> Now, I'm not an engineer, and you kind of have to believe the people
> you have at the company, so we went back to our headquarters, and
> Nakayama said that it just wasn't good enough. We were to continue on
> our own way. Well, Jim Clark called me up and asked what was he
> supposed to do now? They had spent all that time and effort on what
> they thought was the perfect video game chipset, so what were they
> supposed to do with it? I told them that there were other companies
> that they should be calling, because we clearly weren't the ones for
> them. Needless to say, he did, and that chipset became part of the next
> generation of Nintendo products (N64).
>
> So that's an example of how, partly due to our success in America,
> Japan just didn't want to do the things that we suggested.
>
> Sega-16: Allegedly, Yuji Naka left Sega of Japan in disgust after Sonic
> The Hedgehog was released and ended up at the Sega Technical Institute,
> where he began work on the sequel. Is there anything you can tell us to
> validate that rumor and if so, what happened there?
>
> Tom Kalinske: It was never clear to me whether he left in disgust, but
> he was clearly at the Sega Technical Institute, and he clearly brought
> a few guys with him. They had a bunch of our guys, and they worked on
> Sonic The Hedgehog 2, which in my opinion is the best Sonic we ever
> did.
>
> Sega-16: Do you think this caused any bad blood with Japan?
>
> Tom Kalinske: I'd imagine it did. Yeah, it most likely added more fuel
> to the fire. I think he (Naka) wanted more freedom, and since Sonic
> wasn't as successful in the Japanese market as it was in this one, he
> probably wanted to be closer to where it was successful and listen to
> why people thought it had been successful, as well as get the input of
> Americans who loved the character and gameplay and all that. I think
> there was a lot of that in there too. I don't know if that means he was
> disgusted; I think he just felt that there was better opportunity by
> working out of our office.
>
> Sega-16: To this day, gamers have a love/hate relationship with the
> Sega CD, and unfortunately many don't bother to look past the
> full-motion games in its library. What did you think was genuinely
> needed to make it a success?
>
> Tom Kalinske: That's a good question, and you have to remember that
> this was the very beginning of the optical medium in terms of a video
> game experience, and none of us knew what the hell we were doing! I
> mean, it was really an experiment, a great learning experience. One of
> the interesting things to me is that one of our strongest partners in
> developing for that platform was Sony. And Sony didn't have a hardware
> division (at least for video games). They had a software division run
> by Olaf Olafsson, who was a great partner to us. They spent lots of
> money developing games for the Sega CD (probably more than we did), we
> gave them technical help...a lot of it, we lent them people; and there
> was really this wonderful collaborative effort. We each benefited from
> each other's work, and I think that's one of the things that has been
> forgotten in video game industry lore or history: that this very strong
> bond existed between the two companies. In fact, taking it to the next
> step, at one point Olaf, Mickey Shulhoff (former Sony of America CEO),
> and I discussed that since we had such a great relationship from
> working on the Sega CD, why don't we take what we've learned from our
> software developers - their input - and use it as the criteria for
> what the next optical platform ought to be.
>
> So we got all that and put it together so that it wasn't just pure
> engineerese (jargon) but something that people could understand. I
> remember we had a document that Olaf and Mickey took to Sony that said
> they'd like to develop jointly the next hardware - the next game
> platform, with Sega, and here's what we think it ought to do. Sony
> apparently gave the green light to that. I took it to Sega of Japan and
> told them that this was what we thought an ideal platform would be -
> at least from an American perspective - based on what we've learned
> from the Sega CD, and our involvement with Sony and our own people.
> Sega said not a chance. Why would it want to share a platform with
> Sony? Sega would be much better off just developing its own platform,
> and it's nice that you guys have some ideas on what that platform ought
> to be, but the company would be developing its next platform itself.
