The Dreamcast was the last major video game system produced by SEGA, and it was a consolation : in 1999 not only was it unrivaled when it came to hardware, it brought out the best of the supersonic hedgehog company in desktops and arcade games. through awesome gaming experiences. A sense of generational change in video games that today, sadly, almost seems exclusive to retro systems.
Because the Dreamcast was ahead of its time through experiences that laid the foundations of modern videogames, from Shenmue to an online multiplayer infrastructure that would prevail years later, through the minigames and extra experiences of its removable memory cards , with a screen. and with its own buttons and crosshead to play with. This was a look into the future.
The memory card was integrated into the controller and had a screen with info or logos of the games. And when I pulled it out, it was a mini-console!
Interestingly, its premiere in the United States was a success. His success was even compared to that of Star Wars, Episode I: The Phantom Menace. Little joke. SEGA went with everything and users saw their highest expectations exceeded. So what went wrong?
January 31, 2001 was a turning point for the video game industry itself: SEGA announced that Dreamcast would cease production, that it was abandoning the development of video game consoles and that, in addition, its well-known games and characters will continue its rich legacy in Sony and Nintendo systems.
An unthinkable decision considering that a decade earlier they began to position themselves as the alternative to a Big N that controlled practically the entire market. And they did it with unprecedented success: SEGA wasn’t just about their games and slot machines, it was also an attitude . A way of understanding videogames For this reason, when the Dreamcast died millions of fans around the world were shocked.
Although, unfortunately, not enough to make the deployment that SEGA had made to wrap its amazing 128-bit console viable.
The Dreamcast was released in Japan in November of an unforgettable 1998 and discontinued before its third anniversary. In fact, its European launch, in October 1999, further shortened its brief life cycle on the old continent. Is it possible that this unusual event will be repeated in future consoles ?
Almost two decades later, and with a view to the new generation of desktops, we are going to review the most complicated stage of a SEGA that wanted to be transgressed and ended up overwhelmed by multiple factors. Who Killed the Dreamcast? For now, these are the suspects.
SEGA Saturn, a 32-bit that did not finish taking off
SEGA Saturn, the true 32-bit SEGA experience
The true successor to the Mega Drive was the long-awaited (and postponed) leap into the 32-bit gaming experience, but it failed to let go of the meteoric success SEGA had achieved in the early 1990s.
For perspective, at E3 1997 Bernie Stolar himself literally established that Saturn was not the future . Some very harsh statements considering that the system was launched in Japan in 1994 and it had not been two years since it was available worldwide.
However, reason was not lacking: by then SEGA was already the third in contention against a very powerful PlayStation and the recently launched Nintendo 64. In 2009, Bernie Stolar further qualified his own words:
I thought the Saturn was a bug when it came to hardware. The games were obviously awesome, but the hardware was not up to scratch.
While it had very memorable games, the Saturn was a console that had too much against it: the 32-bit disk and cartridge peripherals of the Mega Drive were still on the shelves and SEGA had (counting the Game Gear and arcade) too many fronts open at the same time . Saturn’s chances to shine were too fleeting.
In addition to the context, there were bad decisions on the part of SEGA: the American division launched the Saturn in the United States five months before the announcement , by surprise and making its arrival on the shelves official on the same day of departure, which resulted in a real chaos at the distribution level.
Although, of course, the coup de grace was already given by Sony with the presentation of its first PlayStation: instead of a talk, it simply announced that its system would cost $ 100 less than SEGA’s. It would not be the last time he used a similar strategy.
That SEGA itself indicated in 1997 that the Saturn was not its future had many side effects. While in the West the console was losing positions by leaps and bounds, Stolar’s ruling was a real blow to the owners of the console and the developers who were investing large amounts of time and resources in a system that already had the hours counted.
An announced replacement that was especially painful in Japan, where SEGA Saturn had a much better reception and a more interesting projection. Although it is also true that many more Made in Japan titles and experiences were launched, very difficult to adapt or place in international markets.
As a result, by the time SEGA announced the Dreamcast in 1998, trust in its brand was in question , while PlayStation was steadily grabbing market share with games like Final Fantasy VII, Metal Gear Solid or Tekken 3. Successful sagas that were already fully associated with the PlayStation console of a relentless Sony.
How Sony stole its moment from the Dreamcast
The successor to the PlayStation created unprecedented hype in the video game industry
Although SEGA was very aggressive when it came to advertising with Nintendo, Sony’s strategy against the hedgehog company was truly devastating: commercially, its target and its company image sought to snatch SEGA’s market niche from it , and from his own presentation was not too careful when attacking his rival in his most delicate points. For example, its price.
