What Went Wrong: Sega Saturn Edition

The Sega Saturn

This is how history remembers the fifth-generation consoles’ sales war: Sony won. Nintendo survived with its cartridge-based Nintendo 64, and Sega crashed and burned with its Sega Saturn.

Hard cold facts (sales numbers) confirm the introductory paragraph. Sony’s PlayStation took the video gaming market by storm selling an unprecedented 102.49 million units. Nintendo would take a distant second spot selling 32.93 million units of its cartridge based 64-bit system. And Sega, well… Sega did abysmally low numbers with its Sega Saturn system, as it sold only 9.26 million consoles.

Sega had turned itself into Nintendo’s chief (if “arch”) rival in the early 1990s with its successful Sega Genesis 16-bit machine, and Mario’s rival mascot, Sonic the Hedgehog.

The Sega Genesis managed to move 40 million units worldwide (according to VP of Product Development, Joe Miller), to Nintendo’s 49 million SNES consoles sold.

Going into 1995, anyone could have been forgiven for expecting another two-horse race between Nintendo and Sega, but Sega’s Saturn fate might have been sealed years before it even saw the light of day.

Sega of America and Sega of Japan…Two Opposing Sides of the Same Coin

Sega Saturn Tom Kalinske
Tom Kalinske, President and CEO of Sega of America (1990-1996)

The most powerful reason why the Sega Genesis (Mega-Drive) managed to cut in and grab a huge (if at one point almost equal) market share from Nintendo in the home console market was “good old” American marketing ingenuity.

In 1990, Sega CEO Hayao Nakayama, hired Tom Kalinske as President and CEO of Sega of America. This happened after the previous American CEO had failed to sell a million units in the continent, thus placing Sega in a precarious spot both in homeland Japan and everywhere else in the world.  

Kalinske quickly instituted a four-point plan: cut the price of the console, create an American team to develop games targeted at the American market, expand the aggressive advertising campaigns, and replace the bundled game Altered Beast with a new game, Sonic the Hedgehog (a character whose creation was a joint American and Japanese effort).

Sonic the Hedgehog Genesis
The bright colors and fast-paced play made the little blue guy a video gaming icon.

The marketing campaign worked, and the Sega Genesis went toe-to-toe with the SNES everywhere in the world, but in Japan. In other words, Sega of America was much more competent in marketing and positioning the system than Sega of Japan was.

Had it been left up to the Japanese Executives, Kalinske would have been fired for his four-point plan before it ever got the chance to be implemented as Kalinske himself expressed in a 2006 interview: 

They didn’t agree that we should advertise against Nintendo, staff up the U.S. to develop software, reduce the price of the hardware, or put our best title in with the hardware, and I can’t remember all the other stuff they didn’t agree with. Basically, they didn’t agree with any of it, and I thought that well, this was the shortest career anyone ever had! That’s it, three months, and I have to go find another job. But at the door, as he was walking out, Nakayama turned and said, “but we hired you to make all the decisions for the United States and Europe, and so, that’s what we want you to do, even though we think you’re crazy and don’t agree with it, go ahead and do it. – Tom Kalinske 

The disconnect between the Japanese and American branches of Sega played a huge role in the Sega Saturn’s (and Sega’s) demise. At times, it seemed like Sega of Japan, jealous of Sega of America’s success, purposely shot the American branch’s suggestions down, even when these suggestions were likely better than what Sega of Japan would end up doing in their place.

In a shining example of how Sega of Japan would “sabotage” Sega of America’s ideas, Kalinske recounted in that same 2006 interview a telling instance which affected Saturn’s (which at the time did not exist) eventual chipset, “We (Sega of America) had been contacted by Jim Clark, the founder of SGI (Silicon Graphics Inc.), who called us up one day and said that he had just bought a company called MIPS Inc. which had been working on some things with some great R&D people, and it just so happened that they came up with a chip that they thought would be great for a video game console.”

Kalinske goes on to tell how they (Sega of America) had been impressed with the technology, but Sega of Japan wouldn’t be as eager, “We called up Japan and told them to send over the hardware team because these guys really had something cool. So, the team arrived, and the senior VP of hardware design arrived, and when they reviewed what SGI had developed, they gave no reaction whatsoever. At the end of the meeting, they basically said that it was kind of interesting, but the chip was too big (in manufacturing terms), the throw-off rate would be too high, and they had lots of little technical things that they didn’t like: the audio wasn’t good enough; the frame rate wasn’t quite good enough, as well as some other issues.”

