As Mario's fame grew throughout the 1980s, Sega knew it needed a major mascot of its own if it was ever going to compete with Nintendo. Sega would go on to nail that assignment, creating Sonic. However, the hedgehog was only chosen because his opposing finalist in an internal contest to design a new mascot at the studio was an egg.
No, not Eggman. It would presumably be months before the first concept art for who would eventually oppose Sonic would be created at this point in time. The only thing standing in Sonic's way from becoming Sega's lead character was an egg, and it's only because Sega's head of marketing at the time Al Nilsen thought the egg was “too pre-school” that the blue blur wound up winning.
“I was presented with two coloured boards. The first was this egg-shaped character,” Nilsen told Time Extension. “And then there was a hedgehog. A blue hedgehog… he had a band, a rock band and he had a human girlfriend who looked like Marilyn Monroe and was named Madonna.”
Nilsen didn't particularly like either of the choices presented to him, but describes picking Sonic as “the lesser of two evils”. It wasn't until nine months after that when visiting Sega Japan that Nilsen saw Sonic come to life on screen, confirming he had made the right call. He saw Sonic spinning in a ball on one screen, and the design for what would become Green Hill Zone on another. Upon realizing that the two concepts could be successfully combined, it dawned on him that Sega had something special.
Nilsen feeling like there wasn't a winning horse in Sega's mascot contest was just one of the hurdles Sonic needed to overcome early on. It was also revealed recently that upon being shown Sonic for the first time, Sega of America labeled the character “unsalvageable”. Wild to think that something everyone appeared to dislike so vehemently remains in place to this day and will likely be Sega's mascot forever.