The Sega Mega Drive was the machine that finally broke Sega into the lucrative American market, arguably it remains one of the most important consoles in history, toppling the mighty Nintendo from their dominant position and cementing Sega’s position as a top player in the video-game console market.
As the end of the 80s was approaching Nintendo was an unstoppable juggernaut, in their home territory of Japan they held a 95% market share, in America 92% but their hardware was beginning to look tired and they had been running with a pat hand for too long thanks to the overwhelming success of their NES console, with the introduction of the Atari ST and Commodore Amiga affordable home computers were now a generation ahead of the 8-bit consoles and consumers looking for cutting edge games were more interested in a computer than owning a console, the time was ripe for someone to step in with something new.
As early as 1985 Sega had started working on it’s Master System successor under the codename Mk-1601, to keep manufacturing costs down Sega initially planned to build upon the existing Master System MkIV hardware which would also have the benefit of backward compatibility, however there was a significant push internally to produce something more akin to Sega’s arcade hardware, Hideki Saito set about tinkering with Sega’s own successful System-16 board trying to create a home console that would allow for audio and visuals that were unmatched at the time.
Although compromises needed to be made with reductions in processor speed and available colours necessary to keep the hardware affordable, the machine was close enough to its arcade parent that the hope of fast porting Sega’s impressive arcade titles would help to boost the Mega Drive’s initial roster of games, the name Mega Drive was chosen to reflect the superiority and speed of the machine, unfortunately due to a company in North America already having a copyright on the name, Sega were forced to release it in the territory as the Sega Genesis.
Just like its System-16 arcade board, the Mega Drive was built around a combination of Motorola’s 68000 CPU, coupled with a Zilog Z80 (the same combination that would power Capcom’s CPS-1 and CPS-2 boards and SNK NEO GEO hardware), the inclusion of the Z80 in the Mega Drive hardware was primarily to control both sound chips to produce stereo sound and provide backward compatibility when used with the Power Base Convertor, allowing both Master System cartridges and game cards to be played on the newer hardware, the Texas Instruments SN76489 sound chip from the Master System was also included in the new hardware.
The Motorola 68000 was a 16/32bit CISC processor released as a high end CPU back in 1979, by the late 80’s prices had fallen enough for it to be the processor of choice for home computers like the Atari ST and Commodore Amiga, but these machines were still over double the price that Sega were looking at for the Mega Drive, Sega needed a very low price and managed to negotiate it for a blanket order of 300,000 chips from manufacturer Signetics.
In its home territory of Japan the Mega Drive was released on October 29th 1988, with two titles available at launch, Space Harrier II and Super Thunder Blade, despite the impressive hardware Sega ran into the same problem that had hampered the Master System, Nintendo’s market dominance and restrictive licensing contracts, Nintendo themselves had released Super Mario Bros 3 the latest in their flagship series just a week before the launch and adding to their woes was that some of the thunder of Sega’s 16-bit revolution had been stolen the year before by the release of NEC’s PC Engine which was gaining popularity in the region, nevertheless the Mega Drive sold out within two days of its launch having sold the initial supply of 50,000 consoles.
Good news came early on when Namco, one of Japans biggest games developers and creators of the all time classic Pac-Man signed on to develop games for the Mega Drive, Namco was the first licensee signed to develop for the NES and had been given a lenient deal by Nintendo, but that deal ended in 1989 and Nintendo president Hiroshi Yamouchi duly informed Namco that to continue they would have to sign the same restrictive deal Nintendo had with its other developers, Namco CEO Masaya Nakamura was not best pleased and did the unthinkable, he went public and accused Nintendo of having an illegal monopoly on the Japanese video game market, even going so far as to file a lawsuit charging Nintendo with anti-competitive behaviour.
Unimpressed with their handling of the Master System which hadn’t sold well in America, Sega decided to drop Tonka and find a new partner to handle the distribution of the Mega Drive, founder of Sega David Rosen made the proposal directly to Atari head Jack Tramiel and president of Atari’s Entertainment Electronic Division Michale Katz, but Atari turned them down, figuring the console was too expensive for American consumers and preferring instead to concentrate on their ST line of home computers, Sega unperturbed decided to launch the console themselves through their Sega of America subsidiary, they did however poach Michael Katz away from his position at Atari to become CEO of Sega of America in October of 1989.
In America success was far from guaranteed, the newly crowned Genesis was released to test markets in New York and Los Angeles on August 14th 1989 with a national rollout following in September, the popular yet uninspiring arcade game Altered Beast was selected as the pack in title for the system and the initial price was a competitive $190 with Last Battle, Space Harrier 2, Super Thunder Blade, Thunder Force and Tommy Lasorda Baseball all available at launch.
