Ascent and Fall of Sega

The success of Sony PlayStation is directly linked to the failure of the Sega Saturn console, which also has a history. If you want to understand how Sony could become the market leader out of nowhere, you have to deal with this success and failure story of Sega.

In 1986, the Sega Master System (SMS) was largely a response to Nintendo’s Famicom (NES). With the Mega Drive/Genesis in 1988, Sega gained a technical lead for the first time. It used the two years before the SNES launch to grow from less than 5% market share into a serious Nintendo rival, under the slogan “Sega does what Nintendon’t”. The aggressive marketing strategy gave Sega’s US division broad authority over the crucial North American market, even allowing changes to games: Sega of America revised Sonic’s character design to suit American cartoon audiences. This brought success but later caused problems. Sega believed it needed a 32-bit US console to compete with the announced Atari Jaguar, a misjudgement given the Jaguar’s eventual failure. The Genesis 32X add-on was intended as an interim solution, but the almost simultaneous Japanese Saturn launch made it obsolete there from the outset. American buyers also knew that the Saturn would soon arrive in the West and ignored the Genesis expansion. Sega’s mismanagement of its two main markets then made the Saturn another failure. As the PlayStation appeared likely to win in Japan, Sega rushed the Saturn into US stores in May 1995 to get ahead of Sony, instead of concentrating on the still-successful Genesis. Both consoles had originally been scheduled for North American launches in September. Four months early, marketing, production and third-party developers were not ready. The rushed launch also prompted an early European release with equally disastrous consequences. At the E3 where Sega announced its early launch, Sony Computer Entertainment America president Steve Race delivered the final blow. In what is described as the shortest keynote in video game history, he walked on stage, said “Two ninety-nine” and left. The applauding audience understood: Sony had set the PlayStation price at 299 USD, a hundred dollars below the Saturn.

With the Dreamcast Sega 1998 develops a console one last time, but the trust of the customers in the group is affected by the flops of 32X and Saturn and its financial situation accordingly precarious. This leads to the restructuring of the company in 2001. Since then Sega has been a pure 3rd party manufacturer of software for various systems.