The Inexplicable Death of the Sega Dreamcast

[Music] of all the ups and downs that sega went through as a home console maker the dreamcast remains the most interesting to me there's lots of reasons for that but none more important than the fact that it ended sega's run in the hardware business at the time it just seemed completely ludicrous that it could fail it was priced right it had a game library from the gods how could a console that was so well received not reach the success that it deserved i mean you break down the life of the dreamcast and it essentially did everything opposite of the saturn it was priced better it was easier to program for it had arcade level power that squashed the competition when it was released to someone just looking at the game magazines and store shelves the dreamcast seemed just as big as anything sony and nintendo had gone when sega announced it was exiting the console business in 2001 i was truly disappointed what it started out so positive and full of potential had ended an absolute disaster in this episode we will be taking a look at the reasons why siga failed with the dreamcast did it ever have a chance or was it doomed from the beginning let's take a look and find out [Music] [Applause] [Music] [Applause] the dreamcast launched first in japan on november 27 1998 for 29 000 yen just four years after the saturn sega had been convinced that sony overtook them there because the playstation was perceived as more powerful and easier to program for they very much believed that success ran through japan first and foremost and with the popularity of virtua fighter 3 behind their launch they were confident the dreamcast would be an instant hit this was perhaps one of sega's biggest miscalculations by releasing in japan first they essentially stopped all sega saturn development in its tracks while saturn games continued to flow for another year they were projects that had already been underway since japan had been sega's strongest territory for the saturn many had felt releasing there so early was a big mistake to make matters worse sega's hardware vendors were having a ton of trouble making the chips needed to build the dreamcast so system shortages hurt potential sales numbers early on sega was unable to take many pre-orders because of this and for the rest of 1998 they had trouble replenishing stock sega also had a huge software problem while the dreamcast launched with virtua fighter 3 in japan it didn't have much else and high profile releases like blue stinger and resident evil code veronica were pushed well past their initial release windows software was staggered heavily from there usually no more than a single title seeing release every week interest began to lag in japan as early as march of 1999 so sega lowered the price significantly in june to just 19 900 yen which was less than 200 us dollars at the time you don't hear it talked about often but the japanese launch had essentially been an overall disaster the early hardware shortages the lack of software and the killing of the saturn market had all been realities of launching there too soon sega had a full year and a half head start on the playstation 2 in japan and it would end up meaning nothing at all [Music] the launch in the us had gone much better there was a ton of hype around it the price was great and the dreamcast had a seriously impressive amount of software to start but what you don't often hear about is what the us launch costs sega according to parts breakdowns and manufacturing estimates it costs 250 dollars to make a dreamcast console from start to finish that includes parts housing putting it together and getting it in the box as many of you know the price in the us was only 199 that meant that sega lost fifty dollars just to sell you the system it took sega less than three months to sell a million dreamcast units in the united states with a three to one software attach rate but in doing so the company lost 50 million dollars on the hardware and spent an additional 100 million in advertising essentially wiping away any potential profits immediately with sega already hurting for cash this is a reality that would do them no favors sega was bleeding money and they were losing it faster than they could bring it in the man behind this debacle was none other than bernie stoller sega of japan had not wanted to sell the u.s dreamcast at a loss deciding on a 249 launch price as the best way forward mr stoller went against his japanese manager strategy and priced the dreamcast himself at just 199 dollars guaranteeing heavy losses from day one as you can imagine this pissed off sega of japan something fierce resulting in bernie stoller's termination never before had a single individual done so much damage to sega's business model he oversaw the decision to leave the u.s market without a sega presence for over a year before the dreamcast even showed up and then priced it so a dying company would lose even more money good job dude during the rise of the dreamcast there was a massive shift in sega's management both in ideology and personnel hayeo nakayama had become the president of sega enterprises in 1983 when csk corp purchased the company from gulf and western nakayama believed that there was a huge future in the home console market and was the driving force in most of sega's hardware decisions but in 1998 with the saturn market faltering worldwide and a failed merger attempt with bandai nakayama resigned his position at sega this opened the doors to new blood that had wanted to take sega third party for a very long time for years the u.s arm of sega had wanted to do this as well tom kalinski wanted to join sony bernie stoller wanted sega to back microsoft and even one of sega's original founders david rosen thought third party development was the way as profits continued to fall this thinking began to take hold in the japanese management as well isaiah okawa the head of csk holdings the company that owned sega at the time believed this to be the best path forward as well in september of 2000 peter moore the president of sega of america recommended that sega completely abandon its hardware business and began making software for its rivals immediately though the entire japanese management walked out of that meeting the reality was that sega could no longer continue on this path just four short months later sega announced the end of the dreamcast and its home hardware market for good [Music] whenever you talk about the dreamcast you absolutely have to add in the playstation 2. sony ran a brilliant hype campaign before it released when sega launched the dreamcast in the u.s on september 9 1999 sony was at the tokyo game show only a few weeks later to unveil the playstation 2 complete with playable versions of tekken tag and gran turismo the news that came out of that show dominated the websites and gaming magazines for the following months the playstation 2 would have massive third party support from companies like namco square capcom tecmo konami enix and many more it would have a built-in dvd player that could play movies straight out of the box the dual shock 2 kept the 2 analog stick design and had new innovative features like presser sensitive buttons sony touted it as the most powerful console ever conceived by humankind easily eclipsing anything before it there's no two ways about it sony quickly stole back the next