The Dreamcast was Sega’s last hurrah, it was a groundbreaking machine that ushered in the 6th generation of home console hardware and pushed through several innovations that have now become standard, it should have been the machine to drive the company to untold heights, instead its failure would cause Sega to pull out of the hardware market altogether to become a third party publisher for other manuacturers consoles.
The rumours of Sega’s successor to its 32 bit hardware had been swirling since before the Saturn was was even released, partly fuelled by their partnership with Lockheed Martin, Sega had been using the 3d texture mapping chip originally designed for military simulations in their Model 2 arcade hardware and the company would go on to create the entire graphics architecture for Sega’s Model 3 board through Lockheed Martin’s Real3d division.
Additionally it wasn’t long after the Saturn’s release that rumours began to spread concerning a possible 64-bit hardware add on to the Saturn, codenamed Eclipse, although Sega denied its existence, their past history of previous hardware add-ons like the Sega-CD and 32X certainly made the idea seem plausible, according to the few articles that exist on the Eclipse, when Sega gauged the reaction of developers to the posibility of a Saturn hardware add-on the feedback was universally negative and the concept was quickly abandoned.
Rumours began to intensify thanks to NVIDIA who had based their NV1 Multimedia Accelerator videocard partly on the Saturn hardware, even allowing the connection of Saturn joysticks and joypads, they also signed a deal with Sega to bring some of the consoles biggest games over to PCs utilising their videocard which would be released under the ‘Diamond Edge’ branding, despite lacklustre sales of both the Saturn console and the NV1 the inside buzz was that they were already working on its NV2 successor, this time in partnership with Sega themselves, at one point the NV2 card was indeed considered for the Saturn’s successor, but Nvidia’s desire to keep pushing with quadratic texture mapping over Sega’s desire to switch to the industry standard of triangle primitives with inverse texture mapping, killed the project before it came to fruition.
For a very brief period Sega were in talks to join the 3DO project, who had suffered their own fate with an abitious but ulitmately failed hardware launch, undeterred they were readiying the successor M2 for release and Sega ordered a couple of development kits with the idea to drop their partnership with Lockheed Martin and use the M2 hardware instead, talks broke down between the two sides in 1996 and the M2 console was scrapped the following year although Konami did release a handful of arcade titles based on the M2 hardware, Sega released their own model 3 arcade board in 1996 utilising Lockheed Martin’s Real 3D graphics hardware, which would prove to be the culmination of Sega’s relationship with Lockheed Martin.
September of 1996 saw the release of Nintendo’s N64 hardware and in the “bit wars” at least it looked as if Nintendo would repeat their earlier successes with their Silicon Graphics based 64bit powerhouse, wary of the problems that plagued the Saturn with its high production cost and complex hardware, Sega began looking to the PC sector, approaching both Videologic with their PowerVR platform and 3Dfx with their Voodoo range of graphics cards, with the intention of getting them on board for a potential Saturn successor, development of which would lead to two potential replacements in parallel development.
Development of the Videologic based system would take place in Japan under the codename “White Belt” Hideki Sato the legendary creator who worked on the SG-1000, Master System, Mega Drive and Saturn would be working on the system with his own team, whilst in the US the second system based around the 3Dfx was dubbed “Black Belt” under the expertise of former IBM engineer Tatsuo Yamamoto who was selected to head up the development.
Sato after switching the development name from White Belt to Dural, decided to utilise the Hitachi SH4 chip, the powerful successor to the SH3 that was currently powering the Saturn, using it in conjunction with Videologic’s upcoming PowerVR series II chips. Yamamoto instead played with the idea of utilizing RISC based processors from either IBM or Motorola, eventually however he would follow Sato’s lead and ultimately plumped for the Hitach SH-4, this time sitting alongside 3Dfx’s Voodoo 2 and Voodoo Banshee graphics architecture.
At one point the Black Belt hardware was shown to a selection of developers and was genuinely well received, Bizarre Creations were one such company who even had an early Black Belt development kit which they used to start development on Metropolis Street Racer, Sega had apparently courted the company after Sega’s Kats Sato had discovered they were the company behind the popular and technically impressive F1 games for Sony by pulling the plug on a demo Playstation at the ECTS show so he could take a look at the start up credits.
In 1997 3Dfx began preparing for its IPO, according to the company’s prospectus their contract with Sega accounted for more than 14 percent of revenue during the first months of 1997, the IPO would raise around $35 million for the company, unfortunately their declaration as part of the offering also included details and specification of their work on Sega’s new console, to say the higher ups at Sega were dissapointed would be an understatement.
