Summary of Console Wars by Blake J. Harris

BookSummaryClub Blog Summary of Console Wars by Blake J. Harris

Being a gamer nowadays is easy. You have a multitude of games to choose from, players across the globe and a choice of consoles. It does not matter if you are young or old, there’s a game out there for you.  However, 30 years ago this was not the case. If you were a gamer in the 1990s, you played a Nintendo game. At the start of the decade, Nintendo held 90 per cent of the $3 billion market. They were the clear leaders in the market and controlled which games could be played on its consoles. 

Then a blue hedgehog changed all of that. Sega came in and changed the game. Nintendo now had serious competition and the battle for the gaming market began. What happened in those few years, changed gaming forever and made it what it is today. Console Wars gives readers a detailed look at this battle and how it got us to gaming today.

In this summary readers will discover more about:

  • Nintendo’s dominance of the U.S. market
  • Sega’s bold entrance
  • Sega’s downfall after its massive success

Key lesson one: Nintendo’s dominance of the U.S. market

In the 90s, the Japanese consumer electronics company, Nintendo, had a good thing going. It had completely dominated the gaming market. This was due to the fact that they controlled who created games for their consoles. Companies were charged $10 per game cartridge if they wanted to develop a game which meant that all games were always sold for more than $10. This fixed charge policy enabled Nintendo to collect huge profits on successful games.

And they fiercely protected their dominance as well. They sued a group of developers who tried to create games for the Nintendo console without its approval. They made the message clear that you have to play by their rules if you still want a place in the market. Since Nintendo had the majority of the gaming market, if you went against them, you stood the chance of being iced out forever. 

Being a market leader, however, didn’t mean that they were void of mistakes. In fact, many of the products they produced in haste to stay at the top of the pack were of poor quality. The release of their 16-bit console in 1992, for example, resulted in users being frustrated because it was not compatible with games from the previous 8-bit console. This meant that over and above paying for the new console, gamers had to go out and buy a new set of games as well. These mistakes were being documented by other competitors who set out to relieve Nintendo of its throne.

Key lesson two: Sega’s bold entrance

Sega carefully watched Nintendo’s actions. Noting every mistake and stumble, Sega sought to be everything that Nintendo was not. They knew what gamers wished Nintendo would change and Sega took advantage of that, identifying the perfect market niche. 

Sega offered game developers freedom to create games and more specifically, encouraged them to develop more games for adults. Nintendo was known for being too controlling and sticking to kid-friendly games. So Sega did the opposite once again which resulted not only in more diverse game titles but also developers who were now happy to let their imaginations run wild. 

Sega became the rebellious child to Nintendo’s strict parent and they wanted their image to show this. It was central to their marketing and even their mascot, Sonic the Hedgehog was designed to be the complete contrast to Nintendo’s Mario. Blue, fast-moving and rebellious, just like Sega themselves. It was with these characteristics that Sega made its entrance into the market and became Nintendo’s worst nightmare.

Sega’s marketing and sales strategy

Just like any other battle between popular competitors, the Sega vs. Nintendo battle for the gaming market was one worth watching. Not only did Sega use comparison marketing to gain the upper hand against Nintendo, but their sales strategy also looked at ways they could further emphasize their differences. An example of this was the Sega World Tour which was held in malls across the United States and showcased the new Genesis console. It was actually perfectly timed with the release of Nintendo’s 16-bit Super Nintendo (SNES) so that when gamers went in search of the new SNES, they would come across Sega instead. And since the Sega World Tour was designed to make Mario look old and tired in comparison to Sonic the Hedgehog, the Genesis still sold well despite Nintendo’s SNES release. 

Another example of both companies going head to head was the release of Mortal Kombat. Both of them released their version of the game with Nintendo’s being less realistic with players spilling grey blood. Their thought process was to make it seem less violent and bloody. However, Sega being Sega, went for the uncensored version for its users. The Sega version was much popular that Nintendo’s proving that gamers wanted more.

Sega didn’t even hold back when it came to new game releases. Despite having smaller marketing budgets than Nintendo, they strove to make each release a huge media event. No longer would gamers have to go to a store to find out what was new, Sega was shouting it from the rooftops.

The power that comes with having the right team and the right timing

In order to have a successful company, you need the right employees. Sega’s success began with Tom Kalinske, the head of Sega in America. When he came in, he worked hard to get team members on the same page and to dissolve any mistrust that lurked in the company. He eventually succeeded in building a creative atmosphere amongst employees and built team spirit and trust. This led to a solid workforce who could work together to overcome all obstacles – and they did.

