All language subtitles for Console.Wars.2020.720p.WEBRip.x264.AAC-[YTS.MX]

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- So my partner Bill and I

are going to play
ping-pong for you.

Here we go.

The demo represents some
of the recent developments

in the new business of
audience participation in TV.

Watch me take him out
in a minute.

Ah, didn't do it.

Ah, I did it this time.

We would like
to convince you

that there is indeed a market

in which money can be made
in the near future.

- It was like magic.

You could make something
happen on the screen.

You know,
having grown up with all

of this preprogrammed stuff
on the television screen,

you'd never been able
to change that.

- America's most incredible
video game.

- Suddenly,
with this little controller,

you could actually control
something on the screen.

- You control the players

as if you were
coaching your own team.

- It was just unbelievable,
magical.

- There is a new addiction
in America:

Nintendo video games.

- How many of you own
a Nintendo?

- Joining us from
the company's inner sanctum,

Nintendo game master
Howard Phillips.

- This one's got
about 12 times the memory.

The graphics are--
graphics are much better.

Oh.

Got it.

- People, animals, wizards,
spells,

you see this spread out
over different worlds.

- Nintendo Gameplay,
David speaking.

How may I help you?

- It's not just stick figures
anymore.

There's much more involved
in playing the game,

a better use of colors,
better use of music.

- He is a computerized Italian
swashbuckling adventurer,

as Mario is clearly
number one.

- Not only for this
coming Christmas

but for an entire
new generation.

- The "Mario Bros."
game cartridge is so hot,

it is impossible
to find in stores.

- I've done seven stores a day
for three weeks now.

I cannot find it.

- Can you do something?
My kid wants it.

His friend has it,
and they're not friends anymore

'cause he doesn't have it.

- Nintendo's only been around
for three years

but will ring up mind-boggling
sales of $1.7 billion

by Christmas.

- We were
the video game industry.

- We can't underestimate
the value

of 60 million players.

- Tetris!

- Nobody could conceive
of how Nintendo,

with so many great games,

with 95% or more
of the marketplace,

could ever get toppled.

- The last
"Super Mario Bros. 2"

was just sold.

- My eight-year-old
would kill for one.

- Nintendo!

- Yeah!

- Nintendo! Nintendo!

- Nintendo!

- Today Nintendo controls
the home video game market.

- Let's play Nintendo!

- Anybody would have found
that to be a Herculean task,

to try and unseat Nintendo.

All the other companies
were always trying,

but, you know,
they had maybe one game

or one thing going on,

whereas Nintendo
just had everything.

We're gonna be here forever.

But then it changed.

- ♪ We're not scared
to lose it all ♪

♪ Security thrown
through the wall ♪

♪ Future dreams

- When I first came to America

was with
the Mitsubishi Corporation.

What I really felt here
in the States

was people really have
the opportunity

of making
American dream happen.

That spirit of sort of
entrepreneurship,

I really fell in love
with that.

After working for Mitsubishi
for three years,

Japan headquarters said,
"You must come back,"

but I wanted to stay
in America.

So secretly, I sent my résumé
to an American sort of

recruiting firm,

and I had a call
at the company called Sega.

I had no idea what it was,

but they are looking
for someone

to launch their new video game
business in the States.

- And so it was,
late in the 20th century,

terminal boredom
swept the countryside.

The maker looked down and was
not pleased by what he saw.

And so it was
he brought forth...

Genesis.

- The moment I started to work
for Sega of America,

I started to commute to Sega
San Francisco headquarter

because my family
actually lived in Texas,

and I stayed always
in Comfort Suites.

This small hotel room
became my home away from home.

I checked in there in,
I think, October of '89,

and by the way, I haven't
checked out ever since.

- 800-521-2--

- I don't think
many people knew.

I mean, I'm still shocked
that he still stays there,

personally, but I lived there
for about a year and a half

when I first started at Sega.

- Hi, welcome to Sega.

- It was hard to build
an organization from scratch

and launch a major video game
system in the United States.

There's so many hurdles
to get into the business

with all the retailers.

You know, they just
won't buy from anybody.

You have to prove yourself.

- The challenges we had
in those days

were the very strong
presence of Nintendo.

- Let's play Nintendo!

-"Nintendo Power" magazine
goes out

bimonthly to players
all around the country.

Right now, it's about
1.7 million.

On a weekly average,

we get about
140,000 phone calls in here.

- The key
is in the hidden town.

You have to cast a spell
at the dead end.

- Ah.

- "Nintendo Power."

- Another Nintendo game!

- And parents are now faced
with portable Nintendo.

all: We are Nintendo.

- Say what you want
about Nintendo,

but they were pretty cocky
about their position

and felt assured that
we wouldn't have much success.

- Nintendo's a very,
very strong company,

and so far, its competition
hasn't been more

than a blip on the screen.

- This is the Sega Genesis.

This is their next-generation
video game machine.

- The first year,
the expectation was to sell

1 million units
of Sega Genesis,

but sales was not that great.

- We were struggling
at the time, no doubt about it.

- The president at that time
held a weekly lineup meeting,

and he always somehow seemed
to forget

about what we discussed
previous week.

So it repeated and repeated
and repeated and so forth.

- So we were stuck between
a rock and a hard place.

- We needed someone to turn
the tide around.

So Sega brought in
Tom Kalinske,

the prince of toy business.

- When I was about
to graduate, I got a job

with J. Walter Thompson
in New York City.

We were given the assignment

to develop
a new children's vitamin,

and we developed
Flintstones Vitamins.

- Yabba-dabba-doo!
Yabba-dabba-doo!

- Oh, great idea, Fred.

- Within six months,
it was the number one vitamin

in the United States.

- Yabba-dabba-doo!

- But shortly thereafter,

the Senate had a subcommittee
on children's advertising.

- Super Sugar Crisp is coated
with super sugar

to make it taste so sweet.

- The feeling at the time
was that

children's sugared cereal
advertising

and somehow children's vitamins
advertising was bad.

- They're great!

- And the next thing I know,

Senator Margaret Chase Smith
looks at me and says,

"So, Mr. Kalinske,

you think selling drugs
to children is a good idea?"

And so I read a letter
that a mom had actually

written to me that talked
about how grateful she was

because we're selling a vitamin
that the children

actually want to take,
and I said,

"By the way, I have 5,000
more letters like that.

Would you like me to read
some more of them to you?"

And she said, "No,
Mr. Kalinske, that's enough."

Well, the Mattel guys
were there,

and the next thing I know,
they flew me out,

and I was offered a job.

- You can tell it's Mattel.
It's swell.

- Ruth Handler founded Mattel.

She came into my office,
and she said,

"Tom, the retailers say
it's over for Barbie.

"Forget about Barbie.

"Let's get on
to something else.

What do you think about that?"

And I said, "Ruth,
that's the dumbest thing

"I have ever heard.

Barbie will be around
long after you and I are gone."

And she said,
"That's what I wanted to hear!

You're now in charge
of the Barbie business."

Barbie could be anything

that a little girl
wanted her to be.

- Barbie's taking
her driver's test.

- I love her long hair.

- Is there room in Barbie's
dream pool for me?

- Oh, Daddy.

- And the business
just took off.

It grew like crazy.

And then we created a series
of different product lines

that would appeal
to young boys.

And out of this research came
this very muscular character.

- I have the power!

- And it became
a pretty good hit.

So I got promoted to CEO.

In 1990, I took a vacation
with Karen and the kids...

And literally kind of
lying on the beach...

And all of a sudden,
this guy appears.

It was Hayao Nakayama,
CEO of Sega Japan.

And I said,
"What are you doing here?"

He said,
"I'm looking for you."

He said, "Well, I want you
to come to Japan with me

because we've got
this great 16-bit technology."

- Sega.
- "We want you to run Sega

and take on Nintendo."

And I argued with him.

I didn't really want to go,

but my daughter Ashley said,

"This man came all the way
from Japan to find you.

"You have to go back with him

to see what
he's talking about."

- It's your destiny.

- After a long discussion
with family,

I did go to Japan.

And I must say,

I was very, very impressed
by what 16-bit technology was

compared to what
I had known as 8-bit Nintendo.

