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Rapid Reel
  • 5/27/2025
#CinemaJourney
#GameChangers
Transcript
00:00You know how it goes, pick out a game, pop it out of the case, give it a blow, then stare
00:16into that deep, data-rich, black abyss with a yearning to unlock its fantastic world within.
00:25This, as you know, is the PlayStation.
00:29The SEGA PlayStation.
00:31You can be the Sony SEGA system or the SEGA Sony system, doesn't matter.
00:35SEGA and Sony might have been a match made in heaven.
00:39We knew it was good.
00:40We're gonna make a lot of money.
00:42But here's the thing.
00:43SEGA's a company that does everything wrong frequently.
00:46This is the story of how a Japanese company, SEGA, or as it's pronounced in America, SEGA.
00:54Do I have to do this?
00:57Never quite got it right.
00:59But yet, SEGA was in the running to become the biggest home video console in the world.
01:06They wanted to crack Nintendo's monopoly on the market.
01:10They were running a race littered with hurdles.
01:12We were limping along.
01:14And insurmountable triumphs.
01:18We outsold the Nintendo system dramatically.
01:21SEGA becomes a force.
01:23It's a race against time.
01:24I had to move fast.
01:25The screen couldn't catch up with me.
01:27Technology.
01:28Last processing.
01:29Based on something that's sort of true.
01:31And the competition.
01:32Nintendo completely dominated.
01:35It's the hare versus the tortoise.
01:38The meat.
01:39Mario versus Sonic.
01:41And the winner will change video game history forever.
02:11Before we begin this race to the top of the U.S. console market, we need to make our way
02:24to the starting line.
02:25And this starting line leaves the U.S. mainland behind.
02:29Past the shopping centers and toy stores and out across the Pacific.
02:33Over the seas and into the idyllic warm waters of, oh no, not Japan.
02:39SEGA is often thought of and is now a Japanese company.
02:43But it didn't start that way.
02:45Exactly.
02:46To find SEGA's origins, you need to go down a bit.
02:50Yep.
02:51Across.
02:52A bit more.
02:53There.
02:54Hawaii.
02:55In the American military base.
02:58It started as an American company called Standard Games, which was intended to make slot machines
03:04for military bases.
03:05Gambling machines, whatnot.
03:06Pull a lever.
03:07But then over time, the government was like, hey, maybe having slot machines on bases isn't
03:12the best idea.
03:13Gambling is a vicious evil.
03:14It corrupts our youth and bites the lives of our adults.
03:18And with that ruling, Standard Games made a little gamble of their own.
03:23Because it was now illegal to make these games on American soil, they realized it was legal
03:28to make these games on Japanese soil and became a Japanese-based company.
03:32And it was founded by Hayao Nakayama and David Rosen.
03:36And after a little complicated corporate restructuring, they became a Japanese company called Service
03:42Games, which was shortened in the 1960s to SE Service GA Games.
03:49Or in other words, SEGA.
03:52And with that, SEGA was at the starting line and about to enter the race to dominate the
03:57emerging Japanese video game market.
04:00And so far, they hadn't put a foot wrong.
04:03We're making machines in Japan and importing them to the United States.
04:08Basically, anything that was amusement that you could put a coin in, shuffle games, metal
04:13games, got into electromechanical games.
04:15The first big hit was Periscope.
04:17They followed that up with games like Missile and Jet Pack.
04:21And soon, this little American company that became a Japanese company would be engulfed
04:27by an American company again.
04:29SEGA was purchased by Golf and Western.
04:32The company at the time was just gobbling up companies left and right.
04:36And it becomes part of Golf Western's umbrella of companies.
04:40And under this large umbrella was, among other things, a Hollywood movie studio.
04:45At the time, Golf and Western owned Paramount, and it was placed under the Paramount management
04:50in Los Angeles.
04:52While still maintaining headquarters in Tokyo.
04:55And SEGA reported to Barry Diller and Mike Eisner.
04:59Creating a somewhat complicated arrangement.
05:02As corporate instructions ping-ponged across the Pacific.
05:06Now speaking of ping-pong.
05:08Video games as an industry.
05:11This is where we can say it really gets the ball rolling.
05:14Or more precisely, as with almost every other game of the period, Ponging.
05:19Pong-tron.
05:20A game that was not inspired by Pong.
05:23It was pretty much a ripoff.
05:25With Pong, we were heavily copied.
05:28But SEGA also continues to make amusement machines.
05:32In the mid-1970s, it even gets into pinball in Japan.
05:35And before too long.
05:36SEGA started opening arcades all over Japan.
05:40They had a lot of good games.
05:42They had Pango, Zaxxon, Monaco GT, Congo Bongo.
05:50SEGA would have one all-star Prima game.
