The video game industry in the US exploded into life and then almost just as quickly suffered an incredible death. (A Pixelated Past: Part 1 – Atari and the life and death of video games). Then, just a few years later Nintendo swooped in and resurrected the industry and ruled the market (A Pixelated Past: Part 2 – How Nintendo saved the world). During the late eighties and into 1990, the Nintendo Entertainment System (NES) was in virtually every home. However, by 1993, Nintendo would lose half the market to SEGA. The first true console war had begun.

But, how did Nintendo’s monopoly crumble so quickly? Well, the answer to that lies not only in 1990 but a general feeling of unhappiness which Nintendo had unwittingly bred in the years prior…

Control: Nintendo’s chips were all on their own table

As covered in the previous Pixelated Past articles, the video game industry had suffered a huge crash largely because of an oversupply of mediocre games and systems. The lack of quality meant that demand plummeted. Nintendo’s success was largely due to their recognition of this. They saw and tried to avoid the mistakes that companies such as Atari had made. Nintendo was also Japanese. When these two factors combine – one word became intrinsic to their business model: Control. Nintendo controlled every aspect of the business. Not only production but distribution, relationships with retailers… everything. In every branch of the system, Nintendo had the upper hand in the relationship. Nowhere was this more evident than in the way they dealt with third-party developers.

Third-party developers of course wanted to make games for the massively successful NES. Nintendo allowed this but included a lock-out chip that only they could supply. This chip would allow only games that Nintendo had approved, sanctioned or deemed worthy to work on the system. The chip led to production costs for making cartridges to go up. Smaller developers found it more difficult to finance their games.

Nintendo also began to control the supply of cartridges. Taking into account that, part of the reason the home video game industry had crashed less than a decade before was due to a glut of low quality games, one can partially understand this tactic. However, many believe Nintendo went too far. Third parties were understandably frustrated, and this only became worse when in 1988 a chip shortage occurred. Nintendo then began to ration the chips. Nintendo games would get as many chips as they wanted, however, other developers like CAPCOM or Konami would only get 100 000 chips. So demand (often in the millions) would substantially outweigh supply. If the other companies complained, their next delivery might only include 90 000 chips. Nintendo knew they had all the power and they wielded it. Not only did they get third parties to agree to clearly one-sided weighted contracts, they quickly sued and generally bullied anyone trying to get around the chip. Because gamers were happy and Nintendo kept getting richer – it seemed like nothing was going to change.

A lot of discontent was coming from third parties, competitors and even retailers – Nintendo had very strict policies about how their games could be sold, and strongly ‘encouraged’ the retailers to not stock any of Nintendo’s competitors. These factors and Nintendo’s Big Brother persona, however, would eventually serve as the catalysts for yet another change in the industry.

SEGA does what Nintendon’t!… er, not so much…

SEGA had existed for some time. It was a popular arcade video game company and had a lot of success in its own right. Despite this, when the American home console market crashed, SEGA (like Nintendo) saw a field ripe for harvesting. However, because Nintendo got there first had already done all the harvesting, SEGA’s early ventures failed miserably. Back in 1988, SEGA of Japan (SOJ) had seen the release of their high-tech 16-bit console The Mega Drive overtaken by the release of the Super Mario Bros. 3 in Japan.

Despite selling 400 000 in their first year, SEGA wanted to sell more and they knew they needed to do this in the massive US market. By 1989 the rebranded SEGA Genesis was on American shores and SEGA of America (SOA) and video game veteran Michael Katz was put in charge. Having been involved with the ColecoVision, Intellivision and even Atari, SOJ felt that Katz would be the ideal man to finally take a slice of Nintendo’s pie.

Katz got to work; Not able to get third parties to budge he focussed on signing big names like Joe Montana and Michael Jackson to try and entice gamers into buying SEGA games.

Katz also began to advertise more aggressively and came up with the now-famous SEGA does what Nintendon’t campaign. It highlighted that SEGA had the superior system and finally took Nintendo head-on.

Success was, however, limited. Nintendo had Mario and SEGA’s mascot, Alex Kidd, unfortunately, did not resound with audiences in the same way. Soon Katz’s time at the company would be over. The only thing so far that SEGA (was doing) that Nintend(idn’t) was: failing to make an impact.

Kalinsky and Sonic

Tom Kalinsky was expecting “a Mario killer but not one that literally looked like a serial killer”. This is how Blake J. Harris describes SEGA of America’s (SOA) new president’s first encounter with Sonic the Hedgehog in the excellent book Console Wars: Sega, Nintendo and the Battle That Defined a Generation. Kalinsky had quite a resumé before arriving at SEGA. He had worked at and eventually became CEO of Mattel, reviving the Barbie and Hot Wheels Brands and launched the Masters of the Universe. He had then become CEO of Matchbox. SEGA was struggling for significance when Kalinsky took over SOA, and when accepting the job Kalinsky had done so on the provision that he would have the backing to do things his own way. SEGA of Japan agreed.