And I thought, "This really is
revolutionary,"

but at the same time, I was
somewhat fearful of Nintendo.

- The men sitting in this room

control the American
video game industry.

- The NES continues to havea unit sales projection

through Decemberof 2 million units.

- Nintendo was extremely
arrogant as a company.

- To marketing
vice president Peter Main,

selling Nintendo is easy.

- They come, they try,
they like, and they buy,

and it's a fun business.

- Especially fun
if there's no competition.

- Nintendo threatened
the leading software companies

that if they developed
for any other system,

they would not give them
approval of games on the NES.

- They were able to,
one by one,

contact all major retailers
and intimidate them

or induce them not
to handle Tengen product.

- It was like blackmail.

- No, I don't think so.

No. Sorry.

We were adamant
that this was a legal tactic.

- Retailers were the same way.

Retailers were afraid
to carry any other system.

- The retailers didn't like us,
okay?

We were not liked.

I don't think
we were ever liked,

but we were respected.

- They were anxious
to sue just about anybody

that got in their way
of doing business.

- Please, just go away.

We established the rule

that Nintendo was not gonna
get pushed around.

- We were extremely on top
of execution,

willing to put resources

where they needed to be
at the right time.

- What Nintendo was doing
was monopolistic

and was wrong.

- Nintendo acts like
a unchained

800-pound gorilla
swinging its way

through America's toy stores.

- Save you!
- Help me! Ah!

- Federal and state officials
charge today

that Nintendo threatened
to cut off

supplies of its video games

if retailers charged less
than Nintendo wanted.

- As a law violator,
a lawbreaker,

you did wrong
to your loyal customers.

- Nintendo!
Oh, man!

- Our relationship
with our customers

is our number one priority,
and that's the reason

that we reached this

comprehensive settlement
today.

I think we had
to pay $5 million.

All of the rest of the penalty
was in the form of coupons

that we would give out,

allowing people
to buy more Nintendo games,

which was pretty slick,
if you think about it.

- Do you see that price
coming down in the future?

- I was asked
on the witness stand,

"Do you consider yourself

to be an aggressive
person, Mr. Main?"

I said, "I'm in marketing.

"It's about growing
market share.

"And whatever gets
in your way,

"you try and work around it
or over it or past it.

Is that what you mean?"

He said, "That's what I mean."
I said, "That's what we do."

- I found something
a lot more scary than cocaine.

It's called Nintendo.

- Nintendo was so powerful,

they had a 95% share
of the market.

It was a dominant position

not like which I've ever seen
in my business career,

so the idea of taking on
this giant, Nintendo,

that everybody said
is too powerful, too big,

it's an impossible task,
that just appealed to me.

I knew that Japanese companies
tended to tightly control

their operations
outside of Japan,

so before I accepted,
I told Nakayama I needed

to do things my way,
the American way.

He told me he agreed with me
and he understood that.

So I decided
to take this role on.

Sega of America
was a small building,

and there was no real lobby.

People could wander in and out
very easily, not well lit.

It was so different

than what I was used to
at Mattel.

It was initially a shock
to the system.

- The day Tom, you know,
came to Sega

was a very crucial time.

Tom was someone who can really
grow the company big.

- Shinobu mentioned to me
that Tom was coming,

and I said, "Great," you know.

"It's all uphill from here."

- There were executives
at other companies

that were pretty dismissive

of my coming into
the video game industry

and really having any impact.

They thought I was
just another toy guy.

They thought all I knew how
to do was market Barbie dolls

and Hot Wheels cars.

There were even analogies to,
"Oh, here comes Ken

"to save the Sega--
the video game company,

and, boy,
that's not gonna work."

So personally,
that was at stake for me,

and none of us really knew
if this thing with Sega

was gonna be a success or not.

I didn't even initially move
my family up to San Francisco.

I stayed in a Comfort Inn

very close
to the Sega offices.

It happened to be a place
that Shinobu Toyoda

was also staying at.
- Hi, Tom.

- Tom started staying
at the Comfort Inn,

and then Tom and I decided

that we would, you know, get,
like, a two-bedroom suite

someplace
for about the same price.

- Paul was a great roommate.
We were both baseball fans.

So we'd go back
to the apartment.

We'd have pizza
and drink beer

and got up early
and went to Sega.

I knew Paul Rioux
for a long, long time.

I knew him at Mattel.

So we did discuss
his experience in Vietnam.

- I've had the mustache
since I was,

like--I got out of Vietnam.

That's why I wanted to get out,
so I could grow a mustache.

- I knew he had gone
through battle.

He'd had explosions occur
near his head,

where he lost part
of the hearing in one ear.

To Paul, being in business
was very similar to combat.

He wanted to crush the enemy.

- You gotta be
ready to fight...

similar in business.

It's not as life-threatening

in the business world,
but sometimes it may be.

- ♪ She-Ra,
Princess of Power ♪

- I always felt that one
of my strengths

is coming up
with unique strategies

that either make
companies successful

and either work or don't.

And it seemed to me
that Nintendo

was selling games designed

for a very young audience.

So I saw an opportunity
to go after

the teenage
and college audience,

and let's leave Nintendo
with the kids.

So I worked with Paul
and Shinobu

on putting together a plan

on how we were gonna
take on Nintendo.

- Tom and I went
to Sega Japan headquarter,

where there is a big room
called Decision Room,

full of executives
and managers...

and Nakayama-san
sitting in the center.

- I'm not one to just go
into a business

where I think
I'm gonna be second place.

I had studied the market
and had a strategy

for what I thought
we needed to do.

First, I wanted to do more
American licenses from TV shows

and movies
in the United States...

- Because Japan didn't
understand those licenses.

- Montana, touchdown!

- And I didn't think
the development

could occur in Japan.

Then I said, "We've gotta
lower the price of Genesis."

- We wanted to make it very
competitive against Nintendo.

- And I wanted us
to take on Mario,

and so I wanted
our best character

to be included
with the hardware.

- Nakayama's face turned
very white, and he said,

"What, crazy?
That's our lifeblood.

Give it free?"

And Tom told Nakayama-san,

"By the way,
in addition to this"...

- I wanted to take Nintendo on
directly in advertising

and make fun of them.

- Of course, there was a fear
that Nintendo may sue us

or somehow try to stop that.

- After my presentation,
they all talked in Japanese.

Shinobu would try to translate
in my ear,

but I could tell this
was not going over well.

And I thought, "Well,
that's the shortest career

anybody ever had
with a company."

- Nakayama-san got so mad,
his face turning very pale.

- Nakayama said,

"Well, nobody agrees with
anything that you've said."

- He literally stood up
from chair and almost,

like, kicking the chair.

I really don't remember
physically did he

kick the chair or not,

but he quickly walked
to the door.

- But he turned at the door,
and he said,

"When I brought you on board,
I said you could make

"the decisions for the company
in the United States,

and therefore go ahead
and do what you just proposed."

- For the third year in a row,

it's on the top
of everyone's Christmas list.

- What do you wantfor Christmas?

- Nintendo.

- There were competitors,

home video game companies
that were in the business,

and certainly one
of the companies was Sega.

One of the things
that we always did

was have our game people
play their games.

The feedback was uniformly,
"Great graphics,

but the games are lousy."

As long as we were
hearing that...

we weren't too concerned.

- Welcome to the Fight Palace.

- The title that was packed

into the Genesis
was "Altered Beast."

- Not a particularly good game
in my opinion,

but it also sounded
like devil worship

for half of the United States,

where that would be
just unacceptable.

And we needed something
to compete with Mario.

- So there was company-wide
efforts to come up

with something new.

Yuji Naka,
our genius programmer,

came up with algorithm
to move object very fast,

and he needed a character
to move fast.

- So he asked
the art designer,

Naoto Ohshima, to come up

with some sort of characters.

- It was Al Nilsen,

our director of marketing,

who had to pick
the characters.

- First game I have here

is "Michael Jackson's
Moonwalker,"

which was actually designed
by Michael himself.

- Al was one of the very
first employees hired

to launch Sega Genesis.

He was the game guru,
marketer, PR, everything.

- Al's the best gamer
I've ever seen.

