This interview with toy and game industry pioneer Tom Kalinske was conducted in June 2018 in Atherton, California. During his career, Kalinske served as CEO of Mattel, Matchbox, Sega of America, and Leapfrog, and oversaw the development of many notable products, franchises, and licenses, including Barbie, Hot Wheels, Masters of the Universe, Sonic the Hedgehog, the Sega Genesis, Game Gear, Saturn, and the LeapFrog LeapPad. Prior to joining the play industries, he served as a US Army tank commander, later transferred to military intelligence, and also worked as an advertising professional at J. Walter Thompson, where he initiated the branding of Flintstones Vitamins. For much of the second half of his career—including into his so-called retirement—Kalinske has been an energetic champion of, investor in, and mentor for educational-technology ventures, including Knowledge Universe, Global Education Learning, and Cambium Learning Group. Kalinske was inducted into the Toy Hall of Fame in 1997 and serves on the boards of directors for Dear Doodles, the Wisconsin Center for Educational Products and Services, Cambium Learning Group, and Genyous Biomed International. He continues to mentor educational technology start-ups, both on his own and through his cooperative partnership with GSV Labs, a Silicon Valley incubator. He holds a BS from the University of Wisconsin–Madison, an MBA from the University of Arizona, and he attended the Harvard Business School Strategic Management Program.
Given Kalinske’s long and diverse career, it is not surprising that he explores a variety of themes in the interview. Of special note is his attention to mentoring—to the ways he was taught and the way he taught others the business of play. The particular and essential details of interpersonal relationships often get lost in historical studies of the game industry and other media industries, in part because media artifacts and the industrial processes that create them are so complex and spectacular that they tend to dwarf human interaction (except in rare instances of titanic fights, fits of artistic pique, or political/public grandstanding). And yet it is precisely such workaday interaction upon which media and their industries are made. In Kalinske’s case, mentoring also ties together the many strands of his career, and in so doing hails the interesting and not inconsequential connections between the history of games and the histories of advertising, toys, and industrial attention to children’s health and well-being.
Likewise, Kalinske’s focus on management style is worth highlighting. The history of games would look very different without the liberty and productive fighting (for lack of a better term) Kalinske both benefited from and encouraged at Sega and elsewhere. Indeed, it is hard to imagine Sega’s success in carving out market share against Nintendo had Kalinske not been given the latitude to package Sonic the Hedgehog with the Genesis console or pursue an aggressive marketing campaign. This is not to argue a need or desire to return to a great man/great events vision of history, but simply to note that there are many moments in the historiography of games where a specific approach to team building and management is one (if not the main) key mechanism in shaping the industry, its artifacts, and its cultures.
We hope you find Kalinske’s reminiscences of his career and insights into the history of video games as we found Kalinske himself—delightful as well as illuminating. He truly embodies the spirit of play, a spirit that has informed the span of his professional and personal life.
Ken McAllister and Judd Ruggill: We would like to begin with some panoramic questions that ask after the sweep of your life and career. What is a key phenomenon or quality that has guided you in your life as a successful toy and game entrepreneur?
Tom Kalinske: That’s easy: mentoring. I had great mentors who helped me, and that’s why I feel strongly about trying to help other up-and-coming talent and companies. When I worked at the now-legendary advertising company J. Walter Thompson, I had a mentor named Bob Boyett who really helped me. Together, we, along with others, developed Flintstones Vitamins, which became a big hit. Later, I was hired by Mattel and I had a mentor there named Ray Wagner who became the president of the company. He really helped me grow as a product manager and then marketing director. He made it possible for me to love my Mattel experience despite the challenges. We helped grow the Barbie and Hot Wheels lines, as well as lots of other brands.
One of my professional disappointments at Mattel, of course, was that they took the Intellivision brand away from our toy division and set it up as a separate company. That was a kind of milestone in both the industry and my career because I then became known as the toy guy and Jeff Rochlis became the electronics guy. I think it’s because this bothered me back when it happened that I ultimately got so interested in video games later in my career.
After that, I went to Matchbox and spent three years turning that company around in Europe. Most of their business was in Europe, with only $100 million in the United States. It was a $350 million company, but it was in receivership and they were losing $50 million a year. Thanks to a great team, we turned things around in both Europe and the US. It was while I was doing this that I met Hayao Nakayama at Sega. He’d sought me out and showed me their 8-bit technology—the Sega Master System—and asked me to oversee its distribution in Europe. He’d seen what we’d been able to do with Matchbox, I guess, and thought I could do the same for Sega. I looked at the Master System and wasn’t that impressed. It just didn’t seem that different from the NES [Nintendo Entertainment System], so I told him that and turned him down. That really stuck with him, I guess, because a couple of years later he tracked me down again. I think it had stuck in his mind that “Kalinske doesn’t think my technology’s good enough. I’m going to show him.”