By the time Dreamcast was preparing for its launch, the Sony console already had a privileged presence in front of SEGA and Nintendo, who shortly before had been the titans of the industry. And not only had it survived against a failed 3DO or the Atari Jaguar, but it already had 60% of the market share and a number of launches and projects in development never seen before.
But the most important thing is that Sony was not going to let anyone monopolize the spotlight at its sweetest moment.
On March 2, 1999 , a few months after the launch of Dreamcast in Japan and months after its arrival in the West, Ken Kutaragi offered the first details of the future PlayStation 2 stating that it would present a graphics processor three times higher than that of graphics processors of PC of the time. And his partners were delighted with that promise.
And not only that: Sony made sure to compare what a PS2 whose exterior design was not decided (and which had more than a year left) would offer with the machine that SEGA was left on the shelves. The reality is that what would end up being the true difference between the two consoles was not so much in their visual muscle, but in their versatility as a console.
In addition to the hype itself, which would last until the launch of PS2, Sony’s secret weapon was its disc player: the new PlayStation was also the cheapest option to get a DVD player and, unlike the Dreamcast, it was backward compatible with the catalog of your previous console.
The consequence of this? In Japan, there were cases of buyers who were returning their Dreamcasts and, at the same time, acquiring PlayStation software and hardware. In part, because SEGA’s 128-bit launch catalog could not compete – logically – with the playable proposal of Sony’s first console prior to the turn of the millennium.
Especially when the highly anticipated Sonic Adventure did not accompany the Japanese launch of the console.
SEGA redesigned its standard bearer for the new generation of consoles
And the worst thing for the hedgehog company is that the announcement of PlayStation 2 took place when the new SEGA console had not yet been launched in the West and Sony’s promises were much juicier than what the amazing Dreamcast showed in Japanese territory.
Although it was speculated that Sony’s hardware was not only capable of offering graphics comparable to the Toy Story film and its sequel, and even directing missiles as if it were a military supercomputer. The reality, on the other hand, is that the visual capacity that the new PlayStation could offer would not correspond to the hype generated by Sony itself. Which was not a problem for its brutal commercial success.
After all, PlayStation 2 did not need that hardware capable of matching Pixar’s animated films to become the best-selling desktop in history. His games, timeless classics that continue to be played, spoke for themselves and his privileged position was more than deserved.
But stealing its moment from the Dreamcast and grabbing all the media attention was a lethal blow for SEGA. And, at the same time, a key movement for the success of PS2.
SEGA America and SEGA Japan, condemned to disagree
Plaque of the SEGA offices until 2019. In them Sonic or the Dreamcast were born
In the 90s there were two SEGAs: the western one, led by SEGA of America , and above this was SEGA Japan . And if there was a marked friction between the two during the time of the Mega Drive, the differences in the face of the Dreamcast itself had already started during the design of the console itself.
The failure of the Saturn resulted in the top managers of the company, both from the West and Japan, being succeeded. Logically, the new SEGA console needed to be that blank canvas for a company that was touched internally and clearly weakened in the face of gamers . However, the division between the two SEGAs became more palpable than ever.
The origin of this conflict was born in 1997, when Shoichiro Irimajiri of SEGA entrusted the development of the successor to the Saturn to an external team in the United States, which would be given the name of Black Belt . In response to this, Hideki Sato began together with an internal team to shape his own prototype of the next SEGA console. Her initial name was also a White Belt statement of intent.
As a noteworthy fact, that SEGA finally bet on Whitebelt was not due so much to contrasting both projects, but to a problem derived from a breach of confidentiality with one of the partners of the prototype that was being developed in the United States.
Three prototypes of what would be the final DreamCast model
Logically, the friction between the two SEGAs did not diminish and that left them especially vulnerable against Sony. Especially when audiences in the West and Asia had such different tastes. After the Saturn, a SEGA with many open fronts had to adapt quickly to create next-generation projects and experiences as it witnessed the slow global decline of the arcades that were one of its pillars.
The Dreamcast project was much more than the hardware itself, and that meant a massive investment of resources and budgets. Especially when the invaluable Third Parties like Electronic Arts in the West or Squaresoft in Asia had no interest in the console and were completely devoted to the Sony system and its announced successor.
