Console Wars
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Console Wars

Blake J. Harris

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eBook - ePub

Console Wars

Blake J. Harris

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About This Book

Now a documentary on CBS All Access.

Following the success of The Accidental Billionaires and Moneyball comes Console Wars —a mesmerizing, behind-the-scenes business thriller that chronicles how Sega, a small, scrappy gaming company led by an unlikely visionary and a team of rebels, took on the juggernaut Nintendo and revolutionized the video game industry.

In 1990, Nintendo had a virtual monopoly on the video game industry. Sega, on the other hand, was just a faltering arcade company with big aspirations and even bigger personalities. But that would all change with the arrival of Tom Kalinske, a man who knew nothing about videogames and everything about fighting uphill battles. His unconventional tactics, combined with the blood, sweat and bold ideas of his renegade employees, transformed Sega and eventually led to a ruthless David-and-Goliath showdown with rival Nintendo.

The battle was vicious, relentless, and highly profitable, eventually sparking a global corporate war that would be fought on several fronts: from living rooms and schoolyards to boardrooms and Congress. It was a once-in-a-lifetime, no-holds-barred conflict that pitted brother against brother, kid against adult, Sonic against Mario, and the US against Japan.

Based on over two hundred interviews with former Sega and Nintendo employees, Console Wars is the underdog tale of how Kalinske miraculously turned an industry punchline into a market leader. It's the story of how a humble family man, with an extraordinary imagination and a gift for turning problems into competitive advantages, inspired a team of underdogs to slay a giant and, as a result, birth a $60 billion dollar industry.