And that was the beginning of how I found another great mentor: the very same Hayao Nakayama. I was lying on a beach in Hawaii with my family, still employed by Matchbox, and Nakayama just shows up in a suit—at the beach! He was the CEO of Sega at the time, and he’d tracked me down through my assistant (which I wasn’t happy about) to interrupt my vacation. He said, “You’ve got to come back to Japan with me and see the new 16-bit technology.” I said I didn’t know what that was, and he started talking about how it was going to change everything and how I was going to love it.
At first, I wasn’t going to go. I was with my family and on vacation! But then, my six-year-old daughter, Ashley, said, “Daddy, that man came all the way from Japan to find you! You have to go back with him!” Who could argue with that? So I went back to Japan and saw for the first time the 16-bit Mega Drive—called the Sega Genesis in Europe and the US. I fell in love with it because to me, it was so different from anything I’d seen before. I’d never seen graphics like that or heard sound like that. I was just blown away. That was a really special moment. It’s hard to understand now, maybe, but you have to recognize that my previous media experience was mainly in broadcast television, which wasn’t interactive at all, and I hadn’t paid much attention to the Nintendo NES at that time because, again, I was the toy guy. So when I saw this handheld 16-bit color device that was going to become the Sega Game Gear—which is what Nakayama had really brought me back to Japan to see—I was floored. I thought to myself, “These guys could really have something here.” Their goal was to compete with the Nintendo Gameboy, and looking at this device, I started to believe they’d have a shot at it. Nakayama helped me see that future—which is what good mentors often do I think—and he also got me over to Sega, which turned out to be one of the greatest experiences of my life.
Later, I got hired by Mike Milken and Larry Ellison at Knowledge Universe to use technology to improve education. This was also a great experience for me. I was well funded, and over the next nine years we did thirty-six ed-tech companies, many of which are still very successful today.
TK: People say to me, “Oh, you’re so successful. You have a magic touch.” That’s not really true. I just have a knack for finding people who not only like to do their jobs but also enjoy passing along their skills—and see them improved upon—by others. This has been a persistent source of pleasure for me in my career. I’ve had great mentors, and I’ve also hired great people who seemed to me interested in being mentored. This has resulted in some really fabulous teams of people that have helped me be successful even as I’ve helped them be successful.
Key to the mentoring relationship is that both parties need to be willing to ask for help. When I was a marketing and economics guy, I didn’t know finance very well. I didn’t need that knowledge when I was an advertising exec at J. Walter Thompson. When I got to Mattel, however, I discovered that finance is the language of business—and I didn’t know that language. Ray Wagner there was really the one who helped me learn what I needed to know. He also sent me to Harvard, that thirteen-week intensive program they have. Between Ray, Harvard, and my day-to-day experience at Mattel, I not only got an excellent crash course in finance, but I also started to realize that being able to go and ask for help was something that could make a big difference when it comes to high-stakes business decisions. And there’s always more to learn if you’re open to it, if you keep your ego in check. I’d learned a lot about finance and then I met [Michael] Milken and [Larry] Ellison. Nobody knows finance better than Milken, and it was from him that I gained a whole other level of understanding about the capital structures of companies, alternative ways of financing start-ups, and that sort of thing.
All of which is to say that curiosity, a willingness to admit that I don’t know something, and other people’s generosity have afforded me a lot opportunities that I otherwise wouldn’t have had. I think I learned these habits from my father, who was a professor. He was very well-known in his field of hydraulic engineering and designing water treatment plants. He was very curious and would always ask questions about different things. He always encouraged me to do that, too. He was a very tough guy, though, and when I would ask him a question, sometimes his way of answering was to tell me to go find it out myself—and I would. I think he helped get me on that path of finding answers and new ideas by combining information learned from other people and digging into problems myself.
KM & JR: Is it fair to say that you see a direct connection between mentoring and innovation, that the play industries developed not so much because of the revolutionary ideas of a given designer or a technological leap forward of some piece of hardware, but by the determined, creative, and consistent labors of teams of people, each making small advances here and there?
TK: Yes, I think that’s exactly right. That’s why if you really look at the history of video games in particular, what you see is incremental improvements (hopefully they’re improvements!). Sure, if you look at the industry in ten-year, or even five-year, increments, it looks like a history of revolution after revolution. But if you look at the history more closely, month to month for example, then it’s really just all these short hops as competitors try to best each other in the moment. It’s also important to recognize that for us in the industry, the improvements that led to competitive advantages could happen anywhere in the business: the hardware, the software, the marketing, the distribution channels, the financing, anywhere. Of course we wanted to make the game play more involving, more interesting, and more addictive, but at the top of the company we were thinking about a lot more than that. Those things make games successful for sure, but so can a lower price point that undercuts the competition, or reaching into a market space that no one else has tapped. Plus, we were always thinking about the future.
