In light of the recent rumors flying around concerning the premature death of the Sega Dreamcast and the possibility that Microsoft's Xbox might include Dreamcast's chip set (and thus enabling it to play all Dreamcast games), I thought it might be interesting to go back and retrace the steps (missteps actually) that brought Sega to where it is today. Let's face it, if Sega does indeed cease hardware development, it will mark the end of one of the greatest video game institutions as we know it. If the rumors of Microsoft's Xbox possibly incorporating the Dreamcast chip set into its own prove true, well that's a story for another day.
Now, this isn't a eulogy or anything. Whatever happens, Sega isn't going anywhere. Sega will continue to produce exciting and innovative games like it always has. But who would have thought back in Sega's glory days with the Genesis that it would have ever come to this? The upstart that knocked the great Nintendo down a peg or two is now in deep financial trouble and is desperately fighting to stay in the game—literally.
Ironically enough, we can trace some of Sega's questionable business decisions back to when it was the industry leader in America (the Genesis, or Mega Drive, wasn't quite as popular in Japan). Without getting into silly accessories like the Menacer (a rip-off of Nintendo's Super Scope 6) and the ridiculous Activator, it was, among other things, the release and subsequent financial flop of some pricey Genesis expansion platforms from which Sega still hasn't recovered.
The Sega CD was a CD-ROM drive that attached to the bottom of the old Sega Genesis that was meant to redefine what video games were all about. It really wasn't such a bad call on Sega's part. Multimedia was the buzzword of the day, and people were genuinely excited about playing games filled with grainy full-motion video (FMV). Hell, people were practically having orgasms showing their friends JFK's inauguration speech on the PC version of Compton's Interactive Encyclopedia (which, of course, was eventually released for Sega CD as well).
In the end, the Sega CD cost too much and didn't do enough for consumers to buy into the idea. A sleek redesign that corresponded with the smaller version of the Genesis in 1993 helped a little and coincidentally brought some decent games to the platform, but it would never realize its full potential. The result stopped Nintendo from making the same mistake with its own CD-ROM add-on for the Super NES (a decision that would eventually cause Sony to create the you-know-what).
Footnote: The Sega CD came with an internal memory cache that could be used to save game progress in addition to available back-up RAM cartridges that were sold separately. The Saturn used the same set-up when it was released. Why this practical idea didn't catch on is still a mystery.
Sega Game Gear
When Sega released the portable Game Gear in 1991, Atari's LYNX and NEC's TurboExpress were already on the verge of being discontinued. All three systems had faster processors and full-color displays (Game Gear and TurboExpress were even compatible with optional TV tuners), but they still couldn't hold a candle to Game Boy's popularity—simply because they devoured batteries and weren't as convenient to carry around. Despite that, Game Gear managed to survive the longest and, for a while, seemed to be threatening Game Boy's hand-held dominance.
Game Gear was essentially a portable version of the Sega Master System, Sega's original 8-bit console. It could even play Master System games through an attachment called the Master Gear Converter. Game Gear's own game library grew to a respectable size, though there are only a few truly worthwhile games—such as Defenders Of Oasis and Fatal Fury. Overall, Game Gear was a moderate success and has done the best in giving Game Boy a run for its money.
The CDX was certainly a neat idea—it was a Genesis and Sega CD all-in-one stuffed into a portable CD player—but it was way too costly and suffered from the same problems the Sega CD inherited. This product must have lost Sega a considerable amount of money.
Sega was still sitting pretty with the Genesis when Sega VR was announced. Virtual reality was another idea that somehow captured the imaginations of the public and the media at large, and Sega once again fell into the trap. The Sega VR never got beyond the prototype stage—it was a virtual reality headset that played games—but they put money into it and even had some games in the early planning stages. It was a half-baked idea that thankfully never saw the light of day. Again though, it was money lost.
Sega's Pico was billed as "the computer that thinks it's a toy." It was an educational tool marketed to kids 8-years-old and under and connected to a TV like a standard game platform. The software played out like a storybook and kids could use a "Magic Pen" stylus to interact with the screen. It received some good reviews but never really took off as a mass-market product. Sega deserves credit though for making a serious effort to use video game technology for education purposes.