- He was like a big kid

who played video games
all the time.

- Shinobu came into my office

and explained
about this contest

that Sega Japan had had
to develop our Mario.

He says,
"Nakayama has chosen you.

"They're happy
with two finalists,

and they want you to choose."

The first one was Eggs.

"Okay, let's see
what the other one is."

"A hedgehog?

What in the world
is a hedgehog?"

And there was this rock band.

- He also had a girlfriend
named Madonna,

who was very voluptuous.

- So I've got Eggs
and a hedgehog...

so I chose Sonic the Hedgehog.

I said, "You gotta
get rid of the rock band,

and you gotta
get rid of Madonna."

- We said, of course,
"No, no, no.

we can't use
the name Madonna for this."

- But there were
some other tweaks

to the way he looked...

Just to go
and round off his edges.

- The folks in Japan
didn't like that

because it was their creation

and didn't want
anyone to touch.

- It went all the way up

inside of the Japan culture
to Nakayama,

and he eventually said, "No,
do what the U.S. wants done."

- Six months later,
I'm at Sega Japan.

We walk over to a screen,
and here's this guy Sonic.

Never seen a video game
move that fast...

and look at these
vibrant colors.

After my visit, I went back,
and I said,

"Sega Japan created something
that we can go

"and put up against Mario.

This can be
our number one game."

- "It's gonna be
the best game Sega ever did."

Coming from Al, that was,
like, you know,

"Hey, we got a runner."

- That changed the mood
and tide,

so to speak,
of the company immediately.

And the rest is history,

and, uh...yeah.

- Let's play Nintendo!

- It is the video game craze,

the Nintendo craze,
but this year, Nintendo

may be up against
some serious competition.

- You get better graphics,
more levels of play,

better animation on the screen,
longer games,

just more fun to play.

- Nintendo, however,
does not plan

to relinquish any ground.

- Introducing the next
generation from Nintendo.

- Almost as soon as the NES was
launched in the United States,

Nintendo was working
on the Super NES.

- What do you do
after you've made a fortune

selling American kids
on a product

that drives
their parents crazy?

You declare it obsolete,
of course, and introduce

a new and improved version
next month.

- Nintendo wants a generation
of video freaks

to forsake the gear
they've already spent

several hundred dollars on

for this, Super Nintendo.

- So we arranged
with Sega Japan

to go and pick up
one of the new systems for us.

And we all got together
in Tom's office,

took it out of the box,

hooked it up to the TV,
hit the on switch,

and we were ready to see
what they had in store for us.

- We had a Mario launch game.

I knew instantly
we had a winner.

That game was that good.

- "Are you sure?"

This didn't look like 16-bit.

It kind of looked 12-bit,
if I want to coin a phrase.

It just wasn't taking it
to the next level.

I was like,
"Yeah, we're okay.

"We've got this guy named
Sonic in our back pocket.

This could go and be
very, very interesting."

So I came up with an idea.

- ♪ Ah, push it

- Ask not what machines
can do for you.

Ask what you can do
for machines.

- The Consumer Electronics Show
is a twice-a-year extravaganza.

More than 140,000 products
are now on display.

Hundreds of companies
are taking part,

and more than a third of
the industry's annual business

is done right there.

- But this time,
it's for the ducks.

- Wait.
- Uh-oh.

- Whenever you're at war,

you always hit the guy
in the mouth

as hard as you can.

If you can't hit him hard,

you might as well
not even fight.

That's the attitude
in real war,

and it's the attitude
in business.

You've gotta be prepared
to take on

the competition and win.

- ♪ Ow, dig it

- Do you think
the technology exists

that these'll shrink even more?

- I don't know how much
smaller they can get.

You know what the problem
with them getting smaller

is holding them steady,

because if it's lightweight,
it tends to move.

- ♪ Salt-N-Pepa,
Salt-N-Pepa ♪

- Nintendo had some new games

and accessories on display

inside the enormous
Nintendo pavilion.

Nintendo now has
the lion's share

of the $5 billion
video game market.

Sega of America
will offer two new games,

one featuring a hedgehog.

- Normally before a big launch
of a--of a major title,

you would start getting
early press.

We didn't do any of that.

We waited until
the very, very last minute

to surprise Nintendo.

- ♪ Show the guys
that we know ♪

- Ta-da.

- ♪ I don't know
what I'm doing ♪

- I can't believe it.
Mario, jeez.

- I'm a nice guy, and I felt
that the nicest thing

that I could go
and do for Nintendo

was to introduce Super NES
to America for them.

I see this reporter.

His opening words were,

"Super Nintendo
has 32,768 colors.

"You only have 512.

What are you gonna do
about it?"

We walk over to where we had
the two monitors stacked

one on top of each other,

and I said to him,
"Which one has more colors?"

- ♪ Push it

♪ Push, push, push,
push it, push it ♪

♪ Push it

- He just turned around
and walked out of the booth.

- ♪ Push it, push it,
push it ♪

♪ Push it, push it, push it

- And it's like, "Hmm.

"What can we do with this?

"Let's do what we did at CES

but this time a mall tour
going around the country."

- Here's the challenge.

Super Nintendo, brand-new
competitor of ours, 16 bits.

We challenge them.

We think
we're better than them,

but it's up to you to decide.

- Our small initial team
was very good,

but it was clear to me
we needed help.

- The American marketplace

is a very vibrant marketplace
for the video game industry.

- We were one of the first
video game companies

to have senior women
in the management ranks.

And Ellen Beth Van Buskirk

was a very special find
for us.

- You have the 8-bit segments.

I spent my entire summer
going from mall to mall

to mall to mall to introduce
Sonic the Hedgehog.

And on occasion,

I would don the Sonic
the Hedgehog character uniform.

You could project
that the little kids

were gonna pet me.

They were gonna
wanna be hugged.

"Oh, Sonic,"
kisses and hugs and sweetness.

But the teenage boys responded
to me quite differently.

They kind of wanted to do
high-fiving, fist pumping,

and I kind of got pushed around
a little bit.

- I think Genesis is gonna win
all the way.

- They wanted
something different.

They wanted attitude.

They wanted sass.
They didn't want hugs.

- For Christmas, I'm gonna
ask my mom for a Sega Genesis

because it's way better
than Nintendo.

- Mario was
a very slow-moving,

left-to-right scroll game,

and Sonic was hip
and fast and cool.

- Sega Genesis is way better

because Nintendo
is kind of slow.

- When Sonic
was first released,

everybody kind of scratched
their head and said,

"A hedge-what?"

- You know, was it impressive
that he could roll really fast?

I don't know.
You know, for me,

I didn't probably have

the reaction time
to deal with it.

- But for a lot of people,
they found it really fun

and liked the fast action,
using that pachinko mechanic

of lots of
"ba-ding-a-ding-a-ding,"

very fun to kind of get
that going and keep it going.

And Sonic is a character.

He had that little bit
of edgy kind of wiseness

that Mario--you know, Mario--
"hoo-hoo"--never had.

- It wasn't empirical science
when you say,

"Which one
do you like better?"

Doot, doot, doot,
doot, doot, doot.

- In speed of action,
we looked better;

graphics, we looked better.

They had never experienced
anything like it.

- I don't think
Sonic the Hedgehog

was a masterpiece or something,

but it gave them
additional momentum.

- By then, I knew
we had a winner,

but we needed to find a way

to get in
the major retailers.

- ♪ Wal-Mart's one of those

- Wal-Mart wouldn't agree
to carry Sega products.

- The only thing...
- Hotter than Nintendo games...

- Is Wal-Mart's price.

- Wal-Mart was making a lot
of money from Nintendo,

and they did not need
any unknown second supplier.

- And Wal-Mart just refused
because of this pressure

that Nintendo put on them.

- We were fanatics
about retail space, okay?

That became a thing
we leveraged.

"Hey, you're really doing well
with the product, Mr. Retailer,

"but guess how much better
you could be if you had 20,

30, 40 feet
of Nintendo product."

- And "Super Mario World"is included.

- Okay, okay,
we'll get it for him.

- So we developed a strategy
on how to change this.

