of categories, including image, value, and technology,” he explained. “But Nintendo scored highest in terms of fun, excitement, and game selection.”

Arakawa nodded at this, not because it was an acceptable silver lining but because, to him, it was the only lining that really mattered. Gameplay was everything; all the rest was just noise. Had he voiced this sentiment, nobody in the room would have objected to his logic, but where they likely would have disagreed was on the importance of the so-called noise. Years ago, Peter Main had coined the slogan “The name of the game is the game,” and he still felt that to be true, but there was no denying that Sega’s sizzle had changed the rules of the game. And the biggest change, at least from Nintendo’s perspective, was that Sega had turned this into a war of style vs. substance.

To anyone vaguely familiar with the videogame industry, there appeared to be no reason that Nintendo couldn’t match Sega’s style punch for punch; in fact, it baffled many that Nintendo had yet to publicly respond to Sega’s jabs. After all, they had the personnel, the products, and the financial resources to redefine, or at least refurbish, the Nintendo brand for a new generation. This didn’t have to mean shooting edgy Sega-like commercials, advertising during prime time, or promising the Next Next Level, but Nintendo could have crafted a campaign that reminded the world of all the fun that this level had to offer. Or they could have developed a speedy Sonic-killer game, in the same way that Sega had once upon a time created a Mario-killer. Or if Nintendo planned to stick with Mario, they could have slightly modernized his look (back in 1990, they had given him a nose job to make him look less stereotypically Italian; why not now equip him with torn jeans or a flaming plunger)? The point was that Sega had painted Nintendo into a corner, but there were a million ways they could have tried to escape this fate. For another example, they could market Mario Paint, an innovative art game that came with a computer-like mouse, as a high-tech art program and not a family-friendly color-by-numbers package. As Nintendo’s market share dwindled, it became easy to offer up criticisms like these, but there was one major reason Nintendo didn’t directly respond to how Sega had chosen to portray them: Sega was pretty much spot-on.

Nintendo really was the videogame equivalent of Disney. Not just with cute characters and squeaky-clean family values, but also with that magical sense of nostalgia that even children can feel. And just like Disney and Mickey Mouse, Nintendo and Mario were uncool in exactly the same way: because they weren’t supposed to be cool. They were supposed to be fun, timeless, and magical, and with those great strengths came the great weakness of appealing to teens and young adults. If Nintendo preferred to remain as is, they would continue to concede this growing portion of the market, but if they wanted to evolve, they risked losing their identity. As a result, Nintendo was faced with a simple proposition: acceptance or adaptation.

“Our research is by no means conclusive,” said the Market Data Corporation’s bearer of bad news, “but if nothing else, it indicates that Nintendo needs to implement new strategies to retain a dominant position in the market.”

Although this comment reeked of obviousness, those present listened with a show of thoughtfulness. They did so because each had a slightly different perspective on how Nintendo should progress, and each was secretly hoping that this would be the moment when everyone else in the room realized they had been right all along.

Arakawa, naturally, wanted to stay the course. Tilden generally agreed but thought that more could be done to spruce up the brand and take advantage of Nintendo’s iconic intellectual properties. Main agreed with Tilden in tone but was more concerned with size. He believed that the videogame industry was becoming more and more like the film industry, and he wanted to go bigger and bolder for the launches of Nintendo’s blockbuster titles. The advertising guys from Leo Burnett wanted to reinvent the wheel because that’s what advertising guys always want to do. And last but not least, White didn’t want to respond to Sega per se; rather, he preferred to do what they were doing, but do it even better. He wanted Nintendo to aggressively evolve and become more like Sega, believing that there was no better proof of the market’s changing tastes than a look at the company’s best-selling games in 1992:

Nintendo’s top title of 1992 was a fighting game, and although there was no blood or gore on it, there was nothing Disney-esque about Ryu’s haduken or E. Honda’s hundred-hand slap. And of those top ten games, only five were first-party titles (indicating that other companies were better at capitalizing on consumer tastes) and four of them were sports titles (which Nintendo had typically shied away from but this year lucked out on because they had finally been able to make a deal with Electronic Arts after Trip Hawkins abruptly left the company). And beyond the games, the effectiveness of Sega’s advertising served as further proof that fresh marketing was critical to continued success (and watching any sporting event was a reminder that even market leaders like McDonald’s and Coca-Cola were constantly reinventing themselves). Come on, White thought exasperatedly. Sega had just pulled even with Nintendo; if ever there was a moment to pull out the big guns, now was it.