>
> When you think back on that position, it's an interesting one. We all
> knew we were going to lose money on the hardware, so our proposal was
> that each of us would sell this joint Sega/Sony hardware platform;
> we'll share the loss on the hardware (whatever that is, we'll split
> it), combine our advertising and marketing, but we'll each be
> responsible for the software sales we'll generate. Now, at that
> particular point in time, Sega knew how to develop software a hell of a
> lot better than Sony did. They were just coming up the learning curve,
> so we would have benefited much more greatly - at least in my opinion
> - than Sony would have, at least initially, at least for a year or
> two. But Sega of Japan didn't want any of that.
>
> Sega-16: That sounds a lot like what happened with the Sony/Nintendo
> CD-ROM. Sony was willing to enter into a joint hardware platform but
> was ultimately rejected by Nintendo in favor of Panasonic.
>
> Tom Kalinske: Yeah, but I think ours preceded that though.
>
>
>
>
> Sega-16: So they essentially brought their ideas to the two big guns in
> the industry, only to be turned down and forced out on their own.
>
> Tom Kalinske: Yeah, they had no choice in their mind, I'm sure. First,
> they tried to go with one of the two big companies and when that
> failed, well of course they have to go out on their own. And of course,
> they ended up benefiting because of that.
>
> Sega:16: It must have felt good to see Sega overtake Nintendo as the #1
> hardware manufacturer! It's been said that the company never really
> took Sega seriously as competition, a grave miscalculation obviously.
> Why do you think Sega was able to take advantage of this overconfidence
> when other companies, like Atari with the Jaguar and Electronic Arts
> with its 3DO, were unable to?
>
> Tom Kalinske: Well I think you hit it on the head. I mean, Nintendo was
> the ultimate in arrogance at that time. They treated their 3rd parties
> very badly and with an iron hand, and told them that if they developed
> for Sega, they were going to get punished. So, there were a few
> breakaways that published for us, and of course there was the great
> relationship we had with Electronic Arts in the sports category, which
> put them on the map and also put the Sega Genesis on the map to some
> degree. So, everything we did was in a mutually beneficial
> relationship.
>
> Nintendo never took that seriously until they woke up...and I think
> they certainly woke up in the U.S. before they woke up in Japan, but
> certainly they did wake up in Japan, and I know there are stories of
> how upset they were in Japan with Nintendo of America's operation of
> allowing us to be as successful as we were. Of course, you know all the
> stuff that went on between Nintendo and us on the violence issue and
> the rating of video games, and how Sega had set up a ratings system
> using outside professors, sociologists, etc. Actually, before that I
> had worked with Jack Lorenti of the motion picture industry to use
> their system, but they didn't want us to do that, so we kind of copied
> them, frankly. And when I offered that to the industry, Nintendo was
> the one company that said "we're not going to use that! Are you
> crazy? We don't need a ratings system!" And then we had, of course,
> the whole Senate hearings, which was another whole chapter...
>
> They were just arrogant, and they just didn't believe in Japan that we
> were going to be that successful, and certainly in the U.S. for a long
> time they didn't believe that we were going to be as successful as we
> were.
>
> Sega-16: Do you think you underestimated the impact Donkey Kong Country
> would have?
>
> Tom Kalinske: Not really, but I also don't think that was the only
> reason for their coming back successfully at us.
>
> Sega-16: Despite any criticisms leveled against the 32X, the final
> product was actually much more powerful than what Japan had originally
> envisioned. Even so, many gamers question Sega's decision to release it
> in light of the Saturn's impending launch. Looking back, what are your
> thoughts on the whole 32X scenario?
>
> Tom Kalinske: Well, Joe Miller was really the father of the 32X, and a
> strong proponent of it. But I think it made a lot of sense, from a
> business perspective. We couldn't get a 32-bit platform out quickly
> enough, so why not add that capability, to the degree that you can, to
> the 16-bit platform? That's what Joe came up with.
>
> Sega-16: Many people have argued that the 32X was a stop-gap measure
> designed only to bide time until the Saturn was released. Are they
> wrong?