05:53Uh, no.
05:55Definitely not Sonic.
05:56That was Frogger.
05:59But this frog was unable to capture the hearts and minds of the nation.
06:03SEGA was in need of a more relatable character.
06:06You know, one like...
06:07It's quick-curl Barbie in mod hair can.
06:09Oh, no.
06:10Not Barbie.
06:11Tom Kalinske.
06:12From Mattel.
06:13Hi, I'm Tom Kalinske.
06:15Long ago, I was marketing director of Barbie.
06:18And just like Barbie, Tom Kalinske wore many hats.
06:23Long ago, I was VP of Mattel when we did He-Man.
06:26And the masters of the universe.
06:30It's the masters of the universe collection.
06:32I was senior vice president of marketing when we revived the Hot Wheels business.
06:37Or put quite simply...
06:38I used to be CEO of Mattel.
06:40Yep.
06:41Tom's a bigwig.
06:43And he also knows a thing or two about video games.
06:47Haven't fought in the first console war.
06:49Before I was CEO of Mattel, we invented the Intellivision...
06:53It's got the most going for it.
06:54To compete with Atari.
06:57Intellivision was quite successful for a while.
06:59Atari never got the message.
07:01The company collapsed.
07:02But then when Atari collapsed, Intellivision collapsed as well.
07:06Which frankly irritated me.
07:08And I wasn't involved in the marketing of Intellivision.
07:11But little did Tom know, he was about to cross paths with an ally that would set the world
07:17on a course for the second world console war.
07:20Whether it was ready or not.
07:22When I was at Mattel, and Sega was at the time owned by Paramount Pictures, I met Hayao
07:28Nakayama because we would do some licensing back and forth.
07:32Because it had access to Paramount properties.
07:34It took a Japanese arcade game it made called Zoom 909 and renamed it Buck Rogers and the
07:39Planet of Zoom.
07:40So with all these big names behind them, Sega had a head start over the competition.
07:45They released a game based on Star Trek.
07:47Star Trek Strategic Operations Simulator.
07:51It turns out, it was a false start.
07:55Which was a reality that even Fonzie had to face.
07:57Hey!
07:58Whoa!
07:59Until the crash in 83, Sega retreats from the arcade business and goes back to Japan.
08:05But it gets worse for Sega.
08:07And worse yet for Sega's umbrella parent.
08:09The guy who ran Gulf Western has a heart attack and dies.
08:14And his successor, instead of buying, he believes in trimming the fat.
08:18So he's going to sell off all these things.
08:21Meaning that Sega had once again become a fully Japanese owned company.
08:2683, 84, and 1985 in the US, it was really kind of a dead time.
08:31And while dead times rang out for the video game industry in America, in Japan, the video
08:37game home console market was abuzz with potential.
08:41And Sega found itself in a new race.
08:43Japan didn't really have a crash because there was nothing to crash.
08:47It's also the bubble economy now.
08:49The bubble economy is in like full swing in Japan.
08:52So people really have a lot of extra money to spend on superfluous kind of stuff like
08:56video games or the latest computers.
08:59Now Sega, siloed up alongside its new competitor, Family Computer, rival Japanese video game
09:06maker, Nintendo.
09:11The race was on.
09:12Family Computer between two Japanese juggernauts.
09:16Sega, they were creating a next gen video game console.
09:22Sega and the SG-1000 burst onto the scene on July 15th, 1983.
09:32Versus Nintendo's Family Computer, which also released on July 15th, 1983.
09:41The SG-1000 arrives the same day as the Famicom.
09:44But sadly for Sega, Nintendo pretty much steamrolls Sega.
09:48The Family Computer becomes a big hit in Japan.
09:52The console launched with Nintendo's own established well-known hit, Donkey Kong.
09:57And Donkey Kong, of course, being where this little gentleman, it's me, Mario, first makes
10:03his appearance.
10:05Whereas Sega launched with Kongo Bongo, Champion Tennis, Mahjong, and a slew of other non-character
10:14based games.
10:15And also, Nintendo's console was just a touch cheaper.
10:19The Sega machine, you know, kind of doesn't really go anywhere.
10:22Only sells 150,000 units, which is still much more than Sega expected.
10:27And Sega says, well, there's money to be made in this market.
10:30So while Sega contemplated their next move, it was a different market than Nintendo had
10:35its sights on.
10:36And they started to wonder.
10:38Maybe there isn't a real crash in America.
10:41Maybe people in the West are just looking for a new experience, a better experience.
10:46And thus, the Nintendo Famicom was rebranded as the Nintendo Entertainment System, released
10:54in the U.S. in September of 1986.
10:57The system with the most arcade hits.
10:59As we know, the NES was an instant hit.