I remember realizing while we were still making all those ROM cartridges in the 1970s and ʼ80s that I needed to be thinking about the industry years into the future. I knew—a lot of us did—that we were eventually going to need to get away from cartridges and move on to optical media. We could see that the demand for constant innovation was going to push us beyond what the ROM cartridge was capable of, memory- and cost-wise. Given where the size of games seemed to be headed—full-motion video, better sound, and what have you—we needed to find the next nearly affordable technology, get on that bandwagon, and learn how to do it. To return to the question of mentoring, I think that without the mentoring I’d received, I don’t know that I’d have been able to think so strategically, to think about the little picture and the big picture at the same time, then make the small changes that made big differences.
KM & JR: You have mentioned a number of people who were great mentors to you, and clearly you value providing mentorship yourself given your work at GSV Labs, the University of Arizona’s Eller College of Management, and the University of Wisconsin’s School of Business. Does mentorship happen only person to person, or can experience be a mentor too?
TK: I think mentoring is actually a combination of human relationships and experience, where they play off each other and ultimately teach someone how the world works. A case in point is the creation of Intellivision, which remember, I was kept out of. The backstory on that is this: the guys who ended up working on Intellivision from the marketing side and the product-development side were guys I knew very, very well. They’d developed toys—regular toys that were in either the boys division or the girls division (we had those two divisions for some reason)—and I supervised all of that part of the company at the time. One of them was Mike Katz, who was a marketing guy who first worked on regular games and then got involved in video games and in television. And then they brought in a guy named Jeff Rochlis, who was Mike’s boss, who knew about electronics. Both of these guys at some point had worked for me, as had another guy they brought in from the product-development area named Richard Chang, who was absolutely brilliant. These guys had done successful regular toy products for me and then all of a sudden my boss decides that electronics is an important enough market to make it a separate division. He called me in and said, “Tom, you’re not going with it, you’re the toy guy, you’re going to stay over Barbie and Masters of the Universe and Hot Wheels and regular board games and physical games. You’re not going to be involved in this new division.” It irked me that this exciting new area that we had started to grow was now not going to be part of my realm.
In time, I realized that this decision had been made because my division was already successful and to add something more to it, especially something fairly unproven, might have jeopardized that. And they were probably right. They moved everyone in this new division to a separate building and it became Mattel Electronics. And as you know, it became very successful. But it’s also important to remember that it was a quick burn—it’s that incremental change again. Mattel Electronics shot up and then it shot down. I was on the board of directors at that time and I remember talking to my friends in the retail world—remember we didn’t have the internet back then—who’d say, “There’s an awful lot of inventory here from Atari. And there’s an awful lot of inventory here from Intellivision, too. This whole thing’s going to collapse. It’s overheated.” So I’d go into the board meetings, and I’d say stuff like that, and the CEO—Bob Anderson—would pooh-pooh it saying, “You toy guys don’t know what you’re talking about when it comes to electronics. This is a completely different business and it’s here to stay.” There’s such a thing as countermentoring, by the way, teaching people by demonstrating what not to do.
Anyway, as you know, the whole industry then collapsed. And when Atari collapsed, Intellivision collapsed, which meant that Mattel itself was in dire trouble. The company had invested really heavily in the electronics division, and because we owned all these other businesses, everything was at stake, not just Mattel electronics. At the time, we had the toy division, of course, but we also owned Ringling Brothers and Barnum & Bailey Circus, we owned Western Publishing—which was a children’s book publishing company—we owned a tubular steel company, don’t ask me why ... swing sets, I guess. We owned a pet-supply company, we owned a film company, lots of things. Because of the video-game industry collapse, all these other non–video-game enterprises were in jeopardy. That’s the thing about video-game history: when you’re looking at all these extremely large companies that control that industry, the video-game industry is never just the video-game industry. It’s tied to lots of other industries, and from a financing standpoint, all these different industries are often being used to support each other. Coming to understand this was one of those moments where mentoring from friends and colleagues got combined with real-world experience to really teach me about how the world—or at least my part of it—worked.
So as a result of the collapse, Mattel needed working capital to keep the whole business afloat. Normally, Bank of America and a consortium of other banks provided us with this sort of thing, essentially giving us the money we needed for the first nine or ten months of the year until we got paid during the holiday season, at which point we’d repay the banks. But after the collapse, all of a sudden the banks told us they wouldn’t give us any working capital because of the collapse of Intellivision. Suddenly, the board of directors was faced with going Chapter 11 even though we’d been incredibly successful just the year before.
