When Nintendo was king, clever marketing gave Sega an edge

It’s easy to get swept up in stories of successful startups with revolutionary technology and visionary founders. These stories are inspiring and they make for great movies, but they only tell part of the story of a company’s success. In many of these stories, the marketing that gives a company’s story shape gets overlooked. It’s hard to overestimate the importance of marketing for startups.

Marketing isn’t the most exciting part of running a business, even if the TV show “Mad Men” paints a different picture. How the public sees a company has a huge impact on its early traction and growth, though. This can be seen even with large companies expanding to new markets.

Since we recently discussed the nostalgia economy, let’s take a look back at the early 1990s when the Japanese video game titans Nintendo and Sega were fighting for 16-bit supremacy in the U.S.

Though Sega was well-known in the Japan for its arcade games by the late 80s, it was relatively unknown in the U.S. It had an 8-bit system called the Master System, but it never gained much ground against the juggernaut that was the Nintendo Entertainment System.

Nintendo has single-handedly revived a dead video game industry in the U.S. The company was an effective monopoly in the industry for years until Sega decided it wanted to challenge Nintendo with superior technology.

The 16-bit Sega Genesis was certainly more advanced than the 8-bit NES, but the American public had no reason to buy a system from a company they had never heard of before. Enter: marketing.

Then-CEO of Sega of America Michael Katz is credited with the successful launch of the Genesis in the U.S. The launch was accompanied by an advertising campaign that brashly claimed “Sega does what Nintendon’t.”

After the “Nintendon’t” campaign, Sega sought to foster a more rebellious image with ads like these.

Attack ads would become a cornerstone of Sega’s marketing push for the Genesis, which is something Nintendo shunned. Though Nintendo’s own 16-bit system, the Super NES, would eventually outsell the Genesis 49 million to 29 million units, marketing turned Sega into a true competitor when no one else could challenge the video game giant.

Sega’s Master System sold just 13 million units compared with 62 million for the NES. The drastic change in sales with the Genesis shows the importance not just of Sega’s advertising, but its whole marketing strategy that shaped its image as an edgy outsider.

When Katz was pushed out of the company, Sega brought in former Mattel CEO Tom Kalinske. Kalinske was ultimately able to overcome the challenges of working with Sega of Japan, which had different views of how the company should be run. Sega of America went on to become the more successful arm of the company.

Under Kalinske’s guidance, Sega fostered a rebellious image with advertising that made Nintendo out to be the well-behaved teacher’s pet. It helps that the company had recently launched Sonic, the game with the speedster hedgehog that would become Sega’s mascot.

Having a game that looked faster and more exciting than Nintendo’s Mario helped, but perhaps a more important aspect to Sega’s story is that it allowed more games on its console. Nintendo tightly controlled what kinds of games could be played on its systems and how many a publisher could put out each year.

Sega’s more lenient terms democratized the video game industry. It changed what kinds of games kids could play and that in turn changed how people saw the company.

A series of missteps led to Sega eventually exiting the console business, although it remains the largest producer of arcade games. Yet an entire marketing strategy that shaped the company’s image as the anti-Nintendo gave it a competitive edge in what was at the time a one-man show. It also opened the market for Sony and Microsoft, which would later become dominant industry players.

Sega used negative advertising to juxtapose itself against its competitor, a fast mascot to reshape its image as a “cool” gaming company and gave game publishers the more flexible terms they were never able to get from Nintendo. The Genesis boom years also laid a solid foundation for Sega’s intellectual property, allowing it to effectively pivot when its console business couldn’t keep up with that of Nintendo and Sony.

The story of Sega’s fight against Nintendo is told in the book “Console Wars: Sega, Nintendo, and the Battle that Defined a Generation” by Blake Harris. The featured photo was taken by Ryan Somma.

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