>
> Tom Kalinske: No...no, it really was designed to be an interim piece
> and to prolong the life of the 16-bit platform. I think, in hindsight
> to me, the great lesson is don't ever expect an add-on device to be as
> important as a true, new platform. And I think that's what we had in
> mind. We thought were going to sell millions of those, and that was
> unrealistic.
>
> Sega-16: It appears that time has vindicated you regarding your
> assessment that the 16-bit market was going to be viable well into
> 1996. Nakayama-san seemed to have made the correct decision for Japan ,
> but why do you think he included America and Europe in his decision to
> discontinue the Genesis when it was still selling so well in those
> territories?
>
> Tom Kalinske: Well, I felt that way. I felt that we were rushing
> Saturn. We didn't have the software right, and we didn't have the
> pricing right, so I felt we should have stayed with Genesis for another
> year. I recognize that our volume would have gone down, but I think we
> would have been a much healthier company. We would have been more
> profitable, and I think the folks who appreciated video games would
> have appreciated that we were still doing a lot of great product on the
> 16-bit hardware.
>
>
>
> Sega-16 is thankful to Mr. Kalinske for taking the time for this
> interview, and we wish him the best in all his endeavors.
>
>
> ____________________________________________________________________________
>
>
> ALSO, a recent interview of THE MAN who helped get the SEGA Genesis
> going in the
> United States, Michael Katz
>
>
http://www.sega-16.com/Interview-%%20Michael%%20Katz.htm
>
> Interview: Michael Katz
> By: Ken Horowitz | April 28, 2006
>
>
> In the turbulent month of October, 1989, Sega was busy with their new
> Genesis console, which had launched the month before. It was a time of
> great change at the company, so much so that it was also experiencing a
> shift in leadership. It was during this period that Michael Katz took
> over at Sega of America. Having previously been the head of both Epyx
> and Atari, he had all the qualities Sega founder David Rosen needed to
> get the American branch of the company off the ground.
>
> During Katz's tenure, Sega introduced Sega Visions Magazine and
> launched their famous ad campaign Genesis Does what Nintendon't, as
> part of an all-out assault on Nintendo's market share. Though he may
> not have been at Sega when the Genesis overtook the market, his
> influence and efforts were definitely a large reason why it became the
> success that it was.
>
> Mr. Katz was kind enough to spend some time with Sega-16 and talk about
> his time as president of Sega.
>
>
>
> Sega-16: Between 1988 and 1989, Sega was working on replacing the
> Master System with the Genesis. What was it like when you arrived? What
> was the atmosphere at the company at this time?
>
> Michael Katz: I arrived one month after Genesis launched (Oct '89). The
> company was small (under 50 people). They had gone thru 2/3 Presidents(
> Gene Lipkin, Bruce Lowery) in the "Master System" days. Dave
> Rosen-Vice Chairman of Sega (and original founder of Sega), located in
> L.A. (real estate/stock investor) was (from L.A.) overseeing the
> running of the Company. I reported to him and Nakayama in Japan.
>
> Sega was basically at that time a marketing/distribution company in the
> US . Hardware development and software development was coming from
> Japan. There was a small company atmosphere. The employees were
> wondering what the new management would be like, and how much control
> the Japanese would permit us to have. Paul Rioux, the new COO, started
> the same week and reported to me. I had known Paul at Mattel, where we
> had both been in the 1970's. I initially had to deal with keeping
> current employees happy, determining the quality of the staff and
> getting into the job of building Sega vs Nintendo - the juggernaut.
>
> Sega-16: Sega of Japan had a reputation for being very controlling. Is
> this accurate? How much freedom was the American branch given for the
> Genesis's launch?
