Sega Genesis

• 1. Introduction

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  In October 1988, Sega released a machine called the Mega Drive into a Japanese market already dominated by Nintendo's Famicom. Nobody outside of Sega headquarters expected it to matter much. Within three years, a renamed version of that same console would hold 65% of the 16-bit market in the United States. That console was the Sega Genesis.

  The Genesis arrived not as a sure thing but as a gamble by a company in serious trouble. Sega's arcade revenues had collapsed after 1982, its first home console had been crushed by Nintendo on the very day it launched, and its follow-up, the Master System, had failed to dent either the Japanese or North American markets. With its back against the wall, Sega's engineering team began quietly designing something new. What followed was one of the most improbable competitive reversals in the history of consumer electronics.

  This documentary asks how a machine born of desperation became the console that reshaped the industry, created the first true console war, forced the United States Congress to hold hearings on video game violence, and helped establish the rating system that governs games to this day.

• 2. Engineering a Competitor

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  Masami Ishikawa led the console's hardware design team, working under the supervision of Hideki Sato. When NEC launched the PC Engine in 1987 amid considerable fanfare, Ishikawa's team concluded that only a 16-bit processor could make their new machine credible in the marketplace. They turned, as Sega had often done, to the company's strength in arcades, adapting the architecture of the System 16 arcade board for home use.

  The choice of a Motorola 68000 as the main processor was made relatively late in development. Sato has explained that the team used a Zilog Z80 as a secondary chip for sound because they feared the 68000 would be overloaded if it had to handle both graphics and audio simultaneously. The 68000 was an expensive component that would have pushed the retail price too high, so Sega negotiated with a distributor to buy chips at roughly a tenth of the normal cost in exchange for a large upfront volume order.

  The console's physical appearance was designed by a team led by Mitsushige Shiraiwa, who drew inspiration from audiophile equipment and automobiles. Shiraiwa said the mature aesthetic was intended to appeal to all ages, not just children, as the Famicom had done. Sato noted that the Japanese unit was styled to resemble an audio player, with the words "16-bit" embossed in a golden metallic veneer. When the design was adapted for North America, elements including that gold lettering were changed, a reflection, Sato believed, of different cultural values between Japan and the United States.

  Sega had first announced the machine under the name "Mark V" in the June 1988 issue of the Japanese magazine Beep!, but management wanted a more powerful name. After reviewing more than 300 proposals, they settled on "Mega Drive". For North America, David Rosen pushed for "Genesis", saying he wanted to represent a new beginning for the company.

• 3. Building a Market in North America

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  Sega's first attempt to break into North America with the Genesis did not go smoothly. The company had been distributing its Master System through Tonka and was unhappy with the results. Before launching the Genesis through its own Sega of America subsidiary, the company offered the North American rights to Atari Corporation. Atari CEO Jack Tramiel and Michael Katz, who led Atari's Entertainment Electronics Division, heard the pitch and declined, with Tramiel judging the console too expensive and opting to concentrate on the Atari ST.

  Katz then crossed over to join Sega of America as its new CEO. His strategy had two parts. The first was a confrontational marketing campaign built around slogans like "Genesis does what Nintendon't". The second was a game library built around celebrity endorsements, producing titles tied to Pat Riley, Arnold Palmer, Joe Montana, Tommy Lasorda, Mario Lemieux, and Michael Jackson. Katz sold 500,000 units when Nakayama had asked for one million. Nakayama replaced him in mid-1990 with Tom Kalinske, who came from outside the games industry.

  Kalinske developed a four-point plan: cut the price of the console, form an American team to build games for American tastes, expand advertising, and swap out the pack-in game Altered Beast for a new title called Sonic the Hedgehog. The Japanese board initially resisted every point. Nakayama approved all four, telling Kalinske directly: "I hired you to make the decisions for Europe and the Americas, so go ahead and do it."