11:03Nintendo video games.
11:05It may be the most addictive toy in history, proving without a doubt that the U.S. was
11:10ready to emerge from the dark times of a deflated video games industry.
11:15But the question was, was Sega ready?
11:18Sega was on our radar at Nintendo for a lot of reasons.
11:23So we always were concerned they were going to come out with something.
11:25Looking on with envy at Nintendo's success, Sega quickly devised a plan to repurpose their
11:31technologically superior SG-1000 Mark III.
11:36And part of that plan was headhunting the Nintendo guy.
11:40They had talked to me.
11:41They'd approached me probably 10 different times.
11:44Dave Rosen said to me, you know, Bruce, do you think you got lucky?
11:48He said, we'll give you a chance to launch Sega and you can prove it.
11:52They enticed me with a lot of things.
11:55The country club, the this or that, three times my salary.
11:58It was like ridiculous.
11:59I'll give it a try.
12:01That's the fighting spirit.
12:02Why not?
12:03Bruce got to work spearheading the redesign of the SG-1000 Mark III as the Sega Master
12:09System.
12:10And we did basically the same thing Nintendo did.
12:12We redesigned it.
12:14So it looked nothing like what it was in Japan.
12:17But unlike Nintendo's rebranding of the Famicom, in this case, Nintendo's power was subjective.
12:26Sega came out with the Master System, which was technologically better than the NES.
12:32And games looked better on the Master System.
12:35We were in every retailer, side by side with Nintendo.
12:38So Sega had a technologically superior console.
12:42Two 8-bit machines going toe to toe.
12:44And a very well-paid executive with a proven track record.
12:48And he launches the Master System.
12:50His team chooses the name Master System.
12:52They create the box design, everything.
12:54But once again, Sega lost the race.
12:58And the reason was simple.
13:00You couldn't play Mario on the Master System.
13:03It's Super Mario 2, only from Nintendo.
13:07The thing we were missing, I remember telling him, was you need to have a character.
13:11Mario is what they're playing on.
13:13We need to have something.
13:15But they didn't.
13:16The Master System in the United States gets trounced by the Nintendo Entertainment System,
13:21which is the big thing.
13:23You came a thousand miles for this game?
13:25I've done seven stores a day for three weeks now.
13:28I cannot find it.
13:29But never fear, because Sega had a plan to put this little plumber back in his pipe.
13:35A character so cute, so adorable, that Sega simply could not fail.
13:41Oh, sorry, not Sonic.
13:43No, no.
13:44Sega's answer to Mario was this kid.
13:48Alex Kidd was Sega's first real shot at a mascot.
13:52And God bless him.
13:53That is really some Friday, half-homework-done stuff.
13:58Alex Kidd.
14:00I could not tell you a thing about Alex Kidd as a character in terms of, like, his personality.
14:04The games were fine.
14:05They were just Mario clones.
14:06It was clear that Sega was like, who is our Mario?
14:09And instead of thinking, who is our anti-Mario, like they do later with Sonic...
14:13Oh, no spoilers.
14:15They were like, who is the closest thing we could get to Mario, which was Alex Kidd?
14:20And unfortunately, there was already Mario.
14:23So, Sega didn't have Mario, and soon it wouldn't have Bruce, as he didn't like where Sega was going.
14:30Lowry protests, things don't work out, so he leaves.
14:34Leaving Sega to fight the console war in America, without a general.
14:38But on the European front, Nakayama had just the man for the job.
14:42Ohio apparently liked me because he wanted me to handle the 8-bit Master System distribution
14:49in Europe.
14:50But when I looked at the Master System, I didn't think it was different enough from
14:56the Nintendo NES system, and I didn't think it was that much advanced, and so I wasn't
15:02crazy about the 8-bit Master System.
15:04So Tom stayed out of the race.
15:07For now, at least.
15:08But Sega kept running, and Nakayama began a swift sprint, and began a top-secret development
15:16project.
15:18Yes, it was indeed very top-secret.
15:22On a brand new console, it was a plan so bold, and so much better than Nintendo, that this
15:28time, it could not fail.
15:32Everyone who joined the company that year was allowed to work freely.
15:36We joined that experimental project, and we did creative work.
15:42And so, from this secretive, experimental, creative time…
15:45A scientist creates the ultimate machine.
15:48Sega's answer to the 8-bit Nintendo was to create…
15:51The most advanced video game system in the universe.
15:55Yes!
15:56The Mega Drive.
15:57It brought the 68,000 Motorola processor, and faster processing speed.
16:03Sega Mega Drive, 16-bit, CPU tosai.
16:07Then, in late summer of 1989, Sega unleashed this powerhouse machine on the American public.
16:14This year, Nintendo may be up against some serious competition.
