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

by Steven Kent

  To show that consumers would choose Saturn over PlayStation, Sega waited until the day the Sony console launched to ship more Saturns. Once they did, and the systems were sold side-by-side, Saturn proved the more popular system.

  A New Show

  So, for some period of time, there was a pitched battle between E3 expo and CES for exhibitors, with CES obviously arguing that they were the show of choice because Nintendo was going to be there and E3 Expo arguing they were show of choice because they had Sony, Sega, and most of the major third parties lining up.

  —Douglas Lowenstein, president, Interactive Digital Software Association

  Back in the United States, Nintendo and Sega continued to wrangle for leadership of the video game industry. Sega lost the battle over the rating system, but a new struggle erupted over trade shows.

  Since the early days of Atari, video game companies had unveiled their products at the Consumer Electronics Show (CES), a show run by a trade organization called the Electronic Industry Association. CES was about more than interactive games, however. It was the place where manufacturers unveiled new televisions, car sound systems, telephones, and refrigerators. Despite the bad years for video games, more and more computer software companies were publishing games, and floor space was becoming a limited commodity. In an effort to keep the game makers happy, the Electronic Industry Association proposed a show called CES-I.

  With the creation of the Interactive Digital Software Association (IDSA), the video game industry had its own trade organization and was large enough and prosperous enough to run its own show. As the Electronic Industry Association made plans for CES-I, a large international publishing company called IDG Communications approached the IDSA with a proposal for an annual show called the Electronic Entertainment Expo (E3) that would supplant CES as the show for the interactive entertainment industry. Sega, Sony, Atari, and several leading software publishers immediately announced support for the show, while Nintendo and Microsoft threw their weight behind CES-I.

  When we decided to create a trade show, everyone, including Nintendo, supported a dedicated trade event for the industry. Two organizations were presenting and seeking our support at the time and we had to decide which one to endorse. EIA (Electronic Industry Association) had put together a version of its CES Spring show that was very broadly defined as interactive television entertainment. At the same time, IDG had developed the concept for the Electronic Entertainment Expo. Both organizations were pitching for our support, and, ultimately, we voted to endorse E3, and Nintendo made a decision to sign up with the CES Philadelphia show.

  —Douglas Lowenstein

  Nintendo became isolated. As more companies queued up in support of E3, Nintendo eventually had to fall in line.

  At the end of the day, after some period of time … Nintendo recognized that the industry had essentially voted with its feet, with an overwhelming number of companies signing up with the E3 event. They [Nintendo] then eventually joined the rest of the industry in signing up.

  —Douglas Lowenstein

  The Electronic Entertainment Expo was about to become the next great battlefield.

  Inside Sony

  The other thing that really helped us, and this is important, is that when you put those four letters on a product, S-O-N-Y, it gives you tremendous credibility. It gives the customers great permission to buy, particularly when they’ve been burned by the 3DOs and the Jaguars of the world.

  —Jim Whims, former executive vice president, Sony Computer Entertainment of America

  Ken Kutaragi, the engineer who created PlayStation, faced many obstacles while completing the game console that would eventually be known as the Sony PlayStation. His final unit bore almost no resemblance to the Play Station CD-ROM device that he was creating for the Super NES. He designed the final version around the 32-bit R3000A RISC chip, a processor that was supposed to be capable of rendering up to 500,000 texture-mapped polygons per second. PlayStation’s performance, however, rendered approximately 350,000 polygons per second. While Saturn and PlayStation supposedly had fairly similar capabilities on the surface, there were several very important differences in both design and marketing.

  PlayStation had a single processing chip with a 3D geometry engine in its CPU. This processor, along with the excellent development tools Sony made available, made PlayStation extremely easy to program. That ease of programming, along with Sony’s liberal $10 per game licensing fee and its aggressive marketing plans, made PlayStation an attractive prospect for game designers. Nearly 100 game companies had signed licensing agreements with Sony by the time PlayStation launched in the United States, and more than 300 individual game projects were planned or underway.

  Before Sony could become a serious contender in the game market, it would have to overcome its past. Along with being humiliated by Nintendo over the Super NES CD-ROM drive, Sony also had a dismal history as a entertainment software publisher. Sony Interactive, a small and unsuccessful software arm of the giant electronics company, had earned critical success with a game called Mickey Mania for Super NES, Genesis, and Sega CD, but most of its games were panned by the press and ignored by consumers. Sony published a series of ESPN Sports simulations that were generally acknowledged to be among the worst sports games on the market.

  In what seemed like a poorly aimed attempt to buy its way into respectability, Sony bought Psygnosis, a Liverpool-based software company, for $48 million. At the time of the purchase, it seemed a strange move. Psygnosis’s only hit, a game called Lemmings, had been created by outside developers; yet Sony paid top dollar for the company.

  We got into this business for one and only one reason, and that was to become leaders in the next generation marketplace. And eight months ago we were the new kids on the block, with a lot of hopes and dreams and aspirations and an absolutely 0 percent market share.

