Recaps

Takuya finalized Sega’s Pokémon anime deal with GALLOP, securing a large, guaranteed production and Kunihiko Yuyama as chief director. He then tasked Mr. Suzuki with expanding Pokémon merchandise through San-X, whose strong position made negotiations difficult.

• Takuya insisted that Sega retain all Pokémon IP rights and offered GALLOP twelve million yen per episode for a guaranteed hundred-episode anime.
• Takuya promised further investment in theatrical films if the anime succeeded, and Akio Wakana agreed to the terms.
• Takuya required Kunihiko Yuyama to serve as chief director, and the two companies finalized the Pokémon anime project.
• After leaving GALLOP, Takuya assigned Mr. Suzuki to lead merchandise promotion, especially plush toys, and negotiate with San-X.
• Mr. Suzuki warned that San-X would be difficult to persuade because of Hello Kitty’s popularity, its stores, and its sales channels.

Nakayama Takuya advised Mr. Suzuki to pursue a Pokémon co-branding deal with San-X while investigating Mattel, Bandai, and other toy makers as leverage and backup options. Mr. Suzuki began researching and drafting a negotiation plan, while Takuya returned to overseeing the electronic pet project, which was nearing integration testing.

• Nakayama Takuya told Mr. Suzuki that Pokémon's value was not yet established and set a Pokémon x San-X co-branding partnership as the main goal.
• Nakayama Takuya asked Mr. Suzuki to investigate Mattel and Bandai as potential alternatives and bargaining leverage.
• Mr. Suzuki returned to Sega headquarters, researched the companies, and began drafting a contact plan and negotiation outline.
• Nakayama Takuya reviewed the electronic pet project, noting that hardware samples were awaiting tests and software development was approaching integration testing.

On Dragon Quest’s release day, Tanaka Kenichi skipped work to buy the game and became absorbed in its world and turn-based battles. His landlord, Mrs. Sato, arrived with a community notice and remained at the doorway, captivated by the game on his television.

• On May 27, 1986, crowds gathered to buy Dragon Quest as it went on sale.
• Tanaka Kenichi got permission to leave work under the pretense of visiting a client and conducting market research, then queued to buy the game.
• Tanaka returned to his apartment, started Dragon Quest, and explored Tantegel before fighting slimes in turn-based combat.
• As Tanaka played, Mrs. Sato arrived with the community circulation board and asked what he was playing.
• Tanaka explained Dragon Quest to Mrs. Sato, who stayed in the doorway watching the television.

Tanaka played Dragon Quest with Mrs. Sato, who became so absorbed that she planned to buy a copy and began introducing the game to Mrs. Kawai. After a week of work, Tanaka returned home with snacks and found Mrs. Sato enthusiastically trying to persuade her neighbor to play.

• Tanaka invited Mrs. Sato to play Dragon Quest, and she cheered him on as he explored a cave, found a copper sword, and defeated a spell-casting monster.
• Mrs. Sato stayed until sunset, then asked whether Tanaka had bought Dragon Quest in Akihabara before hurrying home to make dinner.
• Tanaka saved his game, ate instant noodles, and remembered that he had skipped work and still needed to complete his visit record and market survey report.
• After finishing a week's work, Tanaka bought bags of snacks and drinks and found Mrs. Sato telling Mrs. Kawai how enjoyable Dragon Quest was.
• Mrs. Sato thanked Tanaka for introducing her to the game and offered to show Mrs. Kawai how to play, while Tanaka awkwardly escaped into the stairwell.

Tanaka helped Mrs. Sato and Mrs. Kawai with Dragon Quest as the game drew neighborhood players into its world. Meanwhile, Sega’s Out Run found a steady arcade audience, but Yu Suzuki saw that Dragon Quest still dominated public attention.

• Tanaka paused Dragon Quest to buy a drink, then told Mrs. Sato that she needed the Sunstone to explore the dark cave and should ask for information in Maira Village.
• Mrs. Kawai asked Tanaka whether money earned from defeating monsters could be spent in the game’s shops, and Tanaka returned to his room amused by the neighbors’ new interest in gaming.
• By late June 1986, Dragon Quest’s popularity had spread through newspapers, households, and public conversations, strengthening Nintendo’s position in the console market.
• Sega released Out Run in arcades, where its first-week revenue met expectations and players returned for its routes and music.
• Yu Suzuki reviewed Out Run’s early reception with the AM2 team and recognized that Dragon Quest’s frenzy had left Sega’s technically impressive game outside the spotlight.