- I came up with an idea
of opening a Sega Game Store

right in front of Wal-Mart
headquarter in Arkansas.

- We rented a store
in a shopping mall

literally as close
to Wal-Mart headquarters

in Bentonville
as you could get,

and we put as many
TVs and Sega Genesis

in there as we could
and a big sign out front

that said,
"Come play Sega Genesis."

- Free of charge.

- We had lines of teenagers
out the door.

- The store became very popular
for Wal-Mart employees.

- We bought every billboard
leading in and out

of Bentonville
with Sega advertising.

We bought
the football cushions

at the University of Arkansas
football stadium.

After a while, a senior VP
of Wal-Mart called me up,

and he said, "Tom, stop it.

We'll give you a four-foot
section in Wal-Mart stores."

Because Wal-Mart
is such a powerful retailer,

all the other retailers
gave us more space

and were less afraid
of Nintendo punishment.

That changed the business
dramatically.

- As the company started
to grow very fast,

we brought in people
from much bigger company

because we are aiming to be
a bigger company.

- Sega was such
a distant player.

It wasn't like
they were second.

It was like they were 14th.
They were that far down.

Nintendo was so dominant.
- "Nintendo Power."

- So I got a call from Tom,
from Tom Kalinske.

He needed some help
doing marketing,

and he asked if I would do it.

- Mario!

- It was not dissimilar
to what I did at Reebok,

which was trying to unseat
a category leader.

- No-no-nobody.

- Part of the reason
of going to Reebok

was the challenge
of slaying the beast of Nike.

- Impossible.

- And we came up
with this idea

called the Reebok Pump.

It was totally
a marketing gimmick.

It made your foot a lot hotter.

It didn't really give you
any more support.

But at the end of the day,
it was one of those things

that just caught
the consumer psyche.

- Steve Race, the first thing
we heard about

is his wild
TV commercial at Reebok.

- One guy is wearing Nikes.

The other guy
is wearing Reebok.

They both jump off
this bridge.

Commercial ran once.

- Steve Race was a terrorist
for A-type personalities.

If he was a college course,
he'd be Trouble and Difficulty.

- I remember Steve
and I playing tennis.

He had a mean serve.

I think he was aiming
for my head most of the time.

- Sega had a bad reputation.

I just didn't wanna be
the puppet that would be pulled

by a puppet master
7,000 miles away.

I didn't know
who the puppet master was.

Obviously, it turned out
to be Nakayama-san.

Nakayama was the head of SOJ,

and he really was
the patriarch

and the prime mover
in all of Sega.

Nothing went out without
Nakayama's approval

and endorsement.

- Nakayama-san was very
difficult for many people.

If you do not deliver,
he was brutal.

- We'd all be on alert
that he was coming in,

and there was this presence,

almost of evil,
that came into the office.

- He had very long hair

that he kind of wound
around the top of his head.

- We had all these ways
that we thought

Nakayama might meet
his demise,

and one of those was that
his hair would get caught

in the rotor blades
of a helicopter

and pull him around
in a very Gatsby-esque death.

- To me, Hayao Nakayama
was a cartoon character,

and I loved talking about him.

I mean, we all did, you know?

He had weird hair,

he had a weird sensibility,

and he carried
a very big stick.

The Japanese-U.S. relationship
is kind of confusing.

It really kind of starts
with an American serviceman,

David Rosen,
in Japan during the war

and then coming home
and saying,

"Hey, there's
an opportunity me

to sell arcade games
from Japan into the U.S."

We called each other
SOJ and SOA,

Sega of Japan
and Sega of America.

- I don't think
anyone in Japan thought

taking Nintendo on directly
was a good idea,

but it was something
I felt we needed to do.

- People hate advertising
in general.

You know, if I go to a party
and I say I'm a filmmaker,

they go,
"Oh, what films did you make?"

And they think of,
like, really good films.

And you say,
"Oh, I'm an author,"

they think of a good book
that they've read lately.

And if you say
you're in advertising,

they think of the shittiest ad
they've seen in months.

- Oh, yeah!
- Snap into a Slim Jim!

- Sizzler.

- We had four agencies
pitching to us, big names,

and Goodby was a small group.

Jeff was the lead.

- We, at the time, had just had

one of our
original partners leave,

and Rich and I were left here
and were kind of like,

"We gotta win this, you know?"

Good morning.

Thanks for having us here.

The pitch to Sega
was probably one

of the most elaborate pitches
we've ever done.

We had every person
in the company become an expert

in every game
you could play on the Genesis.

So everybody came out

with these beautiful
athletic jackets,

and we put a sound system
in there

that we rented
from the Grateful Dead.

We definitely went overboard.

Eh, lighten up.

The agencies
we were up against

were really the best agencies
in the country,

and I really thought
they'd think of something

to beat us with.

- This work is the best work

we have ever done
as a company.

I can't wait to produce it.
So I hope you like it.

- This is your brain.

This is your brain
on Nintendo.

And this is your brain
on Sega.

- Whoo!
- Ooh!

- What a ride.

- And it worked.

- They overwhelmed us
with their pitch.

- We did
the first commercials,

and one of them was about
this guy who started off

in a very straight
kind of outfit...

- And then transformed
into a really cool guy...

- Welcome to the next level!

- Playing Sega Genesis.

- Welcome to the next level.

- I thought
"Welcome to the next level"

was a great line
because it rewarded you

for playing the thing well.

It promised that
there was depth to the games.

You got better
and could get up higher.

- On the Sega Genesis.

- It was also saying
to the competition

that "you're not
the next level.

You're behind."

I thought that was
absolutely brilliant.

- But I don't think
it would have worked

without the Sega Scream.

The Sega Scream was what really
drove the thing in the end.

Sega!

- There was something
about the way

the guy did it...
- Sega!

- That was just really funny.

- Sega!
- It was slightly Japanese.

- Sega!
- Just absolutely--

you couldn't get it
out of your head.

- Sega! Sega! Sega!
Sega! Sega!

- Sega!
- Sega! Sega!

- I would go pick up
my daughters at school,

and when they saw me,
they'd say, "Sega!"

- Sega!
- Sega!

- Sega!
- We kind of owned

something that Nintendo
didn't have.

They were kind of scrubbed
and clean

and Disney-ish and so on,

and we wanted it to be kind of
uncool to be a Nintendo kid.

That was
our explicit intention.

- Sega!
Sega!

- The advertising was
extremely competitive.

I mean, we made a lot of fun
of Nintendo.

- Look, a cat massager.

Spread cheese snacks.

Use them to tenderize meat.

- Team Sega represented
the antiestablishment team.

Nintendo was the Soviet Union,
and Sega were the guys

that were throwing
Molotov cocktails.

- Hey!

You still don't have
a Sega CD?

- Huh?
- What are you waiting for,

Nintendo to make one?
Show him.

- Whoa!

- Whoa, color.

- And you just try not
to respond

to those kinds of things.
- Sega!

- Treat them as though
they're--you know,

they're doing that
because they're desperate.

We kicked off each launch

with a three-pronged attack,
including...

I joined in March of 1992.

"Nintendo Power" coverage,
and online...

When I first arrived,
there was still sort of a--

I wouldn't say a dismissive
attitude but a feeling that,

"You know what?
This is really not serious."

That quickly changed.

- The Sega Genesis
has blast processing.

Super Nintendo doesn't.

So what's blast processing do?

- This "blast processing"
thing,

it was a total fabrication
of advertising people.

- I like the one when they said
the blast processing.

- Kids would come into
focus groups, and they'd go,

"Yeah, I know that Nintendo
has 16-bit,

but Sega has blast processing."
It was crazy.

- And what if you don't
have blast processing?

- And they have a little truck
for Nintendo.

- I would have loved to have
seen the faces

of the Nintendo people
when that thing ran.

I would just love it.

- "Blast processing,"

as though it was
technology-related,

was kind of vaporware,
but it was catchy,

and it worked.

- Their advertising
was very effective.

It tended to make it uncool
to play Nintendo.

- Which is fine, really,

if you don't mind
being sucked dry.

- You gotta give them credit.
- Sega!

- I think Kalinske
did a great job.

- Sega!
- Sega!