  —Jim Whims

  When it came to marketing PlayStation in the United States, Sony left little to chance. Sony Computer Entertainment of America (SCEA), the American organization charged with the task, was built around a group of experienced game-industry veterans.

  Steve Race, the president of SCEA, had been the vice president of Atari’s European division during the heyday of the 2600. After the crash of 1982, Race and several friends founded Worlds of Wonder—the company that created Teddy Ruxpin and helped market the Nintendo Entertainment System. In 1990, as Tom Kalinske became the new CEO at Sega of America, he brought Race in as a marketing consultant.

  Race’s senior vice president of marketing was Jim Whims, who, like Race, was an ex–Worlds of Wonder executive who had a long history with video games that included stints with iMagic and Data East. Tall, comfortable around strangers, and athletically built, Whims had the look of a leader.

  For his head of third-party relations, Race hired Bernard “Bernie” Stolar, whose roots in the industry reached all the way back to Marty Bromley and David Rosen. In earlier days, Stolar headed a small arcade company called Game Plan that made the 1981 game Shark Attack. Knowing that Sid Sheinberg, head of Universal Studios, might approach him about a possible infringement on the movie Jaws, Stolar met with and outsmarted the intimidating studio chief. Thinking he was giving Stolar a break, Sheinberg said that he would not demand a royalty on the first 1,000 machines. Stolar responded by cutting his manufacturing run after building the first 990.

  As the person responsible for working with third-party companies, Stolar played a major role in luring outside developers to make games for PlayStation. Some of his decisions proved absolutely brilliant. Stolar actively courted Williams Manufacturing and arranged a six-month exclusive deal for the highly anticipated game Mortal Kombat 3, a move that virtually guaranteed PlayStation sales among members of the game’s rather large cult following. On the negative side, Stolar felt that role-playing games, while very important in the Japanese market, were unnecessary in the United States.

  Race hired an old friend named Peter Johnson away from Seg
a to handle marketing and communications. Though Sony was new as a company, its administrative team was composed largely of seasoned game executives.

  We had a lot of people with very, very good industry experience, and qualified guys who I could trust and women who I could trust who had either been in the industry or I had worked with before in some capacity. We got enormously lucky with the talent pool that we had, and we got dealt a great product, and then the rest we just put together.

  —Steve Race

  In October 1994, tragedy struck Sony. Peter Johnson, the man Race had hired away from Sega to run marketing communications, was killed in a plane crash while traveling to the East Coast on business.

  I was a basket case for a long time. Peter and I had worked at three different companies together and he was a close personal friend. The night before the crash, I had gone to a Rolling Stones concert with him and his wife. I was devastated by it.

  —Steve Race

  There was never any question about the quality of the PlayStation hardware or the personnel Race hired, but other issues plagued SCEA. Kutaragi and other executives at Sony did not always share Race’s vision for how to run the company. They fought over everything from the length of the cords connecting the PlayStation’s game pads to the launch price for the console itself.

  I’d been over to Japan a couple of times and we disagreed about pricing, positioning, advertising, color, and ninety-nine other things that you would do for a product to Americanize it or to make it acceptable in the United States.

  It was funny. I would say, “Why are we doing this controller? It should look like this or it should be this size.” Norio Ohga was the president of Sony at the time, and they’d sort of say, “Oh, no, no, no. Mr. Ohga wants it this way. Mr. Ohga designated this one.”

  I kept thinking to myself, what is a guy running a $44 billion company doing going around with controllers for a game system?

  —Steve Race

  Race’s problems with Sony Computer Entertainment in Japan were well-known throughout the industry. Rumors about Race being fired were widespread. Opinionated and outspoken, Race sometimes seemed like a strange fit for the role of an American executive working in a Japanese company. The battles continued as Sony prepared for the official American unveiling of PlayStation at E3.

  Inside Sega

  Clearly, Sega broke some promises about times and dates and all that. If you look at the recent legacy with Sega, between Sega CD and 32X and … well, I guess Nomad’s still around, there were a lot of disappointing products that [Sega said] were next-generation systems that weren’t fulfilled. They certainly weren’t supported by the third-party community.

  —Jim Whims

  As Trip Hawkins had predicted, Sega had stretched its resources by maintaining too many incompatible platforms. By the end of 1995, Sega of America found itself juggling seven separate and incompatible game platforms—Saturn, Genesis, Game Gear, Pico, Sega CD, 32X, and 32X CD. Amazingly, even Master System was rumored to still be active in some South American markets. There was no way one company could support every one of those systems. With an eye toward the future, Sega Enterprises CEO Hayao Nakayama made the logical choice to concentrate on Saturn.

  From the Japanese perspective, Nakayama made the only possible decision. Mega-Drive, the Japanese name for Genesis, never caught on in Japan. Saturn, on the other hand, was outselling PlayStation and looked to be the dominant system. What made sense in Japan, however, was about to become a disastrous move in the United States.