Yu Suzuki and Sega’s teams assessed Out Run’s role alongside Fatal Fury as Dragon Quest dominated the market. Sega then launched a nationwide Fatal Fury tournament, and Nakayama Takuya organized the preliminaries as a spectacle designed to raise the game’s popularity and introduce esports to players.

• Yu Suzuki said Out Run’s technical strengths made it a long-term arcade asset despite the market’s focus on Dragon Quest.
• The AM2 group leader and Development Team 2 deputy leader described how Out Run complemented Fatal Fury and attracted different players.
• In early July, Sega advertised the first Fatal Fury esports tournament, prompting players across the country to train for the city qualifiers.
• Nakayama Takuya instructed the marketing team to standardize competition machines and use announcers, player stories, commentary, and audience activities.
• Nakayama Takuya said the tournament would expand Fatal Fury’s popularity, introduce esports, and strengthen Sega’s influence among young people.

Bai Ye overcame a shaky start to win his first Fatal Fury tournament match. Nakayama Takuya watched the event’s growing crowds and media coverage, then sent a subordinate to report on audience reactions and public opinion.

• Bai Ye lost the first round against a veteran opponent after struggling to execute his combos.
• Bai Ye adjusted his strategy, exploited the opponent’s recovery openings, and won the second round with a combo.
• Bai Ye won the third round by a narrow margin, then reported his result at the counter.
• Nakayama Takuya praised the authorized shop’s event and told his subordinate to survey the competition zones, audience response, and media reports.

Six-year-old Daigo Umehara visited an arcade for the first time after hearing adults discuss a Fatal Fury tournament, and the experience sparked his desire to become a skilled player. The chapter leaves him unaware that Tokyo’s tournament was becoming a major media event, with contestant Bai Ye gaining attention.

• Daigo Umehara overheard adults in his Aomori town talking about a Tokyo Fatal Fury tournament and its five-million-yen prize.
• Daigo and his friends entered the local arcade, watched a match, pooled their coins, and tried playing Fatal Fury themselves.
• After losing their game, Daigo and the other boys watched more matches until parents began taking them home.
• Daigo replayed the arcade’s sights and sounds on his way home and wondered whether people would cheer for him if he played well.
• A local newspaper reported on the arcade’s popularity, while Tokyo newspapers and television covered the tournament as a new esports spectacle.
• Tokyo media highlighted contestant Bai Ye as a Chiba high school student who had defeated several opponents.

Sega executive Nakayama Takuya addressed equipment failures, anti-gaming criticism, and illegal betting as the tournament expanded to Tokyo’s representative selection. Bai Ye advanced through tough matches, earned attention after a comeback victory, and hurried away from a reporter to prepare for his next fight.

• Nakayama Takuya ordered equipment inspections, public-relations responses, and strict action against gambling after reviewing problems from the city preliminaries.
• Nakayama Takuya staged the Tokyo representative selection tournament at Tokyo Institute of Technology’s gymnasium as a rehearsal for the Budokan finals.
• Bai Ye entered the larger, more professional venue and advanced through several difficult matches using Andy Bogard.
• Bai Ye overcame a seasoned Joe Higashi player by waiting for an opening and countering with Shadow Slash Punch and a practiced combo.
• A The Television reporter interviewed Bai Ye after his win, but he gave brief, awkward answers and hurried off to prepare for his next match.

Bai Ye faced Nagai Kenta in the semifinals, losing the first round before adapting and taking the second with a precise counterattack. Nagai won the deciding round 2–1, ending Bai Ye’s tournament run as the crowd applauded both players.

• Bai Ye fought Nagai Kenta’s Terry and lost the first round to Nagai’s relentless pressure and combo.
• Bai Ye changed tactics in the second round, kept his distance, and punished Nagai’s missed Burn Knuckle with a practiced combo to win.
• Nagai abandoned his probing approach in the deciding round and used feints and experience to keep Bai Ye under pressure.
• Nagai anticipated Bai Ye’s jump with Power Dunk, then broke Andy’s guard and finished the match.
• Bai Ye lost the semifinal 1–2, and the venue applauded Nagai’s victory and Bai Ye’s performance.

Bai Ye lost to Nagai Kenta in the semifinal but won the third-place match, earning Tokyo’s final spot in the national tournament at the Budokan. Sega secured Fuji TV broadcasts for the tournament, and six-year-old Daigo Umehara became determined to watch the finals.