A best book of the year: NPR, Slate, Publishers Weekly, Goodreads

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Tom Kalinske had a secret.
For years he had managed to keep it to himself, covering it up with a combination of white lies, noncommittal nods, and uneven smiles, but as he lay on a magnificent beach in sunny Maui with his loving wife and three energetic daughters, he could no longer keep it inside. He had to tell someone.
The right person to tell was Karen, of course. She had always been there for him, and most important, she seemed to possess a magical ability for making his anxieties disappear. She really was his voice of reason, the love of his life, and apparently very much asleep. “Hey, Karen,” he said, nudging her now-tanned shoulder. “Karen?” He lifted up her sunglasses, which confirmed that the blazing sun had knocked her into a slumber. Kalinske considered some other subtle means to poke or prod his wife into waking up until, upon further inspection, he noticed that their newborn daughter, Kelly, cradled in her arms, was also asleep. “Sorry about that, ladies,” Kalinske said, honoring the unwritten rule that all fathers should abide by: do not, under any circumstances, wake an infant, especially when her fragile little nap allows Mom a rare moment of uninterrupted sun-filled dreams. Karen, it appeared, was off the hook, and wouldn’t have to play the role of secret-keeper this time.
Kalinske thought about telling one of his other daughters, Ashley (five years old) or Nicole (three), but they were ankle deep in the ocean capturing hermit crabs in a bright yellow bucket and making the kinds of memories that they’d inevitably forget and only their father would remember. So he returned to reading a day-old New York Times, but as he scrolled through previews of baseball games that had already been played, a slender silhouette covered his newspaper. “Hello, Tom,” a cheerful voice said. “You are a difficult man to track down.”
Kalinske looked up to find a Japanese man with piercing brown eyes and a messy, wind-mangled combover: Hayao Nakayama. “What are you up to?” Nakayama asked, trying to emit a friendly smile, which came out looking more like an ominous smirk. Kalinske would soon learn that Nakayama was incapable of producing a genuine smile. His round face always held too much mystery, making simple, genuine emotions too hard to pull off.
“Well, I was trying to have a nice, relaxing moment with the sun here, until you got between us,” Kalinske gracefully shot back. He never allowed himself to appear off guard in conversations and was committed to masking any discomfort or unease with a Jamesdeanian coolness. Nakayama suddenly realized that he was casting a shadow over Kalinske and took a couple of steps to the side. As the sun hit his face, Kalinske smiled and greeted his unexpected guest. “Great to see you, Nakayama-san. What brings you out to Hawaii?”
“I came here to find you. As I just said, you are a difficult man to track down.” Nakayama spoke nearly perfect English, albeit with a strange slight Brooklyn accent. It was smooth and seamless, except for the occasional broken phrase. His errors, however, seemed to have less to do with grammatical difficulties and more to do with the rhythm of his conversation. It was almost as if he threw in a few “mistakes” from time to time as camouflage; allowing himself to hide behind the language barrier and play the role of clueless foreigner if need be. “When I heard about your departure from Matchbox I left many messages at your home.” Nakayama tried another smile, this one coming out like a spooky grin.
Kalinske bowed his head a bit. After leaving Matchbox, he had tried his best to hide from the universe. He screened all his calls, turned off the fax machine, and rarely left the house. He had been feeling small in the world and he dealt with it by making his world as small as possible. Karen had been good about dealing with his reclusive behavior. She knew he was down and didn’t press the issue. Her husband had bounced back from many things over the years, and there was no doubt in her mind that he would soon return to the world more spectacular than ever before. In the meantime, she didn’t mind having him around the house. For a temporary recluse, he was quite friendly, good with the dishes, and only sometimes a liability when doing the laundry.
“Yeah, I got your messages. Sorry I hadn’t gotten back to you yet,” Kalinske said. “I’ve just been trying to take some time to myself and figure things out a little.”
“Ah, yes,” Nakayama said. “But don’t you know that this is why I called?” Then, right there in the middle of Kalinske’s family vacation, Nakayama made him an offer to become the next president and CEO of Sega of America. As unusual as it was to be offered a top-level executive job on the beach, Kalinske wasn’t completely shocked. After all, Nakayama was the president of Sega Enterprises, and there had been rumors for some time that he was looking to replace Michael Katz, the current head of Sega’s American operation and a man Kalinske knew personally and considered a friend. Nakayama cleared his throat. “What do you say, Tom? I am certain you are the man for the job. We have a wonderful new videogame console.”
Kalinske looked at Nakayama, studying the weathered version of a face he knew well. They had first met in the late seventies, when Kalinske was still the golden boy at Mattel. At the time, there were two companies that were the envy of all others: Apple and Atari. Though it was unrealistic for Mattel to jump into the high-tech, high-risk world of personal computers, it could certainly afford to try its hand at mimicking Atari. Though Kalinske mostly dealt with dolls and action figures, he couldn’t help but see how ridiculously popular and profitable videogames were becoming, and he decided that Mattel’s Toy Division would release handheld electronic games like football and racing. The gameplay was repetitive and the graphics were mediocre at best, but the handheld games were a smashing success. As Kalinske looked to quickly expand this line of business beyond sports, he sought out Nakayama to talk about turning some of Sega’s popular arcade hits into a line of portable games. The handheld technology turned out to be too simplistic to handle Sega’s games, though, so no deal could be reached. Despite not moving forward together, Nakayama found Kalinske endearing and was impressed with his encyclopedic knowledge of the toy industry. The two had remained on good terms ever since.
Kalinske’s adventures in the videogame industry, however, turned out to be short-lived. After releasing this series of primitive yet highly successful handheld devices, Mattel had decided that videogames were the future. As a result, the company formed an Electronics Division, hired a bunch of brainiacs, and took away anything with batteries from Kalinske’s team in favor of this brand-new department. Kalinske was forced to watch from the sidelines as Mattel made a big push to redefine itself behind these handheld devices and their dazzling home console: Intellivision. Kalinske was irked by the move; he had helped create this future and thought he deserved the chance to decide how it should turn out. But ultimately, he didn’t care all that much. Videogames were fascinating, but they did all the work for you. No amount of graphics or gameplay could possibly compare to the entertainment value of toys, which, of course, didn’t run on batteries but rather were powered by the world’s only unlimited resource: imagination.