- What Sega has been doingto make these ads,

they should just keep ondoing more of it

because these ads are great.

- All the kids thought
it was cool.

- Sega has the coolest ads,
the best games.

- And as a result,
the company was cool.

- Nintendo's like,
"Where have they been?"

- You saw it on TV shows.

People were picking up
the popularity of Sega.

- I'm going to Todd's.He has Genesis.

- She doesn't even have Sega.She's such a troglodyte.

- Hell hath no fury
like a woman scorned for Sega.

- I mean, we were becoming

as popular or more popular
than Nintendo.

- To Sega,
we say congratulations

for bringing us
the 16-bit Game of the Year,

Sonic the Hedgehog.

- I got a call the other day
that an 18-year-old was saying

that Sonic the Hedgehog
made him forget about girls.

So I consider that
a great achievement.

- When the very first
Sonic game came

to be released
and became very successful,

obviously, we wanted
to create a sequel.

- And part and parcel
with making that successful

was, "How are we gonna
launch it?

How are we going
to support it?"

- We started looking at
what else we could go and do.

- "Ha! Let's do something
like the movies.

Let's do a world
distribution date."

- We were going to make
the game available

at every retail outlet
on the same day.

I know this sounds silly today,
but it was hard to do.

- "We'll do it on a Tuesday...

Sonic Two-sday."

- Last Christmas, the world
felt its first Sonic boom

when "Sonic the Hedgehog 1"

became the most popular
video game of 1991.

- Writing for Tom
was always great.

I don't know what it was.

He has a natural sense
about what it will take

to draw in the audience.

He's charismatic,
and he knows it and uses it.

I'll say he uses it for good
rather than for evil.

- We believe "Sonic 2" will be
America's hottest video game

this Christmas, and...

both: We project to sell
more than 2 million copies...

- In the United States
between now and Christmas.

- We have Tom speaking,
and then I have Joey Lawrence

running out
from behind the curtain.

You know, we could never afford
the big Hollywood names.

- Dustin Diamond,
come on up here.

- But we could afford
teen idols.

- And if you thought
the first one was good,

wait till you see
the second one.

- You know,
"Sonic 2" is great.

It's better than the first one.
You have great graphics.

Sonic has a new friend
called Tails,

a fox, two tails, cool.

- Sonic Two-sday was so big.

It was a bodacious idea.

- Oh, it's great,
and it's great

because it's two-player,
you know?

So you get to play
with more than just yourself.

- But she's--but this is
the exact same board,

and we're playing here
together,

but she's in a different part
of the board than I am.

So it's something never seen
before, really.

It's great.

- We launched in Japan,

Australia, Europe,
all over the world.

"Sonic 2" is super.

- Pretty good.
- It's brilliant.

- Never, ever been done
before.

- It's comparable
to the launch

of Madonna's "Sex" book,
you know, Sonic Two-sday.

- I'm right below you.

- It was an amazing hit.

- Sega!

- Oh!

- When Genesis succeeded
so much

here in America, in Japan,

it did not
necessarily do great.

So that way,
I think Sega of America

became the valuable core
of entire Sega business.

- Sega was able to make a dent
in the U.S.,

and it kept us on our toes

because we were
in a real battle.

- As we grew,
as we added more people,

Nintendo was in our target.

It became a kind of
"Spy vs. Spy."

Whatever Nintendo would do,
we would try to do better.

- With the Sega Menacer
in my hands,

I'm not afraid of enemy tanks.

- Sega!

- At one point, I was told
there was a dartboard

in Nintendo's office
with my face on it.

- When we went
to analyst meetings,

it would be Tom Kalinske
and Peter Main.

- Well, Peter and I
didn't get along very well.

- A lot of yelling and
screaming at various events.

- I remember getting up
to speak

at one of those meetings,
when I said,

"Boy, following Peter Main

is like following
Dr. Kevorkian."

- It erupted into
a bit of an interesting

after-three-glasses-of-wine
conversation

that carried on
down Fifth Avenue

in a raging snowstorm.

Thank goodness third-party
intervention happened.

- As '93 started,
there was a big game coming...

and it's gonna be available
not just for Super NES

but also for Sega Genesis.

- Mortal Kombat!

- Mortal Kombat!

- "Mortal Kombat"
was a huge coup for us.

For once, we get a big title.

- Ahh!

- We had "Mortal Kombat"
in its original version

with all the possibility
for gore and, you know,

chopping people's heads off
and stabbing them

and what have you.

- There has been so much
violence swallowed into my soul

over the years;
nothing was new.

I mean, consider Roadrunner.

- "Mortal Kombat" went
into a graphic violence area

that Nintendo hadn't allowed
on their consoles.

- We had long discussions
about whether

we should allow the blood.

I ultimately decided
that we would not.

- Fight!

- The Nintendo version
showed green gore.

Well, what human being
has green gore in them?

- I was expecting
we might actually get

some positive feedback
from parents that say,

you know, "Bless you.

"You kept the violence

out of this game."

And on the contrary,

I got lots of letters
from parents

criticizing Nintendo
for censoring the game,

and we got our clocks cleaned.

- Ahh!

- Tom wins!
- We outsold them five to one.

- Sega!
- Sega!

- Sega!
- Sega!

- Sega!
- Sega, Sega, Sega!

- All right, a Sega Genesis!

- Sega!
- It's a Sega!

- Sega!

- Whoa!

- No way!

- ♪ Back with another one
of those block-rockin' beats ♪

- I mean,
we dethroned Nintendo.

- Fight!

- "Mortal Kombat"
on Sega Genesis

is the best video game ever.

- Urkel wins!

- I think "Donkey Kong"
is the best game ever.

- "Donkey Kong" sucks.

- You know something?
You suck.

- The most complimentary thing
I can say about Nintendo

was the fact that they...
reinvented video games.

- Thank you, Peter.

- They had to create,
out of nothing, an industry.

They not only did that;
they did it well.

- Good afternoon. Nintendo.
Nintendo. please hold.

Thank you. May I help you?

- My path to Nintendo
was not so purposeful.

It was just kind of pure luck.

I was at a time in my life
where I was really searching

for something great
and fun to work on,

and it was a place
that was meant--meant for me.

- You always had
to spell Nintendo

back in the early '80s.
Nin-ten-do.

- I would get on airplanes,

and you'd start talking
to somebody,

and you'd give them
a business card,

and they'd say,
"What's a Nine-tendo?"

- People, when I told them
I was working for Nintendo,

they said, "Huh?

What a--you know, what is that?
Is that a dry laundry?"

- For most
of its 99-year history,

Nintendo made board games
and playing cards,

traditional products
for a traditional way of life.

- Nintendo
was some obscure company

that just had
these random helicopter games

and another kind of wannabe
shooter game,

so it was really nothing
from an arcade game standpoint.

But then Mr. Miyamoto
came along.

- Mr. Miyamoto was the original
developer of Donkey Kong

and the creator of Mario

as the character chasing him
up the construction site.

- Whereas I was just
a guy at Nintendo,

Miyamoto is the guy,
the master,

and would go on to design some
of the best games at Nintendo.

When "Donkey Kong" first
came in, it was really cool

because you had
this little guy

who you could push up
on the thing,

and he'd climb up ladders.

You'd go up
and, doink, make a mistake.

One of the barrels
would get you.

You'd say, "Oops.
I can do better,"

and then you'd immediately
start playing again.

I mean, just, like,
it was unbelievable.

- We sold
over $100 million worth

of "Donkey Kong"
coin-operated video games

in less than one year,

and this is a company
that had 30 employees.

- Nintendo of America.

- We'd get shipments
from Japan,

and I wouldn't know
what they were.

Then one of the days,
I open the box,

and there was
this little thing in it.

- I thought, "This is cool.
This is great.

"Let's, like,
give it to everybody.

Let's bring it over, sell it."

Well, Mr. Arakawa said, "Hmm,
we need to think about this."

This thing was really risky,
and it could fail.

So I started to get exposed
to the fact that there was

this thing called the debacle
of the Atari 2600

and that there was this thing
called the "E.T." cartridge.

- "E.T." video game?
Wow.

- The game was so bad,
so unplayable,

millions of copies
went unsold.