• Nagai Kenta congratulated Bai Ye after defeating him and encouraged him to make it to the Budokan as a Tokyo representative.
• Bai Ye used what he had learned from Nagai to win the third-place match 2:0 and qualify for the national tournament.
• Bai Ye told The Television reporter he was excited to qualify and would train harder for the national tournament.
• Nakayama Takuya learned that Fuji TV had agreed to broadcast selected tournament matches and ordered a promotional campaign centered on Bai Ye and Nagai Kenta.
• A few days later, Daigo Umehara watched a televised recap of Bai Ye versus Nagai and resolved to watch the live-broadcast finals at the Budokan.

Yamauchi Hiroshi learned that Sega’s Fatal Fury tournament was thriving while Nintendo’s Super Mario Bros. 2 was receiving criticism for its difficulty. He ordered surveillance of Hudson and NEC and threatened to use Nintendo’s control of cartridge production and promotion against third-party developers.

• A manager reported that Sega’s Fatal Fury tournament had attracted strong attention, earned positive media coverage, and secured live broadcasts of its national finals.
• Yamauchi Hiroshi learned that efforts to undermine Sega through negative narratives and gambling pools had failed.
• The manager reported that Super Mario Bros. 2 sales had fallen short of expectations because players found its difficulty punishing, and Yamauchi Hiroshi blamed marketing or players rather than his own judgment.
• The manager revealed that Hudson had been meeting frequently with NEC to discuss a graphics chip or new gaming platform, recalling that Yamauchi Hiroshi had rejected Hudson’s chip proposal in 1985.
• Yamauchi Hiroshi ordered close monitoring of Hudson and NEC and instructed the manager to pressure restive third-party developers by threatening delays to cartridge production, reviews, and promotion.

Nintendo cut the initial cartridge shipment for Hudson's Takahashi Meijin's Adventure Island, deepening the company's conflict with the platform holder. As Capcom reassessed its priorities and Namco and Konami followed cautious or cooperative strategies, third-party games struggled for attention amid Nintendo and Sega's rivalry.

• A Nintendo specialist told Kudo Hiroshi that Nintendo would reduce Adventure Island's first shipment by twenty percent, and refused to negotiate.
• After the specialist left, Kudo Hiroshi angrily denounced Nintendo's treatment of third parties and told Kudo Yuji to accelerate Hudson's discussions with NEC about a new platform.
• Tsujimoto Kenzo weighed Capcom's arcade development against the need to satisfy Nintendo after the company received indirect criticism over its Famicom output.
• Namco continued to follow Nintendo's rules after its earlier warning, while Konami pursued active cooperation and released Castlevania for the Disk System.
• The attention surrounding the Fatal Fury tournament and its upcoming national finals broadcast left third-party games struggling to attract notice.

The Fatal Fury national finals opened at Tokyo’s Budokan, where teams from all forty-seven prefectures gathered for a three-player elimination battle. Bai Ye entered as the Tokyo Team’s vanguard against Hokkaido, and his match began with the story left on the opening face-off.

• Nakayama Takuya watched the packed Budokan prepare for the Sega Fatal Fury national finals.
• The host introduced the team wheel-battle format and announced the day’s elimination bracket.
• Bai Ye joined Nagai Kenta and their teammate onstage as the Tokyo Team faced Hokkaido.
• Tokyo assigned Bai Ye as vanguard against Hokkaido’s bearded Terry Bogard player, and their match began.

Bai Ye led the Tokyo Representative Team to a clean opening victory by defeating all three Hokkaido players in succession. As the first day of the national finals ended, Yu Suzuki reflected on the audience’s stronger response to competitive fighting games, while viewers across Japan waited for Fuji TV’s highlights.

• Bai Ye used Andy Bogard to defeat the Hokkaido Team’s first player, Terry, 2:0 and win the opening match for Tokyo.
• Bai Ye adapted to the Hokkaido middle player’s Mai Shiranui and defeated him 2:0 with precise anti-air attacks.
• Bai Ye beat the Hokkaido anchor in an Andy mirror match, including a perfect K.O., completing three consecutive wins.
• During the midday break, Yu Suzuki noticed that the audience was less excited by Hang On and Out Run than by Fatal Fury.
• The first day ended with the top eight teams decided, and Nakayama Takuya praised the operations team as Fuji TV prepared its highlight reel.
• Daigo Umehara and his friends gathered at an electronics shop to watch Fuji TV’s coverage of the matches.

The Tokyo Representative Team fought through the quarterfinals and semifinals to reach the national final, where Bai Ye won two difficult matches against Hyogo Prefecture’s Joe Higashi players. Tokyo stood one step from the championship, but the outcome remained uncertain as the winds suddenly changed.