16:18But with Bruce gone…
16:19Sega brings in Michael Katz as president.
16:22Under Katz's watch, the Mega Drive hit American shelves.
16:27Renamed as…
16:28Genesis.
16:29A system with twice the power.
16:31This 16-bit console was set to blaze a path across the world.
16:36And by the way, 16 is twice as many bits as 8.
16:41And this time, they beat Nintendo to the punch.
16:44Leaving this lethargic 8-bit box in the dust.
16:48But…
16:49You couldn't play Mario.
16:51Um…
16:52Alex Kidd in the Enchanted Castle?
16:54Anyone?
16:55But it wasn't all bad.
16:57Altered Beasts was great.
16:59Golden Axe.
17:00Ghosts and Ghouls.
17:02The Genesis had some fans.
17:04We had a bunch of buttons, and it was designed perfectly for that machine.
17:08And it was much, much more fun.
17:10At least by my perception.
17:12But unfortunately, not the perception of the video game console buying public.
17:16A fact that didn't sit well with the Sega boss, Hayao Nakayama.
17:20Hayao Nakayama was a very interesting guy.
17:22He was very tough.
17:23I've actually seen, when he disagreed with a subordinate,
17:26a very tough management style.
17:29A very demanding guy.
17:31And so, for the head of the American Sega operations,
17:34spearheading the Genesis flop,
17:36Nakayama gave him the Golden Axe.
17:41The Sega Genesis was struggling.
17:44But with twice the power of the NES,
17:46surely, it was just a matter of marketing.
17:49But with Bruce Lowry gone, and now Michael Katz as well,
17:52Hayao needed someone.
17:54Someone he liked.
17:56Someone who'd worn many different hats.
17:59Someone who was on holiday?
18:01I was on vacation with my family in Hawaii,
18:04and this guy shows up in a suit on the beach.
18:07It's Hayao Nakayama.
18:08And I said, what are you doing here?
18:10He said, well, I'm looking for you.
18:12I said, well, how did you find me?
18:13He said, well, I called your assistant,
18:15and she told me what hotel you were at.
18:16I said, oh, great.
18:17And so, Hayao Nakayama begged Tom to come to Japan
18:21to see their exciting, powerful console.
18:23My daughter said, Daddy, he came all the way from Japan.
18:26You have to go with him.
18:28And that's where I went.
18:30I left my family in Hawaii, and I flew back to Tokyo
18:33with Hayao Nakayama.
18:35Tom had been unimpressed with the Sega Master System.
18:38I wasn't crazy about the 8-bit Master System.
18:41But what would he think of the Mega Drive slash Genesis?
18:44The graphics were sensational.
18:46What I saw in the arcades
18:50was exactly what you would see on the 16-bit machine.
18:54But as we've established, Tom is a bigwig.
18:58You don't tell the Barbie He-Man and Matchbox guy what to do.
19:02If Tom was going to come on board...
19:05I have the power!
19:08...he'd need the power.
19:10Well, if I'm going to be taking on Nintendo
19:13and become CEO of Sega of America,
19:15I have to make the decisions in the United States.
19:19And you have to give me that freedom and that assurance
19:22that I'm going to be able to make the decisions for the company
19:25from the United States, that it's not going to be dictated from Japan.
19:28And he agreed to that.
19:30And so Tom was on board
19:32and immediately began formulating a game plan,
19:35which he prepared to promptly present to the Sega board in Tokyo.
19:39I started studying the market
19:41and started seeing how Nintendo did business.
19:43You are the game! You are the power!
19:46It became very clear to me that Nintendo owned the 9- to 13-year-old boy.
19:50They were rabid Nintendo fans.
19:53And I thought, well, there's another market.
19:55There's an older market above the 13-age group,
19:58and that's a possibility for Sega.
20:01Tom knew just what to do.
20:03I wanted to do more software development in the United States,
20:06more sports games, more role-playing games,
20:09more strategy games, more fighting games.
20:12We're going to start advertising to teens and college-age students.
20:15We're going to advertise on MTV,
20:17and we're going to make fun of Nintendo in commercials we do.
20:20We're going to position them as the little kid's product
20:22and not an adult product.
20:24But Tom's biggest, most controversial idea...
20:26We're priced too high.
20:28We've got to lower the price of the hardware.
20:30And not only that...
20:32The console came with our Altered Beast packed in with it.
20:35We're going to take Altered Beast out
20:38because in the Midwest they thought that was devil worship,
20:41and we're going to put our best title in.
20:44They didn't even really have a best title.
20:46Well, with that, Tom's plan was complete.
20:49And as per the agreement...
20:51I'm going to be able to make the decisions.
20:53It's not going to be dictated from Japan.
20:55The presentation was surely more of a formality.
