Sega’s Top 10 Biggest Business Mistakes
#3 – Add-ons
These are perhaps Sega’s most notorious mistakes; not the biggest, just most well-known. The SegaCD was developed to compete against the Turbo Grafix-16 in Japan, and with the Super Nintendo in North America. It sounded like a fair plan - release a hardware add-on that could compete with both fronts in the console war. I’m sure if Sun Tzu were a corporate tycoon, he would approve of this… that is, until he saw the price.
The SegaCD cost $300 when it launched. Remember, this is an add-on, and you absolutely needed the Sega Genesis for this puppy to work. So getting a CD-based, 16-bit console with some games set someone back well over $400 or $500. This might not sound like much in today’s market, but you need to remember that in the ’90s, U.S. currency was still worth something. In short, $300 was expensive.
What would you get for relieving your wallet? Mainly crappy full motion video (FMV) “games.” Sega even packaged a FMV game, Sewer Shark, with the SegaCD. When CDs were first introduced, many game developers had no idea on how to utilize them properly, and because of this, many games ended up being poorly compressed videos, with even poorer actors pretending that they had a career. Developers would try all sorts of genres with this method, from point and click adventure to rail shooters, and yet none of them really seemed to work.
The funny thing is, PC gamers had CD-rom games for quite some time before the SegaCD and they were already fed up with FMV games. It was almost like the failed developers from the PC market spread their pain to the SegaCD. Surprisingly, the SegaCD wasn’t entirely terrible though, as real game developers showed up and produced some incredible games. Notable ones are “Sonic CD,” arguably the best 2D Sonic game, and “Snatcher” from Metal Gear Solid’s Hideo Kojima.
Unfortunately, the SegaCD didn’t help the Genesis compete against the SNES or the Turbo Grafix-16, and Sega made one last attempt to seize the market, and increase the Genesis lifespan. The 32x was born.
Where to begin with this mess? The timing was completely off. When the 32x was launched in North America, the Sega Saturn was already released in Japan, and it was going to be released in North America within 6 months. At the time of the release, the 32x was $160 bucks and, like the SegaCD, you needed a Genesis for this failure to work. As for the number of games, there were less than 40 32x games released in North America.
For some reason, they even decided to release games made for both the 32x and the SegaCD at the same time. As sad as this sounds, I had both these add-ons, although it wasn’t my choice. Speaking from personal experience, they simply weren’t worth it.
#2 – Sega Saturn
In 1995, Sega announced the launch date of the Sega Saturn; it was planned to be released on September 2nd, a Saturday (or as Sega called it, “Saturnday”), of the same year. In response, Sony gave their announcement of the Playstation’s launch date, September 9, 1995, at E3; this was one week after the Saturn would launch.
But Sega decided to trick the public by saying that “Saturnday” was a ruse, and that the system was already out at select retailers, 4 months earlier than the announced launch date. Notice I said “select retailers,” meaning that not every retailer was in on the ruse, including Wal-mart. Not only retail not in on it, but third-party developers were left out of the dark as well. Predictably, people were little more than annoyed with Sega’s decision. Developers couldn’t get their games done for the announced launch date, and the relationship between Sega and major retailers were hindered by Sega’s selfish behavior. Just to add more salt to the wound, “Virtua Fighter” was the only game available at launch.
Although stunned but somewhat relieved, Sony would have more time to put some finishing touches on their Playstation, draw up a well-planned strategy and learn from the mistakes of the Saturn. To further get the edge against their competition, Sony slashed their price to $300, making it $100 less than the Sega Saturn. Retailers who were left out of the Saturnday scam sided with Sony in hopes of retaliation against Sega’s behavior.
The launch wasn’t the end of Sega Saturn’s problems. There is no doubt the Saturn was a powerful piece of hardware, sporting two CPUs, but it wasn’t cheap to produce. So naturally, the price had to be higher than the competition. On the developer side, creating games required a lot of effort due to strange two CPU hardware, and to save development costs and time, some games only used one CPU, such as the “Alien Trilogy.”
