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When Sega first announced that a 16-bit system was on the horizon, Nintendo executives did not take them very seriously. To them, Sega was no threat. Sega had been demolished in the 8-bit era, and the only profits keeping them afloat were coming exclusively from their arcade base (only to be swallowed by the black hole of debt surrounding the Master System). Despite Nintendo's nonchalance on the matter of 16-bit systems, other industry players were enthused. Trip Hawkins of Electronic Arts figured that Sega was creating a promising market, with a real future, "for which the price of admission was far less than Nintendo's."11

Sega was beaten to the punch when NEC's Turbographix-16 was released 6 months before the slated Genesis release. However, the Genesis would obliterate the Turbographix when it was released because of one key point: games.

NEC, who had a previous history of electronic entertainment such as CD players, VCRs, and computers, had never actually produced a video game. NEC executives did not know what to look for in a video game designer. Thus, the initial offering of Turbographix titles were very weak. Many game players marveled in the store over displays of "Keith Courage" only to be greatly disappointed when they finally got the system home and found the shallowness of the game.12

Realizing their folly for not designing a 16-bit system, Nintendo attempted to save the Turbographix, in hopes of turning it into the next Nintendo home console. They allowed certain third party developers to produce Turbographix titles.12 But this was too little, too late because Sega debuted its technically superior Genesis shortly thereafter, and quickly seized control of the market.

The Genesis debuted with a smash hit Sega arcade game packed inside (Altered Beast.) Several companies, including Electronic Arts, would initially leave Nintendo to produce Genesis titles. They would be followed by many more as time went by and a 16-bit Nintendo system was merely a rumor.

When the 16-bit Nintendo was finally released in 1991, two years after the Sega Genesis, many predicted it to take control of the market.12 However, because of the SNES slow processing speed, Sega was able to remain a strong player in the industry. Capitalizing on this, Sega produced a game based on speed. Sonic the Hedgehog, Sega's new mascot, was born. Incorporated in the game play of this revolutionary title, were various environmental themes that had become so popular in the media of the time. This little blue character would cause Sega's sales to soar, keeping the Genesis alive and well.

During this era, Sega used their popularity to experiment with alternative mediums. They produced several popular portable LCD games based upon their popular arcade and home games. Sega ventured into educational software and even designed a system specifically for this purpose. A CD system was produced (despite a failed attempt by NEC to do the same) which became quite popular.

One of the few legal battles Sega was involved in during the Fifth Generation was one that can hardly be called a battle. During the 16-bit era, Sega executives decided that the best way to compete with a company that used key-chips in their hardware was to include key-chips of their own in the Genesis. While the first shipments of Genesis systems lacked this chip, later shipments did not. Accolade, still under contract with Nintendo, but desirous to produce Genesis titles, created a sub-division of their company (calling it Ballistic, to avoid any conflict with Nintendoto) to produce Genesis titles. However, they had not become an official liscensee with Sega. Ballistic, exploiting the fact that most Genesis systems out at that time lacked the key chip, ignored Sega's requests that they cease production until a contract was signed. Because of this, a legal battle almost ensued. However, before it was taken to court, the two reconciled their differences and a contract that was beneficial to both parties was contrived. The contract dictated that for every one game Accolade produced on another system, they must produce five for the Genesis. While this seemed like a very good agreement at the time, later many would complain that this "created a situation where Accolade felt obligated to [produce] titles for the Genesis, whether they sucked or not."4