- It is a legendary landfill,
a tomb

where an entire industry
was buried.

Thousands of copies
of one of the epic flops

in video gaming history

laid to rest in a New Mexico
city's garbage dump.

- The video game industry
is now becoming

very much like Hula-Hoops:
there still may be

a lot of people
fooling around with them,

but profits are getting
to be quite negligible.

- Video game cartridges
as Atari.

- Given the collapse of Atari,

the idea
of actually introducing

a home video game system

in the United States
was very risky.

- I was, "the original
salesperson" at Nintendo.

I had family members say,

"You're out of your mind.
You have kids.

"How are you gonna
support your family

when this thing dies
in six months?"

As far as appetite
for video games,

there was none.

- Video games:
play them for fun,

but invest in them
at your own risk.

- But we still had
really great games,

and that's when
Mr. Arakawa said,

"We should do this."

- We ultimately
made the decision

to introduce the NES
to New York,

the epicenter
of the toy industry.

- Our pitch was very simple.

- You're playing with power!

- This is not
just a video game.

It's an entertainment system.

- It didn't make you think
about your Atari.

- Will your family be
the first to witness

the birth of the incredible
Nintendo Entertainment System,

the first to play with R.O.B,
the extraordinary video robot?

- Parents could say,
"Oh, it's got this light gun,

which is totally new.
Look, it's magical."

- We sent a number
of Nintendo employees

to Hackensack, New Jersey,

where we had this warehouse
that was infested with rats.

- I couldn't go to the bathroom
in the warehouse

because it was that not-nice.

There was a huge hurricane
that year,

and the warehouse flooded,
and some barrels

start floating around
the parking lot,

and they have, like,
toxic waste symbols on them.

- For the three months,
we did nothing

but get up in the morning
and give demos to kids

and let kids play while
we talked to their parents.

- Parents were saying,
you know,

"What is this Nintendo thing?"

- People would show up
with cameras and microphones

and notepads and say...

- "What are you,
on drugs or something?

"Are you guys crazy?

No one wants to look
at a video game now."

- I remember
this woman walked up to me

and said, you know,
"What is this?"

and I said,
"Oh, it's Nintendo,"

and she said, "Nintendo?"
and I said, "Yeah,"

and she goes,
"I hope you fail."

- We left that research session

feeling a little unsure
of ourselves.

- We had to go out and get rid
of the doubt on so many levels.

We're at war, guys.

We gotta make believers
out of the world

that this is for real,

this can happen,
this can grow.

- The word Nintendo means,
"Work hard,

and the fates
will smile on you."

I like that idea
that if we all just put forth

our best efforts,
then we'd be successful.

- The buyer of video games
at Toys "R" Us

was the ultimate skeptic,
and his name was Hal.

When I came in
with a video game, he said,

"Forget it.
I don't want you to call me.

"I don't want you
to contact me.

If I see it starting to sell,
you'll hear from me."

- The day before the NES
was supposed to launch,

commercials were on air.

We all went to the warehouse
and opened champagne

and literally loaded the truck
to take it to FAO Schwarz.

We went, and we stood outside
the window of FAO Schwarz

and watched someone
make the first purchase.

The person bought,
like, every game.

- All of a sudden,
the phone rings.

"Hey, how come
you didn't call me?"

I said, "Well, Hal, you didn't
think it was gonna sell,

and I didn't want
to bother you."

"The thing's blowing out
the stores.

"Get up here now.
Today's Saturday,

and I'm ready
to backup order immediately."

- It may be the most addictive
toy in history.

- The product started
selling like hotcakes.

- This is as big or bigger

than anything
the toy industry has ever seen.

- "We're excited
about the possibilities

for this new thing called
Nintendo, whatever that is."

- When Nintendo
entered the game,

the video game market
was a losing proposition.

Nintendo says
it brought it back

with better-quality games
and graphics.

- We decided if we could make
a video game system

with quality games
that we would be successful.

We took that gamble,

and now I think
it's appropriate for us

to reap the rewards
of that gamble.

That is capitalism.

- If the NES had not been
successfully launched

in New York,
I think it's fair to say

there would not have been
a home video game business.

- Suddenly, who knew what game
was gonna come out?

Instead of Christmas happening
once a year, it's like,

suddenly Christmas happened
just all year long.

- What the hell are you?

- What are you?
- I'm Batman.

- I'm from the future.

- Whoa!

all: Cowabunga!

- You know,
I remember at the time

seeing Sega at every trade show
and seeing the Sega people,

and they were trying so hard
to be successful,

but Nintendo was the only game
in town

until Tom came along.

- When Tom Kalinske
joined Sega,

we knew his background.

We knew he was
a very fine marketer.

He was a worthy competitor.

- When Tom showed up,
it was a little bit

of a message to Nintendo
that the game was changing.

- Tom Kalinske's
a very smart marketing guy

feeding the retailer,

"Yeah, tell me more,
tell me more, tell me more."

- I always thought
of Tom Kalinske as, like,

the character
in "The Music Man,"

come into town,

drum up a lot of sales,
get them all excited,

and when you look
kind of behind the scenes,

there wasn't quite as much
there as you would expect.

- Sega was kind of
chipping away at our business,

and in particular, they were
going after the harder edge

that Nintendo wouldn't do.

- Something down there
sucked their brains out!

- But we weren't going to chase
the other guys.

That was never a part
of Nintendo's strategy,

to follow the other guys

or try and do
what they were doing.

Instead it was to do what we do
but just do it better.

- I have to admit,
I was not always in favor

of that strategy.

Having been at Nintendo
for a while, I was young,

and I still believed
that a lot of my thoughts

were the right way to go,

and they weren't taken,
and maybe, you know,

burned some bridges
along the way.

- All of a sudden, Bill

started smoking cigarettes
and driving sports cars.

You know, he'd just kind of,
like, turned to the dark side.

Once Bill got out of Nintendo,
he was--he was Bad Bill.

- The Sega Genesis was doing
extremely well,

and so it made sense
for me to switch teams.

- When he left,

I think Nintendo
felt a sense of--of betrayal.

- He went to work for Tom,
and hey, that's life.

- It was easy for me,
but I think it was difficult

for the Sega people
to accept me.

- We were giving him
a hard time about that,

perhaps
he wasn't true-blue Sega,

and he says, "You know
what I think of Nintendo?"

and he pointed
toward Seattle,

dropped his pants,

and mooned Nintendo.

- Tom always said
that it's easy to be

a number two company
challenged to be number one.

Once we become
the number one company,

that is the real challenge
starts.

- Video games have become
a $4 billion-a-year business.

There is a growing concern
on Capitol Hill

that parents who buy
some of those games

may not realize just how much
violence they're getting.

- Games so violent, bloody,

and gruesome that parents
and politicians have had it.

- Violent, sexual games
available to youngsters.

- The best thing about games
is violence,

realistic things like blood.

- He scores--oh!
- You know what, Mike?

You can make their heads
bleed on this game.

- Make somebody's head bleed.
- There it is, Mikey.

Check it out.
His head's bleeding.

- These are not harmless toys.

They can indeed cause
great emotional

and other damage to a child.

- They're just out
for making money,

and they're not worrying
about the kids' well-being.

- Along with that huge success
came the criticism.

I did not expect the U.S.
Congress to get involved.

- Like the Grinch
who stole Christmas,

these violent video games
threaten to rob

this particular holiday season
of a spirit of goodwill.

These games teach a child
to enjoy inflicting torture.

- They were threatening
the industry

with severe censorship,
so there was a lot at stake.

- It was largely political.

"We're gonna restrict
your children

"from being exposed
to these violent video games,

and we're going to make
the world safe for democracy."

It was total nonsense,
total bullshit.

It's business and politics

meeting in
the worst way possible.

- What you're about to see
are scenes

from the most violent
new video games,

"Mortal Kombat."

Blood splatters
from the contestants' heads,

and a player wins
the so-called death sequence

pulling off the head
of the opponent

with spinal cord attached.

I find this segment
deeply offensive

and believe that it simply
should be taken off the market.

Let me now call to the table
Howard Lincoln,

senior vice president
of Nintendo,

and Bill White, senior
vice president of Sega.