It’s one of my favorite stories what happened next. Chairman of the Board Art Spear and I went down to Wilshire Boulevard and met with Mike Milken at [investment bank] Drexel Burnham. We said, “Look, banks won’t finance us any longer, but here’s what we have. We’re going to have to sell off Intellivision and some of these other things to survive, but if we don’t do it quickly enough or get financing quickly enough we’re going to have to go Chapter 11.” Mike looked at us and said, “Barbie should never go Chapter 11. I’ll refinance you in forty-eight hours.” And he did! So, that was one of those now-famous subordinated debentures—what some people call junk bonds—that allowed for the refinancing and saving of Mattel. That’s why I’ve always had a really special place in my heart for Mike Milken because he didn’t need to do that. If we’d gone Chapter 11, who knows what would have happened, how many jobs would have been lost in Los Angeles, how many jobs out in City of Industry would have been lost where we had our warehouses and some manufacturing facilities. It probably all would have gone away. At one point I estimated that we’d lose five thousand jobs if we couldn’t refinance. Mike saved those jobs. I really learned from this, both from Mike and from the experience.
Now, was it expensive? Hell, yes. I mean at the time the interest rate was unbelievable—maybe 15 percent. And he had all these riders in there where he got extra stock in the company if the company was successful and survived. This was another moment when I learned some lessons. There I was, now the CEO of this new Mattel, and on the board of directors. But the board had also changed. Fast forward several years and He-Man’s successful, Barbie’s successful, but we’re still paying 15 percent interest. I remember going into a board meeting and saying, “This isn’t right. We’ve got to get out from under this debt and refinance it.” The trouble was, there were people on the board who actually held that debt and were getting that 15 percent payment. Needless to say, they didn’t like this discussion at all. That kind of talk, even though it was good for the company, was ultimately how I got (very gently) pushed out. They did it by making me co-CEO with a guy named John Amerman, a good friend of mine. But even though we were friends, I found being a co-CEO difficult. It just wasn’t my cup of tea. And so I left.
KM & JR: It sounds like when a company is working well—or when it has nothing left to lose—it is easy for people to be creative, to try new things, and put forward new ideas. To what extent has your own love of play, combined with your deep knowledge of toys and games, figured into your management style? Have those skills and predilections helped you in your guidance of Mattel, Matchbox, Sega, Leapfrog, and other companies?
TK: It’s figured a lot. Moreover, I think it’s important for everyone in these industries at a top management or board level. I feel quite strongly about this. To run a company built on playful products, you have to have a feeling and an understanding of play and interactivity yourself. You have to get why play is important. We had that at Mattel early on, but I think we lost it as the company became dominated by financial people. At Matchbox, we had it for sure because it was David Yeh—who ran a toy manufacturing company in China—and me, and some of David’s subordinates who were on the board. And at Sega, there was Nakayama, and me, and some amazing developers like Yu Suzuki. Nakayama would always say that he was a lousy game player, but that he could look at any game and tell you if it was going to be fun or not. He had incredible instincts. And at Leapfrog, we had it for quite a long time and then I think toward the end of my time there we started to lose it, again as more straight-laced financial guys got involved. To this day, I think the most successful toy and game companies have these kinds of individuals—people who know how to play—running things. Hasbro with Alan Hassenfeld and Brian Goldner, those guys really understand play and children, and they seem to enjoy their work. The people at Spin Master—Ronnen Harary, Anton Rabie, and Ben Varadi, three high-school buddies—really understand play and the importance of it. So, yeah, I think the more successful companies have leaders who get play, and those that don’t are less so.
KM & JR: It sounds as if you are suggesting that play objects have their origins in phenomena that predate the manufacture of any material product, beginning rather in the corporate culture that produces them.
TK: That’s right. For example, I was never a great video-game player. But to me, how the game felt when I was playing it, what the controls felt like or what was making me look at the screen, those were the important experiences to me. How does this game feel? Am I really enjoying it? Am I able to overcome at least some of the obstacles and progress in my ability to play? Am I continually challenged but not challenged so much that I want to give up, to go do something else? Am I brought to the level of where I’m just about not able to achieve a goal, yet somehow I manage to and get to keep playing? These kinds of feelings are so important. The rewards that stem from these kinds of experiences are what make me feel like a game is really great.
TK: Well, it might not be everyone who learns to work like this, but the key teams have to. I think that’s one of the things that somehow I managed to do relatively well. I used to talk about it a lot, especially at Mattel where we had two different product development groups—Product Development Engineering and Research and Development—plus the marketing people. When I started there, they all worked relatively autonomously, but I basically forced them to collaborate so that our product-development chain was more integrated. And after a while, they enjoyed it. The collaboration between a marketing person and a product-development person ultimately started turning out better products than we’d had for years.
I also forced collaboration through something we called category management, where I’d have one guy over both the marketing side and the product-development side and force them to have meetings, kind of like Walt Disney used to do. He used to bring everybody together and they’d put sticky notes all around the walls about what they were working on. They were basically sharing corporate knowledge and building collaborations out of this shared knowledge. That’s the kind of development philosophy I had at Mattel.
