Prior to the Sega Genesis, Sega tried to compete with Nintendo in the console market with their SG-1000 and Sega Master System, or Mark 3. However, the SG-1000 was absolutely crushed by the Famicom released around the same time, and the Sega Master System was completely outdone by the release of Super Mario Brothers 3.
Sega attempted to come up with their own mascot to compete against Mario, and Kotaro Hayashida came up with Alex Kidd. While Alex Kidd went on to do fairly well for Sega, it couldn't hold a candle to Super Mario Brothers. But, fortunately, with the Genesis, Naoto Oshima and Yuji Naka had a certain blue blur in the works.
Host Dave Klein goes over this story, and how combined with Sega of America's smart marketing, Sonic would go on to SAVE Sega.