- I'd never been in Congress
before.

Of course, it's always
a little bit intimidating

when the senators
sit ten feet above you

and you're down on a little
table in front of them.

- We debated a lot
about who should go,

and we decided that Bill White
was absolutely perfect.

Instead of having the senators
address me and address Howard,

have them address Howard
and another guy

who used to work for Nintendo.

- We knew that it also
would irritate

the hell out of Howard.

- To meet our game guidelines,

we have removed the blood
and death sequences

present in "Mortal Kombat."

We did this knowing
that we would lose money

by sanitizing "Mortal Kombat,"
but sanitize it we did.

- Howard Lincoln
was pontificating about

how Nintendo never would do
anything as horrible

as what Sega had done
with "Mortal Kombat."

All of a sudden, Bill White
whips out this gun

that they used
in a hunting game.

- Senator, I may also point out
that Nintendo produces

product
for a rapid-fire machine gun.

- This is a thing that--
it's called the Super Scope.

I think that this game
is a target sh--this device

is for target shooting
and whatnot.

- To me, that looks like a--
looks like a weapon.

It looks like an assault weapon
of some kind.

- I was starting to get a
little bit agitated with Bill.

He had worked for us,
and he knew what was going on,

so I felt it was necessary
to make our position

very clear, which I did.

And it seemed to go over
quite well.

I can't sit here
and allow you to be told

that somehow
the video game business

has been transformed today
from children to adults.

Small children bought this
at Toys "R" Us,

and he knows that
as well as I do.

We've got to get
further into this.

- Well, thank you.
Thanks for your forthrightness.

Thanks for assuming
responsibility.

I appreciate--I believe you've
shown some leadership here.

You've been a damn sight better
than the competition.

- People were worried about
video games being like drugs,

we were forcing them
on kids.

They would become
addicted to them.

They would ignore
their studies.

And that turned out to be true.

No, it didn't.
It wasn't true.

It was the opposite, actually.

I think that the kids that
became video game aficionados

in many ways
had better imaginations

and a better time
with the world in some ways.

- After the Senate hearings,

Kalinske came out
with some comment.

- What I had said
was that Nintendo

started these hearings

by sending the senators
videotapes of our video games.

- We thought Nintendo
had planted this,

and it was convenient
that Senator Lieberman

actually was getting
reelected that year.

- I found that to be
absolutely incredible.

This is the guy
that sucks us into this.

I was trying to figure out
a way to, in effect,

say, "Buzz off,"

so I decided to write a poem,

"Roses are red,
violets are blue.

So you had a bad day,
boo hoo hoo."

- Come on.

- I think it sent a message
to Sega

that we were gonna continue
to fight them.

- Every year
at about this time,

the sharpest of
the cutting-edge electronics

are unveiled,

and, oh, the places you'll go.

- Hey.
- Hey.

- How you doing?
- What a sight for sore eyes.

Come and sit down for a minute.

- All right.

- We just decided to come out
here on a little hunting trip.

As a matter of fact,

there's some
of those little suckers again!

- Hey.

- Peter, a lot of people thinkthat Nintendo

and this whole businessis going right down the river.

- Yeah, Nintendo
had a bad year.

Sales dropped.
Profits dropped.

But the future's
gotta be bright.

- There was a feeling like,
"You know what?

"This is a maturing industry.

We need to start acting
that way a little bit more".

From now on,
we'll see no repeats

of the "Mortal Kombat"
incident.

"Mortal Kombat 2"
will be the same

whether it's on our platform
or on anyone else's.

- All right.
- Yeah.

- We as a company
had to make a decision.

Were we gonna waver
from the Mario roots?

This was very tough for us.

- The contents may be new,

but the sales formula
hasn't changed at all.

We did modify our approach but
without sacrificing standard.

- If kids want video games
to help them define

their image,
then we're gonna do just that.

The music comes from two
of the hottest grunge groups

out there, the Butthole Surfers
and Sweaty Nipples.

So live it large, run it free,
and play it loud.

- Play it loud!

- And I mean, they--
they kind of got it.

They started to see
what the consumer wanted.

Hey, bravo for that.

Was it iterative of Sega?

Mm, yeah, it was,
and we were complimented.

- Sega!

- We now needed to shift again

and try to figure out, how do
we manage against a company

that's starting to awaken?

- Sega is the current leader
but only by a slight margin.

In an effort
to keep their edge,

Sega demonstrated the latest
in player interface,

the Activator.

- Ugh.

- We had this strategy
to use technology.

- Not just thinking
one step ahead

but two and three steps ahead.

- You look to the right,
and you see the attacker

coming in on the right;
you look above you,

and you could see the airplanes
coming above you.

- Welcome to Sega Channel.

It's cable,
but you don't watch it.

You play it!

- We see the Internet
and online gaming

as one of the big revolutions
in this business.

- They were kind of
just throwing things

against the wall
to see what would work.

- I didn't want us to become
like Nintendo

and let somebody pass us by,

and so having
the next great hardware system

was really critical.

- The next big battle
in the video game wars

is about to begin
as manufacturers

try to get people
to trash their old systems

and trade up to new ones.

- I often get to introduce
our money editor, John Stehr,

but right now,
for the first time ever,

I am going to become
John Stehr.

- It's our way
of introducing you

to the machine
behind today's movie magic.

- It's been a year
of digital distortion.

Artists reanimated
John Kennedy...

- I gotta pee.
- And put Brandon Lee

into scenes
shot after his death.

One brand of computer made
all these movies possible,

the blisteringly fast
computers of Silicon Graphics.

- I got a call from Jim Clark,

who was chairman
of Silicon Graphics.

Said, "Hey, we've come up
with a new chipset

"that we think is perfect
for a video game system.

You wanna come over here
and take a look at it?"

We called Nakayama,
explained the situation,

and said, "You gotta send
a hardware team out."

Nakayama even came himself.

We had a good meeting
at Silicon Graphics.

They showed off
these amazing graphics.

- ♪ That's what I said now

- They went back to Japan,
and the response to us was,

"No, that's not good enough."

They thought there'd be
too much wasted silicon,

so that was
the excuse they gave.

- ♪ Yeah, yeah

- This was the first time
that a major strategy

that I believed in had been
overridden by Nakayama.

- It was a surprise to me.

It was a surprise to Tom,

a surprise to everybody
that this happened.

- Initially, I thought
it was honest differences

in hardware architecture,

but I began to see
that there was this jealousy

that was developing
between Sega Japan

and Sega of America.

You could imagine every week,
your CEOs walking in

and saying,
"How come you're not as good

as those guys in America?"

And they started looking
for ways

where they could disagree
with us

and perhaps, to some degree,
undermine us.

I explained the situation
to Jim Clark, and he said,

"Well, what should I do now?"
and I said,

"Well, there's this other
video game company in Seattle.

Maybe you should go
take a visit to them."

- It's a pleasure to be here
this morning.

There's a lot of talk today
about new technology

soon replacing
16-bit video games,

but ultimately, only hit games
will bring you customers.

- The Super Nintendo was doing
well and making good money,

and so we kept
reminding ourselves,

"It's not about the technology.

It's about the fun
that you deliver."

- Here's an old friend
of mine.

This, of course,
is Donkey Kong,

the star of Nintendo's
1981 arcade hit.

Well, ladies and gentlemen,
my friendly gorilla is back

in his new Nintendo game,
"Donkey Kong Country."

- Since its release, Nintendo

has sold more
than 6 million copies.

- "Donkey Kong Country"
was a critical game for us

to sustain
the momentum of Super NES

in the battle with Sega
and push it right over the top.

- But while we were going
through the battles with Sega,

another competitor
was behind us,

and he's preparing
to enter the marketplace.

- Mommy. Mommy. Mommy!

- It's only a movie,

except on a Sony
big-screen TV.

- Oh, good, something romantic.

- Sony was just desperate

to get into
the video game business.

- We support the content,
the formats

that we think
the consumer's going to like.

- Olaf Olafsson arrived
in my office one day,

and we started talking about
ways we might work together.

- Sony and Sega
secretly agreed to come up

with a common hardware unit.