It was similar at Sega. Probably the best game player in the company was a marketing guy named Al Nilsen. He was such a good game player that the product-development people really respected him. Out of that, a natural collaboration occurred, and if Al said it was a good game, you could bet it was a good game. Sometimes, of course, Al said something wasn’t very good and needed to be fixed. That would annoy the product-development people, but it always worked out. I’ll give you an example. The head of sales at Sega was a guy named Richard Burns, while the head of R and D was Joe Miller. They were both great, especially at pushing their teams to produce great games. But what was really fun was to watch the interaction between Rich, Joe, and Al. They would yell at each other! I mean, they got really upset with each other in these meetings and would start hollering. Rich Burns (sales) would shout, “That damn game better be developed by August thirtieth! I need it! I’ve got to get it out to retail!” And Joe (R and D) would yell back, “That’s impossible! We just can’t meet that schedule!” And on it would go. But then after work I’d see them take off together to go get a beer. It was terrific, a great experience, a great atmosphere. They were playfully upset, pushing each other to see what new things could be made to emerge.
So, clearly, playful collaboration was something we had in spades at both Mattel and Sega. That’s why I emphasize that the successes of these companies were not due to me but rather to the teams that coalesced and overcame lots of obstacles. We were all pretty hard charging and shared a common goal of “Damn it, we’re going to do better than Nintendo.” Everybody bought into that, and it gave us a common enemy to defeat. It spurred on the product-development and marketing people, and it also spurred on the people who were working with the third-party developers to get them to produce great products for the Genesis platform instead of the NES platform.
In my assessment, it’s because our Sega team was so incredible, so aggressively creative in all aspects of the business, that we were able to change the industry. We proved that we could surpass Nintendo, which then opened the door for a lot of other companies to get into the video-game business. It helped Sony, which was doing just a little bit of software development when I was at Sega, to see how it could become a powerhouse in the industry. And the same is true of Microsoft. We opened the door by besting Nintendo, by showing that they weren’t impervious. I’m not saying we’re responsible for these other companies’ successes. I’m just suggesting that because we took on Nintendo and won, it emboldened other companies and let them get going a lot sooner than they would have if Sega had failed.
KM & JR: Given where the game industry was at that time, nascent and not fully differentiated from the toy industry, it must have been challenging to figure out what your job was on any given day. Video games are not like board games, or gambling, or sports in the conventional sense. They offer a distinct experience. As a result, you had to generate new knowledge about the industry and about consumer tastes based on new experiences, not the least of which was the question of what constitutes a good game. And all this was done in real time?
TK: Exactly right. And one of the ways we did that came from my experience at Mattel. We talked there a lot about what we called play value. Play value was a ratio of cost against our best estimate of the amount of time a child would be likely to play with something. (In most cases, we were dealing with children, not teenagers or college students, though the same principle can be applied to them, too.) We also tried to factor in how long they would enjoy it. Ultimately, I came to believe that video games have the greatest play value of any form of entertainment. We used to talk about building fifty hours of play into every game we turned out. In other words, it would take you fifty hours to complete the game. Sometimes it might take you one hundred hours to complete the game. But if it only took five hours, that wouldn’t be good enough and we’d have to build in enough levels of play to reach an optimal point of value per dollar spent. And I believe this is still true today. Today, games are sixty dollars new, but often have at least sixty hours of play in them. That’s a dollar an hour. And of course most of the time—back then and today, too—people play a lot longer than the target play-value time. Plus, if it’s a good game, they’re playing it over and over again. At that point, you’re getting down to pennies per hour of entertainment. Where else can you get that kind of value? You go to a movie, it’s two hours for fifteen bucks. That’s seven-and-a-half dollars an hour, not a great play value. Video games are incredible in this way. They’re so cheap!
KM & JR: Was it that realization about video games’ remarkable play value that got you thinking about how they might also be used in educational contexts?
TK: Well, it was a number of things to be honest. The economics of play value was one part, but so too were my experience of seeing how involving video games could be through their interactivity, the compellingness of the screen, and the ways characters and objects could become so attractive and memorable. Those were the things that made me wonder how we could use the same technologies to improve education. And that’s what got me going for the rest of my life at Knowledge Universe and helping to create educational technology companies. Specifically, it was from my experience with the Pico. The Sega Pico was meant to be a child’s first computer, basically—that’s how it was positioned. It was educational content on a television screen that kids played with via the Pico hardware, and it really worked. Children were learning to read faster than teachers had seen them doing before. When I saw that, I thought, “Here’s a great example of using video-game technology to make education more involving, more interactive, more fun, and more interesting.”