32X was, quite frankly, a huge mistake. With the Saturn's launch nearing in Japan, the big wigs at Sega decided that the Genesis was too valuable and popular for it to merely fall by the way side. The belief was that gamers wouldn't want to part with their beloved system and spend more money on a completely different console. They instead thought consumers would pay for an attachment that would allow the Genesis to play 32-bit games.
The 32X unit sat on top of the Genesis and used cartridges as its game-playing format. Though it had a few noteworthy games—Virtua Racing, Virtua Fighter and Kolibri—the system was little more than a distraction, both for Sega and for consumers. It took Sega's focus away from the upcoming Saturn launch and wore thin consumers' patience with the brand name. The 32X was quickly forgotten once the Saturn and Sony PlayStation hit the stores.
Sega had it backwards with the 32X idea from the start. The assumption that gamers wanted to cling to their aging Genesis was all-wrong—it's the games that matter, not the console you play them on. The Genesis wasn't built to last anyway. First and final drafts of the Saturn design included both a cartridge slot and a CD-ROM drive. If Sega was so concerned about keeping its core Genesis user base, the entire notion of a 32X should have been skipped all together. The focus should have been on making the Saturn compatible with Sega CD and Genesis games. This would have saved everyone involved a lot of headaches.
Another platform that was never released was the Sega Neptune—a Genesis/32X all-in-one console. The 32X was already nearing the end of its short life span, so only one Neptune prototype was made—another waste of resources on Sega's part.
The Sega Channel
The Sega Channel was another interesting idea that came too late to do the Genesis any good. Sega partnered with Time Warner to introduce a service that would pump up to 50 games a month into subscribing homes via a Genesis cable connection. It's actually a little surprising that no other company has tried something like this, because The Sega Channel was kind of fun—it certainly beat renting games, although most of them were not included in their entirety so as not to adversely affect game sales. At its peak, The Sega Channel had over 250,000 subscribers across the U.S., but it didn't last very long due to the quickly diminishing 16-bit market.
In yet another attempt to appeal to its large Genesis fan base, Sega released the NOMAD, a portable Game Gear-like version of the 16-bit console, in 1995. It played all Genesis games and could be connected to a TV and a Genesis controller to accommodate two-players. There was really nothing wrong with this hand-held at all. It featured a large, beautifully clear color display and a huge library of available games. However, the Genesis was almost entirely out of people's minds by the time NOMAD was released, so it quickly became a collector's item.
Sega got an early jump on the Sony PlayStation with their 32-bit console, the Sega Saturn, and yet it seemed Sega was playing catch-up from the start and all throughout the platform's existence. One of the problems was that Saturn debuted with a $400 price tag. Another was the way in which two of its launch titles compared with two similar launch titles on PlayStation. Saturn had Virtua Fighter and Daytona USA—two games that were high on gameplay but a little rough around the edges visually. PlayStation, on the other hand, had Battle Arena Toshinden and Ridge Racer—both of which featured fast and smooth 3-D graphics, though their gameplay couldn't compare with their Saturn counterparts. Clearly it didn't matter with consumers—they liked the graphics. As a result, popular sentiment was in Sony's corner from the outset.
The Nintendo 64 was released in the fall of 1996 to record-breaking sales, but Sega had managed to keep the Saturn in contention through some desperate marketing tactics. That Christmas, Sega introduced the "Three Free" campaign—by which if you bought a Saturn you'd be sent Virtua Fighter 2, Virtua Cop and Daytona USA by mail. It must have hurt Sega to give away games like that, but it worked, if only for the short term. Sega sold 500,000 Saturns in December alone, giving it a second-place finish in the Sony-Sega-Nintendo race at year's end. Sega then targeted another game giveaway at all those new Saturn owners with a buy-two-get-one-game free deal. This was the height of Saturn's popularity in America. Sega would find itself a distant third to Sony and Nintendo the rest of the way out. It was a completely different story in Japan however, where Saturn maintained a very tight race for first with PlayStation.