A constant investment and irregular support among third parties
Shenmue was the workhorse of the SEGA console
As with the Game Gear , the most memorable Dreamcast games bear the SEGA logo. Partly because of its masterful arcade conversions like Crazy Taxi, Virtua Fighter, Virtua Tennis or House of the Death. But also because of the way they dare to innovate with proposals as varied as Chu Chu Rocket !, Samba de Amigo, SEGA Bass Fishing and Space Channel 5.
And, of course, there are also cases as unique as a Seaman that made a very good impression in Japan.
The funny thing about this is that EA did become interested in publishing on the Dreamcast . In fact, according to Bernie Stolar, she wanted to be the only one to launch sports games on the SEGA console.
Larry Probst [Former CEO of Electronic Arts] is a dear friend of mine. Larry came up to me and said, “Bernie, we will make Dreamcast games, but we want exclusivity on sports games.” I asked him, ‘Do you want to be on [Dreamcast] without us having other third-party sports games?’
I looked at him and said, ‘You know what? I’ll do it, but I have one thing to tell you: I just bought a company called Visual Concepts for $ 10 million, so you’re going to have to compete with them. ‘ Larry told me, “No, you can’t even put [his sports games] on the console.” And I said, ‘So Larry, you and I are not going to be partners on this console.
And what about Third parties? As we mentioned, EA and its sports division were a resounding absence, so SEGA chose to create its own SEGA Sports label and give wings to Visual Concepts, creators of the NBA 2K saga that would end up putting the NBA Live saga of EA Sports in check. . But it also had to counteract other genres especially in demand such as RPGs (such as Phantasy Star Online or Skies of Arcadia ) without neglecting its great sagas.
Of course, Sega of America was concerned with consolidating its new sports division for Dreamcast at the media level.
At this point, when you notice that the huge deployment of SEGA took its toll since its launch: the Sonic Team set out to reimagine Sonic in Sonic Adventure , and although the title managed to hallucinate fans, it did not accompany the launch console in Japan, subtracting a good part of the expected impact with a view to his departure.
Of course, SEGA was not alone in this adventure: Capcom wrapped up the Dreamcast a lot and well with the best conversions of its fighting sagas, some of the best ports of the Street Fighter saga ever made, and was even able to move with ease without Their best crossovers preceded, which ran on SEGA’s own NAOMI board. And the thing does not end there: games like Resident Evil Code Veronica or Power Stone became true claims of the system.
Namco and Tecmo also showed off on Dreamcast wearing a Soul Calibur and Dead or Alive 2 that were breathtaking. SNK released versions of its games that had nothing to envy the highly coveted Neo Geo and Acclaim exposed the limitations of the first PlayStation with its 128-bit SEGA conversions of games like Tony Hawk or Spider-Man. Even Ubisoft began to become the titan that it is today from the Dreamcast through exceptional licenses.
For his part, Yu Suzuki , one of SEGA’s greatest creative geniuses, continued to shape the Guppy project: what began as a Virtua Fighter RPG game for Saturn ended up taking a new direction in the face of Dreamcast possibilities, and the deployment in front of it was astronomical. But, of course, the end result would end up making history.
On December 29, 1999, SEGA and Suzuki will show the world the potential of their console with Shenmue , one of the most transgressive, ambitious and revolutionary games in the history of video games. And yet it was not enough to save the console.
Although SEGA was on both sides of the Pacific Ocean putting all the meat on the grill, the reality is that not all projects were profitable and time was playing against the Dreamcast : the hype for PS2 and its next generation titles every It was bigger and bigger, forcing them to make a risky move: From the $ 199.99 the launch system cost, it was lowered to $ 149.99. That was all or nothing.
Peter Moore , president of SEGA of America during the last stage, stated that for Dreamcast to remain a viable platform it needed to sell 5 million units in the US by the end of 2000. SEGA’s economy was going through a moment critical.
By way of illustration, in November of that same year, 6 million Dreamcasts had been sold worldwide and the PS2, in its very short history, had already overtaken it in units sold. Ultimately, SEGA’s 128-bit fell short of the goal set by SEGA Japan, obtaining approximately 3 million units sold in the United States that Christmas.
So who killed the Dreamcast?
As we mentioned at the beginning, in January 2001 SEGA would make official the abandonment of the development of consoles and would focus on the rest of its activities and the development of games for other systems. Including PlayStation 2, Nintendo GameCube and Xbox, Microsoft’s first console and one of the company’s best allies before this role change.