But there was another element of this shift in my professional orientation that had less to do with the potential of video games in education, and more to do with my happiness at Sega. As I’ve said, I mostly had a great experience at Sega. And I didn’t make it easy on them. After being with the company for just a few months, I went to the board of directors and said, “Okay, we’re going to take on Nintendo. We’re going to lower the price of our hardware, we’re going to include our best game in development right now—Sonic the Hedgehog—in with the hardware, we’re going to do more sports games, and EA is going to be our new main partner. We’re going to do more American licenses, we’re going to make fun of Nintendo in advertising, and we’re going to do a lot more development inside the United States because we can’t just rely on Japanese development.” The board members all gasped and thought I was crazy. I was stepping on all kinds of cultural and corporate toes. I was taking away a profitable sale by bundling Sonic and the hardware, I was potentially insulting Japanese business partners, and so on. I thought my career was over. Nakayama literally kicked over a chair, walked to the door of the board room, and said, “Nobody here agrees with anything you said, but when I hired you I said you could do what you wanted. So we’ll go along with you on this. It better work.”
And it did. As a result, for quite a long time I had Nakayama’s complete support. But that changed over time for reasons I’ve never fully understood. What I do know is that here in the United States, we were increasing and eventually passed Nintendo’s market share. The same was true in Europe where Nick Alexander was also getting results that allowed Sega to surpass Nintendo. But in Japan, Sega still just had a 10 percent share of the market. So Nakayama was walking into the local management meetings every Monday and beating the hell out of all these guys in product development, marketing, and finance. I can imagine that they’d grow to hate that over time, constantly being reminded about that damn Kalinske in the US who’s got a 55 percent share of market, and so does Nick in Europe, but we don’t. My sense is that the Japan group decided to stop helping the guys who were making them look bad. It wasn’t until after I’d left the company that I realized that I’d lost the support from Japan that I’d previously enjoyed. As things were winding down, I was forced to do things that were against my better judgement. I was forced to introduce the Sega Saturn before it was ready, for instance, before there was enough software for it. There were lots of things that happened around that time that just didn’t make sense to me and that ultimately made me feel like I didn’t have the support of Nakayama or the board any longer.
Needless to say, I didn’t feel like being forced to make bad business decisions, so that situation, plus the more positive things I’d been thinking about in terms of video games and education, made me decide to pursue something different. Actually, the way that finally happened was kind of funny. At Sega, we didn’t have a place to eat in Redwood Shores, so we’d walk across the street to Oracle and eat in Larry Ellison’s company cafeteria. We had to pay for lunch, but it was a great place and saved us from having to get in a car and drive somewhere. So Larry would see this group of people—half of us Japanese, the other half American—walk into his cafeteria and sit there eating and talking. Finally, one day he came down and said, “Who are you guys?” We said, “Well, we’re Sega of America. Our office is over there, but we like your cafeteria.” He just shook his head. That broke the ice, though, and I got to know him after that. Not much later, Mike Milken and Larry got together and started looking for opportunities to improve education through technology. And when they began to think about people they could partner with and who they both knew, I was the person they had in common. I’m convinced that’s why I was offered the position at Knowledge Universe. We all wanted to use technology to improve not just children’s education but also adult education and corporate training as well.
KM & JR: You have handled a number of iconic properties in your career: Barbie, He-Man, Matchbox, Sonic, and so on. It is easy to imagine how the experiences of developing these products helped hone your business acumen. What lessons have you learned from some of your business failures?
TK: I’ve had a lot of failures, my gosh, and they all taught me something. Wheeled Warriors was a big failure, even though we thought we’d hit on a foolproof formula for selling new toys: combine the toy line with a television show. So, we made the Wheeled Warriors toys, and the story line was that the Wheeled Warriors were mechanical vehicles that had morphed into the vegetation world and because of that were always part tree, plant, or vegetable. It was a weird story line, but we actually did a few television shows. Pretty soon, though, the whole thing fell apart. Nobody cared about the story so nobody watched the show ... or bought the toys.
The Bravestar toy line had a similar trajectory: toys and a TV show that ultimately didn’t work. A lot of us had thought that a TV show would make any toy successful. Nope. We learned the hard way that you have to have great toys to start with, and then a great story line. We clearly had this with He-Man and Masters of the Universe, and we clearly had it with Princess of Power. We even had it for younger children with Rainbow Brite and Popples. In all those cases, everything worked out, but it didn’t work for everything. Take Captain Power, for example—a great idea that just didn’t work. Captain Power was a line of toys that both emitted a light flash and received a light flash from our Captain Power television show. If you had your toys in front of the television, the light flash would turn on either Captain Power or his vehicle. Well, it sort of worked, but not completely, and it wasn’t a success. It was a failure based on an interesting idea: how do you create interactivity between a television show, a toy, and a kid? We know it’s a good idea because it’s still being tested with new toys right now.
