THE MAN WHO CAME<br />FROM PEPSI - CIVIL WAR - Console Wars (2015)

Console Wars (2015)

PART FOUR

CIVIL WAR

47.

THE MAN WHO CAME
FROM PEPSI

Beauty may be in the eye of the beholder, but as George Harrison sat through the final cut of the Super Mario Bros. movie, he felt rather certain that there were very few beholders who would find any beauty in this monstrosity.

“Why are Mario and Luigi at a nightclub?” he whispered aloud, prompting the Japanese man beside him to glance his way and politely smile.

Harrison was here, at a small movie theater in Pasadena, because Arakawa had asked him to fly down to Los Angeles, pick up the legendary Shigeru Miyamoto, and escort the creator of Mario to a special screening of the movie based on his videogame. Up to this point, Miyamoto had not yet seen any cuts of the film, so it was important that Harrison keep him in good spirits for the viewing. Amazingly, given his reputation, Miyamoto appeared to be nothing other than jovial from the moment Harrison picked him up. He remained upbeat as they inched through the LA traffic, didn’t lose steam as the film butchered his iconic characters, and politely smiled whenever Harrison would sigh and whisper something rhetorical aloud.

“And why on earth would Mario dance like that?” Harrison muttered to himself, once again earning an affectionate smile from Miyamoto.

George Harrison was Nintendo of America’s new director of marketing and corporation communications, taking over for the recently departed Bill White. This promotion, making him Peter Main’s right-hand man, was an incredible opportunity, but it left no traces of enthusiasm on Harrison’s face. There were a couple of reasons why this was the case. One was that Harrison had an uncanny talent for staying even-keeled. Whether he was hearing good news or bad, he always had the look of someone who’d just been informed what time it is: thankful, thoughtful, and calculating. The other reason he wasn’t jumping for joy was that just nine months earlier, Harrison had been under the impression that he had already been given this job.

George Harrison was initially recruited by Nintendo in late 1991, just a couple of months after the launch of the Super Nintendo. At the time, he was director of new ventures at Quaker Oats, in charge of investing in external projects or acquiring small companies that would fold nicely into the brand. Although his work there was undoubtedly impressive, what really appealed to Peter Main was the line on Harrison’s résumé right below that. Prior to joining Quaker Oats, Harrison had been the director of U.S. marketing for PepsiCo from 1981 to 1987, fighting on the front lines for the second place soda-maker during the so-called cola wars that dominated the decade.

Much like the current battle between Sega and Nintendo, the cola wars represented a heated corporate rivalry between Pepsi, the scrappy upstart, and Coca-Cola, the established market leader. Although the companies had been battling each other since the end of the nineteenth century (Coke was founded in 1886, Pepsi in 1898), Coke paid little attention to Pepsi, the perpetual follower, until 1975, when the underdog drastically amped up their marketing efforts and issued the now-famous “Pepsi Challenge.” Originally, the challenge entailed blind taste tastes at malls around America, but it eventually expanded to be more than just an amateur science experiment; it came to embody the revitalized spirit of the company. Pepsi wasn’t just challenging Coke, but challenging Americans to break the status quo and drink something different from their parents. This youth-oriented approach soon evolved into a full-fledged slogan “Pepsi: The choice of a New Generation.” By 1983, Pepsi had begun to outsell Coke in supermarkets nationwide, and they were looking for something big to put them over the top. That something turned out to be Michael Jackson, who signed a record-breaking $5 million endorsement deal which made him the face of the Pepsi Generation and, quite literally, the King of Pop. Jackson was a huge part of Pepsi’s rise, but the underdog’s biggest coup didn’t come until Coke made a blunder that almost ruined the company.

While Pepsi was conducting taste tests in public, Coke was conducting similar tests in private. The company’s senior executives commissioned a top-secret internal research program, called Project Kansas, whose objective was to create, test, and brand a new, better-tasting cola. After years of tweaking chemical formulas and testing diverse focus groups, a sweeter soda was born. This reformulated beverage, imagined to be the future of the Coca-Cola brand, was named New Coke and launched in 1985. It didn’t take long for the backlash to begin, and when it did, it was unlike anything a Fortune 500 company had ever experienced before. Coke’s customer support received complaint calls around the clock, and within weeks they had received over four hundred thousand angry letters. The situation got so bad so fast that a consortium of Coca-Cola bottlers even sued their supplier for changing the product.

On July 10, 1985, less than three months after New Coke was launched, Peter Jennings, the anchor of ABC News, interrupted General Hospital to announce that Coca-Cola’s executives had admitted that they were wrong and announced that Coke would be returning to its original formula. As quickly as the backlash had come, so did the celebration for the return of the iconic beverage. Within forty-eight hours of the announcement, over thirty thousand people called Coke’s hotline to commend the decision, and Arkansas senator David Pryor famously called this “a meaningful moment in U.S. history.” By the end of the year, Coke was back to the original formula everywhere, and the cola wars resumed pretty much where they had left off. Back and forth, back and forth it went, with both companies striving to make soda a metaphor to define lifestyle.