It's often difficult to predict which console Japanese and American gamers are going to take to. NEC's PC Engine was long a tremendously popular game system in Japan, whereas its American counterpart, the TurboGrafx-16, failed to establish itself as a viable game platform. The reasons for Saturn's success in Japan and its lack thereof in the U.S. have more to do with Sega's reluctance to play to the system's strengths than anything. Saturn was, in essence, an arcade machine. It was made to play fast action games—the simple arcade design of its controller is just one testament to that fact. In Japan, Saturn was a dream platform for fans of shooters and fighting games. A RAM expansion cartridge was even made available there—enabling Saturn developers to push the system beyond its limits for these types of games. Thunder Force V, Radiant Silvergun, Silhouette Mirage, Metal Slug and Dead Or Alive were just a few great Saturn games that were never released in America. In fact, Thunder Force V, Silhouette Mirage and Dead Or Alive were released in America, only on PlayStation—proving there was indeed a demand for those games. Other popular games like Grandia made their debut on Saturn as well, only to be released in the U.S. on PlayStation.
Failure to release the many Japanese gems was indeed a missed opportunity for Sega, and as a result the Saturn was relegated to a niche market. It was a simple demand that Sega either failed to meet, or simply choose not to. Instead, weak 3-D offerings like Sky Target and Sonic R made it into stores in an attempt to compete with the 3-D games on PlayStation and Nintendo 64. Along the way, Sega even managed to destroy its relationship with Working Designs—a third-party publisher that gave superb game support exclusively to Sega dating back to the Sega CD days (Working Designs is now a staunch Sony ally).
Sega recorded record losses during and immediately after the Saturn stretch—losses the company is still seeing today. However, from a gamer's standpoint, it's hard to think of the system as a failure. Games like Guardian Heroes, Panzer Dragoon II Zwei and Sonic Team's NiGHTS Into Dreams… are just a few unforgettable classics that can't be found on any other game platform. To most however, Saturn's only legacy is one of embarrassment and is rarely mentioned in a positive light.
The final nail in the coffin of Sega of America President Tom Kalinske's career was yet another Sega peripheral that didn't sell—the Saturn NetLink—a 28.8 kbps modem that connected to Saturn via the cartridge slot. Sega was counting on the NetLink to be the system's savior, but it didn't sell to gamers who already owned a Saturn, much less convince anyone to buy Saturn. In 1996, NetLink sold to less than one percent of all Saturn owners.
Looking back on it today, NetLink might not have been such a terrible idea. It could even be viewed as being ahead of its time. It certainly anticipated the approach Sega took with Dreamcast, and let's be honest, Dreamcast's modem is the only reason the system is still alive. With NetLink though, the focus wasn't on playing online games—though cool games like Saturn Bomberman, Sega Rally Championship and Virtual On were NetLink compatible—it was simply about connecting to the Internet. Remember, the Internet was still new to people then, and online gaming was very much in its fledging stages. Mr. Kalinske claimed that Sega had researched the NetLink "off the map," and the findings showed that people really wanted to be online—not to play games—just to be able to surf the World Wide Web. Sega figured that by selling a modem and a Web browser for $200, consumers were getting a great deal (?), nevermind the fact that NetLink-compatible games weren't released until almost a year later. Of course, the release of the NetLink created the need for even more Saturn accessories that would never sell, like a mouse and a keyboard adapter, all of which just added to Sega's production costs.
Dreamcast and beyond
Once Saturn ended its run in the U.S., there was all kinds of speculation as to what Sega would do next. Even back then, rumors were circulating about the company ditching hardware development to focus solely on games. After going all out one final time with Dreamcast, it appears that's the route Sega is taking as Nintendo has formally announced that Sega will be making games for Game Boy Advance.
After examining some of the marketing decisions Sega has made over the years, is it any wonder that the company is in so much trouble? There was an article on Sega that made the cover of Business Week way back in 1994 (the height of Sega's popularity) that talked about most of the ideas and marketing strategies that have been touched on here. From the ambitious plans for what would become Sega GameWorks to The Sega Channel to Saturn, Sega was poised to take over popular entertainment as we knew it. According to the article, Sega was "like an athlete getting ready for the Olympics." Now it appears as if Sega is going to have to settle for somewhat of a lesser role—a supporting one. Already Sega is making partners with former rivals, but hopefully it can continue to lead in creating cutting-edge games.