Tom Kalinske is one of those visionaries in the game industry who made it what it is today. One of those people that, if they did not jump into the industry, it would probably be vastly different and perhaps not as big as it is. As the Chief Executive Officer of Sega of America during the Genesis days, he took the company to heights no one could have even when Nintendo Entertainment System console ruled the industry with an iron fist.
Tom also had an important role in quite a few other sectors that he recently addressed when
he was gracious enough to take some time out of his schedule to sit down with Rich from GamesRelated.
For those that may not be familiar with your significant role in home entertainment, could you start off by telling us a little bit about yourself?
I was raised in Tucson Arizona where I sang in Tucson Boys Chorus. The singing group travelled the US, Canada and Australia, singing.
I earned my Bachelor’s of Science degree at the University of Wisconsin, finished my master’s at the University of Arizona.
I was hired by JWT in New York in group that developed new products for existing clients. I also worked on Chunk King Frozen Egg Rolls and then later Flintstones Vitamins for Miles Labs.
Hired by Mattel to be a Product Manager on Preschool Toys (See n’ Say, Jack in Box, Putt Putts, Tuff Stuff). I moved onto Barbie business in 1973 when business was $42M, started re-building it fast with a great team to $350M. In 1975 I became a Vice President and I was promoted to VP over all toys in 1976.
Next I re-built the Hot Wheels brand with another team and worked on finding a Male Action line for Mattel which became He-Man, Masters of the Universe.
I started work on handheld games which eventually became the Intellivision Division (separate from Toys) and eventually became President of the toy division at Mattel. Several other Mattel Divisions had financial difficulty in 1980 like Western Publishing, Ringling Brothers, Intellivision, etc. and they were all sold except for the toy division.
In 1985 I was made Co-CEO of all of Mattel. I’d met my wife Karen at Mattel and since then we’ve since had five kids.
I left in Mattel 1987 to join with David Yeh to buy & fix Matchbox toys out of receivership in the UK which we turned around to profitability by 1990.
Met several times with Nakayama-san, CEO of Sega, who wanted me to run Sega of America, whick I eventually said yes to. I then helped build Sega to $1.5B in the US and $900M in Europe.
I left Sega in 1996 to join with Larry Ellison and Mike Milken in forming Knowledge Universe as President. We start or buy education companies using technology to improve education. Over the next 9 years we started or bought over thirty companies, including Leapfrog. I became it’s CEO while also serviing President of Knowledge Universe.
I took Leapfrog public in 2002 when revenue was $350M, and built it to $650M. I decided to step down as CEO in 2005, but I still serve on the board. I serve on the Cambium Learning Group board and am Chairman of Global Education Learning
Thes days I spend most of my time with Education Technology companies.
What made you decide you wanted to be a businessman?
I liked both marketing and finance in college so it seemed natural to me. In particular I was excited about developing new products. Many companies only develop a few new products each year but the toy and video game companies develop a great many and I found that very exciting.
During your days with Mattel you launched the “Masters of the Universe” line of He-Man toys. How did the idea for this line come about?
Hasbro, Mattel’s main competitor, had GI Joe & Star Wars, but Mattel had no male action Line. So we decided to research every conceivable theme, character, license to see what boys liked, it turned out that this muscular, heroic, guy who lived in a fantasy world was the most popular, we develop d his friends and enemies (Skeletor) who fought it out in Castle Greyskull, developed a background story explaining all this and launched.
Did you know you had a hit on your hands at the time?
It didn’t take long, we had great advertising, that all ended with He-Man raising his sword and shouting ” I have the Power” , figures flew off the shelf, we had to raise our manufacturing plan, do extra tooling and couldn’t really catch up with sales that first year where we did almost $75M.
In the book “Console Wars” by Blake Harris, Sega is described as being in a little trouble. According to the publication you were wooed there during a family vacation in which then Sega Enterprises President Hayao Nakayama approached you while you were relaxing on the beach. Is this correct?
Yes, but we had met previously and knew each other.
Have you ever been in that sort of situation before where a potential employer interrupts your vacation while you are literally laying on the beach?
No but lots of vacations were interrupted by problems with companies that I was employed with, it goes with the territory.
During your tenure with Sega you seemed to be at odds with your Japanese partners quite often. Was this the case much of the time with Sega or are the examples in the book as far as it went?
During the first few years at Sega I knew most of the executives in Japan disagreed with my aggressive marketing and product development plans, however Nakayama –san always agreed, we executed well and since we were successful I didn’t think too much about the disagreements. I was always treated well on my visits to headquarters in Japan and it was clear we were more successful than they were in Japan or other markets.
Sonic the Hedgehog has an interesting story. He was supposed to look quite different wasn’t he?
Yes, that original Japanese design had him with sharp fangs, very sharp spikes and a buxom blonde girl friend Madonna; he was very aggressive and looked somewhat sinister, we recommended changing that.
It’s widely publicized that you were set against the Sega Saturn. Can you describe your concerns with the console at the time?