It helped somewhat that NEC who had forced Sega into third place in Japan with their PC Engine, had completely botched the launch of their TurboGrafx-16 variant a few months prior, any trepidation Sega may have had was short lived and NEC’s console pretty much sank without a trace, Sega also benefitted from a lot of American developers being unhappy with Nintendo’s restrictive licensing terms who saw the Genesis as a much healthier prospect.
Sega capitalised and quickly forged beneficial ties with a number of game publishers, which saw rapid growth of their console, Sega also partnered with Disney, a relationship that would last several years and would lead to quality titles like Castle of Illusion and Quackshot, these deals would help Sega sell over one million consoles in the territory by the end of 1990.
Katz introduced the “Sega does what Nintendon’t” advertising campaign, directly targeting their biggest rival, Nintendo however didn’t see Sega as any kind of threat, dismissing them as a company in distant third behind NEC who they saw as the stronger and more financially sound competitor, Sega were an Arcade company whose revenues were dwarfed by the mighty Nintendo and after years of trying with their 8-bit hardware they had failed to offer anything close to competition outside of Europe, Sega worldwide had about an 8% market share, compared to Nintendo with 83%.
One of the key companies to Sega’s rise in North America was Electronic Arts, Nintendo were famously tight with their third party developers, requiring companies to order their cartridges direct from Nintendo with a zero return policy, limiting the number of games companies could release, insisting on approval and including a lock-out chip to prevent people releasing unlicensed games on their platform.
Having already reverse engineered the Mega Drive, EA founder Trip Hawkins entered negotiations with an ace up his sleeve, Hawkins requested far more liberal licensing terms than had been standard for the time, including the ability to make as many titles as it wanted, reduced royalty rates, and self approval, arguing that if they wanted to EA could simply bypass Sega and start it’s own licensing program instead, Sega acquiesced and EA released it’s first two Genesis titles before the month was out, a bonus to Sega as Madden proved to be a perfect back up whilst their own Joe Montana football was facing delays.
EA’s top programmers were used to working on Sun Workstations, which were powered by the same 68000 processor found in the Mega Drive, incidentally the founder of EA Trip Hawkins had been instrumental back when he was working at Apple of basing both the Lisa and The Macintosh around the Motorola CPU, so EA had extensive experience along with an enormous code base, thanks to their reverse engineering his team had also been secretly working on games for the Mega Drive for over a year, which allowed them to hit the ground running on Sega’s new hardware.
Sega however were still disappointed with Sega of America and In October of 1990 having failed to sell the one million consoles the Japanese had requested, Sega removed Michael Katz as the CEO of Sega of America and replaced him with Tom Kalinske who despite having no background in either video games or console hardware, immediately shook things up with an aggressive campaign to push sales of the Genesis in North America.
In Europe where Nintendo never did manage to gain much of a foothold things were a little more eclectic, even back in the 8-bit days European consumers had preferred the expanded possibilities of home computers over consoles, with machines like the ZX Spectrum, Commodore 64, BBC model B and Amstrad CPC dwarfing sales of both the NES and Master System, the Mega Drive was now facing up against the Atari ST and Commodore Amiga where it was seen as less functional, Sega had built up a small but loyal following in the U.K. thanks to the Master System doing surprisingly well, whilst Nintendo had the stranglehold in America and Japan, in Europe they held a much smaller 10% market share, 30,000 Mega Drives had been shipped for the UK launch with a retail price of £189.99
There was one issue with the United Kingdom, as popular as Sega were to the die hard arcade fans, the Mega Drive had been on sale in Japan since Christmas of 1988 and a large proportion of those fans that really wanted a Mega Drive had already imported the Japanese console, there were estimated to be well over 100,000 import machines already in the U.K. and by the spring of 1991 only 85,000 official units had been sold, Virgin duly lowered the price to £149.99 in the hopes of undercutting the grey import market.
Having completely obliterated NEC with their TurboGrafX-16 Sega started making huge inroads into Nintendo’s market share in the first couple of years under Kalinske, Nintendo however were pretty sure that although Sega had the head start, the release of their successor to the NES, the SNES would easily redress the balance, Sega hoping to ride things out for as long as possible dropped the price of the Genesis to $149.99.
The success of the Mega Drive in 1991 wasn’t solely due to a price cut, Sega were desperate for a console mascot to rival Nintendo’s ubiquitous Mario, Alex Kidd although popular and the star of several excellent games, never achieved the status of their rival, Sega turned to artist Naoto Ohshima to design a new character alongside Yuji Naka who with his team working 19 hours a day for several months, created Sonic the Hedgehog, an instantly recognisable antithesis of Mario, fast, cool and just what Sega needed, placed side by side with Mario, Sonic looked like the faster, slicker, less child friendly game.