On July 22nd 1997 Sega announced their decision to drop the “Black Belt” hardware project altogether and go full on with development of Dural, a move that sent 3Dfx’s stock price tumbling, as a result 3Dfx accused Sega of unfair competition, breach of contract and misappropriation of trade secrets, they filed a $155 million lawsuit against Sega and NEC that would later be settled for an undisclosed sum.
By 1998 the Dural had changed names again, becoming officially known as Katana, the Saturn at this point was all but dead in the water outside of it’s home territory of Japan where it was still selling well against it’s competition despite losing ground to Sony following the release of Final Fantasy VII on the Playstation, but in Europe and America with major developers such as Electronic Arts having dropped support altogether Sony held a massive chunk of the market and with a new console needed fast, a release date of 1999 was earmarked.
On the 21st May 1998 The final hardware was officially shown for the first time at the Sega New Challenge Conference, unusually Sega had made the decision at this point to drop Sega branding from the machine in a bid to distance itself from past mistakes, a public competition was held to choose a new name with Dreamcast as the obvious standout, the name was a portmanteau of Dream and Broadcast and accompanied by an elegant swirl would ultimately be chosen to adorn the the new console.
The final hardware was based on the Hitach SH4 CPU running at 200Mhz, utilising a 2 way superscaler and parallel pipelining, running alongside the NEC Videologic Power VR CLX2, backed up with 16mb of Ram, 8mb of video Ram and 2mb of audio Ram, a modular modem was also included, along with a proprietory GD-Rom drive allowing games of up to 1gb in size which meant Sega could avoid the costly DVD format, a decision which in hindsight would cost them dearly.
Including a modem was an idea that some didn’t see the potential of, a few people within Sega argued that the increased cost of it’s inclusion wasn’t worth the benefit, Sega had experimented with on-line functionality before with their Meganet service for the Megadrive dating back to 1990 and the Sega Net Link for the Saturn in 1996, both of which had been commercial failures, but the landscape was changing and in the era of AOL, Netscape Navigator and the World Wide Web others, particularly in America, held firm to their belief that the future of gaming would be online connectivity.
The Dreamcast was released in Japan on 27th November 1998, many considered the release premature as unlike the rest of the world, the Saturn was still selling strongly with a fantastic library of games, Sega initially intended to run the machine parallel with the Saturn, with the Dreamcast handling 3D games and the Saturn remaining as a 2D powerhouse, Sega went all out to push the superior graphical power of the machine with the initial marketing budget for the Dreamcast being three times that of the Saturn.
Unfortunately all was not as it should be and over the summer of 1998 NEC were having difficulties manufacturing the PowerVR 2 graphics chip, Sega had planned to have half a million consoles available for launch, a figure which had to be revised down to around one hundred thousand, NEC blamed the issue on difficulties working with the 0.25nm design, which was producing a very high scrappage rate, within three days of the launch, all of the available inventory had been sold.
Four titles were available for the Japanese launch, Vitua Fighter 3tb, Pen Pen TriIcelon, July and Godzilla Generations, it comes as little surprise that Virtua Fighter 3tb was by far the biggest seller, debuting at number two on the software charts for the week, but by anybodies standard the lineup wasn’t exactly stellar and after poor reviews both July and Godzilla Generations would be pulled as launch titles for the rest of the world.
Although the console was a sell out, it was still a dissapointment, the problems at NEC meant that the console was in short supply over the Christmas 1998 season, it also didn’t help that the original plan of releasing one game a week for the four weeks after launch were scrapped with games being delayed until later in 1999, but Sega remained upbeat, they presumed Sony would be releasing their PS2 console in late 1999 so were desperate to get a head start and if nothing else they had achieved that.
North American consumers would have to wait ten months for the Dreamcast to be released in their region, this was always by design, Sega wanted the opportunity to analyse the machines debut in Japan and see if there were any lessons that could be learned before rolling the hardware out worldwide, it also meant that other territories would benefit from an expanded selection of launch titles, Sega of America CEO Bernie Stolar for his part had successfully managed to repair much of the damage in confidence of the US retailers following the negative fallout from the triple dissapointments of Sega CD, 32X and Saturn.