From an urgency standpoint, White may have been correct, but unfortunately for him the stars just weren’t aligned for a big change at this time. Had it been two years earlier (prelaunch) or two years later (toward the end of the console’s life cycle), Nintendo would have been more likely to roll the dice, but as they headed into 1993, there was just too much at stake. Sega had not only swiped away a large portion of Nintendo’s market share but also had proven that there was room for more than one in the console business. And now that the precedent had been set, the barbarians were lined up at the gate and five reputable hardware makers lurked on the horizon:

1. 3DO: A sleek, sophisticated, 32-bit system that planned to be more than just a console. With a tagline proclaiming it to be “the most advanced home gaming system in the universe,” this do-it-all dynamo would also play movies, music, and CD-ROM content. Although this sounded overly ambitious, if there was anyone who could pull it off, it was Trip Hawkins, the founder of Electronic Arts, who believed so much in this grand new vision that he was willing to abandon the software company he had started from scratch. Even more ambitiously, his 3DO company wouldn’t manufacture the hardware itself (like Sega and Nintendo both did) but would instead license the technology, the incentive being that while these manufacturers would have to bear expensive production costs, they would only have to pay very low royalty rates. In 1983 Hawkins had founded Electronic Arts to disrupt the software industry, and now, ten years later, he was looking to do the same with hardware.

Release date: fall 1993

2. Atari: After sitting on the sidelines for many years, Atari planned to return to the console business with a bang. So while everyone else was just starting to think about 32 bits, they were preparing for the launch of their 64-bit system, called the Jaguar. Nobody knew quite what to expect from the return of Atari, but the system’s “Do the math” slogan indicated that Atari was counting on its pedigree and standing out when it came to bits and bytes.

Release date: November 1993

3. NEC: In October 1989 Sega launched the Genesis and NEC launched the Turbo-Grafx. Of the two 16-bit consoles, Nintendo was more worried about the latter because of NEC’s enormous financial resources. A bad launch lineup, poor marketing, and the long shadow of Nintendo had quickly doomed the Turbo-Grafx, but NEC seemed to have learned from that experience (just as Sega had learned from the failure of their Master System) and was ready to get back in the game. By the middle of 1992, NEC had developed a 32-bit system architecture called Iron Man, which earned rave reviews behind the scenes at the Consumer Electronics Show.

Release date: early 1994

4. Bandai: Although Bandai had no experience in the videogame industry, they were the third-largest toy company in the world (behind Hasbro and Mattel), which automatically equipped them with three important advantages: brand recognition, top-tier intellectual properties, and strong distribution networks. Given these assets, Bandai began working on a console code-named BA-X, which they designed to target a young demographic through edutainment and anime content.

Release date: late 1994

5. Sony: Following the failed romance with Sony, Nintendo had little idea what the company was up to. Rumors circulated that Sony was serious about moving forward on their own, and there appeared to be some truth to this, as evidenced by Norio Ohga’s shielding Ken Kutaragi and moving him under the umbrella of Sony Music. Although this may have given the PlayStation a stay of execution, it was hard for Nintendo to imagine that Sony would actually take this project all the way. Unless they had the support of a stable partner who knew the videogame business, they risked another Betamax debacle. And now that Nintendo was out of the running, that left only Sega, but there had been no whispers of any such relationship, and an alliance like that was simply too big to keep quiet.

Release date: TBD

Each of these potential competitors had a nuanced set of strengths and weaknesses, and of course not all of them would flourish, but if even just one made a serious dent in the market, then the pie that Nintendo once had feasted on all by itself would be split into three pieces instead of two. Given the lucrative nature of the videogame business, a more populated pie-eating contest seemed all but an inevitability. And it was for this reason that, in these changing times, Arakawa was even more committed to staying the course and maintaining Nintendo’s identity. Tweaks could be made, but in a coming war between style and substance, it was important that Nintendo remain more substantial than ever.

“Can we at least discuss the magazine?” White asked, hoping to leave the room with some sort of concession, even something small. He had unsuccessfully broached this topic before, but figured that with the research results now would be a good time to try again. “Nintendo Power is great, and I know Gail has done a great job; we can all see that it’s, you know, great. But we have to recognize that by hoarding all of the secrets to our games, it’s really pissing off the other magazines and, with that, lots of people in the industry. And let’s face it—that’s one of the areas where Sega really torched us.”

Although Arakawa often took long moments to juggle pros and cons (or at least to make it appear that way), he did not like to be challenged in this manner and his answer to White was brisk. “No.” He shook his head. “There is nothing of this matter to discuss.”

In lieu of a conversation, a stiff tension permeated the room. White wanted to shout something back, at least to spur a discussion, but he knew there was nothing he could possibly say that would open up Arakawa’s mind, and that only made him want to shout even more. But it was pointless, and everyone there could feel the staggering lack of efficacy.

As if to break up the subtly uncomfortable mood, the representative from MDC offered some optimism. “It’s not all bad news. We did find some signs of progress,” he said, quickly glancing at the papers in his hand. “More girls between the ages of six and fourteen are becoming primary players. And of all the people we surveyed, 96 percent knew who Mario was, and 83 percent of people said that they liked him.”

It wasn’t enough to put minds at ease, but it was enough to unknot everyone’s stomachs. And it served as a reminder that beneath the numbers, Nintendo always had the advantage of Mario and everything he represented: Miyamoto’s genius, and the no-nonsense perseverance that had enabled NOA to resurrect an industry from the ashes. Defeating Sega would require a recommitment to many of the same values: focus, belief, and the confidence to follow a vision in the face of adversity.

This was what made Nintendo so wonderfully successful in the past, from playing cards to videogames, and this strategy to double down on substance over style likely would have worked, if not what for Sega did next.