>
> Michael Katz: Sega Japan was not that controlling. They did have a
> Japanese management person in our offices in an
> administrative/coordinating role. Each evening, that person reported to
> Japan by phone, telling the Japan execs what we were up to and answered
> any questions they had. Shinobu Toyoda was that person, initially, then
> it became Shinobu and a higher level person - Dai Sakari. I liked
> them both. Shinobu still is a part-timer/consultant to Sega U.S.
>
> I wrote a monthly status report to Nakayama with the month's
> achievements. I rarely visited Japan. I was involved with building Sega
> U.S. as a major force in the market, and my style is
> "task-oriented/goal oriented" and I could care less about politics.
> I had a job to do and I went ahead in my fashion to get it done. Dave
> Rosen knew and understood this and the nature of my management style.
>
> We didn't have enough software for Genesis and what there was, wasn't
> oriented to the U.S. market, so we decided to set up an internal U.S.
> development group, develop the sports game category and use our
> internal group and select independent U.S. developers to develop some
> other genres; and Japan development maintained responsibility for
> action/character/arcade-type games. I brought in Ken Balthaser and we
> built the first Sega U.S. development department, that became
> significant in size and quality.
>
> Sega-16: Gamers were very impressed with the leap in graphics quality
> the Genesis represented. Did it sell as well as expected initially, or
> did it take some time to gain steam?
>
> Michael Katz: Sega Japan set an arbitrary number for Genesis sales
> volume of 1 million units as a sales goal for the first 6 months. Each
> day I was supposed to chant Yok mon Dai, which meant one million units
> in Japanese. We sold about 500K units - which I considered damn good
> - because Genesis was new, didn't have a large, broad software
> library initially, the Nintendo franchise was hard to crack, Nintendo
> owners were waiting to see the Super Nintendo (introducing in summer
> '91) and all the key retailers were not going to commit heavily until
> after the Nintendo introduction. The Sega Japan management didn't
> believe this, or more likely, would not accept it, and it eventually
> became the reason/basis for my departure.
>
> Genesis gained steam in '91, when our software library was in place,
> when gamers saw Super Nintendo, and many of them deserted to Genesis
> for their 16-bit system, and when our aggressive and unique Genesis
> Does What Nintendon't positioning and strategy took hold.
>
> Sega-16: Nintendo's ironclad licensing agreements at the time prevented
> competitors from securing many arcade ports, but Sega was lucky enough
> to have their own catalogue of hits to rely on. How big a part do you
> think they played in the initial success of the Genesis?
>
> Michael Katz: The success of Genesis initially came from us having the
> "personality" licensing position for software. It was defensive, and
> brilliant, if I do say so myself. We COULD NOT compete with the
> strength of the Nintendo arcade licenses, so as a defensive move, we
> decided to get (for awareness) personalities: Montana, Pat Riley,
> Lasorda, Michael Jackson, Holyfield; develop good games around them,
> and make the most of a tough competitive positioning/stance - GENESIS
> DOES WHAT NINTENDON'T, which meant to the consumer: more powerful
> hardware, 16-bit graphics/animation, and exclusive personalities that
> Nintendo couldn't claim to have. This was smart marketing, and, as
> Howard Lincoln (from Nintendo) is quoted as saying, was what caused Mr.
> Arakawa (Nintendo of America's president) to admit privately, had
> turned the tide toward Sega in 1991.
>
> Sega-16: Sega sought to counteract Nintendo's dominance by licensing
> the top sports names of the time, like Pat Riley and Joe Montana. We
> all know how successful signing Joe Montana proved to be, but was it
> the same with the other titles? Did they sell as well?
>
> Michael Katz: The key sports titles, early on, sold the best. I fought
> to get Japanese management to let me go after and sign Joe Montana for
> the Genesis football franchise. We outbid Nintendo and grabbed Joe. I
> gave him a check for $1.7MM (advance and guarantee.) This was a
> critical move, because it demonstrated to the market that Sega and the
> Genesis were REAL. The Montana franchise over three years went on to
> net Montana $3.5 Million in revenues - that's how successful it was.
