Sega’s Biggest Missteps
Sega was once one of the most iconic game companies around, a fierce competitor with Nintendo on the console market and a house-hold name. However, Sega also has a long history of terrible business decisions that came back to bite them time and time again. Especially in the 1990s, Sega’s management was a veritable clusterfuck of difficult personalities who nearly managed to burn one of the world’s biggest video-game companies to the ground.
Please note that I’m writing this blog as a fan of the company. I’ve previously given Sega a lot of love in the form of a Top-10 Games and Platformer list, and from way back when, Sega pretty much dominated the Top-10 Forgotten Consoles list. But we definitely need to recognise Sega’s failings as well. Here are the company’s biggest mistakes through history…
Sega’s history as a video-game company from 1980 up to 1985 had been mostly solid. The company made a succesful entry into the arcade business, snagged a lucrative movie licence in the form of Star Trek: The Motion Picture and became one of Japan’s two first domestic console manufacturers with their 1983 release of the SG-1000. However, very early on, Sega’s pioneering was getting eclipsed by the far better known Nintendo.
1985 was the year Nintendo resurrected the American video-game industry with the NES. Sega realised they had a whole new market to exploit and thus immediately took the latest system in their SG-1000 line (Sega Mk. III) and converted it into the Sega Master System. Also, probably hoping to save some money, Sega handed the marketing rights of the console to toy-manufacturer Tonka. This seemed logical since Sega, like Nintendo, wanted to appeal mostly to children and because big American toy-companies, Mattel and Coleco, had previously released video-game consoles themselves.
Sega sadly realised too late that Tonka had no clue how to market the Master System. The most painful evidence of this was Tonka’s abysmally hilarious cover-art which they made for the Master System’s games, rejecting the far better and classier Japanese cover artwork. This and Sega’s general lack of popularity in Japan later made the system’s life-span a difficult one, with very few games appearing on the system on a regular basis. Sega learned from their mistake and bought back the marketing rights from Tonka.
1989 was another pivotal year for Sega. It was the year when the Mega Drive would make its entry to the North American market as the Sega Genesis, properly kicking off the console war with Nintendo. It was also the year Nintendo threw down the gauntlet on the handheld console market by introducing the Game Boy. Not wanting to be outdone by Nintendo (and the Atari Lynx), Sega pushed out its own handheld game system, the Game Gear.
Unfortunately, Sega under-estimated how well the Game Boy would sell despite its non-back-lit, monochrome screen. Nintendo held the release rights for Tetris, which helped push millions of Game Boys out to the market and eventually establish a healthy game-release cycle. The Game Gear was hampered by its large size and, initially, poor battery life despite being technically superior to the Game Boy.
Sega themselves unfortunately let the Game Gear gather dust after its initial release. Although games kept appearing fairly regularly up till early 1990s, by 1993 Sega had all but abandoned the console. The Game Gear only released lesser ports of better known Master System and Mega Drive games, and very few original titles. Sega repeated this same mistake with the Game Gear’s successor, the Sega Nomad, which only ever saw release in Japan and North America.
Once the 1990s rolled around, Nintendo was ready to fight Sega with their own 16-bit console, the SNES. Sega hoped to get a leg-up on its competition and so decided to bring the thunder with a CD add-on unit which it hoped would blow Super Nintendo out of the water.
Safe in the knowledge that Nintendo had considered but then aborted its own CD add-on project for its console, Sega thought that the Mega-CD (Sega CD) was going impress people with Full Motion Video, better audio and vastly greater space provided by the optical media. Unfortunately, Sega over-estimated the power of their Mega Drive system which tended to make the CD-games slow to load. Adding insult to injury, most of Sega’s CD-games rarely did more than have slightly better audio quality as well as feature a lot of video. The add-on didn’t really step up to replace the 16-bit cartridges the way Sega envisioned.
In this case, the CD-unit was more of a technical foul-up on Sega’s part, rather than a timing one. There were many CD-based consoles already coming out at the time like Philips CD-i and the 3DO, so Sega imagined it was in good company. However, it really did take until the mid-90s for CDs to usurp ROM cartridges on the market.
Most embarrassing of Sega’s failures during the 16-bit era was the introduction of the Sega 32X. Originally conceived as a stand-alone unit called the Sega Mars, whose release would lead the way to Sega’s next console Jupiter (later renamed Saturn), Sega reconsidered its options when it finally started to develop its first full-fledged 32-bit system. The Mars-project was instead dumped and turned into another add-on for the Mega Drive, which allowed it some primitive 3D capabilities.
The 32X was a huge flop from Sega and a complete non-necessity. People were unwilling to pay for an add-on that allowed for 3D games when it was already public knowledge that the Saturn was on its way. The 32X therefore catered for practically no-one and became just an elephant in the room at Sega.
So the 32X was a failure on two fronts: timing and common sense. Timing wise there was very little to keep it afloat with the 32-bit systems just around the corner. Moreover, much as with the Game Gear, Sega again threw its baby to the wolves by not releasing enough games to justify the purchase of the system. Sega really should have focused on the 32X more or just not release the god damn thing in the first place.
