Today, life is so simple for gamers. If they want to play a video game, they have many options to choose from. In fact, it seems that there is a staggering number with choices from first-person shooter to fantasy exploration on either a console, a PC or a handheld device.
However, things were completely different 20 years ago.
If you were a gamer in the 90s, you only played Nintendo. This brand dominated the US market and heavily monitored the games that could be played on consoles.
However, that was only the case until Sega, with their noisy blue hedgehog, caused a bit of a disruption in the gaming industry. In this article, you will find out about the enthralling story of how both Sega and Nintendo fought to run the video game market. Sega’s aptitude for shock marketing, gruesome games and controversial characters flipped the industry on its head and moved it to the road that it is on today.
Nintendo’s rapacious strategies earned it market dominance in the U.S., but also left it vulnerable.
In 1990, if you had a game console, then nine times out of ten, it was Nintendo’s. This Japanese consumer electronics brand controlled the entire video game market. At that time, in the US, they had approximately 90 percent of the market share.
They maintained dominance mainly from their tight control of who could and couldn’t make games for their console. If there was a business that wanted to develop a game for them, then they had to buy a game cartridge at exactly $10, so games had to cost a higher price, regardless of if it was a hit or a miss. That policy guaranteed Nintendo a big profit on really successful games like Street Fighter ⅼⅼ, which was created by Capcom. They also let Nintendo carefully monitor the businesses that created games for their consoles.
It’s no secret that Nintendo was pretty protective of their influence on the market. Once a team of developers attempted to make games for the Console but without the approval of Nintendo, so they sued the team. For most developers, it’s dangerous to get on Nintendo’s bad side because they could be completely banished from the market so they really try to stay loyal and follow the rules that they set.
However, being at the top of the market also has its disadvantages. Nintendo always had to bring out new items and they had to take many chances to keep up with their market position. Despite this, they had brought out many low quality products because they were always forced to constantly bring out new ones and they also made a lot of mistakes. For instance, their updated 16-bit console, released in the US in 1991, wasn’t suitable for the older games from the prior console. That had made lots of console owners mad because they had to purchase their favorite games again. Those type of mistakes as well as the displeasure from games manufacturers that Nintendo had successfully removed from the market, thus making room for a new competitor. That new competitor was Sega and it came to play off of Nintendo’s defects.
Sega strove to position itself as the punk rebel to Nintendo’s boring parent, with great success.
Although the intense battle between David and Goliath is an exhausted metaphor, it is a great way to describe the battle between Sega and Nintendo.
When Sega had joined the video game market, no one thought that they would be able to take on the leader, Nintendo. However, they did, but how?
They figured out exactly what they could play off of. They understood the weaknesses of Nintendo and knew about their mistakes. So, they made a brand image that was the total opposite.
One of their weaknesses was the fact that they were viewed as incredibly controlling. Sometimes, even paternalistic. Gamers also thought that the names of Nintendo’s games placed too much of a focus on children’s games. Therefore, Sega allowed developers more freedom and on top of that, they supported the creation of more games for adults. As a result, they had a larger variety since the developers had more say in what they wanted to make.
Above all, though, Sega wanted to differ from Nintendo’s restrained and imposing image. Instead, they wanted to be enjoyable and slightly rebellious, kind of like the underdog that wasn’t afraid to bite. In fact, even their mascot, Sonic the Hedgehog, was created to contradict Nintendo’s main character, Mario.
When they had released their 16-bit console, the Genesis, or Mega Drive in both Europe and Asia, they offered Sonic the Hedgehog game at no cost.
Mario was a tidy, kid-friendly cartoon character with a mustache whereas Sonic was a thorny, bright blue hedgehog that was not easy to control and moved really quickly, just like Sega.
Sonic became popular immediately and as a result, became a pop icon in no time since a lot of people, not only gamers, felt that Sonic’s attitude was a good representation of the quickness and comicality of that decade
Sega pulled out the marketing stops to get people excited about Sonic, and ignore Nintendo.
Many of the market leaders intentionally market themselves against their top rival such as Coke and Pepsi, McDonalds and Burger King, as well as Apple and Microsoft.
Sega invested in comparison marketing to gain an edge over Nintendo through, as we’ve mentioned earlier, the brand image. However, they didn’t end there. Their sales strategy also incorporated making money on the opposing views of the two businesses.
When Nintendo had released their 16-bit Super Nintendo (SNES) console, Sega had taken their console, the Genesis, on a tour along many shopping malls in the US. They called it the Sega World Tour.
Their approach was to infringe upon those who were only planning on purchasing Nintendo’s new SNES. The tour displayed the antics and gaming enthusiasm from Sonic the Hedgehog, which wascompletely different from Nintendo’s exasperated character, Mario.
