Authors: Steven Kent
The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World (64 page)
Katz moved to Atari in 1986 and oversaw the rerelease of the Atari 7800 game console. Unlike the Master System, the 7800 was not meant to compete with the Nintendo Entertainment System head-on. Atari introduced it as a low-end alternative system that sold for $30 less than its competitors. The 7800 barely dented Nintendo’s billion-dollar market, but it contributed to Atari’s best year since the fall of 1982. In 1988, Atari reached $452 million in revenues.
We brought back Atari video games as the low price spread for three or four years and made a hell of a lot of profit. As I recall, we made about $80 million of profit over that period. We brought back the 7800. We needed software for it, but, of course, this was the period when Nintendo created the market again in the U.S. and Nintendo had a lock on all the hot arcade titles. Nobody else, whether it be Atari or Sega or anyone, could get the hot arcade titles because Nintendo had exclusives.
It occurred to me that the standard for the last few years had not been arcade games. There was a core group of computer gamers who knew all the hot computer games, so I went to those companies who were just doing computer format. I went to Doug Carlstom at Broderbund, to Ken Williams at Sierra, to Gilman Louie at Spectrum Holobyte, and to Alan Miller at Accolade, and asked if we could license games like
Hardball
and
Lode Runner.—Michael Katz
By the beginning of 1989, Katz needed a break from work. He had not taken a two-week vacation since graduating from college in 1967, and the Tramiels were notorious for placing high expectations on their executives. Tired and needing time to decide what he wanted to do with the rest of his life, Katz left Atari Corporation and spent the next three months traveling around the world. While he was gone, Sega released the American version of the Mega-Drive. It was called Genesis.
Sega of America launched Genesis in two markets, Los Angeles and New York, on August 14, 1989. The console sold for $189 and came with a single controller and the game
Altered Beast.
There were five additional games available at launch:
Thunder Force, Tommy Lasorda Baseball, Super Thunder Blade, Space Harrier II
, and
Last Battle.
A second wave of games arrived one month later.
As the game that came with the console,
Altered Beast
played an important role in convincing consumers about the power of Genesis’s 16-bit processor. NES games generally had small characters occupying only a limited area on any game screen. The shape-shifting hero of
Altered Beast
was nearly half as tall as the screen and had recognizable facial features. The snakes, wolves, enemy
sorcerers, and other creatures that attacked him were also large and clearly drawn. In size, game play, and graphics, the Genesis version of
Altered Beast
was amazingly similar to the arcade game on which it was based.
In October, as the Genesis market expanded from New York and Los Angeles to a nationwide campaign, Sega of America announced the hiring of a new president and CEO, Michael Katz.
Dave Rosen asked me if I wanted to come to Sega and become president, so I joined Sega in October of 1989 and spent a year. And every day, the chant that I was supposed to be saying and our troops were supposed to be saying was “Hyakumandai,” which means a million units in Japanese because Nakayama felt we should be selling a million units.
We had to differentiate ourselves from Nintendo, and once again we couldn’t get hot properties from the arcades other than Sega’s own arcade titles. Just like it was at Atari, it became a matter of figuring out a way to position ourselves strongly when we couldn’t get the hottest arcade titles. So we decided to get the hottest personalities instead.
—Michael Katz
As the head of Sega, Katz’s first goal was to establish an identity for Genesis. The marketing team came up with a two-part approach. On one hand, team members needed to demonstrate the superiority of Genesis over the NES. They needed to show that Genesis games had better graphics and sound and looked more like arcade games. Realizing that most consumers were more interested in games than technology, Katz’s team members did not want to focus too heavily on the 16-bit processor. Instead of reciting technological achievements, they developed an advertising campaign that challenged Nintendo head-on. Sega’s new marketing mantra was, “Genesis does what Nintendon’t.”
Sega came out slamming us in their commercials. They were naming us by name, and that was really a big deal. It’s like somebody calling your team “crap.” We took it good-naturedly and competed the best we could.
—Don James, vice president of design, Nintendo of America
The second part of Katz’s marketing rollout was to circumvent the lack of arcade properties by creating a library of instantly recognizable titles. Nintendo could dominate the arcade translation business; Sega, meanwhile, would contract athletes and celebrities and create games with their names and images. Under Katz’s direction, Sega created
Pat Riley’s Basketball, Arnold Palmer Golf, Buster Douglas Boxing
, and
Joe Montana Football.
Joe Montana became the ultimate example. We paid $1.7 million up front. I fought to convince Nakayama and the Japanese that we needed Montana, and I gave Joe Montana the check. We also had Michael Jackson, we had Pat Riley, and we had Tommy Lasorda. Buster Douglas was my selection, too. He got knocked down in his first challenge after he won the championship, but that was okay because the royalty was on a sliding scale and that meant we didn’t have to pay as much. He gave up the title right after he had gotten it.
—Michael Katz
Shortly after starting at Sega, Katz convinced Nakayama to sign a five-year agreement with 49er quarterback Joe Montana. The deal enabled Sega to use Montana’s name and image in a football game. Once the licensing deal was signed, the next problem was finding the game itself. Sega did not have a large U.S. game production facility at that time, and Sega of Japan had not designed a football game. By coincidence, a small software company, Mediagenic,
*
had a game under development. According to the team that had worked on the project, the game was approximately 30 percent finished, but Mediagenic executives said that it could be finished by October, or November at the very latest, so Katz decided to purchase the game.
We didn’t know about all the internal turmoil that was going on at Mediagenic. Basically, they deceived us over a period of four or five months that the game was proceeding on schedule. We—Sega—were naive and irresponsible. We should have known.