SGI would re-work the chip and fix all the issues that Sega of Japan had complained about, Sega would once again send their Hardware team, and again, the answer of the Japanese Sega branch would be a resounding “no”.

In the end, SGI ended up partnering with Nintendo, and its tech powered the Nintendo 64, which consequently was the most powerful console of that generation. Clearly, Sega of Japan’s Hardware team had delivered an early ill-fated strike to its own future console.

Sega Also Had a Chance to “Kill” the PlayStation

sony playstation 1
The PlayStation as we know it, might not have existed if Sega had partnered up with Sony when it had the chance.

It is well known that Nintendo’s betrayal of Sony is what spurred the electronics giant to create its own console. What is less known, however, is that Sony went to Sega right after the Nintendo debacle. Unsurprisingly, Sega of Japan, in direct opposition to Sega of America’s wishes, decided against partnering up with Sony.

Sony apparently gave the green light to that. I took it to Sega of Japan and told them that this was what we thought an ideal platform would be, at least from an U.S. perspective, based on what we’ve learned from the Sega CD, and our involvement with Sony and our own people. Sega said not a chance. – Tom Kalinske 

And so, just like Nintendo before it, Sega had a hand in the PlayStation’s eventual existence. Unlike Nintendo, Sega wouldn’t survive Sony’s entrance into the console market, making Sega of Japan’s oversight in the failed “Sony partnership” an even more damning mistake.

Portables and Add-Ons

Sega Saturn article 32X promo
The 32X is notorious as a failed add-on. It split Sega’s own market, lost the company millions of dollars, and created distrust amongst its own loyal fanbase.

 

Along with the clear disconnect between Sega of Japan and Sega of America, Sega’s hardware trigger “happy” ways put the company in a weakened position right before the Saturn launched in western territories in 1995.

The 32X, was a 32-bit Genesis add-on conceived as a response to Atari’s 64-bit Jaguar:

The 32X was born in a call from Sega of Japan president Hayao Nakayama to Sega of America’s R&D head Joe Miller. He was on speakerphone and there were several of us in Joe’s suite at CES in Vegas. Mr Nakayama basically said that we had to do something about Atari’s forthcoming 64-bit Jaguar console. An hour later, Marty Franz – SOA’s vice president of technology – had sketched up a device that sat on the Mega Drive system bus, sported a ton of power and had two ginormous frame buffers that could be accessed directly by both the Mega Drive CPU and a pair of Hitachi SH-2 CPUs. – Scot Bayless, Senior Producer Sega of America (1990-1994)

Basically, Sega of Japan was worried that the Sega Saturn would not make it in time for the 1994 holiday season. They wanted hardware that could compete with the 64-bit Jaguar, and they needed something to keep their fan base busy until the Saturn’s arrival.

The 32X was a bad idea on many levels. Sega of America is credited for making the device an add-on (opposed to SoJ who wanted the hardware to be a standalone device), but Sega of Japan green lighted the device, and launched the Sega Saturn ahead of it in Japan, and about 5-6 months later in the US.  This inexplicable, if nearly simultaneous release of competing hardware showed how carefree the company was with its financial spending.

The 32X also demonstrated Sega’s lack of foresight. Its biggest competitor at the time was Nintendo. Nintendo would remain committed to it SNES platform until 1996. On the other hand, Atari’s Jaguar was a doomed console, and Sega failed to predict it. Sega threw millions of dollars down the drain manufacturing a hopeless add-on device in order to compete with a doomed console.

Broken Consumer Trust

Sega of Japan’s mishaps would cost them millions (the less said of the Nomad, and the Sega CD, the better), but the 32X’s real damage was to the company’s reputation with consumers. Sega loyalists who purchased the device, quickly learned that they had invested $160.00 on a white elephant, and that the true Genesis successor would arrive less than a year later.

Another feature article would be needed to discuss why the 32X seemed like a good idea (at least in Sega Executives’ minds), but ended up being a failed experiment.  What concerns us now is how Sega angered a relatively large (800,000) fan base who purchased the device, and created distrust with Genesis owners by splitting its own market in such a befuddling way.

After witnessing how quickly the 32X was replaced by the Sega Saturn, who in their right mind would trust Sega with $400.00 (the equivalent of $700.00 today) by purchasing a Saturn? Sega had abandoned the 32X, what would stop them from doing the same with the Saturn?