First up was distribution. Retailers were hesitant to stock Sega products in case they lost Nintendo as a customer. The Sega team spent a lot of time trying to persuade them otherwise. For example, they had to set up meetings between their executives and Wal-Mart’s executives regularly to pitch their marketing strategies. This meant that the Sega marketing department worked relentlessly to come with effective strategies for these meetings. All Sega’s efforts eventually paid off as the convinced Wal-Mart to stock their products. 

They also made sure that they got their timing perfected. Advertising campaigns, product releases, price changes – you name it and they successfully implemented it at the correct time. This was demonstrated when Sega got word that Nintendo would be reducing the price of their consoles the night before it happened. Sega staff worked tirelessly through the night and managed to cut the price of their console before Nintendo did! This made it look as if Nintendo was following Sega’s lead.

Key lesson three: Sega’s downfall after its massive success

Sega overtook Nintendo as the market leader when Mortal Kombat was released. This was their peak but one which they could not maintain. 

In the gaming industry, two options exist. Creating new software by the development of games or creating new hardware in the form of consoles. Sega chose hardware from the start.

When it came time to update both the Genesis and SNES consoles, Nintendo had a safe option: the FX chip. The FX chip was a simple upgrade to the Nintendo console. Sega, once again doing the opposite to Nintendo, released the Sega CD. The Sega CD was no doubt much better than Nintendo’s  FX chip but it was much more expensive as the cost to develop it was high. It was because of this high price that few gamers chose to purchase it. 

The next problem Sega had was the console after Genesis, the Saturn didn’t have enough games for people who bought the console. They also had another console called Game Gear. They had too many consoles and too few games. Game developers could not keep up with the changing technologies. Sega’s brief reign came to an end when fans turned against them when they could not keep up with the demand for the Saturn console.

The final blow came in 1994 when Nintendo released Donkey Kong. Nintendo finally took back the title of market leader when it surpassed Sega in sales.

Sega’s downfall can also be attributed to its parent company, Sega of Japan. Surprisingly, Sega of America under the leadership of Tom Kalinske was much more successful that Sega of Japan. In America, Sega had marketing strategies which pushed boundaries whereas, in Japan, they played it safe. Kalinske was trusted by the parent company’s head, Hayao Nakayama which lead to him having some independence in the start. But as the years went by, this independence was slowly taken away with the parent company becoming more controlling. It all came to a head when Sega of America disputed the date which the Genesis console would need to be replaced. It was still doing well on the market and they thought it could sell for longer. Sega of Japan refused this recommendation and pulled the product from shelves which cost Sega its position of leading the console market. 

Sega of Japan also refused to partner with Sony which would have given them a huge edge over their competitors. Sony wanted to get into software development which would have benefitted Sega. Sega of Japan knew that partnering with a company like Sony would lead to the loss of their control over the company so the refused their offer to partner. 

When Sega refused what did Sony do? It developed the Playstation which made Sega’s Saturn obsolete. Sega of Japan also turned down Silicon Graphics (SGI) which would have seen them developing 3D games. At this point, Kalinske was so frustrated, he actually gave the SGI executives Nintendo’s contact details because he knew what a great opportunity it was. 

Nintendo also answered to its Japanese parent company but they were eventually allowed to develop games on their own. With this difference, Kalinske realized that it was no longer a matter of Sega vs. Nintendo but rather Sega America vs. Sega Japan.

The key takeaway from Console Wars is:

Sega may have fallen from their top spot but in those years between 1990 and 1994, they revolutionized the gaming industry. At the start of the decade, the market was worth $3 billion worldwide. Just 4 years later, the gaming market was worth $15 billion with Sega sitting at the top. This rapid growth of the gaming industry changed everything. Games now had to be regulated, with age limits put in place due to the content. Even the way games were developed changed. They had better graphics and were more responsive with more action. The rivalry between Sega and Nintendo gave rise to video games as we know them today and for that, the gaming world is grateful.

How can I implement the lessons learned from Console Wars:

Whether you are a gamer or not, you can appreciate how Sega rose rapidly to the top. They identified a niche market and became everything that Nintendo was not. They worked hard to stay ahead with a dedicated team. This dedication allowed them to work toward a common goal of seeing Sega surpass Nintendo as market leaders. This entailed everyone working together to get their timing, marketing and sales strategies perfected. These are strategies which you can also aspire to achieve if you want to surpass your competition.

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