> I had to fight hard to get approval from Japan for the Montana
> connection. I'm still waiting for a "thank you!"
>
> Sega-16: Did it ever seem at the time like the Genesis had a shot a
> toppling the NES?
>
> Michael Katz: Nintendo had 90%% of the market, so I was willing to
> settle for 40-50%% for Sega. We knew we had the ingredients with a
> 16-bit system and a decent software library to give them some
> competition, but I felt that their lock on all the hot arcade titles
> (being ported over from the Namcos/Taitos. Konamis, Capcoms, etc -
> EXCLUSIVELY TO NINTENDO - would make things tough.) I'm surprised we
> got such momentum, coming off of the introductory 18 months, but I'm
> very gratified by it. The success of the Sonic The Hedgehog franchise,
> created in Japan, was important to this success.
>
> Sega-16: Many people are quick to note Tom Kalinske's decision to
> tackle Nintendo head-on in advertising, but you implemented the classic
> "Genesis Does what Nintendon't" campaign first. How did you ever
> convince Sega of Japan to take them on directly?
>
> Michael Katz: Competitive advertising/positioning has always been a
> strong weapon for me. I started as a brand manager at Lever Brothers
> and we competed against Proctor and Gamble with competitive
> advertising. Right after I became Vice President of Marketing at Coleco
> we did the FIRST ever (1979) competitive electronic games TV commercial
> against Mattel in the handheld game space, Coleco's Mr. Quarterback vs
> Mattel Football 1 (ironic, because I started the hand held games line
> at Mattel). I had a history of seeing competitive commercials work,
> when your product had a strong message/advantage vs. competition.
> Against Nintendo, Genesis had a compelling product story, and we needed
> to "raise hell"/make noise with maximum awareness and a gutsy
> get-in-their-face approach. I didn't talk to/fight with Sega Japan
> about it. I just told Dave Rosen that this was what we were going to
> do, I told the Ad Agency to execute on a competitive strategy, and the
> rest is history. It really irks me, that subsequent Sega management has
> taken credit for a lot of this. They ought to study their history a
> little better, "get a life," and try to take credit for what they
> really did or didn't do.
>
> Sega-16: Bill Kunkel and others have stated that Sega Visions was just
> an advertising tool with little creative control. Is this true?
>
> Michael Katz: I basically recall that as being true in the minds of
> editors like Bill. It was like an internal propaganda/PR newsletter for
> Sega owners and prospects. I don't really see anything wrong with that,
> based on our goals. I remember that it was a pain in the ass to edit
> and publish and it was hard to get people to work on it.
>
> Sega-16: You once mentioned that Sega of America didn't think too much
> of Sonic the Hedgehog as a character, but came away impressed with the
> game in action. Did you ever think the game would be so successful?
> Nintendo sure didn't!
>
> Michael Katz: I certainly under-estimated the potential of Sonic. Thank
> God there was good and sustained gameplay (critical in any game
> success). I know that I thought it was nuts, when we were going for
> targeted and widespread awareness in everything we did, for the
> Japanese to develop a game based on a type of character - a hedgehog
> - that no kid in the U.S. 6-16 year-old demographic would have any
> familiarity with.
>
> Sega-16: What do you think were Sega's biggest mistakes during the mid
> '90s?
>
> Michael Katz: I didn't keep close tabs on why Sega lost their edge; I
> was in a post-Sega era of my life.
>
> Sega-16: Why exactly, did you leave Sega?
>
> Michael Katz: Japan management replaced me with Tom Kalinske. I never
> knew how to say Yok Mon Dai and I guess they didn't want to hear how it
> (life) really was, and they needed more warm fuzzies from their U.S.
> president... That ain't me. Carpe Diem.
>
>
>
> We are very grateful to Mr.Katz for his candor and wish him the best.
> He'll always be the "man behind the Genesis" to us!