  The plan worked beyond most expectations. During the 1991 holiday season, the Genesis outsold the Super Nintendo Entertainment System nearly two to one in the United States. By January 1992, Sega controlled 65% of the 16-bit console market. It was the first time Nintendo had not led the console market since 1985.

• 4. Sonic and the Blue Hedgehog's Origins

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  Sega held an internal company-wide contest to create a mascot character capable of competing with Nintendo's Mario. The winning design was a blue hedgehog with red shoes, created by Naoto Ohshima, a character that would spawn one of the best-selling game franchises in history.

  The gameplay itself originated elsewhere. Yuji Naka had built a prototype platform game featuring a fast-moving character rolling through a long winding tube. That technical concept was combined with Ohshima's character design and levels developed by designer Hirokazu Yasuhara.

  Katz and the marketing team at Sega of America actively disliked Sonic when they first encountered it, convinced the character would not appeal to American children. Kalinske overrode them and made Sonic the pack-in game. Critics praised Sonic the Hedgehog as one of the greatest games ever made at that point, and Genesis sales climbed sharply as consumers who had been waiting for the SNES changed their minds and bought a Genesis instead.

  In Europe, the Mega Drive captured 65% of the market and held its lead over the SNES through 1994. Sonic the Hedgehog 2 set records for the fastest-selling game at the time, moving 3.2 million copies worldwide within two weeks. Sonic the Hedgehog 3 and Sonic and Knuckles together sold a combined 4 million copies worldwide.

• 5. Electronic Arts and Reverse Engineering

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  American publisher Electronic Arts wanted to bring its games to the Genesis but found Sega's licensing terms too costly for independent publishers. According to Accolade co-founder Alan Miller, third-party developers were paying between ten and fifteen dollars per cartridge on top of manufacturing costs, which roughly doubled their cost of goods. EA decided to find another way in.

  The reverse-engineering effort began in 1989, led by Steve Hayes and Jim Nitchals. EA created a controlled room at its headquarters nicknamed "Chernobyl", with access restricted to a single person: Mike Schwartz. Schwartz studied Sega's development manuals and hardware, then wrote original documentation summarizing his findings. The process took him about a month. His work was reviewed by EA's lawyers and then shared with Hayes and Nitchals to verify its originality before going to the rest of the development team.

  EA founder Trip Hawkins confronted Nakayama the day before the 1990 Consumer Electronics Show, telling him that EA had the capability to run its own licensing program without Sega's cooperation. Sega relented. The next day, EA's upcoming Genesis games were on display at CES.

  Hawkins later described the resulting agreement as "a very unusual and much more enlightened license agreement", noting that EA won the right to approve its own titles and negotiate more reasonable royalty rates. EA chief creative officer Bing Gordon admitted afterward that the company had not actually cracked all of Sega's protections and that "Sega still had the ability to lock us out" if they had chosen to. EA's first Genesis release under the new deal was John Madden Football, which Gordon called a "killer app". Gordon and EA's vice president of marketing services, Nancy Fong, created a yellow tab molded into EA's Genesis cartridges as a visual identifier for the brand.

• 6. Violence, Ratings, and Congress

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  By 1993, the American media had fixed its attention on the content of certain games. Night Trap, a game for the Sega CD in which players watched scenes involving women and vampire-like attackers, drew scrutiny in the United States and was cited in the United Kingdom Parliament, which classified it as a "15" due to its use of real actors. Former Sega of Europe development director Mike Brogan noted the controversy gave Sega considerable publicity that reinforced its edgy image.

  The year's most intensely debated game was Midway's Mortal Kombat, ported to both the Genesis and the SNES by Acclaim Entertainment. Nintendo replaced the blood with sweat and toned down the game's finishing moves. Sega took a different approach. It launched the Videogame Rating Council, a ratings system for all its platforms, with categories running from the family-friendly GA rating to MA-13 and the adults-only MA-17. Sega released Mortal Kombat with an MA-13 rating after appearing to remove blood and violent content, but players could restore all of the arcade's blood and uncensored finishing moves by entering a "Blood Code". The Genesis version outsold the SNES version by a ratio of three or four to one.