20:58Well, at the end of my presentation,
21:00Nakayama and the board, they were all talking in Japanese,
21:03which of course I don't understand.
21:05And my friend's translating in my ear as fast as he could,
21:08and basically he said to me,
21:10Tom, they don't agree with anything you want to do.
21:12If you take Altered Beast out and include our best title in,
21:15you'll lose a profitable software sale,
21:18and that's not going to work.
21:20If you lower the price, we're going to have less profit as it is
21:23on the hardware system, so that's not going to work.
21:25And they don't like the idea at all of taking Nintendo on
21:28and making fun of Nintendo.
21:29They're a Japanese company.
21:30You can't make fun of another Japanese company.
21:32That's just not done.
21:33And they don't like the idea of doing more software development
21:36in the United States because they're going to have to hire lots of people.
21:38That's going to cost a lot of money.
21:40So basically, Nakayama, he got up,
21:43he kicked over his chair,
21:45and he took a walk out the room.
21:48And that was it.
21:50And I thought, well, that's the shortest career anybody ever had.
21:54But before Tom put his sandals back on and headed back to Hawaii,
21:58he turned at the door and he said,
22:00When I hired you, I agreed with you that you could make the decisions
22:04for the United States, so go ahead and do these things you've outlined.
22:08And now a new race began.
22:11The pressure was that I had to move fast.
22:13Tom's race.
22:14It happened very quickly.
22:15But Tom couldn't do it alone.
22:17We had quite an opinionated staff at the time.
22:21Our executive staff was about 20 people,
22:24and not everybody saw things the same way.
22:27But everybody knew that the goal was to beat Nintendo.
22:31And now Sega had everything they needed to win the war.
22:35A powerful war machine,
22:37a competent general with a plan,
22:39and a legion of loyal soldiers ready for battle.
22:43And eventually we all came around.
22:46We all agreed to the next steps that we needed to take to make heads roll.
22:51And if not heads, mustaches.
22:53Because the first order of business was working out.
22:56We're going to take Altered Beast out,
22:58and we're going to put our best title in.
23:00What to package the console with.
23:02And the game Tom was thinking of might really give Mario a run for his money.
23:08One of the other things we wanted to do was have our own mascot to compete with Mario.
23:12So that was an ongoing project when I arrived at Sega.
23:15A project Hirokazu Yasuhara had been pondering.
23:23The Genesis has multiple layers of scrolling.
23:26The processing speed is pretty fast.
23:29The programmers wanted to create fast characters and a colorful world
23:36to use the fast and colorful capabilities of the Genesis.
23:42Easier said than done, because this young game designer was a little on the fresh side.
23:48In high school and college, I wasn't really into games.
23:52I saw Star Wars when I was in junior high.
23:56Then I was like, I have to make films.
24:03It was time to look for a job,
24:05and a friend of mine was interviewing for a gaming company.
24:08Namco had Galaxian 3D.
24:11It was just like Star Wars.
24:15You can have a movie experience in a game.
24:18So I thought about going into gaming.
24:22And thus, Hirokazu ended up at Sega
24:25and found himself working on what was about to become a very important project indeed.
24:31There was this egg-shaped character.
24:33There was an animal, dog-shaped character.
24:36There was a human-type character.
24:39Until eventually, they land on a character named...
24:42Mr. Needlemouse.
24:43Oh, right. Mr. Needlemouse.
24:46The version that we saw of Sonic at first was very radical,
24:51and he had a girlfriend that looked like Madonna.
24:55This thing, it was very ferocious looking,
24:58very sharp spikes all over his body.
25:01And when that comes to the U.S., Sega's U.S. market team is like, God, no.
25:05We shut that down real quickly.
25:08And Mr. Needlemouse will never be mentioned again.
25:16The stakes were higher for Sega,
25:18who were finally developing a character now named Sonic
25:21who would be worthy of taking on Mario.
25:24He changed his looks and his attitude to be more appealing
25:28to not only our target audience, but the parents of our target audience.
25:32In other words...
25:34Safe, prepackaged rebellion in Sonic the Hedgehog.
25:38So they removed the girlfriend, and they gave Sonic attitude.
25:42Because in the 1990s, everything had to have attitude.
25:45It was very clear to me very early on that this was the best idea that we had.
25:49So it was looking like Tom had a strong contender
25:52for his repackaged, lower-priced Genesis.
25:55It was time for the game designer to deliver.
26:00We were so focused on work,
26:03and we stayed over at the office,
26:06and we didn't have a change of clothes.
26:09So we would buy new underwear every other day.
26:12And at the end of the year,
26:15we ended up having a ridiculous amount of underwear.
26:18It wasn't just a mountain of underwear.
26:21He'd also created a mountain of work.