It might seem like a debacle, but the Dreamcast debut on American soil was great. It even briefly overshadowed Nintendo and slowed Sony’s growing momentum by selling more than 225,000 Dreamcasts on its US launch day. By Christmas 1999 SEGA was back in the game and held 31% of the video game market share in North America. Almost a third of it.
Putting it in perspective, Peter Moore, who was in charge of its launch campaign for SEGA of America, praised the results, calling them ” the most successful 24 hours for businesses in entertainment history .” And not only that: two weeks later they would double those figures and even exceed 500,000 systems sold. In Europe, however, the situation was very different: PlayStation continued to dominate the old continent easily.
The reality, on the other hand, is that it was a fleeting impulse: the launch of PS2 was set for October 26, 2000 in the United States.And despite the fact that – like any instant success console – the new Playstation Sony had to face a shortage of units, buyers preferred to wait or purchase the new model of PlayStation (PSone) than to release a Dreamcast. SEGA was not counting on market stagnation.
The year 2000 was decisive for SEGA . And despite all its deployment, both commercially and when producing software, Sony had won its battle before launching its console worldwide: the success of the Japanese launch of PS2 sentenced the plans of SEGA Japan and, despite the aggressive Dreamcast price reduction, not reaching the figure of five million consoles sold in the United States before the end of the year made the 128 bits of SEGA an unviable project.
Peter Moore aligns all of the above and summarizes the rise and fall of the Dreamcast in remarks to The Guardian.
[At SEGA] we had a spectacular 18 months. Dreamcast sold like hotcakes and we really thought we could pull it off. However, Japan set a goal for us: either we generated x million dollars during the Christmas season and sold x million units of hardware, or we simply couldn’t stay in business.
When the time came, we had to make the call that we feared so much. I don’t mean [SEGA Japan]. I had to fire a lot of people; It was not a pleasant day. So on January 31, 2001, we said that SEGA was exiting the console hardware market.
We were selling 50,000 consoles a day, then they became 60,000 units, then 100,000, but added together we were not going to reach the necessary figures for the launch of PS2. It was a very risky bet. SEGA had the option to spend more money and go bankrupt and they decided they wanted to live to fight another day.
SEGA’s crash translated into massive layoffs and net losses of 51.7 billion yen (approximately $ 417.5 million). Dreamcast gradually reduced its price until the units produced and distributed were released. The final photograph for the distribution of market share in the United States was 50% for the PlayStation brand, 35 for a Nintendo strongly supported by Pokémon and a SEGA that, despite its trajectory, closed its stage as a developer with a modest 15% of the market.
Who Killed the Dreamcast? We can say that his fall is the result of several lethal blows:
- The failure of Saturn and the different add-ons of Mega Drive undermined the confidence in the brand.
- Sony managed to capture all the media and commercial attention in the most delicate moments of SEGA.
- The company itself was adrift in the middle of a storm, its two factions rowing in opposite directions.
- And to top it all, the blue hedgehog company ended up burning itself up internally through an aggressive pace of productions and distributions that was (and is) unsustainable if there aren’t enough consoles sold.
The instant success of PS2 was the coup de grace for the Dreamcast. However, the key piece of this puzzle is elsewhere : the real answer as to why the console stopped being manufactured is offered by Ricardo Ángeles , CEO of SEGA Spain during the last stage of the Dreamcast. And it’s blunt: the Hardware Business has never been profitable for SEGA.
The Hardware Business has been a very important and interesting aspect of SEGA’s history, but it has never really been made any money from it. From a business point of view, it has never been a profitable business for SEGA.
SEGA consoles were a window to distribute their projects, initiatives and products. And without enough distributed consoles it was impossible to sustain the business model until then . In January 2001 there were 200,000 Dreamcasts sold in Spain. Before disappearing from the Spanish market, SEGA lowered the price of its 128 bits to 19,900 pesetas. A bargain for the time.
A story with a sad ending? Well, the Dreamcast legacy lives on. Shenmue and its sequel became two of the great pillars of the modern video game. His vision of online multiplayer on consoles ended up crystallizing and that same online has ended up being one of the top priorities of the current titans. And, of course, sagas born in the 128 bits of SEGA like Phantasy Star Online, Space Channel 5 or Chu Chu Rocket! are still alive.
However, many of us who lived through the launch are clear that the greatest milestone of the latest SEGA console is another: no system after the Dreamcast has been able to match the glorious feeling of being witnessing a true generational leap .
A console whose launch coincided with SEGA’s most delicate moment, but which also serves as a timeless reflection of how big, transgressive and ahead of its time the company of the hedgehog in red sneakers was.
