Console Wars

1. Tom Kalinske revitalizes Sega with innovative marketing and leadership

"I can only speak for myself, but there's not a character out there that I'd rather spend some time with than our new Sonic The Hedgehog. And if I feel this way, I think there are a lot of others who will feel exactly the same."

Bold leadership: Tom Kalinske, former Mattel executive, joins Sega of America as CEO in 1990. He brings fresh perspectives and a wealth of experience in toy marketing to the video game industry.

Strategic vision: Kalinske implements a "Four-Point Plan" to revitalize Sega:

• Bundle Sonic the Hedgehog with the Genesis console
• Lower the price of the Genesis to undercut Nintendo
• Target an older demographic with edgy marketing
• Develop more games tailored for the American market

Team building: Kalinske assembles a talented team of executives and marketers, including Al Nilsen, Paul Rioux, and Ellen Beth Van Buskirk, to execute his vision and challenge Nintendo's dominance.

2. Sega challenges Nintendo's dominance with the Genesis console and Sonic the Hedgehog

"Genesis does what Nintendon't."

Console wars begin: Sega releases the 16-bit Genesis console in 1989, positioning it as a more powerful alternative to Nintendo's 8-bit NES.

Sonic's impact: The creation and launch of Sonic the Hedgehog in 1991 gives Sega a mascot to rival Mario and a flagship title to showcase the Genesis's capabilities:

• Fast-paced gameplay
• Vibrant, colorful graphics
• "Attitude" that appeals to older gamers

Market share growth: Through aggressive marketing and strong game releases, Sega increases its market share from single digits to over 50% at its peak, seriously challenging Nintendo's long-held dominance.

3. The video game industry evolves from niche to mainstream entertainment

"Videogames were for everyone; they just didn't realize it yet."

Cultural shift: Video games transition from being perceived as children's toys to a form of entertainment for all ages.

Economic impact: The industry grows from a few hundred million dollars in the mid-1980s to several billion by the early 1990s.

Broader appeal: Games begin to tackle more mature themes and complex narratives, attracting older players and expanding the market:

• Sports games like John Madden Football
• Role-playing games like Phantasy Star
• Action-adventure titles like Sonic the Hedgehog

4. Corporate culture clash between Sega of America and Sega of Japan

"Sega was one company, and together SOJ and SOA were inciting a pop-cultural revolution. And yet, even as he had this thought, a small part of him couldn't help but root for Sega of America to beat the living daylights out of Sega of Japan and make those directors choke on their condescending smiles."

Communication challenges: Differences in business practices and decision-making processes create tension between Sega's American and Japanese divisions.

Creative differences: Disagreements arise over game design, marketing strategies, and target audiences:

• Character design for Sonic the Hedgehog
• Naming conventions for characters and games
• Marketing approaches for different markets

Power dynamics: Sega of America's success leads to increased autonomy, but also friction with Sega of Japan over control and direction of the company.

5. Nintendo's business practices and market control face scrutiny

"Nintendo wanted to exert their leverage? They wanted to gouge developers, producers, and publishers? They wanted to be paid everything in advance, before a single game was ever sold? Fine, Nintendo had earned the right to call the shots."

Monopolistic concerns: Nintendo's tight control over game licensing, manufacturing, and distribution draws attention from regulators and competitors.

Legal challenges: Companies like Atari Games (through its subsidiary Tengen) and Galoob challenge Nintendo's practices in court.

Market reactions: Retailers and developers become increasingly frustrated with Nintendo's policies, creating opportunities for Sega to gain partners and market share.

6. Key personalities shape the competitive landscape of the gaming industry

"Arakawa was forever seeking ways to improve efficiency. As physical proof of this obsession, he carried around a thick tan Ultrasuede portfolio that was always overflowing with cost sheets, inventory reports, and all sorts of additional data that would put most company presidents to sleep."

Nintendo leadership:

• Minoru Arakawa (Nintendo of America President)
• Howard Lincoln (Nintendo of America Senior VP)
• Peter Main (Nintendo of America VP of Marketing)

Sega innovators:

• Tom Kalinske (Sega of America CEO)
• Hayao Nakayama (Sega Enterprises President)
• Yu Suzuki (Sega game designer)

Other industry figures:

• Trip Hawkins (Electronic Arts founder)
• Olaf Olafsson (Sony Electronic Publishing)

These individuals' decisions, personalities, and rivalries significantly influence the direction and growth of their respective companies and the industry as a whole.

7. Marketing strategies and retail relationships drive console wars

"We're going to have a street date, Mad, we're going to have the world's first global launch, and in the process we're going to break every single sales record."

Innovative campaigns: Sega's aggressive and edgy marketing targets an older demographic, contrasting with Nintendo's family-friendly approach:

• "Genesis does what Nintendon't" slogan
• Direct comparisons between Sonic and Mario
• Celebrity endorsements and partnerships

Retail tactics: Both companies vie for shelf space and retailer support:

• Exclusive deals and promotions
• In-store displays and demo units
• Pressure on retailers to choose sides

Event marketing: Sega introduces the concept of a global launch date with "Sonic 2sday," creating a worldwide event for the release of Sonic the Hedgehog 2.

8. Technological advancements and creative game development fuel industry growth

"The Famicom, as it was commonly called, was an 8-bit console that stood head and shoulders above anything that had ever come before."

Hardware evolution: The transition from 8-bit to 16-bit consoles marks a significant leap in graphics and gameplay capabilities.

Software innovation: Developers push the boundaries of what's possible in video games:

• Improved graphics and sound
• More complex gameplay mechanics
• Larger, more immersive game worlds

Peripheral devices: Companies experiment with add-ons and accessories to enhance gaming experiences:

• Nintendo's R.O.B. (Robotic Operating Buddy)
• Sega's planned CD-ROM add-on for the Genesis

9. The importance of brand identity and mascots in the gaming world

"Basically, an agency that swung for the fences and actually hit home runs. At this point, Sega still couldn't afford the game's heaviest hitters, but Volkwein was confident that the company's recent momentum would attract an agency looking to get into the videogame business."

Character creation: Mascots become crucial for brand recognition and marketing:

• Mario for Nintendo
• Sonic for Sega
• Crash Bandicoot later for Sony

Brand positioning: Companies carefully craft their image to appeal to specific demographics:

• Nintendo as family-friendly and reliable
• Sega as edgy and cool
• Sony (later) as sophisticated and cutting-edge

Cross-media promotion: Game characters expand into other forms of media:

• TV shows
• Movies
• Merchandise

The success of these mascots and brand identities plays a significant role in shaping consumer preferences and loyalties during the console wars.

Last updated: November 19, 2024