26:24I came up with all the gimmicks,
26:27designed all the stages,
26:30designed the enemies,
26:32and designed most of the stories.
26:34In fact, it's hard to overstate
26:37Hirokazu's contribution to this soon-to-be classic game.
26:40The character was fast.
26:42Sonic could run so fast, the screen couldn't catch up with him.
26:45It utilized the technology.
26:47You'd see them doing loops.
26:49You have the parallax scrolling of the background as you're running.
26:52And the sumptuous, colorful world was the perfect backdrop.
26:55All of that really is immersive.
26:58Like this new game would run rings around Mario.
27:01Now, speaking of rings...
27:08Mario was collecting coins.
27:11So Sonic needed something as a guide.
27:14We thought, donuts are popular in America.
27:17Something with holes.
27:20So that's how we decided to use rings.
27:24And so to catch up with Nintendo,
27:27Sega released Sonic the Hedgehog on June 23, 1991.
27:31New Sonic the Hedgehog.
27:33The moment it hit the shelves,
27:35Sonic immediately began to blow people's minds.
27:40Selling a whopping 24 million copies worldwide in the process.
27:44And so, after coming last...
27:47Nintendo pretty much steamrolls Sega.
27:49Then last...
27:51The Master System gets trounced by the Nintendo Entertainment System.
27:54Then last again...
27:56Sega completely dominated.
27:58Sega was finally poised...
28:00To crack Nintendo's monopoly on the market.
28:03That is until...
28:05There's only one place to come, the games of Super Nintendo.
28:08Nintendo was hot on Sega's heels.
28:10And not even Sonic could outrun the Super Nintendo.
28:14And that is what led into the great, great console war
28:18between the Super Nintendo and the Sega Genesis.
28:21But before the final round of this great battle,
28:24Sega enjoyed a Christmas miracle.
28:26From September through Christmas,
28:29we went from under 20% of the market share
28:33to about 50%.
28:35We actually beat Nintendo for that one month
28:38in the Christmas holiday period.
28:40Cool!
28:42Christmas was great for us that year.
28:44We outsold the Nintendo system dramatically.
28:47I heard Mac got a Sega Genesis.
28:50In the Christmas season,
28:52when Sega beat Nintendo,
28:54it made me very happy.
28:56But then, Christmas was over.
29:00Super Nintendo sales began to gain momentum.
29:03It was time to fully implement the next prong of Tom's plan.
29:07We needed more aggressive advertising.
29:09And they wouldn't be pulling any punches.
29:12We went out to a handful of really strong,
29:15creative advertising agencies
29:17in the country.
29:19And one company that stood out above the rest...
29:22I'm Jeff Goodby, and I'm the co-chairman
29:24of Goodby Silverstein and Partners.
29:26And I run a band of crazy people who make advertising.
29:30The same crazy people who got us chugging milk
29:33and quoting frogs.
29:35Goodbyes hurt.
29:37But to win Sega over...
29:39We got a sound system.
29:41We took nine TVs, put them together in a stack.
29:44We let three, made them into one picture.
29:47They showed making fun of Nintendo.
29:49And they had a little kid playing.
29:51And we were like, let's make them into the Boy Scouts
29:53and the Girl Scouts.
29:55We'll be the Hells Angels.
29:57I think we had the account immediately when that happened.
29:59They understood the video game industry.
30:01They understood how to make fun of Nintendo.
30:04We had to do something in your face
30:06and have it happen fast.
30:08To do that, Goodby and his team
30:10would need to show the entire world
30:12that Nintendo and Mario were a couple of giant...
30:15And like...
30:17Sonic was not a...
30:19The very first ad that Goodby did for us,
30:22they took a typical nerd,
30:24transcending over time
30:27into a cool, edgy rebel.
30:30But maybe it was Diane who was the rebel.
30:33There's something missing.
30:35And Diane's simple observation
30:37would lead to one of the most
30:40abrasive, memorable ad campaigns of all time.
30:47Diane and the marketing team
30:49were refining their attack ads on Nintendo.
30:51So they came back the next day and said,
30:54well, we think we got something for you.
30:59When you listen to it, it's ever so slightly Japanese,
31:02which I think is cool.
31:05So that was the beginning of our tagline.
31:08The Sega Scream.
31:10Sega! Sega! Sega!
31:11And we used that over and over.
31:13Sega! Sega! Sega!
31:15It was stressful. It was like, this was life or death.
31:18You needed this Sega Genesis console.
31:21I would drive up to my girl's school
31:23and the kids would yell...
31:25Sega!
31:26...when they saw me.
31:27And after a very short period of time,
31:29the commercials were known because of that Sega Scream.
31:32Hey, Sega!