On August 23rd 1991 Nintendo released its SNES console to the American market and Sega had reason to be worried as it was about to lose its technological edge, the SNES was a capable machine, as it should have been arriving almost two years after Sega’s hardware, it boasted more colours than the Mega Drive and could handle hardware based sprite scaling and rotational effects that the Mega Drive simply could only come close to replicating through tricky software solutions, backed by the release of Super Mario World, the newest and arguably best in the beloved series, it looked like Nintendo might be able to win its market share back.
Sega of America however were incredibly savvy during this time, they switched their advertising focus, portraying the Genesis as not only cheaper, but a cooler system to own, they started targeting an older demographic, painting the SNES as a console for children and the Genesis as the machine for teenagers, Nintendo countered by dropping the price of the SNES from $179 to $149, Sega however went one better, lowering the Genesis to $129.99 and evening offering a console only deal for $99.99.
Sega of America also founded the Sega Technical Institute under the direction of ex-Atari employee Mark Cerny, the legendary game developer who had been the designer and co-programmer on the Atari hit Marble Madness when he was 18 years old, Cerny had been working for Sega in Japan for the last couple of years and after its founding STI would go on to produce successful Mega Drive games such as Kid Chameleon, Sonic the Hedgehog 2 and Comix Zone that would help Sega maintain their market position in America, such was the draw of working for STI in the Mega Drive’s most successful market, that Japanese programmers including Yuji Naka and Hirokazu Yasuhara left Japan to work for the new studio.
As 1991 got into its swing Japan was gearing up for the release of the Mega-CD. From the beginning Sega had always intended for the Mega Drive to be upgradable, hence the inclusion of the expansion port on the lower right hand side of the console, Sega had some history with expandable console designs with both SG-1000 which featured the SF-7000 that added a floppy disk expansion along with additional memory and the Master System which featured an expansion slot and was originally branded as a “Power Base” although due to the lack of success for the console, no expansion was released, the Mega Drive itself had already had a Power Base Convertor allowing for backward compatibility with the Master System and in Japan the Mega Modem.
Although Sega were not the first manufacturer to release a CD add on, NEC which had kept Sega in a distant third place in its home country of Japan had already released a CD drive for it’s PC Engine console back in 1988 to reasonable success, despite it being somewhat fiddly and expensive, by the time the 90’s rolled around there were more CD titles being released for the system than standard Hu-Cards, so Sega knew that with the right hardware and software combination there was little reason why the concept couldn’t be financially beneficial.
The original plan was pretty much to match the concept of NEC’s offering, including just the CD drive with double the amount of memory, but after examining the PC Engine CD-Rom Tomio Takami and his team discovered a number of flaws in the system and decided to attempt to rectify them, the higher ups at Sega also wanted more power to compete with Nintendo and its newly released SNES console that was trouncing them in Japan, they wanted hardware scaling and sprite rotation, this would mean the inclusion of a new chipset, so another Motorola 68000 series CPU had to be used to handle these extra tasks, helping to prevent bottlenecking on the Mega Drive’s own CPU.
Sega decided their new CD-Rom project should be kept a secret, they refused to send development drives to the western market for fear of the project being leaked before it was ready, although rumours of a new console were running rife in the western press, the idea of a faster more powerful Mega Drive with CD-Rom games whet the westerners appetite, many of whom were no doubt disappointed when the the machine turned out to be an expensive addition to the console they already owned.
Sega finally showed off the machine at the Tokyo Toy Show in 1991, announcing that 27 different developers had signed on to make games for the Mega-CD, at the same show NEC unveiled its Turbo Duo system that combined it’s PC Engine and CD-Rom drive into one sleet, futuristic looking unit.
The Mega CD was released in Japan on December 12th 1991 shifting fifteen thousand units on its first day at retail, despite being responsible for the hardware Sega only had one game available at launch, it would not release another until May of the following year, so the third party developers bore the brunt of carrying the system through those early launch months, unfortunately having been given limited time to produce the games, the line up was a little uninspiring, with a number of titles being ported from Sharp’s X68000 home computer.
Back in America The Genesis was officially crowned as the best selling toy of Christmas 1992 with Sonic The Hedgehog 2 being the best selling video game, Sega started 1993 with a new advertising strategy, with a boastful claim that Nintendo’s SNES was underpowered by comparison and claiming the Genesis was easily the faster machine with a concept known as Blast Processing, Nintendo were wrong footed and eventually had to take out two page print ads denouncing the idea, but the damage had already been done, the Genesis became known as the console for faster more responsive gaming.