Sega’s 32-bit console, Saturn, appeared on Japanese store-shelves in late 1994. Helped along by an aggressive marketing campaign, the system took off by storm in its home country (something which was rather rare for Sega’s products in Japan). However, right around the same time the new kid on the block, Sony, also released their competing PlayStation system. The PlayStation also took off as a surprising success despite industry-wide scepticism.
Sega were now genuinely afraid that they’d be up-staged by a new-comer to the market. Which is why at the very first E3s in 1995, Saturn was announced as being immediately available (whereas people were expecting it in September of that year). Sega hoped that this surprise announcement would distract people from the fact that the PlayStation would be a full 100 dollars cheaper on launch. It didn’t.
Instead, Sega shot itself in the foot by pushing out the Saturn with no sensible release pattern for games. This made people less than happy to fork up money for the system. In addition, Sega’s market partners were also unhappy. Third party developers turned their backs to the system, thinking Sega moved the release ahead in order to attract more attention to its own games, and store-owners were pissed at Sega for ruining the previous release plans. This put Sega on the black list of a lot of companies which along with a few other bad decisions was going to spell utter disaster for the system.
As far back as 1994, Sega had been prepping its development team, Sega Technical Institute, to start work on a 3D Sonic game for the Saturn system. After first dumping the project as a 32X-release, the game known as Sonic X-treme finally began full-fledged production in 1995. STI developed two game engines, one for levels and the other one for boss-fights, so that its teams could work on separate parts of the game without interruption.
In early 1996, Sega executives visited their US head-quarters to see how STI was coming along. They were demoed both game engines. Unimpressed with the level-engine, they ordered it axed and ordered the game to be finished using the boss-engine, leaving the first development team stunned. What had happened? Through sheer human-error the executives had been shown an out-of-date version of the level engine which might have made the executives think that the game wasn’t coming along as well as they had hoped. The first development team refused to let their hard work be ignored and began developing it into a separate Sonic game for Sega’s PC division. The project was eventually shut down and the development team disbanded.
Meanwhile, the other company, low on men and time to work were speedily trying to finish the game for late 1996. Unfortunately, they couldn’t get much head-way, and the old engine was momentarily scrapped while STI asked permission to use the Sonic Team’s NiGHTS-engine to help production. They were cock-blocked by Yuji Naka (Sonic’s creator) who threatened to leave Sega if STI were allowed to use their engine. Eventually, the development team dwindled down to the point where only the head of STI, Chris Coffin, was working on the game. After he developed pneumonia half-way through 1996, Sega were forced to acknowledge that the writing was on the wall and shut down STI.
Basically, Saturn was left without an official Sonic-game, which in the face of Sega’s other troubles, probably didn’t help the company’s image.
Sega’s management at the time were known for their bone-headed and at times, flat-out childish decision-making during the 1990s. The company was out for blood when it came to competing with Nintendo, which could be understood due to their history with the company, but Sega also treated its own employees like crap and this lead to a lot of unwanted tension within the company. As early as 1991, Yuji Naka actually moved from Japan to the US to form a second Sonic Team to finish up Sonic the Hedgehog 2 there, since he felt that Sega’s internal politics were distracting him from his work.
Then there was Saturn’s infamous game-releasing strategy. Bernie Stolar who became the head of Sega’s American division is often blamed for this debacle. Stolar helped spread the ill-conceived notion that Japanese Saturn games would not sell well in the West and as a result the Saturn, a system already suffering from a shortage of game releases, saw its games library dwindle further as time went on with roughly half of all Saturn-games remaining Japanese exclusives.
Sega also handled its family of companies extremely poorly. Sega didn’t seem to value its American offices much and this began to show with internal rumbling during the Dreamcast era. Mind you, Sega wasn’t the only one to suffer from bone-headed localised management (Nintendo during this time was guilty of it as well) but it’s not hard to imagine why people weren’t exactly flocking to work at the company.
As early as the mid-90s, Microsoft had been looking to enter the game industry in a serious fashion. Microsoft was in talks with both Nintendo and Sony for a long time to possibly develop a system for either of the companies but was shot down both times. By 1998, Sega was phasing out the Saturn due to poor sales and focusing its efforts on a new system, the Dreamcast.
Sega’s failure was rather crushing, barely reaching 10 million units in world-wide sales over three years. Sega was left with a lot of unsold merchandise and the system had dealt a large blow to it financially. Sega were also courted by Microsoft during their Dreamcast planning. Microsoft wanted to become the official console assembler for Sega. This would have alleviated Sega’s abysmal financial situation as they were about to lose a lot of money anyway while launching the new system.
However, either internal pride or a lack of faith in Microsoft as a company (who finally released their own console in 2001), led Sega to instead continue producing the Dreamcast by themselves. Of course, we all know what this resulted in. There were production shortages pretty much through the entire existence of the console, despite the hype it never sold as well as the company hoped and finally the release of the PlayStation 2 turned the Dreamcast’s sales downward, leading to Sega liquidating their console wing and becoming a game developer for other consoles.