31:34At this point, Tom must have felt pretty good
31:37about the race he was running.
31:38It's working.
31:39Mario couldn't keep up with Sonic.
31:41When Sonic 2 comes out, the game is an immense success,
31:45even more popular than the original Sonic the Hedgehog.
31:48They established Sonic as a universe,
31:51not just one character,
31:52the same way Mario wasn't just one character.
31:54And that's how you get spin-offs and licensing
31:56and things like that,
31:57and you create a brand as opposed to just a game.
32:01The world had fallen head over heels
32:03with Sonic and his pals.
32:05But then, a small voice echoed on the wind.
32:08It's-a me, Mario!
32:11And people once again started to notice
32:14something about the Sega Genesis.
32:16You couldn't play Mario.
32:18If you want to play the next Mario game,
32:20you cannot play it with your old Nintendo.
32:22It's only if you get new Super Nintendo.
32:24And that was really enough at that point
32:26to convince millions of people to buy a Super Nintendo.
32:29And with that, Kalinske doubled down.
32:32More aggressive advertising?
32:34Hitting Nintendo harder.
32:36Sales took off.
32:37And, you know, things were happening.
32:39And harder still.
32:40It even slices and dices.
32:41And just like last time...
32:43Genesis does what Nintendo...
32:45It worked.
32:46Sega!
32:47A little too well.
32:48Nintendo hated our advertising.
32:51And Howard Lincoln, the president here in the United States,
32:54would call me up and complain.
32:56I'm gonna sue you over that commercial
32:58for belittling his product.
33:00Never did, as far as I know,
33:02but anyway, he claimed he was going to.
33:06But it wasn't only Nintendo who didn't like it.
33:11Overseas, they had a very aggressive marketing campaign.
33:15From the boss on down,
33:17it was potentially possible that cracks
33:19were beginning to form somewhere in the Pacific.
33:23It wasn't illegal,
33:25but it was considered rude.
33:27But rudeness mattered not to Tom
33:29and the Goodby advertising firm.
33:32What makes Genesis faster than Nintendo?
33:36Well, you've got two different parts of the system
33:39that are pushing data through at the same time.
33:43Like a blast of data.
33:45So we nicknamed the technology Blast Processing.
33:49The Sega Genesis has Blast Processing.
33:51Super Nintendo doesn't.
33:53And it was based on something that was sort of true.
33:56Great technology.
33:58What's Blast Processing do?
34:00That the marketing team invented.
34:02What if you don't have Blast Processing?
34:07But if the truth was blurred around Blast Processing,
34:10it was crystal clear
34:12when it came to the future of video gaming.
34:14Because while the gloves were off,
34:16the bare-knuckle battle between Sega and Nintendo
34:19had given rise to a whole new type of technology.
34:23I knew that optical disk was the way of the future.
34:26The memory capabilities of an optical disk
34:28compared to a cartridge are 100-fold.
34:30And fellow Japanese company, Sony,
34:33was at the cutting edge of this new technology.
34:35We knew it was good.
34:37But Sony were far from the cutting edge
34:39of making games or consoles.
34:41Sony wanted to do games on optical disk platform.
34:44And I liked Sony.
34:46And I wanted them to be a part of Sega.
34:49And so Tom Kalinske made the biggest play of his career,
34:53a decision so consequential
34:55it would shape Sega's fate,
34:57along with the entire video game industry.
35:00So we went to Japan and met with Sony management,
35:03and we said we want to do a combined hardware system.
35:06It can be the Sony-Sega system
35:08or the Sega-Sony system, doesn't matter.
35:10We're not going to make money on hardware,
35:12but we're going to make a lot of money
35:14on the optical disk software that we produce for it.
35:17And Sony said, yeah, that's a pretty good idea.
35:20Tom Kalinske was on the cusp
35:22of grasping the greatest treasure
35:24the video game industry had seen
35:26since Atari's cartridge-based 2600 back in 1977.
35:31Yeah, that's a pretty good idea.
35:33And as the finish line approached,
35:35with Sega crossing that line in first place,
35:37a familiar voice echoed on the wind.
35:40It's-a me, Mario.
35:42Oh, no, not that one.
35:44Sega's a company that does everything wrong frequently.
35:47Yeah, that's the one.
35:49We went to Nakayama-san, and he said,
35:51that's a terrible idea, why would we want to help Sony?
35:54And so we didn't do that deal with Sony.
35:57We can't confirm if chairs were kicked,
36:00but Nakayama said no, and Tom...
36:03This was stupid.
36:04...wasn't happy.
36:05We were better at doing games than Sony was,
36:08so we would have had more successful games
36:10than they would have, and we would have benefited
36:13from the profit from those games.
36:15So to me, it was stupid.