The renamed Sega-CD was announced to the American market the Consumer Electronics Show in the summer of 1992 and Sega held a press conference on the 15th October in New York to officially launch the new add-on with a tentative price set at $299.95 and a range of 20 titles planned for the release, set to be more than doubled within the first six months, keen to offset the issues Sega of Japan had created with lack of first party support, Sega of America devoted one third of its research and development budget toward the Sega-CD, this led to Sega of America becoming the largest developer of software for the machine far outstripping the Japanese arm of the company who were struggling to keep the machine relevant in their home market.
Despite the fanfare, the Sega-CD was quickly sidelined by American consumers, for an expansion the machine cost far more than the Mega Drive itself, had a somewhat lacklustre line up of games, some of which were based around the belief that consumers wanted FMV titles, when in reality they wanted anything but, even though CD based software was more cost effective than cartridges, this wasn’t reflected by retail prices for the games and without a significant boost in quality, there was little to entice consumers.
Over in Europe the price of the Mega Drive had been lowered to £149.99 in the UK and despite lagging behind the home computers of the time, sales were on something of an upswing helped in no small part by the release of Sonic The Hedgehog, which was perceived by many to be to be beyond the capabilities of machines like the Commodore Amiga, by the middle of the year the price was cut again in the UK down to £129.99 and Sonic became the pack in game, similar price reductions followed all over Europe and within months sales were on an upswing, by spring of 1991 85,000 Mega Drives had been sold in the UK with 193,000 across Europe, in 1991 a further 225,000 had been sold in the UK and 815,000 across Europe.
By the time Nintendo released its SNES in the UK it looked very much like things would follow the path of the Master System vs NES, Nintendo at this point had never seemed to value the European market and consumers took note, in 1992 680,000 SNES consoles were sold across Europe, with Nintendo taking a narrow lead in Germany and Scandinavia, the Mega Drive sold 920,000 units giving them the lead everywhere else.
In Europe the Mega-CD was delayed in much the same way as the Mega Drive had been, in the UK the system didn’t launch until 2nd April 1993, almost 16 months after Japan, part of this was by design, as Sega wanted to avoid the issues of launching the console with very little attractive software, the downside was that news of the Mega-CD 2 a cost reduced version of the hardware were now filling up the games magazines before the older Mega-CD had even been released, however the initial shipment of 65,000 units to the UK sold out within the first month.
There was still no getting around the fact that the machine was expensive, the Mega Drive had already received its first price cut in the UK and was retailing for £149.99 the Mega-CD had a launch price of £269.99, even with a couple of pack in games, the perception was that the machine just cost too much, for new consumers buying the Mega Drive and Mega-CD was far more expensive than picking up an Atari ST or Commodore Amiga, the latter of which was in the middle of its golden period and thanks to rampant piracy, a quality software library could be obtained for the price of the blank disks.
Within 4 months of the Mega-CD launch the cost reduced Mega CD 2 hit UK shelves, France, Spain and Germany were amongst the countries that deliberately held back on releasing the Mega-CD until the cheaper version was available, yet even with the cost reduced system, European consumers showed little interest.
During the early 90’s the marketplace for CD based consoles was becoming crowded, Philips launched its CDi system, Atari had a CD add on for the failing Jaguar console and SNK with the NEO GEO CD, in addition the humble PC was also expanding into the gaming sphere with CD-Rom drives and new graphics and sound cards that meant the PC was starting to pick up steam and was beginning to rival the Atari ST and Commodore Amiga as the home computer of choice.
Commodore also came out swinging with the release of its CD32 console, based around the hardware of its 32 bit Amiga 1200 computer, the machine was well received by the press and compared to the Mega-CD was reasonably successful in the UK, unfortunately despite being able to take away a percentage of the market share from Sega, financial issues and component supply problems at Commodore meant the CD32 was poorly supported and quickly fell by the wayside.
Down in Australia things followed a similar pattern to the UK, the console was launchd on April 19th 1993 with the Mega-CD 2 following swiftly at the tail end of August, like everywhere else the machine was just too expensive to make any kind of impact and by late 1994 only around 20,000 units had been sold.
One of the big tipping points in the war between Sega and Nintendo came in 1993 with the home console release of Mortal Kombat, a huge success in the arcades due in no small part to it’s digitised graphics and ultra violence, fans were rabid for the opportunity to play the game in their own homes, the Mega Drive version featured all the blood and fatalities of the arcade original, the SNES version didn’t, offering up a sanitised take on the arcade game, once again the SNES looked like a child’s toy next to the Mega Drive.
