October 29, 2020
by Carla Hay
Directed by Jonah Tulis and Blake J. Harris
Culture Representation: The documentary “Console Wars” features an almost all-white group of people (with one Asian), who are current or former high-ranking executives at videogame companies, talking about the 1980s and 1990s rivalry between Nintendo and Sega.
Culture Clash: Nintendo was the dominant market leader for video games played on consoles until the rise of Sega Genesis and later Sony PlayStation.
Culture Audience: Besides the obvious target audience of people who like playing video games, “Console Wars” will also appeal to people interested in 1980s/1990s pop-culture nostalgia or how the videogame industry operated during this era.
Long before the Internet existed, people’s options to play video games were limited to public arcades, computer discs or by using consoles that could be hooked up to televisions. The thoroughly entertaining documentary “Console Wars” takes a revealing behind-the-scenes look at the extremely competitive business rivalry between the U.S. operations of Nintendo and Sega in the 1980s and 1990s. You don’t have to be interested in video games to enjoy this film because it’s really an underdog story about how an upstart business took on a giant corporation that most people thought at the time could not lose its dominant hold on the marketplace.
Almost all of the people interviewed in the documentary are business executives who used to work for Nintendo and Sega during the 1980s and 1990s, but that doesn’t mean that “Console Wars” is dull. Far from it. It’s a movie that’s intriguing because it shows how individual leaders and their visions (and the power to carry out those visions) make a big difference in whether or not a team fails or succeeds. The lessons that can be learned in this documentary can apply to any business.
“Console Wars” isn’t perfect, but it’s a fascinating look into how these leading videogame companies, which have their headquarters in Japan, operated the U.S. branches of their companies. The Japanese approach and the American approach to business is often very different. “Console Wars” gives some explanation of how those cultural differences might have affected how these companies conceived and marketed their products and delegated responsibilities to employees.
Directed by Jonah Tulis and Blake J. Harris, “Console Wars” begins with an overview of the history of Sega, the “underdog” of the story. (Harris wrote the 2014 book “Console Wars: Sega, Nintendo and the Battle that Defined a Generation,” which is the basis of this documentary.) Sega of America, which is the U.S. operation of Sega, had very humble beginnings when it was launched in 1986 as the American counterpart to Sega’s operational division Sega of Japan. Sega of America didn’t even have a corporate office at first, but instead did business out of a Comfort Suites hotel in the San Francisco area.
Shinoba Toyoda was a former Mitsubishi employee who joined Sega of America as executive vice president in 1989. In “Console Wars,” Toyoda says that one of the main reasons why he joined this start-up operation was because he wanted to work in California. And so, he checked into Sega’s Comfort Suites headquarters to live and work. Although Sega of America has since relocated further south to the California city of Irvine, Toyoda still lives part-time in the same Comfort Suites.
At the time that Sega of America launched in 1986, Nintendo was the Goliath of the videogame industry, with a near stranglehold on the marketplace. According to several former Sega employees interviewed in the documentary, Nintendo was such a dominant force in the videogame industry that the company would pressure retailers not to carry products from Nintendo’s competitors, or else Nintendo would threaten to boycott the retailers. Nintendo was also accused of using similar tactics on software companies to deter these software companies from working with Nintendo competitors.
It’s an accusation denied by former Nintendo of America director of marketing Bill White in the documentary. However, former Nintendo of America vice president of sales Randy Peretzman admits, “Retailers did not like us … but we were respected.”
Nintendo had anti-trust problems with the U.S. government that eventually led to class-action payouts. However, Nintendo used these payouts to the company’s advantage, by distributing the payouts as coupons to buy Nintendo products. Nintendo’s legal issues over its business practices and the way that Nintendo “bullied” retailers were indications that the company was making enemies and could be vulnerable to a new rival swooping in to compete on the same level as Nintendo.
Sega of America took on the challenge of launching its own console system and games to rival what Nintendo of America was doing. Sega’s first attempt to launch a console was in the early 1980s, but it had middling success. In 1988, Sega launched a new console called Sega Genesis (which was called Mega Drive outside of North America), which would change the way that the videogame industry operated.
Paul Rioux, who was executive vice president of Sega of America during this time, says in the documentary: “It was hard to launch an organization from scratch and launch a major videogame system in the United States, There are so many hurdles to get into with all the retailers. They just won’t buy from anybody. You have to prove yourself.”
At the time, Nintendo’s most popular game franchise was Super Mario. For the launch of Sega Genesis, the initial marketing strategy was for Sega of America to have games that relied heavily on licensing already-established brands from celebrity names. Early videogames for Sega Genesis included Michael Jackson’s Moonwalker and Joe Montana Football.
According to Toyoda, Sega of America’s goal was to sell 1 million units of Sega Genesis in that first year. The company fell short of that goal, by selling only 500,000 units, according to Sega. It was time to take a fresh new approach to the business.