Besides, the quick end to his relationship with videogames turned out to be for the best. By 1983, it seemed that every company had copied Mattel (who had copied Atari) and gotten into the gaming racket. The market quickly became oversaturated, and the burgeoning videogame industry collapsed. Mattel lost hundreds of millions, Atari lost billions, and Americans from coast to coast lost interest in buying the latest and greatest videogames. After teetering on bankruptcy, Mattel learned their lesson and decided that videogames were no longer their future. Their future would be the same as their past: dolls and action figures.
Kalinske knew that even though Americans had given up on videogames, this wasn’t the case overseas. While Atari famously buried three million copies of their notoriously unsuccessful game, E.T. the Extra-Terrestrial, in a New Mexico landfill, the Japanese were flocking to arcades faster than ever. So although Nakayama and Sega seemed to not be welcome in America, the company continued to survive and enjoy success with a generation of Japanese kids and teens who instinctively took to rapidly blinking, brightly colored arcade screens like moths moving toward a glowing light in the dark.
Raising an eyebrow, Kalinske turned to Nakayama. “This new thing you’ve got is like the Nintendo, right?” Kalinske had never played Nintendo’s 8-bit system, dubbed the Famicom in Japan and the Nintendo Entertainment System (NES) in the United States, but he was certainly aware of its massive success. Everyone was. Nintendo was a small but ambitious Japanese company that, in 1985, dared to try to resuscitate the videogame industry in the United States where it had been dead since the failures of Atari and Mattel. Against immense resistance, the NES finally knocked down the fickle walls of pop culture and proved that videogames were not a fad: they were big business. Now, by 1990, less than five years later, Nintendo owned 90 percent of a $3 billion industry. The other 10 percent of the market was made up of wannabes who had seen Nintendo’s success and wanted in on the action. Among this group was Sega.
Nakayama rolled his eyes. “No, it is nothing like the Nintendo. Our system is much better. The Nintendo is a toy, but what we have, it is like . . .” He trailed off, struggling to find the perfect words. “Tom, I need for you to come with me to Japan. You must see this for yourself.”
Before Kalinske could find a respectful way to protest, he was saved by his five-year-old daughter, Ashley, calling his name, “Daddy!” In that ghostly way that kids can appear out of thin air, she stood before both men and raised her clasped hands to show him something. After doing so, she noticed Nakayama and took a small step backward. “Who is he?”
Nakayama introduced himself and offered the young girl a smile.
“Sweetie,” Kalinske said tenderly to his daughter, “Daddy needs some advice. Would you be willing to give your father some advice?”
Ashley loved telling people what to do. She nodded.
“Great,” Kalinske said, and paused to figure out how to phrase his question. “So my friend here wants me to go with him on a little vacation to Japan. He wants to show me something there. But I don’t think that’s a good idea because, you know, I’m already on a vacation with you, your sisters, and Mommy. What do you think I should do?”
Ashley bit her lip and gave this question tremendous thought. As her eyes darted between her father and the man with the funny hair, Kalinske was struck by how fast his daughter was maturing. He felt a pang of pride followed by a pang of sadness. All this time she’d been growing up and becoming a person, and he’d been busy chasing his tail at Mattel or at Matchbox. It was all going on right before his eyes, and he was missing everything. Ashley interrupted his thoughts. “You should go to Japan with your friend.”
“What? No.”
“Listen to her, Tom,” Nakayama said. “She is a wise one.”
Kalinske looked into his daughter’s eyes. “You don’t want me here?”
“Of course I want you to stay. But he just wants to show you something, Daddy,” she said, exasperated. “Jeez!”
Kalinske was struck by the wisdom of her kid logic. “Well, if that’s what you think . . . then I’ll go.”
“Okay, okay, whatever,” Ashley said. “Now can I show you my surprise?”
Amid all the potential life-changing decision making, Kalinske had forgotten that his daughter had come over with a surprise in her hands. “Oh, yes, please.”
She opened her hands and revealed a clump of sand.
“What is it, sweetie?”
A devilish smile crept across her face. “It’s a snowball that’s made of sand.” She laughed a few times, then threw it at her father’s stomach. It left a little mark just above his bathing suit before falling to the ground. This was too funny for Ashley to handle, and she ran off laughing so hard that she practically fell over.
Kalinske turned to Nakayama. “Well, I guess I’m going to Japan.”
“You will like what I show you.”
“I better. Because my wife is not going to be happy.”
“She will not be happy now, but she will be happy later,” Nakayama said. “When you become president of Sega.”
“You’re pretty confident, eh?”
“I do not mean to be so forceful,” Nakayama said. “I understand this is your family vacation. If you wish to remain at the beach for the rest of the day, we can leave in the morning.”
“Uh-oh, are you getting nervous that I might not be as impressed as you first thought?” Kalinske said, sensing a playfulness within himself that had been absent for some time. He felt youthful, curious, perhaps even excited, and he could hear it in his own words. The world seemed slightly bigger, and he felt the private pride of being the only one who noticed it. He looked at his unexpected guest, wanting to say something to extend the moment. “Nakayama-san, can I tell you secret?”
“Yes, Tom. Of course.”
Kalinske looked over his shoulder before leaning in and confessing the dirty little secret to his new friend. “I don’t even like the beach.” Nakayama didn’t seem to react to the words, but Kalinske had gotten them off his chest. “I mean, I understand why someone would like it. The sun, the sand, the water; I guess that’s relaxing. But I just don’t feel that way. All that stuff, I think it’s . . .”
Nakayama jumped in to finish his sentence. “Boring.”
“Yes!” Kalinske said. “Exactly. It’s nice and all, but it’s boring.”
“Of course, Tom. Of course,” Nakayama echoed. “It is boring for people like us.”
Suddenly, strangely, Kalinske didn’t feel so alone.
Nakayama put his arm on Kalinske’s shoulder. “Okay, then, let us now go on a real vacation.”
Kalinske smiled. “Let me just ask my wife if it’s okay.”
He turned to Karen, who continued to lie motionless on her back.
“You have my permission, honey. Go conquer the world and all that,” she said.
Kalinske was caught off guard. “You’re awake? You heard everything?” He asked, before quickly converting his clumsy surprise into a sly sureness. “Sneaky move, Karen. I’m impressed.”
“Don’t be. You’re not as quiet as you think you are,” she said as she lifted up her sunglasses, revealing her shining brown eyes. “Oh, and honey, everyone knows you don’t like the beach. It’s not exactly a well-guarded secret.”
Karen winked at Tom, and with her blessing, he was on his way to Japan.



Like a shark swimming by a school ...

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