Living through these battles, George Harrison learned a great deal about marketing, brand equity, and the hidden psychological advantages of being an underdog. So much of what Pepsi did was about bloodying Coke’s nose and provoking a reaction, and so much of it worked because Coke had been caught off guard with Pepsi and had to do twice as much to make up for earlier mistakes. As a result, Harrison’s biggest takeaway from his experience at Pepsi was the importance of reaction: how to respond, when to respond, and, most important, when it was better to just stay on the sidelines.

In a world where most marketing folks want to come up with the next big thing (e.g., Sonic 2sday, a head-to-head mall tour—basically what Al Nilsen did so well), Nintendo was pleased to find someone who appreciated the importance of picking one’s battles. This mentality fit perfectly into the Arakawa-inspired, Main-executed NOA devotion to long-term strategy over short-term shakeup. Plus, Harrison came with the added bonus of having a glimpse into the heart of their competitor, having worked for what could be considered the Sega of the cola wars. So in March 1992, Harrison accepted the job of Nintendo of America’s director of advertising and promotion, making him the company’s number two marketing man behind the incomparable Peter Main.

Or so he thought. But when he arrived in Redmond, he discovered that Bill White (the man he thought he’d been hired to replace) had been shifted to a newly created position running corporate communications. This surprise led him to believe that either White had been on thin ice for a long time or Nintendo was actually a terribly disorganized company. And based on everything he had witnessed thus far in his career at Nintendo, it certainly didn’t appear to be the latter. Naturally, Harrison was frustrated by this turn of events (although it was hard to tell because of his perpetually even keel), but any ill will quickly evaporated when he fell in love with Nintendo’s unique corporate culture and the fast-paced environment of the videogame industry. Compared to the food industry, this was rapid-fire. Pepsi was a blast, but the products didn’t change. There was Pepsi, there was Diet Pepsi, and then you do it all over again. But at Nintendo there were new games each month and, similar to the Hollywood business model, it was a hit-driven industry, where opening weekend would typically make or break a title. There also turned out to be an unexpected fringe benefit to working at NOA: father-son bonding. Harrison didn’t know the first thing about videogames, but his six-year-old son did, and the boy would stay up with his father, testing out titles and giving him insights on which games to advertise and which features to highlight. After years of playing corporate Chutes and Ladders, Harrison felt like he had finally found the perfect job. Although some outsiders were perplexed by why he would join Nintendo during a period of decline, this never bothered Harrison. From his perspective, Tom Kalinske was nothing more than the videogame industry version of the Man of La Mancha: getting everyone excited with all sorts of hype until everyone realized that Sega was nothing more than smoke and mirrors. Nintendo’s slow and steady pace suited Harrison well, and then in early 1993 it suited him even better, when Bill White was suddenly gone and he got the job he’d once thought he already had.

“Fantastic!” someone shouted when the credits for Super Mario Bros. rolled down the screen. There was laughter, there was clapping, and when Harrison turned to Miyamoto there was still that smile. Harrison was nervous to hear what he had to say and braced for the worst; even soft-spoken creative geniuses must have a mean streak, and there seemed no better time to strike than when your masterpiece has been butchered.

“So, what did you think?” Harrison asked. The movie was obviously horrible; all that mattered now was how annoyed or upset Miyamoto would be.

Miyamoto cocked his head in what appeared to be a sincere period of thought. The movie was scheduled to be released next month, May 28, 1993, to be precise, but a furious reaction from the game’s creator could potentially change all that. Finally he spoke, and when he did there was no yelling or screaming. Nothing that even, for a moment, betrayed his gentle stuffed-animal-come-to-life personality.

He was a good sport about it all, and appeared confident that the people who watched the film would be able to separate what they saw from what he had spent years creating. Like most people at Nintendo, it appeared that he possessed an instinctive talent for knowing which battles were worth fighting.

After the screening, Harrison flew back to Redmond and met with the president of NOA to make good on the second part of Arakawa’s request.

“George,” Arakawa greeted, ushering the young executive into his office. “Tell me, have you seen the film?”

“Yes,” Harrison said with a gentlemanly nod as he took a seat opposite his boss’s boss. “I watched it from start to finish with Mr. Miyamoto.”

“Good,” Arakawa said, curious but never quite showing it. “What did you think?”

“It’s sort of a bad-news-and-good-news situation,” Harrison said. In addition to looking out for Miyamoto, he had been tasked to watch the film and determine if it had turned out so badly that Nintendo ought to pay however many millions for the distribution rights and then never let it see the light of day. “Well, the bad news is that the movie is really bad. It’s just terrible.”

Arakawa nodded; this was hardly a surprise.

“But the good news is that it’ll be in and out of theaters so quick, no one will notice it. So we’re better off to just let it go and die then to pay a king’s ransom merely to stick it on a shelf somewhere.”

“Do you feel certain of this?”