- But we'll each make
our independent profit

off of the software.

We were a much better software
developer than Sony was,

and so I thought,
"Boy, this is a win for us."

- Consumer electronics giants
Sony and Sega

are teaming up
on the video games,

putting Sony music
and movie software

behind the video game maker.

- Everybody involved thought
the marriage would happen.

- Unfortunately, Sega Japan
just couldn't agree

with the Sony engineers
on specifications.

I was really upset

and felt like they
didn't try hard enough.

- People were coming
to our door to say,

"Hey, we want to be part of
what you're doing here."

For whatever reason,

Sega of Japan
didn't want to play.

- Kalinske did a good job
of protecting us,

and it wasn't easy.

- He was a bit
like the sin eater.

He was eating all the sins
for the entire SOA group.

- He would tell me what was
going on over there,

but I didn't really
internalize it

'cause I didn't have to
go there and get yelled at

like he did
and scared like he did.

- Once the decision was made

not to do joint hardware
with Sony,

I knew that things
were different now.

- Nintendo, together
with Silicon Graphics,

have entered into a worldwide
joint development

and license agreement

under which our companies
will develop

this new and unique product.

It will feature a new,

true 64-bit
multimedia engine chipset.

- That freaked them out at Sega

because there was
nothing to do about it.

They just could not get up
to a 64-bit machine right away.

- At that time, the strings
were being pulled by Japan.

We had very limited
degrees of freedom.

Our ideas were
typically ignored

or not responded to,
more often than not,

and I just wasn't looking
for that intellectually.

And then I got approached
by an executive search firm

looking for someone to run
the Sony PlayStation.

- PlayStation.
- And I said, "Well,

"here's another
interesting challenge.

I can just undo
what I just did at Sega."

- I was a little bit surprised
that they went for Steve.

- I was done,
and I just wanted to move on

and didn't want to stay
at Sega any longer.

- Sony wanted to really
stick it in our eye

at this point,

and clearly, Steve
was delighted to do that.

- My former wife
used to always tell me

that there's no chance that
I'll ever get a broken heart

'cause I don't have one.

To me, it's just a decision
that one makes about business.

You can't be
terribly emotional.

You have to be willing to cut
off your hand to save the arm.

- Sony was really
a scary competitor.

It was kind of like,
the show business people

were gonna come
into this thing,

and their sound and graphics

were gonna be way
above what we could do.

There was a lot of fear around
the Sega halls about that.

Kalinske was coming back
from Japan

having nervous breakdowns
about what was coming up.

We had no product at the time.

- At that point,
Nintendo was on the wane.

- The biggest problem
that we have with Nintendo 64

is to try to figure out

how to make great software
real-time 3-D.

- We were teasing the retailer
for, like, two years.

We were showing them
these great graphics,

but from a sales perspective,
it was a killer.

- When Nintendo announced
64-bit system,

Nakayama felt that we got
to make it 64 too.

- Introducing...
- Sega Saturn.

- Sega Saturn was
32-bit machine to start with.

It was too late
to redesign the machine,

and we ended up
putting two 32-bit chips.

That made the programming
challenging and complex.

- The software
looked like shit.

Not until three months
before launch did we find out

that the software was not
gonna be there to support it.

- Not only did
we not have enough software.

We didn't even
have enough hardware,

so we had to limit

the retail distributors
who carried it,

and we cut out
Target and Wal-Mart,

and these guys
were furious with us.

I expressed
all this to Nakayama,

and he disagreed with me.

He was afraid that Sony
was gonna steal our thunder,

so he wanted an immediate
launch of Saturn at E3.

- When giants
in the video game industry

square off against each other
at a major trade show,

people pay attention.

With $10 billion on the line,

it's all about
which expensive toys

consumers will pay
to play with.

- This is no game; this is
a multibillion-dollar gamble

for a lot of entertainment
companies.

To borrow from a couple
of their more popular titles,

they're locked
in "Mortal Kombat."

For the losers,
it could spell "Doom."

- Without the right games,

we're delaying the launch
of Nintendo Ultra 64.

- We feel it's more important

to make
a good first impression,

have the absolute best possible
software when we launch.

- So you're willing to wait
till '96?

- Yeah, we're gonna wait.

- Product launched in Japan.

We sold 100,000 units
on the first day,

300,000 units
in the first month.

We're approaching
a million units sold in Japan.

We just need to replicate that
in the United States.

- No question in my mind,
there are gonna be casualties,

and there are gonna be
casualties soon.

- Tom and I were both
staying at the same hotel,

and they had taken over
the lobby

and the swimming pool,

and they had these large
inflatable balloons

of some of their iconic
characters like Sonic.

Somehow those blow-up balloons
wound up

in the bottom of the pool.

- He had them deflated,

stuck pins in them
or something.

- After Sonic was found dead
in the bottom of the pool,

Tom came to me and said,
"Steve, can you cut it out?"

and I said, "Tom, no.

There's no way
we're gonna cut it out."

- Clearly they were trying
to out-Sega Sega.

- You know, if you're
planning to buy

a new video game machine
this year,

you better start saving
for one now.

Some supersophisticated
new systems

are about to hit the market,
and they are pricey.

- Sega rushed Saturn
on the market,

and it sells for around $399,

and don't expect that price
to come down anytime soon.

- I wish that we could say

we were gonna see prices
come down,

because I think
it would help my business

and we'd sell a lot more units.

- I'm gonna talk to my parents
about this one.

I like this one a lot.

- You better tell them
it's $399.

- Up next,
the Sony PlayStation.

- I'm going to ask
Sony Computer Entertainment

president of America,

Steve Race, to join me
for a brief presentation.

- I was sitting
right in front of him.

It was Tom and I
and Shinobu, and...

we were just
sitting there watching.

Sony PlayStation!

- What is that?
What is that?

- It's an enormous parade,
including 16 balloons.

- Yeah!
- All right.

- It was a cold and windy day
this Thanksgiving,

and some of the new balloons
didn't fare terribly well.

Sonic the Hedgehog
hit a utility pole

around 58th Street
and Broadway.

- Oh!
Oh!

- Sonic wounded
an off-duty police officer

and caused minor injuries
to a young woman

and a ten-year-old girl.

Sonic the Hedgehog
didn't finish the parade.

- The success of Sega
of America

really is American dream.

- All right.
- Yeah.

- Americans like challenges,

so I think, overall,
battle against Nintendo

was perfect
for the spirit of Americans

to fight David and Goliath
sort of battle.

So I think I'm very proud
to be part of,

you know,
whole Sega phenomenon.

- 19 more shopping days
until Christmas,

and the heat is on for parents
all over the country

from kids who simply have to
have this year's hottest toys.

- It's no longer Sega.
Now I'm into Nintendo.

- Nephew wants one,
my son wants one.

- Oh, that's a--that's
a lot of systems.

- Go!

- Nintendo's top execs traded
suits and ties for helmets

and racing togs today.

- Here comes another finisher!

It's Howard Lincoln,

Howard Lincoln,
ladies and gentlemen!

- An incredible race,an incredible effort.

What's with thecome-from-behind strategy here?

- Well, at first I thought his
go-kart was faster than mine.

But then I found
when I kept crashing into him,

he started moving a little bit
to the right side,

and I was able to get by him.

- Hey, plumber boy,
mustache man,

your worst nightmare
has arrived.

Pack up your stuff.

- In my life, I've been
very fortunate to have worked

with great, wonderful people,

and my proudest
business accomplishment

was seeing all those people
all doing so well,

all of you who I worked with,
that I owe this--this honor to.

- Sega!
- Sega.

- Sega!
- Sega!

- Sega!
- Sega!

- Sega!

- ♪ You know very well

♪ Who you are

♪ Don't let 'em
hold you down ♪

♪ Reach for the stars

♪ You had a goal

- I understand.

- ♪ But not that many

♪ 'Cause you're the only one

♪ I'll give you
good and plenty ♪

- ♪ Super Nintendo,
Sega Genesis ♪

♪ When I was dead broke, man,
I couldn't picture this ♪

- We would like
to convince you

that there is indeed a market
in which one money--

money can be made
in the near future.