It was very successful. The Genesis still sold well, even with the release of the SNES. In addition, they also had a face to face battle when they both came out with their version of Mortal Kombat, which is a fantastical fighting came. Nintendo had tried to make theirs not as realistic, going to lengths such as making the blood from fighters gray, opposed to red.
On the contrary, Sega gave the option of a non-censored version with red blood and the choice to enter a specific code to make it even more gruesome. As a result, their version was favored.
Although Nintendo had a bigger marketing budget, Sega had transformed games releases by using an innovative method and did so with a splash.
Back then, if you wanted to purchase a game, you had to go to a game retailer to find out if there was anything new. Sega had changed that method by releasing new games at large media programs.
When Sega had come out with Sonic 2, they created “Sonic 2 Day” and made events all over the world to correspond with the initiative. It was a success and as a result, the game, the console, and the company got a lot of publicity.
Therefore, Sega became known as the atypical, creative and fundamental gaming company effectively and in no time. However, behind the fun face of the company is the business side of it.
An uncanny sense of timing and a well-oiled corporate machine: Sega’s success had a broad foundation.
It doesn’t matter if you are the most creative and atypical business because regardless of the fact, you still need structure and intelligent employees in order to be able to work. For Sega, they became effective in the US when Sega in American (SOA) hired a newl eader, Tom Kalinske.
Prior to this position, Kalinske had worked at Mattel. There, he assisted with making the strong and powerful character He-Man. Additionally, he helped bring back demand for Barbie.
When Kalinske took control at Sega, the first thing that he had to do was flatten the numerous cases of mistrust that had increased within the team. A lot of anger was aimed at Shinobu Toyoda, who had been believed to be a spy for Sega’s parent business located in Japan. Kalinske had ended that belief by showing and telling everyone how much he trusted Toyoda and trying to get others to do the same. As a result, he brought the team back together, enforced the team’s spirit, and created a creative and uplifting environment.
This was exactly what Sega had needed. They could only deal with one of their biggest hurdles, which was distribution and that could only be conquered if they worked as a team.
A lot of retailers were nervous that if they sold Sega products, Nintendo would stop working with them. Therefore, Sega had worked on persuading them that that was not going to happen. For instance, they had put in a lot of energy into persuading Wal-Mart to sell their items. In fact, Sega’s top brass had regular meetings with Wal-Mart executives while having their marketing department work more than they should have had to in order to create effective advertising approaches. As a result of their efforts set forth, in the end, they persuaded Wal-Mart.
Good timing was also a very crucial skill to the executives at Sega. They became professionals at understanding when to initiate the advertising campaigns or come out with new items. They also had to keep up and make good predictions of when Nintendo would lower their prices. For example, the executives had once become aware of the fact that Nintendo was planning on lowering their price of their console the night before the publication. As a result, Sega had worked the entire night to figure out how to lower the price before they do. Therefore, people thought that Nintendo had copied Sega’s price cut.
When Mortal Kombat came out, Sega overtook Nintendo as the leader in the market. Although that was a high point for the business, today, Sega consoles are just a part of history.
Going big on hardware instead of gaming software confused customers and cost Sega its crown.
The are two central roads that gaming companies such as Nintendo or Sega can take in order to grow. They can either make new software by developing games, or make new hardware by developing consoles. However, executing that kind of strategic decision is risky. You will need to look into which strategy you will need more of your time and effort, and which option will give you a better chance of having more sales.
Sega understood what it wanted and thus, decided to go with the hardware road, which was a tricky decision. When both the Genesis and SNES consoles had to be updated, the strategies that Nintendo and Sega had used could not have been more different. While Nintendo played it safe with the basic upgrade with its Super FX chip, Sega did something a bit more revolutionary with the Sega CD.
Although the Sega CD was a lot more technologically advanced to Nintendo’s upgrade, it was much more expensive to develop and as a result, was more costly for retailers. Despite the technology being revolutionary, it was expensive and as a result, not that many people purchased it.
Sega also stumbled with its successor to the Genesis, which was the Saturn. They didn’t have enough new and good quality Saturn games to make consumers happy. In conclusion, they just had one too many devices. On top of the Genesis and Saturn, they also had the Game Gear and game developers just didn’t have enough time to create games fast enough for all of the various devices.
Additionally, Sega didn’t catch up to the demand of the Saturn. In fact, they had difficulties creating and delivering enough consoles to make customers happy and as a result, a lot of people stopped buying from the brand. Therefore, their fast growth came to a pause really quickly. They hit rock bottom when Nintendo had come out with Donkey Kong Country in 1994. Although Sega did have a little time at the top of the ladder, Nintendo has ever since held onto that position, beating them in sales.
The success of Sega in American began to dim when its Japanese parent company meddled too much.