Harrison considered the question. It was definitely one of the worst movies he had ever seen, and there was no way it could help Nintendo take back any market share from Sega. There was a temptation to just make it go away (after all, Nintendo had the money to make that happen without issue), and also an urge to publicly make light of the situation, but those were the kinds of reactions meant for the Pepsis of the world. The Cokes, the market leaders, needed to shrug off these kinds of things and just keep moving forward. “Yes,” Harrison said. “I’m certain.”

“Very good. Then we move on,” Arakawa said. And so they did.

Meanwhile, as Nintendo was formidably playing the role of a market leader like Coke, Sega was plucking a page right out of Pepsi’s playbook. Ten years earlier, Michael Jackson had helped boost Pepsi to the top (albeit momentarily), and that’s who Sega was counting on to now do the same for them. It was a lot to ask from Jackson (especially after his earlier game, Moonwalker, had only been a mild success), but this time he’d have help from another celebrity: Sonic The Hedgehog. And so, as per his deal with Sega, Jackson was hired to create the sound track for Sonic 3. Kalinske not only believed that this would be Sega’s biggest game yet, but that this would be the first in a new genre of videogame sound tracks that would be consumed like a pop music album. It all seemed so perfect, except there was one small hitch to the plan.

As suspected, Sonic 3 would not be ready in time for the 1993 holiday season, but with Fornasier’s any-day-can-be-Christmas strategy, the delay was almost moot. Timing, at least initially, was not the problem with Sonic 3, but the size of the game was starting to become one. Since this would be Yuji Naka’s last Sonic title for the Genesis (after this, he would begin developing for Sega’s next generation 32-bit console), he wanted it to be the best and biggest of the franchise, and for him to accomplish that to his liking the game would need to be 24 megs, which was 50 percent larger than normal. Although the size issue certainly presented challenges, it didn’t really become a problem until Naka realized that making a quality 24-megabyte game would take longer than he had initially thought. On second thought, Sonic 3 probably wouldn’t be ready until summer 1994. Delaying a game was never ideal, but it usually wasn’t crippling because marketing plans could still be moved. With Sonic 3, however, things were a little more complicated because Sega’s promotional wizard Tom Abramson (whose prowess would soon earn him Advertising Age’s Promotions and Event Person of the Year award for 1994) had recently attained marketing’s Holy Grail: a Happy Meal at McDonald’s. This was a major achievement for Sega, financially as well as symbolically, but the problem was that Sonic 3 would need to be released some time during the first quarter of 1994. Based on Naka’s current prognostication, that was absolutely impossible. This left Sega with two options: either cut down Naka’s game and release it earlier, or let Sonic’s creator just do what he did best and lose the McDonald’s promotion. When laid out like that, the decision was simple, until Paul Rioux complicated everything with a Hail Mary idea that could potentially solve everything.

Years earlier, Rioux had remembered seeing a contraption that, when attached to a videogame cartridge, could add new characters, levels, and additional content to the original game. It was almost like the Game Genie, except instead of granting powers, it revealed all new worlds. What if Sega could harness that technology? The big feature of Sonic 3 was a new playable character named Knuckles, and that had to be accounting for a good part of the delay, right? So what if Sega released the first half of Sonic 3 without this Knuckles character and then, a few months later, they sold a contraption that would essentially “unlock” the rest of the game? Would that work? Amazingly, it would. Sega could then release the equivalent of Sonic 3: Part 1 in February 1994 (with nothing but a small cameo from Knuckles), and then when Naka was done they could release the second half. The concept might be a little confusing to sell, but that could be solved with clever marketing, so the real question was whether two Sonic games in 1994 (plus a Sonic-themed pinball game in late 1993) would cause consumers to become sick of Sonic’s hero. This was certainly a very realistic possibility, but Kalinske and company were never ones to back down from a challenge, especially one in which they had Michael Jackson on their side.

As Kalinske sat in his office reading about the “lock on” technology that would make Rioux’s Sonic plan possible, the stars were aligning to knock Nintendo out of the solar system. Everything was coming together, until suddenly it was not.

“What do you mean?” Kalinske asked, speaking into the phone with a frustrated desperation. “You’re kidding, right? Please, tell me you’re kidding.”

It was Olaf Olafsson on the other end. “I’m afraid not,” he said with a sigh. “They couldn’t make it work. ‘Creative differences,’ that was the party line.”

“I can’t believe this,” Kalinske said, digesting the fact that Sega and Sony had abandoned the plans to jointly release a next generation console together. “I don’t really know what to say, except that I’m sorry.”

“Oh, please,” Olafsson replied. “You tried your best.”

“That’s what scares me,” Kalinske said. “I did, I really did, and they still couldn’t find a way to make it work.”

“Don’t beat yourself up. It’s just business. These things happen.”

“Am I correct to assume that Sony will be moving forward without us, and that you will be launching a console on your own?”

“Hopefully,” Olafsson answered.

“Well, if you do,” Kalinske said, “then I wish you the best of luck.”

“To you as well, my friend,” Olafsson replied.

After the men hung up, each allowed himself a final moment to theorize about what could have been before moving on to the much more pressing theoretical question: is the videogame industry big enough to support having three horses in this race? And if not, which horse is headed to the glue factory?