Stolar tapped the marketing firm Foote, Cone & Belding, who had been responsible for successful campaigns for companies like Levis and MTV, adverts began teasing the Dreamcast over the summer of 1999 with a somewhat ill-conceived “It’s thinking” campaign which left most consumers baffled rather than excited, Nevertheless when pre-orders opened around 300,000 people signed up, which was three times as many as had for the original PlayStation four years previously, Stolar also managed to put together a successful pre-launch promotion where consumers were able to rent the console from branches of Hollywood Video before it went on-sale, before long there wasn’t an American gamer who didn’t have the launch date of 9.9.99 etched into their memory.
Unfortunately however Stolar was unable to entice Electronic Arts back into the fold, instead EA announced that they wouldn’t be producing games for the new system, going so far as to relase a damning statement questioning the competancy of Sega, EA had asked for exclusive rights to be the only company allowed to produce sports games for the Dreamcast which he simply could not agree to, at Stolar’s request Sega had just spent $10 million buying up the California studio Visual Concepts who were the team behind some of EA’s most successful sports titles to work on games for Sega itself and obviously Sega wasn’t prepared to write everything off just to benefit EA.
On August 11th Stollar was fired from Sega and replaced by Sega of America’s senior vice president of marketing, the charismatic Peter Moore.
The Dreamcast finally launched in America on September 9th 1999, with an initial library of 18 games, 15000 retail stores received stock 400 of which took part in special launch parties, Sega courted celebrity endorsements and went as far as sponsoring the MTV movie awards, sales were pretty good, the console and games took in a combined revenue of $97,904,618.09 on the first day, all branches of Toys ‘R’ Us had sold out their stock by lunch time, four days after launch the console had shifted 400,000 units, at the time this was the biggest launch of any entertainment product, easily outstripping any film, album or videogame launch in history.
In Europe where Sony held a whopping 75% of the market share, the N64 had been considered a flop and Nintendo didn’t have the brand loyalty that it had in Japan and North America, the UK was selected as the primary focus for the launch, the initial date of September 9th had been pushed back to September 23rd and then again to October 14th, this was to give British Telecom time to sort out the online infrastructure that would be the backbone of Sega’s Dreamarena service. It was backed by an extensive advertising campaign, with the first advert dropping alongside the premiere of Star Wars Episode 1: The Phantom Menace.
The Dreamcast had been featured heavily in the UK gaming press since long before the Japanese launch, most notably in C&VG and Edge magazine, considered to be the countries two premiere multi-format titles, Game stores and Blockbuster Videos up and down the country received Dreamcast pods running demo versions of Trickstyle and Ready 2 Rumble boxing, advertising was released to focus on the online feature of the console, promising “up to 6 billion players” a slogan that had to be dropped when Sega ran afoul of the UK advertising Standards Agency who classed it as false advertising as the console didn’t yet support on-line play.
In the UK the Dreamcast was priced at £199.99 making it the cheapest console release since the 16-bit era, however due to the strength of the English pound American and Japanese machines were already available for £150 and £130 respectively, for the launch many stores up and down the country did midnight openings and within the first 24 hours 3,000 people had signed up to Sega’s Dreamarena on-line service, BT’s servers were so overwhelmed they were forced to increase capacity.
Such was the demand for the Dreamcast that outside one branch of Electronics Boutique in Croydon a man was stabbed and robbed of his console by a 16 year old girl, initial sales figures for Europe looked healthy, 185,000 consoles were sold over the first weekend, with 63,000 of those being in the UK, sony sensing the threat dropped the price of the Playstation to £79.99 as a response.
Back in America the Dreamcast crossed the 1,000,000 sales figure 11 weeks after launch, which made it the fastest selling videogame console of all time, there were also claims of a 3:1 ratio on game sales, Sega even moved their projections forward, predicting 1.5 million sales by December 31st instead of the original date of March 31st, they wouldn’t quite hit the target, but they weren’t far off either, they hit the target a couple of weeks later in January of 2000.
Unfortunately for Sega over the same holiday period Nintendo shifted 1.9 million of their N64 console and Sony sold 3.3 million of their aging Playstation hardware, keeping Sega firmly in third place, but after the Saturn things were at least looking positive, by March 31st Sega had sold 2.5 million consoles and almost 14 million games, which after just 5 months gave them a 20% share of the US videogame market.
Such was Sony’s market dominance at the time that despite Sega having a 13 month lead much of the gaming press were devoting huge swathes of their page count to the as yet unreleased Playstation 2, not helped by Sony taking a position of bullshit and bluster, overselling the capabilities of the console into the realm of pure fantasy, talk of the processor being capable of theoretically processing many millions of polygons a second handily ignored the lack of available VRAM that would be required, but the press ate it up, with some magazines claiming the PS2 would be 20 times more powerful than Sega’s Dreamcast.