With the messed up launch, ruined retailer relationships, expensive hardware, and a horrible marketing campaign, Sega Saturn was pretty much doomed. At the end of the its lifespan, Sega lost $200 million and laid off 30% of its workforce. Ouch.
#1 – Bernard “Bernie” Stolar
Bernie has been in the video game industry since its infancy, working for Atari in their coin-op arcade division. From there, he moved to Atari’s home division with his first project, the Atari Lynx. Finally, he served as the President of the company, and founded an arcade cabinet company called Pacific Novelty. Sounds like a guy with plenty of experience.
Sony thought so too, thus they made Bernie the first president of Sony Computer Entertainment America (SCEA), and gave him control of the Playstation platform. When Bernie joined in, he instituted a policy that would have many developers worried: no 2D or RPG games. His reason for this was because 2D games didn’t utilize the Playstation’s full potential and RPGs were, at the time, mainly 2D.
While this is understandable to expect developers to not make a half-ass attempt use of your company’s hardware, it doesn’t make much sense to “blockade” products that might prove profitable in the future. Bernie was released shortly after the Playstation’s first holiday season, which is when Sega offered Bernie a highly prestigious position… being in charge of the Sega Saturn in North America.
Bernie took the job and bought his policies along with him. This is why when you look at the Sega Saturn’s library, you don’t see many RPGs or 2D games released in the States. Bernie thought he could read the North American market like a book, and only allowed games to be released for the Sega Saturn that were, in his eyes, suitable for the platform.
His foresight proved to be fatally flawed, as arguably the greatest RPG of all time “Final Fantasy 7″ was released for the Playstation after Bernie left. The first three days in Japan, it sold 2.3 million copies, and when it was released in North America, it sold 300,000 during its debut weekend and eventually sold a million in early December, only 3 months after the release. In December 2005, “Final Fantasy 7″ sold 9.8 million worldwide.
What makes Bernie’s policy so ironic is Sega had their own RPG franchise, “Phantasy Star.” They even released a collection of their old “Phantasy Star” games and released for the Saturn. However, it was only released in Japan, since Bernie didn’t want RPGs in the North American market.
It doesn’t stop there. Working Designs, a company that specialized in localizing niche RPGs to North America, wasn’t too happy with Bernie’s presence. They used to work for Sega, tried to work with Sony when Bernie was there, then jumped backed to Sega again only to see Bernie…again. Which, in turn, caused them to go back to Sony where they started releasing RPGs like “Alundra.”
So Bernie managed to piss off a few developers, and denied Sega the release of their own franchises in North America. It was because of all these mistakes, made not only by Sega, but by Bernie’s mismanagement in North America, that the Sega Saturn wasn’t doing so hot. It was barely trailing behind the Sony Playstation and Nintendo 64. Bernie came up with plan - scrap the Saturn, and get a new console up and running. Sega of Japan agreed to this, and at E3 in 1997, Bernie said these famous words.
“The Saturn is not our future.”
Picture yourself having a store who recently bought thousands of dollars worth of merchandise, only to be told that your investment in the product doesn’t have a future. Better yet, picture yourself as a gamer who spent a hundred dollars more than they could have on a Playstation to support Sega, buying their console and some of their games, just find out that they were no longer supporting it. The developers and publishers for the Saturn weren’t too happy with the news either, as they spent all that time and money developing games on what was essentially, a dead console. To make this even more interesting, the Dreamcast wasn’t much more than an idea on paper yet when those famous words were said.
Afterward, when the Dreamcast became an actual product to sell to the people, Bernie started marketing the hell out of the console. And it worked, as so many people wanted to get their hands on the Dreamcast at release that they were hard to keep in stock. He even went against his superiors in Japan by pricing the Dreamcast at $199 in the U.S., instead of the planned $249. The launch was so successful, it sold over $300 million dollars of hardware and software during the its first week of launch.
However, Bernie was fired from his position a day before the North American launch of the Dreamcast. Don’t worry, he got a nice $5 million severance package.