How One Decision Ruined Sega

September 25, 2018

The early release of Sega Saturn was meant to give the company an advantage, but instead, it allowed Sony PlayStation to take the lead in America's video game market.

FULL TRANSCRIPT

FEMALE_1: [MUSIC] In September 1999

FEMALE_1: Sega released Dreamcast in the US

MALE_1: [inaudible 00:00:07]

MALE_2: It's equal graphics you've never seen before.

MALE_3: It's more realistic.

FEMALE_2: It's more exciting.

MALE_4: We have a lot thinking.

MALE_5: On the Dreamcast.

FEMALE_1: And it was a groundbreaking piece of technology,

FEMALE_1: but perhaps that didn't matter.

FEMALE_1: The company was already doomed by

FEMALE_1: a single moment on this stage three years earlier.

FEMALE_1: [NOISE].

FEMALE_1: After a decade of developing

FEMALE_1: console's without much success,

FEMALE_1: Sega finally made it to the top of the market with

FEMALE_1: their 1989 release of Sega Genesis.

FEMALE_1: Initial sales were underwhelming,

FEMALE_1: but in 1990's Sega CEO Hayao Nakayama

FEMALE_1: hired Tom Kalinski as president

FEMALE_1: and CEO of Sega of America.

FEMALE_1: Kalinski's detailed plan for the Genesis lowered

FEMALE_1: the price and developed games

FEMALE_1: specifically for the US market.

FEMALE_1: Sales skyrocketed.

FEMALE_1: For the next seven years

FEMALE_1: Sega maintained their position at the top.

FEMALE_1: When Nintendo released Super Nintendo in 1992,

FEMALE_1: Genesis matched their initial growth.

FEMALE_1: In total, Nintendo sold

FEMALE_1: 23.3 million super Nintendo's in North America.

FEMALE_1: Sega sold 22.4 million Genesis console's.

FEMALE_1: By 1992, Sega was beginning to

FEMALE_1: develop their next console, Sega Saturn.

FEMALE_1: It was an impressive piece of equipment

FEMALE_1: for the time and in the late 1993,

FEMALE_1: the design was just about finished.

FEMALE_1: But then, someone else joined the party.

MALE_6: Your worst nightmare has arrived. Playstation.

FEMALE_1: [NOISE] Sony spent 1994 hyping

FEMALE_1: their first gaming system a 32 bit 3D capable,

FEMALE_1: CD-ROM based console PlayStation.

Ken: [MUSIC] Sony was gonna get it to video games because

Ken: it was already buying a movie studio,

Ken: it was moving into becoming a multimedia empire.

FEMALE_1: That's Ken Horowitz, a Sega aficionado.

Ken: Sega Genesis is my favorite console of all time.

Ken: That's my Genesis collection.

Ken: I have, ah, almost 500 games oh, complete.

FEMALE_1: He runs the website Sega 16 and has

FEMALE_1: published two books on the history of Sega.

FEMALE_1: Sony had money,

FEMALE_1: resources and a distinct marketing campaign.

FEMALE_1: While, Nintendo and Sega had

FEMALE_1: always sold to kids and teens,

FEMALE_1: Sony was targeting adults.

FEMALE_1: Their edgy ads incorporated

FEMALE_1: dark styles and mature themes.

MALE_7: Excuse us Mr. Logan.

MALE_7: [NOISE]

FEMALE_1: PlayStation was cool.

FEMALE_1: PlayStation was the future.

FEMALE_1: Sega panicked.

FEMALE_1: Saturn was scheduled to hit stores in Autumn 1995.

FEMALE_1: The console was in production.

FEMALE_1: Retailers were placing orders,

FEMALE_1: but Sony was also preparing for an autumn launch.

FEMALE_1: So, Sega CEO Hayao Nakayama and

FEMALE_1: Tom Kalinski made a rush decision.

MALE_8: Since I began [inaudible 00:02:52]

MALE_8: announcement I made this opening with another.

MALE_8: We started our role out at Sega yesterday.

FEMALE_1: Sega was already on shelves.

FEMALE_1: Nakayama decided to get Saturn out

FEMALE_1: early and establish itself in the American market

FEMALE_1: before PlayStation had a chance for a price of $399.

FEMALE_1: But there was a big misstep here.

FEMALE_1: Sony was at the same conference and had yet to present.

Steve: $299. [APPLAUSE]

FEMALE_1: [NOISE] That's right.

FEMALE_1: Sony announced PlayStation would be

FEMALE_1: $100 less than Saturn.

Ken: With Steve Race got up there and just

Ken: said $299 and walked away.

Ken: That was like a blow to the stomach

Ken: for a lot of people say of America.

FEMALE_1: Saturn was more expensive arguably less

FEMALE_1: technically capable and simply not ready for retail.

Ken: All of Sega's retail partners,

Ken: Kaybee Toys R Us trade antique

Ken: Babbage's were getting ready for a September launch,

Ken: its third party companies Kaname, Capco,

Ken: and all those guys were

Ken: also getting ready and Sega would come and say,

Ken: "No, we're gonna release in May."

Ken: First of all, there wasn't enough product,

Ken: so they only released decided to search stores and

Ken: companies like Cavey decided

Ken: they were so mad they didn't carry it at all.

FEMALE_1: Saturn's early release gave Sony more time to build hype.

MALE_9: You want a piece of me? You want some of this?

FEMALE_1: Sony was also able to watch the market react to Saturn

FEMALE_1: and improve the performance of

FEMALE_1: the PlayStation before their autumn release.

Ken: Sony had formatched the track Sega sales and

Ken: just immense amount of

Ken: marketing dollars had just

Ken: released the console everywhere.

FEMALE_1: Sony released PlayStation in North America

FEMALE_1: on September 9th, 1995.

FEMALE_1: The fight wasn't even close.

FEMALE_1: Between May and September,

FEMALE_1: Sega sold 80,000 Saturns.

FEMALE_1: Sony sold 130,000 PlayStation's in the first week.

FEMALE_1: In March of 1996,

FEMALE_1: Sega lowered the price to $249.

FEMALE_1: But it was too late.

FEMALE_1: And later that year, Tom Kalinski resigned.

FEMALE_1: In total Sega sold just

FEMALE_1: 9.2 million Saturn units worldwide.

FEMALE_1: Sony sold 102 million PlayStation's.

FEMALE_1: Sega gave consoles one last shot with

FEMALE_1: the release of Dreamcast in 1998.

Ken: The North America launched to the Dreamcast was

Ken: an absolute and mitigated success.

Ken: It was just brilliant.

FEMALE_1: But again, Sony was one step ahead.

Ken: Sony had a lot of money to throw behind the blade.

Ken: Sega- Sega didn't have the cash reserves to promote and

Ken: to market and push

Ken: the Dreamcast the way Sony had with the PlayStation.

FEMALE_1: Sega's days of developing consoles were over.

FEMALE_1: To this day, Sega is still

FEMALE_1: making games and they're making money.

FEMALE_1: In 2017, they reported a profit of

FEMALE_1: $243 million and every now and then,

FEMALE_1: rumors surfaced suggesting another Sega console.

FEMALE_1: [MUSIC]