In an article from Newsweek published on March 6th 2000, they even went as far as to state “The secret is the Emotion Engine, a fast, high-powered chip set that is fine-tuned to generate polygons, the building blocks of 3-D graphics. While the original PlayStation could handle a mere 360,000 polygons per second, version 2 can spit out more than 20 million: it’s a jump from South Park to Toy Story”.
Following the release of the Dreamcast, Sony’s hyperbole reached unparalleled levels, Sony initially had no real plan for on-line connectivity, but following Sega’s successful North American launch Sony quickly changed track, Playstation designer Ken Kutaragi opined “You can communicate to a new cybercity. This will be the ideal home server. Did you see the movie The Matrix? Same interface. Same concept. Starting from next year, you can jack into The Matrix”.
The PS2 hype was so much that the Japanese Trade Ministry imposed restrictions on the console, banning its sale in Iran, Iraq, Libya and North Korea for fears that it could be used as a weapon by international terrorist groups, this in turn led to concern from US and UK governments as the system was seen as some sort of super computer unlike anything that had been seen before where supply needed to be banned to rogue states.
In the transition period following the failure of the Saturn, Sega had been busy restructuring their internal divisions, the “AM” arcade development teams and the “R&D” console studios had been given more creative freedom, although they still ultimately answered to the Sega board, they were run almost like seperate autonimous studios, the new freedom allowed them to persue new ideas, concepts and even hardware that was previously closed off to them, Studios were rebranded, United Game Artists, Hitmaker, Smilebit, Overworks, were formed from the staff of the “AM” divisions to sit alongside the legendary AM2 and Sonic Team.
In the first couple of years of following its release the Dreamcast quickly gained a reputation for being home to creativity and innovation that arguably hasn’t been surpassed since, as well as being home to startling arcade conversions like Soulcalibur, Crazy Taxi, Sega Bass Fishing, Virtua Tennis and Virtua Fighter 3tb, it also featured some truly inspiring original titles with standouts Jet Set Radio, Rez, Chu Chu Rocket and Space Chanel 5 sitting comfortably alongside quirky oddities like Seaman, Typing of the Dead, Illbleed and Samba de Amigo.
One of the most fondly remembered titles was released on December 29th 1999, Yu Suzuki the legendary developer behind Hang-On, Outrun, Space Harrier and After Burner along with the Virtua Fighter series, had been developing a game that initially had started out as a Virtua Fighter RPG for the Sega Saturn before becoming the game that would eventually be released as Shenmue. Shenmue was unlike any game that came before it, boasting an open world 3D environment interspersed with arcade style fights and quick time events, it included elements of roleplaying games, life simulations, featured variable weather, a day night cycle and such asides as a functioning arcade and vending machines filled with collectables, innovation however comes at a cost and at the time with an estimated production budget of between $47–70 million, it was the most expensive videogame ever produced and despite being a critical success, the game was not a commercial hit, according to GamesRadar “every DC owner would have had to have bought it twice in order for Sega to turn a profit”.
In Europe the Christmas period had been more encouraging, although the Dreamcast hadn’t managed to outperform the aging but cheap Playstation, they were outselling the N64 by at least double, helped in no small part by the fact that Dreamcast games were around £20 cheaper than Nintendo’s big hitters and sat side by side on instore demo pods the Dreamcast offerings looked technically superior in every way.
By March 31st 2000 Sega had sold 1.04 million consoles, beating its target of crossing the million figure by May, it had also sold 3.99 million games helped in no small part by the decision not to publish games in the region that had failed elsewhere, leading to a lot of praise in the gaming press over the quality of the game library, despite this though and thanks in no small part to the market dominance of Sony, Sega was having a hard time breaking the all format sales charts.
Back in Japan things were not looking quite so rosy, launched on March 4th 2000 and backed by extensive press and advertising the PS2 was such a behemoth at the time that many consumers had held off buying Sega’s console because they knew that Sony’s offering would be superior, what with all the talk of emotion engines and photorealistic graphics, the PS2 bulldozed Sega on its Japanese launch, strangely though considering the previous statements about the on-line capabilities of the machine the PS2 shipped without on-line connectivity, a feature that wouldn’t be available until the release of an adaptor 14 months after the consoles launch.
