The Rise And Fall Of Sega
Manny Fidel: Among fans in the gaming industry,
there's something called the "console wars."
Today it's a battle between
Nintendo, Sony, and Microsoft
to see which gaming console
makes fans wanna spend the most money.
But before Microsoft entered the fray
with the first iteration of the Xbox in 2001,
there was another company
that completed the holy trinity of gaming.
♪ Sega ♪
Sega is a Japanese video game company
that exploded in popularity in the '90s.
But it went from selling over 30 million
Sega Genesis consoles at the height of its fame in 1993
to selling just 3 million units of its final console
before pulling the plug on its hardware empire.
So, what happened?
The year is 1988.
"Man in the Mirror" by Michael Jackson
is the No. 1 Billboard hit,
and Sony's Disk-Jockey CD player was selling for $400.
It's also the year that Sega
released the Sega Mega Drive in Japan.
At the time,
the worldwide video game industry
was being dominated by Nintendo,
whose Nintendo Entertainment System
was by far the biggest gaming console on the market.
With an iconic mustached plumber as its mascot
and a family-friendly ensemble of video games,
there was virtually no competition.
By the early '90s in the United States,
Nintendo held 94%
of the country's $3 billion gaming market.
It would be foolish to challenge that dominance,
but that's where Sega enters the picture.
Sega had already made a name for itself in Japan
by making arcade games,
but its home console, the Sega Mega Drive,
was struggling.
That's when Michael Katz,
the president of Sega of America,
decided that in order to challenge Nintendo,
Sega had to focus its sights on the west.
The Mega Drive was rebranded as the Genesis in America.
Katz proposed going for the jugular
by attacking Nintendo's reputation with marketing.
Commercial: The Sega Genesis has blast processing.
Super Nintendo doesn't.
♪ Genesis does what Nintendon't ♪
Manny: Sega's reputation as a cooler,
more adult version of Nintendo
started to resonate with fans.
For example, because of internal restrictions,
the Mortal Kombat series on Nintendo couldn't show blood.
But on Sega...
In order to truly take the gaming crown
from Nintendo, though,
Sega had to come up with a mascot
that could rival Mario,
one that could easily appeal to American audiences.
The company tasked artist Naoto Ohshima with the job,
and he came up with a little guy named Sonic The Hedgehog.
Sega's Sonic games featured a much faster-paced,
action-oriented experience that a lot of Americans favored
over the slow-moving Mario platformers.
The boom in sales came when Sega
decided to drop the price of the Genesis
and include a copy of Sonic with new purchases.
This tactic led to an additional 15 million units sold.
By 1992,
Sega had matched Nintendo in sales in the US.
From 1989 to 1993,
Sega went from $800 million in sales
to $3.6 billion.
Sega solidified itself as a top contender
and a force to be reckoned with.
And then...
[tapping]
Commercial: Hey!
You still don't have a Sega CD?
Huh?
Manny: The Sega CD was an add-on device
for the Sega Genesis.
It let you listen to music
as well as play new choose-your-own-adventure games
featuring live-action footage.
But instead of investing its time into new,
innovative games that could attract new customers,
Sega opted for this add-on device.
It couldn't increase its market share with this product
because only people who already had
Sega Genesis consoles could use it.
The Sega CD also suffered from terrible publicity
after the release of its game Night Trap,
which let the player watch "surveillance tape"
of teenage girls trying to escape
from bad guys who broke into their home.
This particular bathroom scene
was cited in a US congressional hearing
led by Joe Lieberman in 1993.
Lieberman said that Night Trap
promoted violence against women
and shouldn't be in the hands of children.
To make matters worse for Sega,
Nintendo chairman Howard Lincoln testified at that hearing.
Howard Lincoln: I want to state that Night Trap
will never appear on a Nintendo system.
Manny: Decades later, the game has actually
been rereleased for the Nintendo Switch.
But that's beside the point.
All of this hurt Sega's credibility,
which proved to be detrimental
when it released the Sega Saturn in the US
at the E3 conference in 1995.
It had an impressive technical prowess,
but at $400, it was expensive
for a machine that didn't have many games yet.
It also didn't help that a new player
in the console wars emerged.
♪ PlayStation ♪
The PlayStation featured sleek 3D models,
while the Sega Saturn still partially relied on 2D sprites.
Finally, the PlayStation cost only:
Steve Race: $299.
[audience applauding]
Manny: For $100 cheaper than the Sega Saturn,
it was a no-brainer for gamers.
Sega's console aspirations
went out with a financial whimper
when it released the Sega Dreamcast in 1998.
Sega of America's president at the time,
Bernie Stolar,
has since acknowledged the Dreamcast's mistakes.
He told Polygon that the company
should've created a larger variety of games
instead of focusing on providing internet connectivity
to the few games that the Dreamcast had.
Internet gaming wouldn't really take off
until Microsoft released Xbox Live in 2002.
But it wasn't all bad news at first.
The Dreamcast sold an impressive 372,000 units
in the first four days.
After a year, though,
sales for the Dreamcast plummeted.
From 1998 to 2001,
the Dreamcast only sold 3 million units
in the United States.
In the last year of the Dreamcast's life,
Sega lost over $200 million.
With the PlayStation 2 coming right around the corner,
it was the last console Sega would ever make.
Today, Sega exists as a video-game-making company only.
It makes games for all the popular consoles.
And while there's been a ton of rumors
of Sega making a return to consoles,
nothing has been confirmed.