The Sega Saturn had the Oddest Major Console Launch in History

At this point it is clear that Sega of Japan should have handed the ‘decision making’ reigns to its American counter part, but alas, Sega of Japan did not, and at no point was the company’s incompetence more evident than in May 11, 1995.

It is important to note that just two months before Sega’s ill fated May E3 presentation, Tom Kalinske had publicly announced that the Sega Saturn would launch on September, 2nd 1995. The launch date was aptly named “Saturnday”, as the date fell on a Saturday.

Sega of Japan panicked at Sony’s own American PlayStation launch date (September 9 of that same year). Sega felt that the Saturn needed a head start over Sony’s competing system, and thus, without telling anyone, Sega of Japan directed Tom Kalinske to make an announcement that would doom the Saturn’s fortunes forever.

Kalinske got onto the proverbial podium and announced both, the Sega Saturn and its immediate availability. The moved stunned everyone. From unsuspecting gamers, and press members to unsuspecting retail chains. No one seemed ready to receive or purchase the Sega Saturn. Retail chains like Walmart and KB Toys were caught completely unawares. As a response, KB Toys dropped all of its Sega merchandise soon thereafter.

To punctuate the failed launch announcement, Sony would get its own presentation underway after Sega’s and the electronics giant went straight for the jugular.

$299

“$299” those were the only words (or number) that the head of PlayStation development Steve Race had to say before he was cheered off the podium in a triumphant note. Sega’s Hardware team in Japan had crafted an expensive machine that would have to go toe to toe with a cheaper, but better “3-D” suited machine for 32-bit supremacy.

Kalinske must have been shaking his head at the befuddling decisions made by Sega’s Japanese branch. The company had handed Sony the keys to the console generation, and doomed Sega, even before a single PlayStation unit had made it to a US retail shelf.

A Developer’s Nightmare

Despite Sega of America’s best efforts to fix the Saturn chipset, Sega of Japan’s pride in its own hardware making capabilities doomed the Sega Saturn techwise. Saturn’s problem wasn’t that its eight-processors were not powerful enough to compete with the PlayStation. In fact, on paper the machine was more powerful, the issue was that the machine was more expensive to make than Sony’s hardware, and it took programming wizardry in order to code for it.

Sega, on paper, had more power than Sony in hardware terms, in actual real gaming results, however, very few developers were able to ever harness the full power of the machine. The PlayStation had been designed from the ground up to be a 3-D machine, the Saturn had early roots as a 2-D powerhouse, and the 3-D aspect of the machine suffered for it.

The early launch proved disastrous for the system, as third parties were totally unprepared for the May launch. The surprise launch coupled with the difficulties of programming for the machine insured an abysmal 1995 for the system in terms of the quantity of quality titles available at retail.

Sega Saturn Virtua Fighter 2
The Sega Saturn received excellent Sega Arcade ports like Virtua Fighter 2.

Third Parties struggled throughout the Saturn’s lifecycle often porting inferior conversions of games that were also featured on the PlayStation. Once it became clear that Sony’s machine installed user base was much larger than the Saturn’s, most developers just stuck to Sony’s hardware.

In the end, Saturn’s library ended up with 600 titles which was twice as large as the Nintendo 64’s library, but it never had games that matched Nintendo’s software sales.

Sega’s own teams did have some mastery over the hardware, and the system received highly acclaimed titles, most of which were Arcade ports.

Sega Saturn’s Early Grave

Right out of the gates the PlayStation outsold the Saturn, and Sega’s machine would never manage to recapture the market share that the company had lost from its stellar Genesis/Mega-Drive run. Kalinske left Sega in 1996. Eventually, Bernie Stolar would succeed him, but Stolar arrived at a harsh if chaotic environment, and as early as 1997 rumors (spread by Sega itself) of a Sega Saturn successor were everywhere.

For all intents and purposes by 1998, a year remembered by enthusiasts as one of the greatest in video game history, the Saturn was dead in the water. It did get one of the finest games ever made in Panzer Dragoon Saga, but Sega did not market the game, and only shipped 20,000 units. In other words, Sega did, in a way, abandon the machine and its North American installed base of users.

Sega splitting its market with peripherals before the Saturn’s launch, the company’s poor choice for its hardware design, the eventual disastrous launch of the console and its initial high price; Sony’s almost flawless execution in both hardware and marketing strategies, and the lack of third-party support, all contributed to the system’s demise.

Could the Saturn have Triumphed Had it Launched on Saturnday?