  At the congressional hearings, Nintendo of America's executive vice president Howard Lincoln confronted Sega directly, pointing out that Night Trap had carried no rating when it first went on sale and that small children had purchased it at Toys R Us. Senator Joe Lieberman called for a follow-up hearing in February 1994 to assess industry progress. According to Digital Pictures founder Tom Zito, Night Trap sold 50,000 units in the week following the hearings.

  The result was the Entertainment Software Rating Board, an independent organization that Lieberman praised. With the ESRB in place for the 1994 holiday season, Nintendo reversed its censorship policy, and the SNES port of Mortal Kombat II was released uncensored.

• 7. Add-Ons and Hardware Fragmentation

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  Sega developed two major add-ons for the Genesis. The first was the Sega CD, which Sega launched in Japan on the 12th of December 1991, at an initial retail price of JP¥49,800. It arrived in North America on the 15th of October 1992, priced at US$299. The unit added a more powerful processor, additional system memory, and hardware-based scaling and rotation. Sega and its partners produced games that incorporated digital video, and Sega bundled the add-on with a full-motion video game called Sewer Shark, developed by Digital Pictures. The Mega-CD sold only 100,000 units in its first year in Japan, partly because just two games were available at launch. Worldwide, the Sega CD sold 2.24 million units.

  The second add-on, the 32X, had a more complicated origin. In January 1994, Sega of America's research and development head Joe Miller received a phone call from Nakayama during the Winter Consumer Electronics Show, in which Nakayama stressed the urgency of responding to the Atari Jaguar. Miller's team proposed a peripheral rather than a new standalone console, and the resulting 32X expanded the Genesis with two 32-bit SuperH-2 processors. Those processors had been developed in 1993 as a joint venture between Sega and the Japanese electronics firm Hitachi.

  More than 1,000,000 orders were placed for the 32X, but Sega shipped only 600,000 units by January 1995. The problem was timing. Sega released the Saturn in Japan on the 11th of May 1995, four months ahead of its original September target date, and the Saturn's arrival made developers and consumers question the point of the 32X. In early 1996, Sega acknowledged it had overpromised on the 32X's game library and discontinued the system to concentrate on the Saturn. Both add-ons were officially discontinued in 1996, and the fragmentation they created confused consumers across the system's final years.

• 8. Legacy

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  Sega sold 30.75 million first-party Genesis units worldwide: 3.58 million in Japan, roughly 8 million in Europe, and between 18 and 18.5 million in the United States as of June 1997, when Sega stopped manufacturing the system. Tectoy sold an estimated 3 million additional licensed units in Brazil as of 2012.

  In 2014, USgamer's Jeremy Parish wrote that the Genesis "began pushing the medium toward something resembling its contemporary form", describing it as "the key incubator for modern sports franchises" and a system that "made consoles truly international" by giving Western publishers a fairer licensing alternative to Nintendo's terms. Parish also credited the Sega Channel, which ran until the 31st of July 1998, as foreshadowing subscription gaming services by more than fifteen years.

  Kalinske highlighted Sega's role in targeting older players and in pioneering a simultaneous North American and European release date with Sonic the Hedgehog 2, a practice that would become standard in the industry. John Sczepaniak of Retro Gamer observed that the console's appeal was inseparable from its era: "It was a system where the allure was born not only of the hardware and games, but the magazines, playground arguments, climate, and politics of the time."

  New commercial cartridges for the Genesis continued to appear long after Sega moved on. In December 2010, WaterMelon released Pier Solar and the Great Architects, described at the time as the biggest 16-bit game ever produced at 64 Mb, and the only cartridge-based title that can optionally use the Sega CD add-on to play an enhanced soundtrack. Sega's own Genesis Mini, released worldwide on the 19th of September 2019, included 40 games with menu music composed by Streets of Rage composer Yuzo Koshiro.