We often believe that businesses are just one large entity. There is only one General Motors (GM), one General Electric (GE), one Nintendo, as well as one Sega. Despite this, the structure of a business is actually much more complicated. The first Sega was actually Sega of Japan (SOJ) and it was located in Japan. It’s extension was Sega of America (SOA), which, as the name implies, was located in America. That one was managed by Tom Kalinske. Surprisingly, SOA was the most successful out of the two businesses.
Sega was at the top of the market in America, however its parent business never reached the same position in Japan. Their strategies had just been more profitable, whereas SOJ never took those kinds of risks. Al Nilsen was SOA’s global marketing director who had seen the difference first hand when he went to Japan and had food at a restaurant one day. His Japanese co-workers had ordered him fugu, which was a fish that could be poisonous if it wasn’t made properly. Nilsen had tried it and asked if anyone else wanted some, but they all politely refused. He then understood that SOJ was like its employees, they preferred to stay on the safe side which was something the group at SOA did not do.
SOJ had only given SOA the freedom at the beginning since Hayao Nakayama, which had been the top executive at SOJ, trusted Kalinske. Over time, though, SOJ started to take away some of the indepence. They slowly began to listen to SOA’s opinions and in the end, completely disregarded it.
Conflict erupted when SOJ repealed SOA on the controversy of whether or not to keep Genesis. SOA had come up with what they believed was the best life span for it, whereas SOJ had different ideas. In fact, SOJ decided to try to carry out their calculations, thus removing the console from stores despite still doing well. That choice ultimately made Sega lose their top position in the American console market.
Sega had its hands tied by its parent company’s refusal to partner; its eclipse was almost complete.
In a quick and artsy market such as the video game market, it is typical for various businesses to collaborate, often times when they have a compatible skill set. Sadly, though, that was not the vision of Sega’s parent business.
SOJ just wouldn’t work with any other businesses since they wanted to keep their tight control over the entire brand. In fact, a joint venture executive hadn’t accepted a deal that could have been a profitable deal with Sony, the Japanese consumer electronics brand.
Sony was very interested in going into the video games market, but they had their hearts set on developing software instead of the hardware. That could have been a good opportunity for Sega because of their background with CD-ROMs from both its Sega CD and Sega Saturn consoles.
Sadly, though, they had not accepted the offer even after the discussions had gotten to an advanced stage between the two, but their decision really came to bite them back in the future.
Since Sony didn’t get the opportunity to work with Sega, they decided to make their own console, which became known as the PlayStation. When it came out, competitively, it drowned Sega’s Saturn.
However, that wasn’t the last time that Sega had turned down a deal. They had also been negotiating with Silicon Graphics (SG) to go into creating 3D games, but Sega turned yet another offer down. This had made Kalinske so mad at having no choice but to refuse yet another deal, so he ended up giving the executives at SGI, Nintendo’s phone number to give them another option.
Even within the company, SOJ was hesitant to make deals with SOA. At first, the American versions of Nintendo and Sega could only make games with the authorization of the Japanese parent business. In the end, though, Nintendo ended up giving its American extension the independence to make their own games
Sega revolutionized the gaming industry, setting new norms for tech, marketing and game play.
When Tom Kalinske became the head of Sega, it looked as if the business was most likely on the verge of dying.Nintendo was at the time, at the top of the games market, and the actual market was new and the future was unknown.
However, in the span of several years, Sega not only became successful, but they completely innovated the video game industry. Their intense marketing strategies changed the way games are now created, come out, and consumed.
In 1990, that market was worth $30 billion all around the world, with almost 90% entirely controlled by Nintendo in the states. However, by 1994, competition starting rising. The market was now worth $15 billion all around the globe, while it was worth $6 billion in America, with Sega at the top.
That fast growth had encouraged a social change as well. Finally, both lawmakers and politicians started to look at the video game industry as something that required regulation such as TV or film. As soon as they had come out with Mortal Kombat, the U.S. Congress had hearings about violence and video games. A regulatory group was the result of those hearings, placing limits and ratings on video games that were seen as too extreme or violent for children.
The games also changed. In the short span of time between 1990 and 1994, great technological advances had been made, too. The previous games had been slow, with boxy graphics with a tight range, whereas the ones created afterwards were more colorful, responsive, and incorporated quicker action sequences.
As a result, although Sega hadn’t had the longest success rate, their impact had changed the industry for good. The way video games are today is all due to the competition that Sega and Nintendo had that led to Sega’s quick ride to dominance.
Final Summary
Although Sega wasn’t successful for long, the brand’s impact and revolutionary methods drastically changed the industry. At the beginning of the 90s, Sega had been able to bring down Nintendo, which had been the leader, and created new standards for the way games were produced and marketed. Despite the fight between the two being short, today’s surroundings within the gaming environment are still very heavily impacted from this competitive rivalry from the past.