No. While the following paragraphs are largely based on speculation, there were inherent issues with Sega of Japan, and the machine’s design itself that didn’t lend themselves well to the console’s prospects.

Sega of Japan’s arrogance led the company to make crucial mistake, after crucial mistake, each one costing it millions of dollars, at some point the loses would have been too great. Even if the proposed September North American launch would have gone on as planned, the Saturn had issues with third party support, and pricing.

The Saturn didn’t have a real killer app, no original Sonic game was ever made for the system, a fact that must have stung Sega deeply when Nintendo’s triumphant Super Mario 64 took the world by storm in 1996.

Sega had its Arcade conversions going for them, and it was the era of Arcade conversions, but the small installed base of users outside of Japan made it impossible for the system to turn profit even on software. The system itself due to its overly complex design was too expensive to make, and because Sega was constantly forced to match Sony’s PlayStation price point it has been speculated that the company was bleeding money on the hardware end of things.

So yes, botching the launch hurt the Saturn, but it only served to dig it deeper in the hole, a later launch wouldn’t have helped the system unless a true Sonic 3-D entry would have accompanied it. Which, even in an alternate reality, seemed like an impossibility. 

Panzer Dragoon Saga Sega Saturn
Panzer Dragoon Saga, Sega’s answer to Final Fantasy VII arrived too late to save the Sega Saturn.

Other than a partnership with a red-hot Squaresoft, and the deliverance of a Final Fantasy VII type of hit on the Saturn, it is hard to envision a scenario where the console – designed as it was under Sega of Japan’s prideful eye – would have found success outside of the land of the rising sun.

The Sega Saturn’s demise might have been the hardest blow that led to the company’s downfall, the Dreamcast never had a chance to dig Sega out of the hole that it had dug itself in by 1998. 

The Sega Saturn’s Rivals

Nintendo made its own mistakes (the cartridge-based console, and greed-based practices alienated third parties) However, the company had the most powerful system, and consequently, the most groundbreaking software. It was enough to propel the Nintendo 64 to sales numbers (32.93 million) that moved Nintendo’s games in droves, thus turning a profit.

For Sony, however, the planets aligned. Everything that could go right in terms of hardware, third party relationships and marketing went right. The door might have been open for Sega to be competitive with Nintendo, had Sega played its own cards well, but Sony and its PlayStation brand seemed destined to expand and lead the video game market into the new millennium.

What Went Wrong

Sega of Japan’s dismissal of the Sega of America’s proposals and ideas led its hardware team to build a pricey, and hard to program for machine. A surprise launch caught retailers unprepared, and damaged business relationships. Third parties already under duress by the Saturn hardware’s complexity, found themselves in a tight spot by the earlier than expected launch.

Sega failed to convince costumers outside of Japan to choose their machine over Sony’s. The PlayStation at launch offered a greater library of games at $100 less. In addition, the PlayStation was home to many games of popular genres of the time, including RPGs with Final Fantasy VII (and Squaresoft’s support) being key to the platform’s success.

Once Nintendo launched its 64-Bit Nintendo 64 in 1996, the Saturn sales dropped further. Sega’s 32-bit console couldn’t compete with the ratio of quantity and quality of the PlayStation lineup, and with the novel and groundbreaking experiences provided by Nintendo’s own first party titles.

This isn’t often talked about, but the rumors (spread by Sega itself) of the Saturn’s successor codenamed: “Black Belt” as early as 1997, killed whatever enticement the Saturn had left at that point for gamers. Even if said costumers were fans of Sega’s arcade hits, it did not make sense to invest on a soon to be obsolete system.

Sega Article Dreamcast
The Dreamcast was fated to pay for his father’s (Sega Saturn) sins. Sega handled the Dreamcast with much more care than it did with its forbearer, but it was too little too late for the company to survive as a hardware manufacturer .

The Sega Saturn is a cautionary tale of how an established brand can run itself to the ground by poor decision making in its higher spheres.  Sega’s transition to the Saturn from the Genesis didn’t have to be a complicated as its own mishaps made it be. Sega would end up addressing most of its issues for the 1999  Sega Dreamcast’s American launch, but by then the monetary loses incurred by the Sega Saturn had been too great for its sixth generation console to survive another console cycle.

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By Samuel Rivera

An avid video game player and book reader, Samuel has been playing video games for the last 31 years. He has played nearly every PS1 JRPG known to man, and loves Ocarina of Time more than any other game.