• Daigo Umehara gathered his friends to watch Bai Ye compete, while Fuji TV and Sega celebrated the tournament’s ratings and sponsorship success.
• The Tokyo Representative Team narrowly defeated Osaka in the quarterfinals and then overcame Fukuoka in the semifinals, with Nagai Kenta winning both deciding matches.
• Bai Ye defeated Hyogo Prefecture’s vanguard Joe Higashi 2:1 after surviving an aggressive assault and capitalizing on an opening.
• Bai Ye battled Hyogo Prefecture’s middle player, lost the second round by a sliver of health, then won the deciding round with a combo after catching the opponent’s recovery.
• Tokyo secured a second point and moved within one step of the national championship, but the match’s momentum suddenly shifted.

Hokushin Genichiro’s Geese overwhelmed Tokyo’s team until Nagai Kenta adapted, won the deciding match, and led Tokyo to the championship. Watching from Aomori, six-year-old Daigo Umehara was inspired by Nagai’s victory.

• Hokushin Genichiro chose Geese Howard and defeated Bai Ye and Tokyo’s middle player 2–0, leaving Tokyo on the brink of defeat.
• Nagai Kenta chose Terry Bogard, lost the first round, then adjusted his tactics and evened the match at 1–1.
• Nagai Kenta dodged Geese’s Raging Storm and knocked him out with a Burn Knuckle, securing Tokyo’s championship victory.
• Nakayama Takuya and Sega executives presented Tokyo’s team with the trophy and prize, while Bai Ye looked ahead to future competitions.
• Daigo Umehara watched the final in Aomori and was thrilled by Nagai Kenta’s winning attack.

Nintendo president Yamauchi Hiroshi criticized Metroid’s performance and Nintendo’s promotion, while Hudson’s Kudo brothers faced backlash over Adventure Island shortages. Kudo Hiroshi chose to accept NEC’s cooperation terms, accelerating Hudson’s move beyond Nintendo’s control.

• Yamauchi Hiroshi told Yokoi Gunpei that Metroid had failed to seize players’ attention and demanded stronger games and promotion.
• Kudo Yuji reported that Adventure Island shortages had angered customers and driven some of them to buy Metroid instead.
• Kudo Hiroshi blamed Nintendo’s reduced cartridge quota and told Kudo Yuji to proceed with NEC.
• Kudo Yuji called Mr. Ishihara and accepted all of NEC’s proposed cooperation terms.
• Kudo Hiroshi said Hudson would build its own path beyond Nintendo’s influence.

Sega celebrated Fatal Fury’s success in Japan and sent Suzuki’s team to organize a North American tournament, prompting Nintendo of America to prepare a response. As NoA focused on Sega’s esports push, an unexpected storm of public opinion erupted in North American gaming.

• Suzuki reported that Fatal Fury had driven arcade orders to three rounds and made Sega a leader among young fighting-game players.
• Nakayama Hayao ordered Suzuki and the Japanese organizing team to travel to California and plan a North American Fatal Fury tournament.
• Suzuki gave reporters a confident statement at Sega’s send-off ceremony, framing the tournament as a global event without directly challenging Nintendo.
• Minoru Arakawa and NoA executives treated Sega’s tournament plan as a threat and urgently discussed promotions and other countermeasures.
• While NoA concentrated on the esports challenge, a sudden storm of public opinion broke out in North American gaming.

Sega exposed Nintendo's use of Dream Factory: Doki Doki Panic as North America's Super Mario Bros. USA, causing a public backlash and throwing Nintendo into crisis. Meanwhile, Sega finalized a deal with Mattel, and Nakayama Takuya faced production-capacity concerns over his Pokémon electronic pet.

• Nakayama Takuya passed Nintendo's North American release plans to David Rosen, who leaked the information to game media.
• North American players condemned Nintendo after reports revealed Super Mario Bros. USA was based on Dream Factory: Doki Doki Panic, and NoA's explanation failed to calm them.
• Yamauchi Hiroshi blamed Sega for the scandal as Nintendo's brand image suffered.
• David Rosen and Mattel representatives signed a cooperation agreement in El Segundo.
• Mr. Ishida warned Nakayama Takuya that Sega and its subcontractors could not meet the proposed Pokémon production target because of labor and factory constraints.

Nakayama Takuya proposed shifting much of Pokémon’s production to Hong Kong to ease capacity constraints and cut costs. After persuading Director Terauchi and Director Hatano that overseas expansion could strengthen their Japanese factories and open opportunities in China, he secured their approval for an immediate inspection trip to Hong Kong.