The thing about Captain Power was that it was pretty expensive. I also don’t think the toys were good enough as independent toys, you know, just to play with. The story line wasn’t good enough either. A great story line makes people remember the toy or game and makes them want to be involved with it. We clearly didn’t have this with Captain Power. The fact is that toys require a kind of narrative to be successful. I used to encourage both the marketing and product-development team to “tell the story.” I wanted to make sure that kids connected to the toy through a story, to know why the toy was like it was.
I’ll give you an example. There was one story that I really liked back in the mid-1970s. It was the Sunshine Family. It was this doll family—a mother, father, and baby—and it came with a book that was reminiscent of the maker craze that’s going on today. Back then, it was a craft book and it taught the child to make things for the Sunshine Family, mainly for the baby. It showed how to turn a strawberry basket into the baby’s playpen, how to turn an empty thread spool into a table for the family, stuff like that. It basically showed how to make toys out of household things you’d ordinarily throw away: empty toilet-paper rolls, soup cans, and that kind of thing. The dolls were sold as a family, and that was the only way you could get the book. It was relatively inexpensive—maybe $5.95 or $6.95—and they were seven- or eight-inch dolls (the baby was smaller). But the craft idea, I thought, was what was so essential to it, especially with the family connected to the crafts. The book talked about how the mother and father loved each other, and they’d had a baby. The father had a wedding ring on his hand. It was a really nice story about how everyone was going to help the baby develop and grow. Children really responded to it.
I don’t know if this sense of a backstory or raison d’être is still as important for toy and game developers today. In my day, though, we always talked about the story for every game and toy. In fact, for games, we storyboarded everything and created a game bible. This was a big book that contained the game’s story and backstory, sample art, the script, everything about the game. Before everything got bound into a book, these things would be plastered all over the walls of the rooms where the game was being developed. I don’t know if they still do that or not. I remember that the guys who worked on Jump here at GSV didn’t seem to be doing this, at least not with physical paper. But maybe they were doing everything on computer.
KM & JR: Given your considerable familiarity with the development of toys and games—including video games—what are their similarities and differences?
TK: I would argue that both need to have a background story and a reason for existing, but great toys (including games) really inspire imaginative play. Take Barbie for instance. I think people get what Barbie is all about wrong most of the time. I really believe in what Ruth Handler, the founder of Mattel, told me back in 1973. Barbie had just had its first decline in sales ever, having fallen from 100 million to 42 million. She said, “Tom, my sales force says Barbie’s over, my retail buyers say she’s over, and the Wall Street analysts are asking why we’re still messing around with Barbie. What do you think?” I said, “Ruth, that’s the stupidest thing I’ve ever heard. Barbie will be around long after you and I are gone.” She said, “That’s what I wanted to hear. You’re now the marketing director on Barbie.” But before she left my cubicle, I asked her what she thought made Barbie so great, and she said, “With Barbie, a girl can be anything she wants to be.”
And that’s what makes every great toy. If we allow children’s imaginations to help make the toy—not overdesign it so that it can only be the physical object that’s there—it can inspire a kind of play that’s incredibly deep. Games can also be very inspirational. Look at Sonic the Hedgehog. Sonic’s kind of a smart-ass, you know? He’s like a teenager, one who wants to do the right thing but doesn’t always start down the right path. He gets there eventually, but it takes some trial and error. I think there’s a lot of that in the whole Sonic franchise. His personality is what people really connect with.
With video games, you have screen play, whether it’s a computer screen or a TV screen or a mobile-device screen. Screens give us an opportunity for very deep involvement, more even than with a physical toy. We can get really wrapped up in what’s happening on that screen with that character, especially when we’re controlling things. It’s past what your imagination is capable of; you’re seeing it in a kind of real life. This gets back to what I was saying earlier about video games offering more play value (entertainment per hour per dollar spent) than any other form of entertainment. The screen involves you at a much deeper level than a physical object on the floor. You’re putting yourself into that environment that you can see before you and it’s very immersive, very interactive, and challenging. But not so challenging that you want to quit.
KM & JR: As someone who has made a career out of marketing one product with another—toys with cartoons, games with food, educational computers with video games—how do you think about the role of merchandising in the play industries?
TK: Well, I’ll say this: you can make one hell of a lot of money off the merchandising that emanates from a toy line, game, or television show. I’m not sure of the figures anymore, but I know that, for instance, more money was made from all Star Wars merchandise than attendance at the actual movies. With a successful license, you’re talking about hundreds of millions or even a billion dollars. The idea is to spread the love so that it all blends together: you love the movie, love the game, love the toys, love the clothes and bedding and posters, and so on. All that love gets converted into sales. And the sales feed each other: I need shoes to go with the shirt. I need a shirt to wear to the new movie. I need a night-light to go with the sheets. That’s what happened with He-Man. That’s what happened with Sonic the Hedgehog.