  I would absolutely defend the American management on that. Tom knew that the 16-bit business was going to be there. Paul Rioux knew it, and so did Shenobu Toyoda; but Japan refused to believe. They were convinced, and they would not listen to Tom [Kalinske]. They would not listen to Paul [Rioux]. They would listen to no one and they absolutely bullied the U.S. into launching the system. It very much compromised their ability to keep the 16-bit business.

  —Michael Latham, former head of Omega Team, Sega of America

  Back in the United States, the magazine Next Generation ran an article in which the internal components of PlayStation and Saturn were shown side by side. The editorial staff had developed a preference for PlayStation over Saturn, based on game performance, and that preference became far more pronounced as more games were published. Next Generation’s editors described PlayStation’s design as “elegant” because all of the components fit neatly on one single circuit board. The Saturn design, by comparison, seemed jumbled, with its CD-ROM controller placed on a separate daughterboard.

  I think a lot of people are confused about that. I’ve heard a lot of people say, “Oh gee, look at all these chips they’ve got.” Well, there’s a reason for it and the reason is that our people feel that they need the multiprocessing to be able to bring to the home what we’re doing next year in the arcades. That kind of power requires what we’ve got and we don’t think the other machines can take advantage of.

  —Tom Kalinske, former CEO, Sega of America

  In theory, Saturn, which featured two Hitachi SH2 32-bit central processing chips, was more powerful than PlayStation. The truth was that the SH2 chips were somewhat inferior to the chip Sony had selected. There was even a rumor that Nakayama had selected the chip as a favor to a golf buddy. All rumors aside, programming Saturn was difficult, and allotting different operations to both of the processing chips proved nearly impossible. In an interview with the press, Sega star arcade-game designer Yu Suzuki openly admitted having trouble with the dual-processor design while working on the Saturn version of his hit game Daytona.

  As E3 approached in mid-May, Sega announced that the release of Saturn would take place on September 2—Sega Saturn Saturday. Behind the scenes, however, Sega was preparing an E3 surprise.

  Inside Nintendo

  I realize that Nintendo keeps saying [that the Ultra 64 will be released in] 1995, but there is absolutely no evidence to support that. What they did in Chicago [at the 1994 Summer Consumer Electronics Show] was show people the coin-op hardware, which has absolutely no connection with the Ultra 64 from an internal standpoint. No way, Jose. It’s a big promotional head fake.

  If he [Nintendo vice-president Peter Main] told you six months, mark your calendar and call him on that date. He’ll tell you, “No, six months from now,” and he’ll still be blowing smoke at that point.

  —Trip Hawkins

  On August 23, 1993, Nintendo announced plans to collaborate with Silicon Graphics on “Project Reality,” a new technology that would be incorporated into a future game console. The pairing seemed perfect. Silicon Graphics was the leading company in high-end computer graphics. Hollywood special-effects studios used their workstations to create the effects in such movies as Terminator 2 and Jurassic Park. The new system, which Nintendo claimed would be released in 1995, would include a modified version of the technology used in Silicon Graphics’ expensive Indigo workstations and would sell for under $250. Nintendo would not give many specifics on what the system’s architecture would look like, but it was stated that the final product would have a 64-bit processor.

  He’s [Howard Lincoln] convinced that the new Nintendo momentum will carry over into 1997. “One of the things I find most incredible,” he says, “is how anyone could possibly conclude that Nintendo will not have a predominant share of the next-generation platform. We have the best technology—namely, Silicon Graphics’ proprietary technology. Mr. Nakayama [Sega’s president] wanted that technology as badly as Yamauchi [Hiroshi Yamauchi, president of Nintendo Co., Ltd.], but Yamauchi got it,” he says. “Sega and Sony have world-class 32-bit systems. But unfortunately for them, we will be marketing a world-class 64-bit system at the same time.”2

  In 1994, Nintendo kept up a fairly regular rhythm of announcements. In March, Nintendo of America chairman Howard Lincoln announced that the British developer Rare, Ltd., would make games for Nintendo’s new Project Reality console. This announcement was made two months before the unveiling of
Donkey Kong Country, so few people knew anything about Rare. A quick scan of old Nintendo cartridges would have revealed that Rare was the company behind Battle Toads, but that was the only thing anyone outside of Nintendo knew.

  On May 2, 1994, Nintendo announced that a Scottish firm called DMA Designs had signed up to do games for Project Reality. No better known than Rare, DMA had one significant claim to fame—it was the company that created Lemmings, Psygnosis’s one big game. Three days later, Nintendo announced that Project Reality would use cartridge media instead of CD-ROM. This was a much more significant announcement.

  At the time, Howard Lincoln claimed that the reason Nintendo decided to stick with cartridges instead of moving to CD-ROM was speed. With CD-ROMs, game consoles access information and load it into memory. These “access times” could take a few seconds with early CD-ROM drives such as the ones used in Sega CD and 3DO. Nintendo said that waiting for the games to load up diminished the experience. Because cartridges have ROM chips built into their circuits, access time is not a problem.