• Nakayama Takuya told Mr. Ishida that OEM factories in Hong Kong could handle most Pokémon production, lowering costs and relieving Japan’s production bottleneck.
• Nakayama Takuya asked Mr. Ishida to present the proposal to Director Terauchi and Director Hatano through the proper channels, and Mr. Ishida arranged a meeting.
• Director Terauchi and Director Hatano questioned how Hong Kong production would affect their factories and whether Hong Kong businesses would accept yen.
• Nakayama Takuya proposed that their companies acquire Hong Kong factories, move labor-intensive assembly overseas, and focus Japanese factories on core components, precision assembly, and quality inspection.
• Nakayama Takuya argued that expanding into Hong Kong and potentially mainland China could attract Chinese support and give Japanese companies an early advantage in the electronics industry.
• Director Terauchi and Director Hatano approved sending subordinates with Nakayama Takuya and Mr. Ishida to Hong Kong immediately to inspect factories and advance the plan.

Nakayama Takuya and Ishida visited Hong Kong Huake Electronics to discuss Sega’s large order for circuit boards and components for the Pokémon electronic pet. Nakayama reassured Huake’s cautious executives with plans for technical support and a pitch about the gaming industry’s growth, leaving them willing to continue negotiations.

• Nakayama Takuya and Ishida presented Sega’s preliminary order quantities to Huake Electronics, whose representatives were startled by the scale and wary of their ability to fulfill it.
• Manager Li explained Huake’s concerns about production capacity, supply chains, quality standards, and its limited experience with gaming products.
• Nakayama answered in fluent Chinese and promised detailed technical documents and Sega engineers to guide production and train workers.
• Nakayama described the video game market’s growth and argued that partnering with Sega offered Huake access to new technology and a long-term business opportunity.
• Huake’s executives became interested and decided to begin discussing the cooperation.

Nakayama Takuya negotiated with Huake Electronics to manufacture circuit boards and accessories for Sega’s electronic pets, while preparing a fallback factory in Hong Kong. The sides agreed on a draft contract that included transferring Sega’s old production lines to Huake in exchange for payment offsets, and the projected first-batch output stunned the directors.

• Nakayama Takuya and Huake Electronics haggled over prices, delivery schedules, quality control, and defective products before Huake paused to assess the terms internally.
• During the pause, Nakayama Takuya inspected other Hong Kong factories and arranged the purchase of a small factory near the port as a backup and transit site.
• After Huake raised concerns about production capacity, Nakayama Takuya proposed transferring two of Sega’s decommissioned production lines to Huake in exchange for offsetting the cost against future orders.
• Nakayama Takuya explained to the Sega representatives that payment offsets would help Huake manage China’s foreign-exchange restrictions, winning their approval.
• Huake Electronics and Sega drew up a letter of intent and a first draft contract for electronic-pet circuit boards, accessories, and the production-line transfer.
• Director Terauchi, Director Hatano, and Nakayama Hayao approved of Nakayama Takuya’s work, while the other directors were shocked by the contract’s projected first-batch output.

A nationwide Pokémon marketing campaign led into the October 4 premiere of the anime, and elementary-schooler Kyosuke watched Ash and Pikachu grow close during their first adventure. A commercial for a Pokémon electronic pet followed the episode, leaving Kyosuke captivated by Pikachu.

• Trucks delivered Pokémon merchandise to warehouses as television, shop, transit, and school-area promotions built anticipation for the anime premiere.
• On October 4, Kyosuke watched the first episode of Pokémon while eating breakfast before a family visit to his grandmother.
• Ash received Pikachu from Professor Oak, but Pikachu initially ignored his commands and refused to enter its Poké Ball.
• After Ash protected Pikachu from attacking Spearow, Pikachu used a powerful electric attack to drive them away and then collapsed.
• Kyosuke was moved by Ash and Pikachu's bond, and a commercial introduced a Pokémon electronic pet featuring a responsive Pikachu.

After Pokémon's debut episode sparked a nationwide rush for the new electronic pet, Nakayama Takuya saw toy stores fill with eager children and learned the episode had earned exceptionally high ratings. He urged Director Yuyama to reduce flashing effects in future episodes, then reflected that the Poké Ball craze had begun.

• Kyosuke begged his parents to buy him a Pokémon electronic pet after seeing Pikachu on television.
• Children across Japan rushed to toy stores, where clerks sold randomized Pokémon sets that included a chance to get Pikachu.
• Nakayama Takuya visited crowded toy stores and felt reassured by the strong demand for the new product.
• Director Yuyama told Nakayama Takuya that the first episode averaged over 30% ratings and peaked above 35%.
• Nakayama Takuya warned Director Yuyama that intense flashing effects could harm children, and Director Yuyama agreed to review and revise the animation.