My team and I had several concerns, we didn’t think the graphics provided enough of a difference to 16 Bit. 3-D wasn’t good enough, but most importantly we didn’t have a key clear hit title to drive the business at the time of the launch. Then the launch date was ordered by the Sega of Japan board to be June which was way too early. We didn’t have enough hardware or software to launch then and I had been arguing that the Fall was too early and that we needed to keep Genesis alive longer until we could develop better software titles for Saturn, but I was overruled.
Were there other console ideas being worked on at the same time?
Yes, there were several others. One was from a chip set that Silicon Graphics had developed. My head of R&D Joe Miller and I thought that was better than what was in the Saturn, but the hardware design team from Japan disagreed. That chip later became N-64’s main engine.
You pulled Sega virtually out of the rookie category into a serious contender for gaming console market share with the Sega Genesis and the “Sega Scream” campaign. How satisfied are you today of where you were able to take Sega?
So I’m glad we went after an older audience, developed the first rating system, helped form the Industry Association and the E3 show and passed Nintendo in share of market for a period of time which opened up the business to others.
I’ve always felt that Sega could have been so much more; felt that if they had agreed to my plan to develop the next hardware platform with Sony, where Sega and Sony each shared the inevitable loss on the HW sales but mutually benefited from their own software sales on the combined platform that the company would have been much better off. While we did two different Sonic TV shows in the US, I also felt they could have done more in using Sonic and other characters for entertainment, movies, DVD’s and in using video game technology to improve education. I Guess I’m satisfied with what I helped to do – helped change the industry – but wish the impact was longer lasting for Sega.
Are there people that you absolutely counted on and had implicit trust in that you believe were crucial to your success at Sega?
Yes, a great many; Paul Rioux, COO, another ex- Mattel guy, Al Nilsen, Director of marketing another ex – Mattel guy, Joe Miller, VP of R&D, Shinobu Toyota, Executive VP and my right arm and the deflector of Sega of Japan questions. In addition there was Madeline Canapa Schroeder, Director of Marketing and mother of Sonic, Diane Fornasier, Director of Marketing, Ellen Beth Van Buskirk, Director of Communications and Public Relatios, Rich Burns VP of Sales,…and too many others to mention.
What made you decide to leave Sega?
By 1995 it was clear that Nakayama-san couldn’t continue to overrule his management team in Japan even though originally he had said that I could make the decisions for the US. I was being overruled, I disagreed with the launch of Saturn and at the same time Mike Milken and Larry Ellison were after me to join with them in using technology to improve education, which was and is a passion of mine, so I quit to help form what became Knowledge Universe.
Sega has gone through a lot of turmoil lately, first with layoffs and restructure and now with their announcement that they will have no booth at E3 this year. How concerned should the industry be about the state of Sega?
Sega Sammy is still a profitable company, however the revenue from it’s Sega Consumer products (mostly Games & Toys) is down to about $800M worldwide, about half in the US, and the focus of the corporation is on Japan, Resorts, Pachinko, TV Shows, Movies, Licensing,…less interest in the US, Europe and rest of Asia. So I’m not sure Sega Corporate care that much about the packaged or download app game business in the US.
If you were to jump back in the saddle at Sega, do you have any ideas how they could turn it around?
Yes I do, think it Sega could be rebuilt to be a very powerful video game company in the US/Europe without having to re-enter the HW business. But I’m not going to share my ideas/ thoughts right now for free. I don’t think Sega understands the value of their brand or the value of their IP, particularily the value of Sonic, fear they will screw it up, diminish the value further.
After Sega you moved into the educational sector. What drew you to that decision?
Ever since Mattel, maybe because I had so many children, I was interested in using new technologies to improve how kids learned. I had served in my spare time on the UCLA Graduate School of Education Board of Advisors, the RAND Think tank on Education Policy, the Keys School Board in Palo Alto, the National Education Associations’s Foundation Board, the University of Wisconsin and Arizona’s Graduate School of Business Board of advisors, and was involved in lots of other education issues. I felt then and still feel that we can help every child/person learn better faster/better through the use of technology much of which comes from the video game industry.
You’ve worn many hats in your very successful career including tenures with Mattel, Matchbox, Leapfrog and of course Sega. Is there one company that sticks out in your mind as being the most fulfilling?
I would say that Mattel, Sega and Leapfrog have all been very fulfilling. I felt like I was with great people, making a difference and doing good things.
Some people may be reading this and think to themselves that they would like to be a business executive someday. Do you have any words of advice that may help nudge them in the right direction?
Sure, even though you may not like finance , study it as it’s the language of business – if you moved to Spain you’d probably learn Spanish – respect the creative people; the engineers. Learn to work with them, learn to develop strategies that are different what your competitor is doing or perhaps can do and remember the experts are always wrong.
Ok random question time. You need a partner to take on a new business venture and you’ve got the entire Masters of the Universe lineup to choose from. Who would you choose to partner with and why?
SheRa. she’s beautiful and smarter than He-man.
GamesRelated would like to thank you for taking a time out to chat with us! Any parting shots for our readers?
Keep playing and do good things.