And that’s when Sega Corp. CEO Hayao Nakayama decided to personally recruit an American marketing whiz named Tom Kalinske, an executive who previously worked for the mega-successful advertising agency J. Walter Thompson and for market-leading toy company Mattel. Kalinske is given credit for reviving the popularity of Mattel’s Barbie dolls in the 1980s, after Barbie dolls got a feminist backlash in the 1970s.
How much did Nakayama want Kalinske to work for Sega of America? According to a story that Kalinske tells in “Console Wars,” Kalinske was lying on the beach in Hawaii during a vacation one day, when Nakayama (whom he’d never met before) approached him and asked Kalinske to be the leader of Sega of America. Kalinske says he didn’t know how Nakayama found him on this beach, but Kalinske took the job on the condition that he run Sega of America the way that Kalinske thought was best for American business, with little to no interference from the Sega executives headquartered in Japan. Nakayama agreed to those terms.
In “Console Wars,” Kalinske describes coming up with a strategy for Sega Genesis consoles and games that was considered risky and radical at the time. The strategy had three main components: (1) Have more licensing from movies and TV shows; (2) Lower the price of Sega Genesis; (3) Make the best original character game in the Sega Genesis catalogue included for free with Sega Genesis.
It was that last idea that was considered the riskiest, since no other videogame company had ever included its most popular game for free with the purchase of a console. In “Console Wars,” Kalinske said that when he presented all of these ideas in a meeting with Nakayama and other Sega executives in Japan, the Japanese executives hated the ideas, but Nakayama kept his word and let Kalinske run Sega of America in the way that Kalinske thought was the best way.
As for the original Sega Genesis character that would be the hook to get people to buy the console, that’s when Sonic the Hedgehog was born. Al Nilsen, who was Sega of America director of marketing at the time, says that he came up with the name of the character, which was created by Ian Flynn.
Sonic the Hedgehog games distinguished themselves from Super Mario games by being more colorful, with higher pixel resolution and with faster action. Sonic the Hedgehog also had a sarcastic, slightly rebellious personality that appealed to older kids (teenagers), whereas Super Mario was considered a much safer character. Instead of trying to copy Nintendo videogames, Sega decided to market its videogames as edgier and “cooler” than Nintendo’s games.
And to get around the problem that major retailers such as Wal-Mart wouldn’t carry Sega Genesis products, Sega of America launched a tour of shopping malls for Sega Genesis and rented out pop-up retail spaces to showcase Sega Genesis in a retail environment on Sega’s own terms. Many of these pop-up retail locations were in close proximity to giant retailers that carried only Nintendo products. One of those locations was right next to Wal-Mart headquarters in Bentonville, Arkansas. Sega also did strategic advertising (including billboards) of the pop-locations to reach the people most likely to buy videogame products.
It was all a great marketing strategy that caught Nintendo off-guard. The gamble paid off because Sega Genesis became a hit, due in large part to its lower price and its image as the more technologically advanced and “cooler” alternative to Nintendo. And by 1994, Sega was the market leader in the videogame industry.
Just like Super Mario was the flagship character that turned Nintendo into a videogame powerhouse, so too was Sonic the Hedgehog for Sega. Ellen Beth Van Buskirk, who was was Sega of America’s director communications at the time, says that in the early days of promoting Sonic the Hedgehog, she often had to dress up as the character at different Sega events. And she noticed a major difference in Sega’s target audience and Nintendo’s target audience.
In “Console Wars,” Van Buskirk remembers that Sonic the Hedgehog was immediately a big hit with teenage boys, compared to younger kids. When she was dressed up as the character, the teenage boys saw Sonic the Hedgehog as a character they could relate to and would want to give a lot of “high fives.” By contrast, younger kids would see Sonic the Hedgehog as cuddly character, like Super Mario, and would be more inclined to want to hug the character. Van Buskirk comments on why Sonic the Hedgehog appealed mostly to teenagers: “They wanted something different. They wanted attitude. They wanted sass. They didn’t want hugs.”
Mortal Kombat, which was Sega’s next big hit videogame franchise, was popular with teens (usually teenage boys) for the way that it portrayed blood on screen. Whereas Nintendo’s version of Mortal Kombat had green blood, the blood in Sega’s version of Mortal Kombat was a realistic red color. In hindsight, former Nintendo of America senior vice president Howard Lincoln says in “Console Wars” that it was a mistake for Nintendo to tone down the realistic blood color for Mortal Kombat. He says that Nintendo surprisingly got more complaints from the parents than the kids about Nintendo’s Mortal Kombat being too tame.
However, there have been other parents who don’t like violent video games at all. Mortal Kombat, for better or worse, ushered in a trend for people to want more realistic-looking fight scenes in video games. The videogame industry would soon come under intense scrutiny and criticism for its violent content, including U.S. Congressional hearings.
The controversy over videogame violence continues today. Steve Race, who was a marketing executive for Sega during the early 1990s, had this to say about the government scrutiny on videogame violence: “It was total nonsense … It’s business and politics meeting in the worst way possible.”
