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 (66 page)

While working at Amiga, Mical struck up a friendship with a hardware guru named Dave Needle. Both men shared the same “Yin and Yang” philosophy about the interrelationship of hardware and software. They both left Amiga in 1985. Needle took a job with Apple Computer and Mical became an independent contractor. A few years later, however, while eating at a Mexican restaurant, they began discussing projects they could build together. The conversation turned to video game systems. Needle grabbed a napkin, and they sketched the basic plan for a handheld video game system with stereo sound and color graphics.

Mical and Needle originally planned to design their system around a 16-bit processing chip but decided it was not a practical idea. The chips they looked at would have had heat problems, and when they evaluated the components needed to support the 16-bit processor, they decided the system would be bulky and heavy. They switched to an 8-bit 6502 chip from the same family of chips used in the NES and Atari 2600.

Mical and Needle did not have the money needed to build and market a game system, so they began searching for a company that would buy their idea. They contacted Epyx and demonstrated their idea toward the end of Michael Katz’s tenure as president of the company. They did not know that Katz had urged the company’s board of directors to accept the project. Over the next few months, they entered a lengthy and friendly negotiating process that ended with them accepting stock in Epyx and taking positions with the company. They called the project “Handy Game.”

Though Katz had managed to keep Epyx running, he was never able to completely solve its financial problems. The company, needing financial backing in order to bring out a new game system, invited several potential partners to view Handy Game while it was under development. In 1988, Nintendo sent Don James to have a look at it.

Needle and Mical learned a new phrase while working on Handy Game—“emag tresni.” For them, the phrase became a sort of Murphy’s Law. It meant that no matter how carefully you worked, and no matter how meticulously you checked every detail, something was bound to go wrong. In this particular case, the mistake occurred as Needle designed Handy Game’s screen with engineers from Sharp Electronics. Needle and a Japanese engineer discussed every point in the design, but at some juncture, they slipped up on one digit slot in the binary coding, and instead of listing a “1,” the engineer placed a “0.”

Epyx’s financial problems increased throughout 1988, and the company ended up selling Handy Game to Atari Corporation. Many of the employees at Epyx resented the idea of working with Atari. Mical and Needle disliked the idea of working with Atari so much that they left Epyx. A few months later, Epyx collapsed.

Atari changed the name of the system from Handy Game to Lynx to highlight the fact that up to eight Lynx consoles could be daisy-chained together using link cables. The system was launched in October 1989 to rave reviews. Lynx was designed to accommodate both left- and right-handed play, and it had one of the finest LCD screens of its time. The screens on Game Boy and later handheld systems tended to blur when showing fast movements. Lynx’s screen handled speed without blurring, though it scratched very easily. Color graphics and a crisper screen were not enough, however. While Toys “R” Us and most of the dedicated video game stores carried Lynx, Atari could not give it the marketing and retail support that Nintendo gave Game Boy. Atari’s poor reputation with retailers, and fear of Nintendo, caused many retailers to avoid the system. Originally retailing for $199, it cost twice as much as Game Boy and was never widely advertised. Many stores pulled Lynx from their shelves within a year. It was available mostly through mail order thereafter.

Run for the Money

With the 1989 releases of Genesis and TurboGrafx, Nintendo found itself lagging in technology behind the competition; but amazingly, technology did not seem to matter. Nintendo sold more than 17 million copies of
Super Mario Bros. 3
worldwide, setting a lasting sales record for a game cartridge that was not packed in with console hardware.
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There were other hits, too. Sun Soft scored a major hit with
Batman
, a game that built off the popularity and storyline of the Tim Burton movie. Konami scored a major hit that year as well with
Teenage Mutant Ninja Turtles
, the first game to be published under the new Ultra label.

In 1987, Nintendo of America president Minoru Arakawa met with executives of Konami—one of Nintendo’s three most successful third-party partners—to discuss a problem they saw in their licensing agreement. According to the agreement, third-party licensees were allowed to publish only five games per year. Konami had published a long line of bestselling games, including
Castlevania, Blades of Steel, Double Dribble
, and
Life Force
, and the five-games-per-year clause was holding the company back from realizing additional profits. Based on the games’ quality and torrid sales, they argued, Konami should not be limited to five games per year.

Another third-party publisher had the same complaint. Acclaim, Greg Fischbach’s Long Island–based game company, also asked for permission to publish more games. Having created such games as
Double Dragon II
,
Iron Sword
, and several games based on WWF wrestling, Acclaim was another one of Nintendo’s top licensees.

After considering their arguments, Arakawa found a way around the rule. He gave Konami and Acclaim second licenses so that they could publish an additional five games under different names. Acclaim adopted the name
LJN for its second license and Konami published additional games under the name Ultra.

Under the Ultra label, Konami sold approximately 4 million copies of
Teenage Mutant Ninja Turtles
, giving Ultra a heady send-off. One of Ultra’s next titles,
Metal Gear
, also helped establish the product line. But Ultra’s days were numbered. The Ultra license was only for the Nintendo Entertainment System (NES), and that system was coming to an end.

Even with earnings of $3.34 billion and 48 million Nintendo Entertainment Systems sold worldwide, Nintendo executives knew that they could not control the market with obsolete hardware. Work had already begun on the new 16-bit game console that they hoped would help them shut competitors out of the market.

Breaking Nintendo’s hold on the international video game market proved to be more than a matter of technology for Sega. Nintendo controlled more than 90 percent of the international market. But whether Sega’s 16-bit game console was sold as the Mega-Drive in Japan or the Genesis in the United States, the unit
was simply not catching on. With memories of the failed Master System still vivid in his memory, Sega Enterprises CEO Hayao Nakayama decided to shake up Sega of America, in the hope that new ideas might lead to new success.

In mid-1990, Nakayama bumped into an old acquaintance named Tom Kalinske who was visiting Tokyo on business. As they spoke, Nakayama told Kalinske that he now worked at a company called Sega that had a new game console that he hoped could steal the market away from Nintendo. Kalinske, who was working for a struggling toy car manufacturer called Matchbox, almost laughed. “You’re competing with Nintendo! They’re huge!” he said.

According to a 1995 article, Nakayama offered Kalinske the position of CEO of Sega of America on the spot.
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Thomas J. Kalinske was a natural choice for president and CEO of Sega of America. An affable man with clean-cut all-American good looks, he graduated from the University of Wisconsin with a degree in marketing and spent years in advertising before joining Mattel as a product manager in the early 1970s. While at Mattel, Kalinske’s bold style caught the eye of top executives, and he moved up quickly.