Alternate History: Sega doesn't drop the ball in the 4th to 5th gen transition

[The_Liquid_Laser]

shikamaru317 said:

Ka-pi96 said:

Don't you actually need to be holding a ball before you can drop it?

Not sure what you mean. Are you trying to argue that Genesis/Mega Drive was not a success in the west? If so, you're dead wrong. Mega Drive beat SNES in Europe, and in the US Genesis was actually selling more than SNES for much of the generation, largely thanks to the efforts of Tom Kalinske.

Allow me to give you a little history lesson about Sega of America and the man named Tom Kalinske, it'll be a long read but I promise it's worth it, the story is one of the most interesting in Gaming history imo:

Tom Kalinske worked for Mattel toys from 1972 to 1987, during which time he successfully revived the fallen sales of both Barbie and Hot Wheels, turning around the company's fortunes, and they promoted him to CEO from 1985-1987. He then was recruited to be head of Matchbox, the chief rival of Mattel's Hot Wheels; though he was only CEO of Matchbox for 3 years, he successfully turned around a company which was nearly bankrupt when he stepped in, and allowed them to turn a profit for the first time in years.

Meanwhile, while this was happening, Nintendo had a total stranglehold on the US video game market. By the end of 1986, NES had reportedly sold 1.1m units in the US in the US, compared to 250k for Master System and 100k for Atari 7800, despite Sega spending a similar amount on marketing compared to Nintendo, with Master System falling short of Sega's sales expectation of 400-750k units for the year. Things only got worse throughout the generation. The following year, Sega decided to sell the US distribution rights to US toy company Tonka, but they had no clue how to sell a game console either, and by the end of 1988, Nintendo had 83% of the North America marketshare, and the Sega vs Nintendo marketshare was 6% to 94% by the end of 1989. 

So in 1990, Sega's CEO, Hayao Nakayama, decided to hire Tom Kalinske to run Sega of America, after seeing how he turned around the fortunes of both Mattel and Matchbox. Hayao himself flew to Hawaii where Tom was on vacation with his family, and personally asked Tom Kalinske to run Sega of America. Tom flew from Hawaii to Japan with Hayao and was shown Sega Mega Drive and how much better it looked than the 8 bit NES, and was convinced that Sega had a winning product.

So Tom immediately set about creating a strategy for selling Sega Genesis in the US. His battle plan: 1. Sell the console at a loss so you can sell more consoles to people who will be buying games and accessories throughout the generation, allowing you to make more money in the long run. 2. Defeat Mario. 3. Get sports games on Genesis. 4. Market Genesis to teenagers instead of kids. 5. Make fun of Nintendo. He then had a meeting to present that battle plan to the Japanese Board of Directors, and the Japanese board didn't like it all and it turned into an angry argument between Hayao Nakayama and the other members of the board that ended when Nakayama abruptly stood up, knocking over his chair in the process, and went to the door to leave, and Tom thought he was finished with Sega before he really even started. Then Nakayama turned to him and told him that he hired Tom to run Sega of America and he was going to let him run it his way in spite of objections from the rest of the board of directors. 

Tom set about implementing his plan. He slashed the price of Genesis from $189 to 149. Tom worked with Yuji Naka, Hirokazu Yasuhara, and Naoto Ohshima to design Sonic with the western market in mind, who would be the new mascot of Sega to help take down Mario. Tom partnered with EA to get John Madden Football, Joe Montana Football, and other EA Sports franchises on Genesis. Tom marketed Genesis to teens from 13 to 17 and young adults, compared to Nintendo marketing NES and SNES to kids 9-13, with the thinking that little brothers wanted to emulate their big brothers, so if you won over the big brothers with Genesis marketing, little brothers would then see their older brother playing Genesis and want to play it too. They organized demonstrations in malls that let teens try NES/SNES and Genesis side by side; made early use of influencers by sending a free Genesis console and free games to at least one student on most college campuses in the US, so that he could hype up Genesis to others on campus; they organized a big game tournament on MTV which tons of teens watched; they partnered with Michael Jackson who teens loved and watched on MTV. The ads were also focused on teens by making fun of Nintendo, with the infamous "Genesis Does What Nintendon't". 

How successful was Tom's battle plan? Well, when Tom was brought in in 1990, Genesis had apparently only sold about 500,000 units in North America in 1989, half of Sega's goal of selling 1m units in 1989. Tom's plan increased sales to 1m in 1990. Genesis then outsold SNES nearly 2 to 1 Holiday 1991. Genesis outsold SNES 4 consecutive Holiday seasons in the US from 1991-1994, thanks to it's lower price, better marketing, and larger game library. It wasn't until late generation that SNES managed to pull ahead in the US.

Do you want to know what brought Sega down in the end? Jealousy of the success of Genesis/Mega Drive in the US and Europe by the same Japanese Board of Directors who disapproved of Tom's battle plan for Sega of America, they were jealous that Sega America under Tom Kalinske and Sega Europe under Nick Anderson were beating SNES in their markets, while Sega Japan had sold just 3.5m Mega Drives to Nintendo's 17m SNES units in Japan. They made the foolish decision to design Saturn with the Japanese market in mind and and let Genesis die early, resulting in Genesis falling behind SNES in sales the last couple of years of the generation in the US due to not having enough stock to meet demand, which is ultimately what allowed SNES to pass Genesis overall in the US.

Tom argued against Sega of Japan and told them they were making a mistake with the design of the Saturn, told them that nobody could successfully market that console in the US and Europe. They didn't listen to his warning, and he resigned in 1996 as a result. His prediction turned out to be accurate, with Saturn selling just 1.8m units in the US and 1.1m in Europe, compared to 18m Genesis in the US and 8.8m Mega Drive in Europe. Sega Japan's pigheaded belief that focusing on the Japanese market over western markets was the right strategy for Sega moving forward ultimately brought them down, they lost so much money on Saturn in the west that they couldn't afford to sustain Dreamcast even though it was selling well from 1998-2001. 

This.

Basically what Sega needed to do was fire several Japanese executives and/or have Tom Kalinske decide their worldwide strategy for the Saturn.  Kalinske knew both how to win and how to run a profitable business.  The Japanese arm didn't know how to do either.