Sega’s popular commercials are also mentioned in the documentary. Jeff Goodby of advertising agency Goodby, Silverstein and Partners talks about his company creating the “Welcome to the Next Level” slogan for Sega Genesis, as well as the famous short-but-frantic one-word “Sega” line that’s blurted out at the end of the commercials. This one-word “Sega” utterance gave the Sega products an image of being slightly madcap, and there was an urgent tone to buy the products. Goodby also says that the term “blast processing,” which touted that Sega’s consoles were faster than Nintendo’s consoles, was an advertising fabrication.
“Console Wars” isn’t told in chronological order, because about halfway through the film, the movie goes into the history of how Nintendo rose to power. This section on Nintendo isn’t as interesting as the section about the rise of Sega, mainly because Nintendo didn’t have any real competition after Atari (the videogame company best known for the Pac-Man game) crashed, burned and never fully recovered in 1983. Atari’s flop sales for the E.T. game (based on the hit movie) was one of the main reasons why Atari’s business suffered in the early 1980s.
Nintendo rose to prominence, thanks to games like Super Mario and Donkey Kong. (Videogame designer Shigero Miyamoto is credited with creating both games.) The Nintendo Entertainment System (NES) launched as a test product in New York City in 1985, and created instant huge demand. NES then became the console that dominated the marketplace for most of the 1980s.
Former Nintendo executive Lincoln comments: “If the NES had not been successfully launched in New York, I think it’s fair to say that there would not have been a home videogame business.” Other former Nintendo executives who are interviewed in “Console Wars” include Howard Phillips (former Nintendo of America spokesperson), Gail Tilden (former Nintendo marketing executive/former editor-in-chief of Nintendo Power) and Peter Main (former Nintendo of America senior vice president of marketing).
As with any competitive industry, companies recruit employees from rival companies. One of the major shakeups in the executive structure in the war between Nintendo and Sega was when marketing executive White defected from Nintendo to work for Sega. And then Sega marketing executive Race jumped ship to work for Sony, which was gearing up to launch its own videogame console: Sony PlayStation, which launched in Japan in 1994, and in North America and Europe in 1995.
Sega, which was the market leader at the time, was under pressure to compete with old rival Nintendo and new rival Sony. Sega of America’s Kalinske also says that Sega was experiencing internal problems. According to Kalinske, the Sega of Japan team was becoming increasingly jealous of the Sega of America team’s success. Sega Corp. CEO Nakayama also became less supportive of Kalinske’s ideas, according to Kalinske, who says that Nakayama squashed a proposed partnership between Sega and Sony.
In “Console Wars,” several people cite the 1995 Electronic Entertainment Expo (also known as E3) as the turning point for Nintendo, Sega and Sony. According to Kalinske, Sega of Japan CEO Nakayama wanted to rush the production of the Sega Saturn console so that it would be ready to be introduced at E3 in 1995. However, the product wasn’t quite ready and had some technical complications that Sega executives knew would be problematic.
At E3 in 1995, things got nasty and juvenile when Sonic the Hedgehog balloons were found popped and deflated all over the convention site. Sony executive Race (a former Sega employee) and his team were suspected of this vandalism. And in his “Console Wars” documentary interview, Race smirks and doesn’t deny that he and team were responsible for popping the balloons when it’s brought up in the interview. The Sega/Sony rivalry took an intense turn at the E3 convention when Sony surprised many attendees by announcing that it was pricing PlayStation at a suggested retail price of $299, compared to the Sega Saturn’s $399 suggested retail price.
And there were more changes in alliances. Silicon Graphics, which worked with Sega to take Sega’s videogame graphics to the next level, ended up partnering with Nintendo for the 64-bit central processing unit that was the basis of the Nintendo 64 console, which launched in Japan and North America in 1996 and in Europe and Australia in 1997.
In the end, according to the documentary, Sega Saturn sold 10 million units, Nintendo 64 sold 30 million units, and Sony PlayStation sold 100 million units. Kalinske resigned from Sega in 1996, Nakayama left Sega in 1999, and Sega got out of the hardware console business in 2001.
“Console Wars” has plenty of great archival footage that will satisfy people looking for some videogame nostalgia. But the video games in the story were really just pawns used in a “chess match” of a corporate competition that could get ruthless. Because the documentary focuses on the U.S. operations of Nintendo and Sega, it has a very American point of view overall.
However, it would’ve benefited the documentary to include more perspectives of the Japanese creators and Japanese business executives who played crucial roles in making these games and consoles possible. There’s no mention in the documentary if any attempt was made to interview Nakayama, who was Kalinske’s boss at Sega and who is the Japanese executive who’s mentioned the most in the documentary. In other words, “Console Wars,” although it has a lot of great anecdotes, appears to be very one-sided in favor of the American perspective.
Although the documentary could have used more perspectives of Japanese creators and Japanese business executives, “Console Wars” does a very good job at presenting an overall cautionary tale about how companies that are market leaders shouldn’t get too comfortable or arrogant. There are always hungrier companies that want to rise to the top. And sometimes, if the timing and ideas are right, these upstart companies can exceed expectations and topple larger companies from their proverbial thrones.
CBS All Access premiered “Console Wars” on September 23, 2020.