As the 90’s got into full swing, talk started to turn to 32bit consoles and developers were becoming less interested in releasing games for the comparatively small market the Mega-CD offered, a triple A game released on the base Mega Drive or the SNES would pull in far more revenue than even the best CD based titles.
1994 saw the release of another new hardware add-on, the 32X, Initially designed by Sega of America’s Joe Miller under request from Sega CEO Hayao Nakayama as a response to the release of Atari’s 64bit Jaguar console, the development of the system had a simple goal, to produce a next-gen version of the Mega Drive with double the available colours at a lower price point, Miller however thought that was a terrible idea and pushed instead to have the hardware released as an add on the Mega Drive itself.
Producing a system so close to the release of its true next-gen hardware was somewhat problematic, the Sega Saturn was officially announced before the 32X was ready to release, the launch price of the 32X was considered by many to be prohibitively expensive, especially when the cost of buying the games was factored in, to make matters worse and not wanting to take any steam out of the impending Saturn launch the 32X was marketed as a “transitional device” Rumours that a Mega Drive, Mega-CD, 32X combo (colloquially dubbed the Tower of Power) could run Saturn games was quickly quashed by former EA head Trip Hawkins who stated
“Everyone knows that 32X is a Band Aid. It’s not a ‘next generation system.’ It’s fairly expensive. It’s not particularly high-performance. It’s hard to program for, and it’s not compatible with the Saturn”
In America the 32X was released in November of 1994 at a launch price of $159.99, no game was bundled with the system, so if you wanted a game to play on it the price was over $200, despite this the unit was initially well received by the gaming press, by the end of the year the 32X had shifted over half a million units and spirits at Sega of America were optimistically high.
In Japan the 32X was released in December, the issue with this was that the Sega Saturn had been launched the month before, and whilst the Mega Drive had always struggled to stay relevant in its home market the Saturn was turning out to be a different story, it certainly didn’t help that despite requesting the 32X, Sega of Japan seemed to have absolutely no interest in the system and the big question remains why they bothered to release it at all.
Over in Europe the 32X arrived at the same time as its Japanese launch, with a challenging price tag of £169.99, to counter the steep asking price the machine came bundled with a rebate voucher for £50 off a selection of games, the offer however left most customers feeling like they had been sold a promise as the the rebate was not exactly straightforward, shortly afterward the machine was dropped to £99.99 to match the pricing of the Mega-CD 2, although initially popular, supply problems hampered the machines early months and by the time these were rectified consumers had already woken up to the fact that its days were numbered, the machine was discontinued 18 months after its launch.
By mid 1995 most developers had abandoned the 32X, preferring to shift focus to the Sega Saturn and Sony’s soon to be released Playstation console, by early 1996, Sega of America abandoned the hardware altogether telling all 32X developers to focus their attention on the Saturn instead. Store shelves were still ripe with the unloved system and even with a reduced price of $19.95 they were slow to shift.
In total only 40 games were officially released for the 32X six of which were Mega-CD 32X titles that required both Sega hardware additions to run, ten were North American exclusives, two were Pal, one Japanese and one Brazilian, A far cry from the over 100 titles that were promised at the systems launch.
All told the Mega-CD had fared little better, by 1995 only 80,000 Mega-CDs had been sold in the UK, compared to 2.1 million Mega Drives, Germany by far had the highest rate of adoption selling 140,000 units off the back of 800,000 Mega Drives, but the writing was already on the wall, in the UK the price was slashed to £99.99 with little effect, in America where the machine was most successful they had sold around 1.5 million units.
It is impossible to overstate the success of the Genesis in North America, the machine saw Sega going from having a 2% market share compared to Nintendo which at one point had a 92% share, to having over 55% in 1993 with it’s 16-bit hardware, it was also the console of choice for most of Europe, but in its home market of Japan it failed to make an impact, to the point that Sega refused to release an official sales figure for the region, when all is said and done the Mega Drive remains Sega’s highest selling console, selling an estimated 35 million units worldwide.
Both the Mega-CD and 32X were capable additions that should have pushed the console to new heights, but they were let down by being too expensive to release as an add-on for a console that was by that point a fraction of the price of either and with games that were more expensive than their Mega Drive counterparts, the arrival of the Sega Saturn with its botched international launch and the desire of Sega Japan to push forward abandoning its 16-bit hardware entirely, proved to be the straw that broke the camels back with many western consumers and game developers, unfortunately the lasting legacy was such that in the west Sega would never recover.