generation thunder and had customers salivating for their next machine even better the 39 800 yen price of the japanese version would almost certainly translate into another 299 dollar u.s launch few play the game as well as sony and they advertise the playstation 2 with the exacting expertise of a brain surgeon [Music] you will often hear in discussions about the success of the playstation 2 the dvd played a huge role in that dvd as you know was the optical standard that replaced cds it had more storage and allowed for higher video quality stand-alone dvd players were really expensive in the late 90s so the prospect of essentially giving one away for free with your new video game system held a lot of appeal dvd was released first in japan and the market there had accepted them with open arms hilariously it was sega that openly began talking about using dvd technology in its future consoles and making an all-in-one device that could play movies games and more that was all the way back in 1996 before the dreamcast was even close to being finished it's actually kind of ironic that sega knew the potential impact of such a device yet actively did everything in their power to skirt making it happen the impact of dvd not being in the dreamcast cannot be overstated though it did make the sega option less expensive than the playstation 2 the value proposition was still in sony's favor customers around the globe clearly favored a games machine capable of playing movies proving once again that few companies knew its market the way sony did [Music] piracy in video games is nothing new even back then since sega was losing money on every machine sold in every territory by late 1999 software sales were of paramount importance but once that piracy started software sales took a major hit i knew guys that worked at pc repair shops that ran side businesses making copies for people and selling them for ten dollars the impact on sega was undeniable particularly in europe and asia where boot disks and cdrs were rampant sega had been pretty aggressive with the copy protection on the saturn and gd gdroms on the dreamcast were copy protected as well the problem actually came in with sega's support of mill cds mill cd stood for music interactive live cd which was basically a music cd that could also have videos because there was no copy protection on the format the dreamcast could run unlicensed code from a standard cd which people quickly realized meant games would run as well this oversight was a blunder of inexplicable proportions the entire reason sega had gotten yamaha to develop gdrams for them was a way of combating piracy and then they allowed the dreamcast to boot unauthorized code from a format that few people were ever gonna use this was 90 sega in a nutshell my friends it's a tale that almost sounds made up one of the biggest reasons i feel that the dreamcast failed was the simple fact that sega couldn't financially support it properly starting in 1998 the company began losing money on an epic scale despite the popular belief that the saturn had ruined sega its arcade and genesis businesses had helped offset some of the saturn's losses so the company wasn't in dire straits quite yet but with much of the western market being abandoned in 1998 sega had nothing to sell there for more than a year investment in the dreamcast meant sega was pumping out money like crazy and getting little of it back leading to massive losses for four straight years by 2001 the company was destitute in debt and facing an absolute certainty of bankruptcy and liquidation it was only due to the csk holdings founder and chairman of sega enterprises iseo akawa providing nearly 700 million of his own money and for giving millions more that he had personally lent the company to allow sega to pull itself together and climb out of the cellar to see sega's financial performance during its dreamcast years is to see a company that was never in any position to market and sell a console in the first place [Music] my last point is to discuss the loss of electronic arts as a third party they had contributed heavily to sega's rise as a leader in the 16-bit market their sports games alone are the reason why millions flock to the platform in the first place despite popular belief electronic arts had supported the saturn strongly as well they continued making sports games for the saturn and brought over popular franchises like road rash need for speed and soviet strike no one can deny just how important they were as a developer and sega lost them completely on the dreamcast not a single ea developed or published game appeared on it meaning that the prospect of a next generation madden could only be realized on someone else's console there's a ton of rumors and thoughts on why ea abandoned sega some believe it was sega's treatment of the saturn while electronic arts was still releasing software for it and some believe it was sega's choice to use nec's power vr chipset over the ea-approved 3dfx design the why ultimately doesn't matter because when matt in 2001 landed in the us you could only play it on the playstation 2. i had friends that openly rejected the notion of owning a dreamcast for this very reason even though the 2k football series was readily available ea was a force to be reckoned with in the united states and not having them was a huge blow to sega's chances so there we are my eight biggest reasons why the dreamcast failed most of the time you cover a topic like this you get all kinds of opinions and facts that made up the bigger picture rarely did anything fail in the video game industry for just one thing if anything sega was a case study on how not to run a company from about 1994 onward so many mistakes so many missed timings so many cooks in the kitchen the dreamcast was a product with a load of potential that was hamstrung by a great many factors in the end my only conclusion can be that the dreamcast never had a chance with the way things played out sega didn't have the market money or motivation to see it succeed leading to a sort of corporate malaise that led to a certain death what i had said in the beginning of the video was absolutely true for damn near every reason people give for the failure of the sega saturn the dreamcast did the opposite and still failed this leads me to a second conclusion the power of intangibles like brand awareness brand confidence and the consumer's faith in a company nearly every one of these issues i covered could have been overcome had the dreamcast sold better right out of the gate but the simple truth was many consumers just didn't see sega as a worthwhile investment anymore years of abandoning platforms early and questionable software releases had damaged them to obscurity the stuff we covered here just festered the wound i'm sigalord x thank you guys for watching and i will catch you next time [Music] [Music] [Music] [Applause] [Music] you

Channel: Sega Lord X

Views: 115,750

Keywords: dreamcast, segalordx, sega lord x, sega saturn, sega genesis, sega dreamcast, mega drive, megadrive, game gear, 32x, mega cd, genesis, saturn, master system, sega, sega cd, gameplay, review, movies, retro games, retro gaming, video games, ps4, xbox, wii, nintendo, gamecube, n64, ps1, ps2, ps3, psp, vita, switch, atari, best dreamcast games, dreamcast games

Id: 3oyY-B9wTIA

Length: 16min 51sec (1011 seconds)

Published: Sat Apr 10 2021