Kalinsky created three-point plan of attack. First, he slashed the price of the Genesis. Instead of $189 he thought the console should be sold at $149. Second, he aggressively attacked Nintendo through advertising. Not only did he want SEGA to move away from their arcade roots and shine through as a great and technologically superior home console, but Kalinsky also wanted to depict Nintendo as boring, slow and ‘just for kids’. Finally, he felt that not only should Sonic become the face of SEGA, but Sonic would also typify the heart, soul and spirit of SOA. However, for that Sonic had to make some changes.

The original concepts for Sonic were quite intense: Fangs, a leather jacket, a guitar and even a busty human female love interest. Although these features would be completely fine in Japan, they would not be as easily accepted by the then more conservative American audience.

These were worries that Katz himself had had. Did American kids even know what a hedgehog was? Despite these concerns, the new SOA team saw in Sonic not only a game that could compete with the Mario franchise but also typify the attitude and direction of the fledgling company. His appearance was tweaked, a narrative and character mythology was created and soon the Sonic we all know arrived, evoking similar reactions as the popular Teenage Mutant Ninja Turtles. Harris explains how important Sonic would turn out to be: Sonic would not only be the face of their company – Sonic would embody their spirit and perfectly encapsulate the cultural zeitgeist of early nineties America – Bill Clinton, Michael Jordan and Kurt Cobain all perfectly wrapped in a super-fast blue streak.

SEGA would bundle the Genesis with their best title, Yuji Naka’s masterpiece: Sonic The Hedgehog.

Despite SOJ’s initial reluctance to drop the price, take Nintendo head-on and their concern that bundling their best game would mean a significant loss of money, the SOJ president backed SOA and the aggressive strategy began to pay off.

The War Begins…

In 1991, SEGA was able to land its first significant gut punch in the battle with Nintendo. Sonic was a huge hit. Despite, its limited presence, the aggressive advertising campaign was starting to pay off. Radio stations, adolescent TV show stars and more were all proclaiming the arrival of SEGA. Mario finally had a worthy adversary.

Eventually, SOA even began to get retailers on board. To get Walmart (the biggest player in the game) they rented space near Bentonville, Arkansas near the Walmart ‘home base’. Bentonville quickly became Sonic and Sega Central. The advertising push was so relentless here that eventually Walmart, pressured by consumers, caved and began to stock the Genesis. Other retailers soon followed suit.

Nintendo of Japan did not want to get into an advertising mud-slinging match with SEGA. Instead, they decided to double down on their already popular own software and hardware, in fact now not only did they have the NES but also the 16-bit Super NES and the fantastic Super Mario World.

Super Mario World is viewed by some as the best game of all time. However, again, SEGA went on the offensive. Nintendo had Super Mario World and the SNES, so SEGA touted Blast Processing and oozed cool. They wanted everyone to know that SEGA was hip, better and cheaper – and because Nintendo said nothing against SEGA it allowed SEGA to frame the competition between Mario and Sonic as a popularity contest and a race – SEGA was able to show again and again how cool and fast Sonic was. SEGAAAA!

Soon the Genesis actually had more market share than Nintendo. Third-Party developers now were happy to have a choice between Nintendo and SEGA. SOA had succeeded and now everyone now HAD TO CHOOSE. Playgrounds, schools and even workplaces became the battlegrounds. You were either Nintendo or SEGA. SNES or Genesis. Super Famicom or Mega Drive. Sonic or Mario.

A turbulent future

The next few years would see a big change in the video game market. With games like Sonic 2 and Ecco the Dolphin coming from SEGA and the visually stunning and super fun Donkey Kong Country and Yoshi’s Island from Nintendo it seemed that the battle was nowhere near done. But, the emergence of CD-roms would prove to be a watershed moment. Not only would this lead to Nintendo losing even more market share, SEGA, after a series of incomprehensibly bad decisions by SOJ, would eventually collapse as hardware company. At around this time, we would also get the emergence of two consoles you may have heard of: first, the PlayStation and later the Xbox.

Want to know more about SEGA’s fall, the rise of PlayStation and Xbox or even how we almost had a Nintendo PlayStation and SEGA Xbox? Let us know in the comments section below and look forward to more Pixelated Past features in the future.

 

References

Console Wars: Sega, Nintendo and the Battle that Defined a Generation – Blake J. Harris

Super Mario: How Nintendo Conquered America – Jeff Ryan

Video: The History of Nintendo – 2005 (Gamearang)

Video: Nintendo VS Sega – The Greatest Gaming Rivalry Ever – 2018 (MojoPlays)

Video: The Rise and Fall of Sega – 2012 (TheGamerFromMars)

IGN Present The History of SEGA – 2009 Travis Fahs

IGN: Genesis vs. SNES: By the numbers – 2009 Levi Buchanan

IGN: Top 100 Video Game of all Time – 2018

Several Images: http://info.sonicretro.org/

https://en.wikipedia.org/wiki/Tom_Kalinske

Originally written for SA Gamer. Used with permission.