Although Sony suffered initial supply problems with the PS2, with some auction sites charging as much as $800 for a console, that didn’t translate into disgruntled consumers flocking to the Dreamcast, in December of 2000 Sega sold 463,750 units in North America, Nintendo shifted 640,000 N64s in the same period and even Sony managed to sell 515,000 of it’s original Playstation hardware, leaving Sega with just 15% of the market against Nintendo with 37% and the all-conquering Sony with 47%
In May of 2000 Isao Okawa replaced Shoichi Irimajiri as the president of Sega, Okawa had previously invested heavily in Sega having loaned the company $500 million in 1999, Okawa however seemed to lack the faith of previous Sega presidents and from the beginning was stating that the Dreamcast would be the last videogame console the company would produce, seeing the cost of console development as just too expensive to remain viable and preferring instead to restructure the company as a third party software developer.
The American launch of the PS2 in November of 2000 wasn’t too different from the scenes witnessed in Japan, Sega dropped the price of the Dreamcast to $149.99 to remain competitive, even though the Dreamcast was a bargain compared to the PS2, some consumers saw it as a desperate move, on it’s first day of release the PS2 sold a little over 500,000 units in America, pulling in $250 million in sales, Sony’s runaway success was the nail in the coffin for Sega and commercially it just couldn’t see a way to compete.
On September 8th 2000 in the UK Sega dropped the price of the Dreamcast to £149.99 again in response to the arrival of the Playstation 2 in the region, in November Gem distribution started packaging the Dreamcast with an Encore DV450S DVD Player, a copy of Chu Chu Rocket and DVD vouchers for the bundle price of £299, it did little to help, 6 months after its launch the more expensive PS2 had eclipsed sales of the Dreamcast in Europe.
At the tail end of 2000 Sega would again release a seminal title for the Platform with Sonic Team’s Phantasy Star Online, Produced by Yuji Naka, the legendary producer of the Sonic the Hedgehog games, PSO was an action RPG where players could team up in groups of four to fight enemies in real time combat whilst completing quests and acquiring collectibles, the game was massively ahead of its time and pointed the way to what on-line enabled games were capable of, it would end up as both a critical and commercial success.
Despite the lack of success in it’s Japanese home territory Sega released several cosmetic variations of the base console including a pink Sakura Wars console, a metallic silver console, A Hello Kitty branded console available in both skelleton Blue and Pink, a Coca Cola branded console, a Divers 2000 CX-1 combination television and console, the Maziora Edition console, and many, many, more, none of which improved the fate of the console, but many have become highly desirable on the collectors market.
Despite initial reluctance, Sega announced the discontinuation of the Dreamcast in January of 2001, according to The Guardian newspaper rumours of the discontinuation the week before the announcement led to Sega’s stock price rising by 60% with many analysts predicting the company could return to profitability within twelve months after suffering three years of heavy losses.
On April 14th 2001 Sega attended GameJam, presenting 36 titles that were set for release before the end of the year, Yuji Naka fresh off winning numerous awards for Phantasy Star Online, along with Yu Suzuki and Noriyoshi Oba effectively signed off on the console and of Sega as a home console manufacturer.
In North America the Dreamcast had sold roughly 3 million units, on February 4th 2001 the price was slashed again down to $99.95 production was ceased in November of 2001, despite the failure of the machine in North America, it was still more successful than both the Saturn and Master System hardware.
In Europe much like North America, the price was also slashed, in the UK the price was £99.99 as of February 2001, unlike America this did lead to a mini surge in sales, with around 5000 consoles being sold in the UK per week. Software prices were also capped at £29.99 which definitely helped, the Dreamcast survived slightly longer than it managed in America, officially being discontinued in the Spring of 2002.
In an odd twist of fate the Dreamcast died in its strongest market first, the last official release in North America being NHL2k2 in february of 2002, in Europe it lasted a little longer giving Europeans the benefit of releases like Rez and Shenmue II, the machine would live longest in its home market of Japan, despite it being the weakest of the three major markets, this was thanks in no small part to the NAOMI arcade hardware, which was the budget board of choice for many arcade developers, games such as Ikaruga, Zero Gunner II, Metal Black and the final official release Border Down.
However the console would keep trickling along in the years that followed thanks to a whole community of indie developers, keeping the console alive with new releases such as Sturmwind in 2013, NEO XYX in 2014 and Leona’s Tricky Adventures in 2016, in the end the Dreamcast would enjoy a longer life than any of its 6th generation rivals, but unfortunately just not with the kind of sales that would have kept Sega in the home console business.