The game wasn’t very far along at all, but we didn’t discover that till about September or October. By the time we found out, the only way we
were gonna get a game out near Christmas would be to find another game that was either mostly finished or completely finished, and convert it.—Michael Katz
In desperation, Sega turned to Electronic Arts, one of its first American licensees. Well known for its sports games, Electronic Arts had been publishing the
John Madden Football
series for four years. The first
Madden Football
, released for the Apple II computer in 1986, was so successful that Electronic Arts began updating its team rosters and playbook and rereleasing it on an annual basis. Electronic Arts president Trip Hawkins agreed to help, and his designers put together a game that Sega could name
Joe Montana Football
and publish under its first-party label. The game was released in January 1990. Electronic Arts released a Genesis-compatible version of
John Madden Football
later that year.
The finished versions of
Joe Montana Football
and
John Madden Football
were so completely different that few people would have guessed that the same company had made them.
John Madden Football
featured a playbook partially designed by Madden himself. As an NFL broadcaster and former Raiders coach, Madden helped Electronic Arts’ designers create a game realistic enough to appeal to football purists.
Joe Montana Football
, on the other hand, was an arcade-style game that emphasized fast action over realism. Unlike
John Madden Football
, which had all 28 NFL teams,
Joe Montana Football
had a 16-team roster and a simplified playbook built around a passing-intensive offense that discouraged running plays.
Although the
Joe Montana
series did not last as long as the
Madden
games, it helped establish Sega’s reputation among sports fans and Genesis as the leading video game platform for sports simulation. Electronic Arts developed only the first
Joe Montana
football game. Blue Sky, an independent development company, created Sega’s later football games. Founded by George Kiss, who worked with Michael Katz at Coleco, Blue Sky went on to make several important Genesis hits, including
World Series Baseball
and
Vectorman.
I think Joe Montana earned something like a $2.5 million or a $3.5 million royalty over the course of the five years of our agreement. The Japanese were originally concerned that he wouldn’t even earn the money that we paid him [in advance], so I was gratified to hear that.
—Michael Katz
Of all the games that Sega released in 1989,
Michael Jackson’s Moonwalker
made the biggest impression on the media. Not only did the game contain synthesized versions of such hits as “Smooth Criminal,” “Bad,” “Billie Jean,” “Beat It,” and “Thriller,” it also had Jackson and chorus lines of villains dancing to choreographed moves that looked like they belonged on MTV. Loosely based on Jackson’s
Moonwalker
video, the game followed Jackson as he explored pool halls, graveyards, and other secret hideouts in search of kidnapped children. Just like the video, the game ended with Jackson turning into a robotic alter ego as he battled a nefarious criminal named Mr. Big.
*
Sega’s marketing team was led by Al Nilsen,
**
who constantly reminded the press that Jackson had added his own creative suggestions during the development of the game. Jackson even released a statement saying that Genesis was the first game console that had enough power to handle his music. In this, however, the pop star was wrong. The first system powerful enough to handle his music was the Master System. Sega published an eight-bit version of
Michael Jackson’s Moonwalker
as well.
Sega of America may have slowed down its Master System marketing effort with the launch of Genesis, but it did not abandon the retailers in the video game channel. Sega released Master System versions of such Genesis hits as
Michael Jackson’s Moonwalker, Ghouls ’N Ghosts, Golden Axe, Columns
, and even
Sonic The Hedgehog.
It also released the Power Base Converter, a pricey adapter that allowed consumers to play Master System cartridges on their Genesis consoles.
When we announced the Nintendo deal, the stock went up. When we announced the Sega deal, the stock went down because the market was so ignorant about what was going to happen. Of course, by the end of that year, everybody realized that the wheels were falling off the 8-bit market, and we were getting punished for that. They still didn’t appreciate the 16-bit
[systems]. A lot of people in the period from 1989 to 1990 just assumed that Sega was not going to do anything.—Trip Hawkins
Electronic Arts’ relationship with Sega produced significant rewards for both companies. Genesis quickly became a lucrative new outlet for Electronic Arts, and Sega benefited from having a line of sophisticated games that appealed to an older audience more than most games on the NES.
Nintendo approached Electronic Arts about making games for the NES in the mid-1980s, long before Sega announced Genesis. But Hawkins did not want to make games for the eight-bit console. He and many other Electronic Arts board members felt that the NES was not powerful enough to run their computer games and they did not want to downgrade their games to run on it. Like many people at the time, Hawkins was openly disdainful of console games and critical of Nintendo’s chances of success. The difference was that Hawkins waited too long to change his mind. By the time he realized that Nintendo was going to succeed, Electronic Arts’ stock was tumbling and the eight-bit market showed signs of aging.
We decided that Genesis would do really well and that we had very appropriate content for it. We did not want to be in this business the way it was currently being run, the way Nintendo did it with that one-sided licensing agreement, and Sega was trying to clone almost everything about Nintendo. I thought, look at what Atari is doing. They have reverse engineered the machine and are selling their own games. If Atari wins that lawsuit, that will open up the market and you won’t need to have one of those oppressive licensing agreements.
—Trip Hawkins
In 1989, Electronic Arts’ technicians successfully reverse engineered both the NES and Genesis. Though the NES market was considerably larger and his company eventually released a few games for it, Hawkins felt that Genesis was a better fit for his company’s goals. Electronic Arts’ programmers were familiar with its 16-bit 68000 processor, having worked with it while making games
for the Atari ST, Commodore Amiga, and Apple Macintosh computers. Converting games to work on Genesis also required less work since the most popular computers had 16-bit processors at that time. Only one obstacle remained: waiting to make sure that Sega did not change the architecture of its game console before releasing it in the United States. (Hawkins was aware of the security chip Nintendo added to the Famicom before shipping it to the United States as the NES.) When Genesis proved nearly identical to Mega-Drive, he decided to move ahead with his plans.