36:17That meant that we had to give up
36:19pursuing the PlayStation as our hardware unit.
36:22So instead...
36:24So I introduced both a CD attachment.
36:27Mega CD.
36:28Then I introduced 32X.
36:30Redouble his power to 32.
36:32Did work out.
36:33That is the beginning of Sega starting to fall behind.
36:37Or, in other words, the beginning of the end.
36:42In what might be arguably one of the worst corporate blunders
36:45in history...
36:46Yes, friends, I'm talking about this.
36:48...Sega let Sony and the PlayStation
36:50slip through their fingers.
36:52To me, it was stupid.
36:53And to make matters worse,
36:55some of the Sega team changed horses mid-race.
36:58The marketing executive was now heading marketing at Sony.
37:03He stole a couple of our marketing people.
37:07They went out and built a lot of relationships
37:11based on the Genesis relationships,
37:14and they out-Sega'd Sega.
37:18Tom did try to keep up with Sony.
37:21Introducing Sega's Saturn.
37:23Sega released their next console, the Saturn.
37:25But it appeared to be a race to the bottom.
37:27Uh-oh.
37:28Sega's next console, the Saturn?
37:30Technologically advanced game.
37:31Sega of America is spending a lot of money
37:34and they're not selling what they should sell.
37:36We didn't have a Sonic game for Saturn.
37:39That was a huge mistake.
37:41Yeah.
37:42And when the PlayStation hit the market in September of 1995...
37:46PlayStation had taken number one immediately,
37:49first-month sales.
37:51It took Sony about four months to completely take over.
37:55Nintendo was hanging in, and Sega was the loser.
37:58And for the head of Sega America, a loss too hard to take.
38:02All of the sudden, where I had been allowed
38:04to make all the decisions for the United States,
38:07the decisions started to be overruled by Japan.
38:11Japan was trying to run our business too much.
38:15And I wasn't getting the cooperation out of Japan that I used to get.
38:20Because of that, we were limping along.
38:23I think after the Genesis,
38:25Sega never really kind of regained their hardware footing.
38:29It really seemed like all the effort to beat Nintendo
38:33and put out such good product into the market for a long time
38:37was no longer the case.
38:39I told Tom that I would stay if he would renew his contract,
38:43which was coming up in 1996.
38:46And he looked at me squarely and said
38:49that he couldn't make that commitment to me.
38:52And because of that, I felt that we didn't have the strength any longer
38:58to make it worthwhile to stay at Sega.
39:01Tom was so taken by my situation that he called Nakayama-san,
39:07and he used it as an example
39:10of how Japan was trying to run our business too much
39:14and how we were losing good people because of it.
39:17And finally, it was Tom's turn to kick them where it hurt.
39:20It was time for me to go.
39:22So Tom Kalinske left Sega.
39:24So did Diane, and even Nakayama-san himself,
39:28as well as Sega founder David Rosen.
39:31After that, Sega continued on a very nebulous direction.
39:36They came out with the Dreamcast a few years later,
39:40and that was the last hardware unit that they came out with.
39:44I'm sad that Sega is no longer in the console business,
39:48but don't get us wrong, they are still very much in business.
39:52Sega to this day still makes amusement machines,
39:56metal games, the same games it was making back in 1960.
40:00And of course, video games, just minus the console.
40:04I'm glad that Sonic the Hedgehog has become a very successful movie.
40:08It feels like I've been running my whole life.
40:11The third movie's coming out this fall,
40:13and they tell me it's going to be wonderful, I believe them.
40:16So Sonic and Mario continue their battle at the box office.
40:20Wow, you were great!
40:22And now, even in the same games!
40:24Sonic and Mario are now in games together!
40:26On the Xbox, the Nintendo Switch, and the Sony PlayStation.
40:31I wonder what the console wars were even about.
40:35Sega's a company that's 60 years old,
40:38and only made consoles for 16.
40:41Today, Sega has been out of the console business
40:44for more years than it was in it.
40:46But for Sega, those glorious years at the front of the pack
40:49were surely the highlight.
40:51And thanks to the leadership of Tom Kalinske,
40:54who would go on to wear other hats,
40:56his multi-pronged plan had worked.
40:59Oh, and by the way,
41:01if you're wondering about this final prong...
41:03Do more software development in the United States.
41:05More sports games.
41:07Here's the kick.
41:09Well, that's a whole story into itself.
41:12The problem Sega had with electronic arts.
41:16So pop on your shoulder pads
41:19and put in your mouth guard.
41:21Because the story of how electronic arts...
41:23This is wrong. You can't do this.
41:25Swindled Sega
41:27and gave rise to an entire genre of sports games...
41:30EA Sports. It's in the game.
41:33...might be the greatest comeback in history.