KM & JR: Speaking of merchandise, you have quite a collection of Sega artifacts from your days leading the company. Do you have any favorite items or stories about the items in your collection?
TK: Well, it’s not the collection you have at the Learning Games Initiative Research Archive, but it’s definitely got some unique things. There’s a Sega store-display kiosk that could play up to six downloadable games. I’m not sure it ever made it past the demo stage of development, but it looked great. I’ve also got different versions of the infamous Night Trap. Somebody asked me the other day, “Weren’t you embarrassed to do that?” I wasn’t. We’d done it as a tongue-in-cheek project, a kind of homage to the B movie genre. But people didn’t take it that way.
I’ve got Fantasia, too. That’s a great story. It’s based on the famous Disney movie, of course. We’d done a beautiful game based on it, and we’d produced fifty thousand cartridges right across the bay, in Fremont, California. We were just about to start shipping and I got a call from the head of Disney’s licensing area, and he says we can’t ship the game. I told him we’d already shipped a few hundred and were just about to send out everything else. He told me we had to keep any more from going out, and we had to get the ones we’d already shipped back! I asked him why, worrying that, oh my god, did one of my developers put an Easter egg in the code and a naked woman jumps out or something. He says he’s flying up and that he’ll explain everything when he arrives. So he flies up from LA, I pick him up at the airport, [and] he says we have to stop everything because Disney screwed up. His people didn’t know that before Walt died, he’d said to never license Fantasia. His nephew, Roy Disney, was still alive and reminded everybody of that and demanded that we get all the cartridges back. “It’s against Uncle Walt’s desires,” he says. So somehow we have to get everything back. I tell my buddy that this is going to cost a lot of money, not just because of the lost sales and profit off the game, but also because it was going to take a lot of money to go around retail America getting all those stray cartridges back. But we did it. After that, Disney owed us a big favor, and we always got more favorable licensing terms with them from then on.
I’ve also got a full-sized Sega Baywatch pinball machine that the developers coded to print “Welcome to Tom Kalinske’s Game Room” on the LED display between games. It also has audio that says “Baaaaay Waaatch,” like the Sega jingle. Very funny. In my file cabinets I’ve got a few game bibles and various paperwork. Lots of stuff. Someday I need to go through it all.
KM & JR: With the understanding that this interview is being published in ROMchip, a journal specializing in the historical study of games, what are some histories game scholars should dig into?
TK: One of the things I’ve always wondered about is what if Sega hadn’t come along. What would have happened to the video-game industry? Would it have just been Nintendo forever, the end? Or would, as usually happens with large corporations, Nintendo have eventually stumbled and gone down? If that had happened, what might have happened next? How would Sony have fared? They didn’t even know how to program games until we taught them. That’s a fascinating period of time to me, partly because I was there, of course, but also because so many new avenues were being established for the industry. It would be a speculative research project, I suppose, but an interesting one.
I’m also curious about patterns in the history of the console business. For example, the demise of the console has been predicted repeatedly, but it keeps not happening. Why not? And now with so much digital distribution, cheap but powerful computers, and VR [virtual reality] and AR [augmented reality], will these things spell the end for consoles? Or launch a new generation of them? I’ve played around with a bunch of VR hardware, and in addition to it being amazing, it’s also exhausting. I wonder how designers are thinking about the length of games, when those experiences are not being done from the couch but have players standing, running, turning, bending, and so on. That’s a lot of activity for a fifty- or one-hundred-hour game. So will VR games be shorter than non-VR games? Or will they have a different set of design principles that take into account the physical limitations of the body?
I’ve also always wanted to read about the negative side of Nintendo’s impact on the game industry. Everybody thinks about Nintendo and its role in saving the industry, but they were a dominant, dominating force. It was really frustrating. There was real fear in the third-party development world that if they dared to develop something for Sega, they’d be punished by Nintendo. That was a huge economic club that Nintendo held over their head, and it worked. The same was true with retailers, which really amazed me. I’d never seen retailers cower to a company like they did to Nintendo. Of course, Nintendo was making them massive amounts of money, but for even a company like Walmart—which at the time was the largest employer in the United States and growing at top speed—for them to be afraid of Nintendo was amazing to me.
Currently, I’m intrigued by online games that are never finished, where developers keep adding to them with new features and other downloadable content. With all the microtransactions and special powers/weapons/costume purchases, are players paying far more than the old $50-retail game purchase?
There are so many details in the history of this industry. So many lives and stories that need to be told. There’s lots of work to be done, and I’m glad that people are starting to do it. I know that for me, I never would have been able to have this journey if it wasn’t for the support and help of my beautiful wife, Karen, and our six playful kids.