How Sega blunder handed game console domination to PlayStation

20 years ago, market leader's bungled upgrade of Saturn console, and Sony's lower price and 3D vision, sealed its fate. Then came Grand Theft Auto and Tomb Raider; the rest is history

PUBLISHED : Wednesday, 20 May, 2015, 12:46pm
UPDATED : Saturday, 23 May, 2015, 11:21pm


Twenty years ago this month, at the E3 video game conference in LA, the head of Sega of America accidentally killed the company's Saturn video game console.

Tom Kalinske was in a bind. He knew that Sony was readying its new PlayStation machine for an autumn launch in the US (both the Saturn and the PlayStation had already been released in Japan at this point), and the hype was building. The creator of the Walkman, the portable music device that revolutionised the music industry, was coming after games. And it was serious.

Sony had spent 1994 on a global charm offensive. The company's chief system designer, Ken Kutaragi, visited developers all over the world, bringing an impressive set of graphics demos (including the famed dinosaur 3D model) and promising a wealth of cool development tools and favourable production deals. Sega, meanwhile, had been confusing and alienating its audience and development community with a string of add-ons for the hugely successful (but increasingly dated) Mega Drive console, and a wealth of promises about new hardware platforms that never materialised. Sony had one product and one message: PlayStation is the future.

There were also rumours of a rift between Sega of Japan and Sega of America; although it was never quite as simple - or juicy - as that. What the divisions faced was a huge challenge in appeasing two very different markets. The Japanese office was encouraged to head straight into Saturn development after the launch of the Mega Drive because the machine hadn't been a huge success in the domestic market. However, the company had to be much more cautious about the US, where it wanted to protect and enhance the huge market share it had torn away from Nintendo.

The 32X, a semi-32-bit add-on for the old console, was engendered almost entirely by the US R&D team - in fact, the original concept was designed by lead engineers Joe Miller and Marty Franz, who hastily jotted down the idea for a basic 32-bit system on a piece of hotel notepaper while attending the Consumer Electronics show in 1994. But the order to go ahead with this curious hybrid came from Sega of Japan president Hayao Nakayama who - as incredible as it may seem today - was concerned not about the looming PlayStation, but about Atari's Jaguar console. He wanted a quick stop-gap to rival the Atari system (which would go on to flop hopelessly) and the US team agreed. But this muddied the waters for the Saturn. The 32X was an expensive failure with little software support. And, although the Saturn was selling well in Japan, shifting almost 500,000 units in its first month, PlayStation was catching up.

Sega had an autumn US release for the Saturn lined up; its production line was in motion, retailers were ready. But Japan panicked. Nakayama believed that Sega had to get into the US market early and establish a presence before Sony. So on May 11, at the E3 event, Tom Kalinske went on stage and announced that the Saturn was not only launching early in the US, it was already on the shelves - at the basic price of US$399. "Many Americans have gone to the extent of paying $800 and more for Sega Saturn units from Japan," said Kalinske in the resulting press release. "We've decided to bring the product to market earlier than scheduled to meet the high consumer demand, to refine our marketing strategy over the summer, prior to the important autumn season, and to get a head start on the competition."

But it was a shambles. The machines were expensive and in short supply; only a handful of major retailers got them, alienating the rest of the market. There was only a small selection of games, including a passable port of the arcade hit Virtua Fighter, with few new titles expected until later in the year. All that was to come, but the big blow was only minutes after Kalinske's announcement. During Sony's own E3 press event, Sony America chief Olaf Olafsson called head of development Steve Race on to the stage to make a brief announcement. Race calmly approached the lectern, put his notes down and said "$299". Then left the stage. If he'd had a hand mic, he would have dropped it. The audience went wild.

Had we waited until we had more and better games, launching with all retailers instead of with a few, with marketing that could reach every player, we would have been much more successful
Tom Kalinske

That was it. Although Saturn was hanging on in Japan, the US market was essentially lost, and with it the big British publishers and developers, too. There were technical issues as well: PlayStation was comparatively easy to develop for, with its clean architecture and suite of user-friendly programming APIs. Saturn was a complex beast that used twin CPUs and another couple of video processing chips. With PlayStation, Sony understood that the future was about sleek 3D visuals at all costs; Saturn still had one foot in gaming's 2D, sprite-based past. It also thought that games were still about teenage boys, licensing dance music soundtracks, sponsoring club nights. It saw a future of post-pub gaming sessions, it saw a new audience of young professionals with disposable incomes, using their formative working careers as an extended adolescence.

But if Sega had held its nerve, perhaps all that wouldn't have mattered. Saturn had rank-and-file dev support. A lot of coders at the time were frustrated by the way the PlayStation forced them to use high-level programming language C and denied access to the raw hardware; Saturn was a geek's dream, a mess of interlocking chipsets that skilled programmers could code down to the metal. Sega also retained some close international relationships from its 16-bit days to call on.

The company had always supported Derby-based developer Core Design, for example, so when that studio was working on a certain game about a female archaeologist exploring treasure-filled tombs, Saturn was the development target. If things had gone differently, it could have been an exclusive.

Furthermore, at that time, arcade game conversions were the real profit drivers in the home console space - and Sega had the best coin-op development divisions on the planet. Its Amusement Machine (AM) departments were cranking out smash hits such as Virtua Racing, Virtua Fighter and Daytona USA, and its Model 2 arcade hardware was enormously powerful. Sony knew it had to compete, so it tied an exclusivity deal with coin-op rival Namco to ensure games such as Ridge Racer and Tekken only appeared on PlayStation, but Sega had the talent to compete. It also had great first- and second-party console studios such as Team Andromeda, responsible for the Saturn hit Panzer Dragoon Saga, and Team Sonic, that had more than a certain blue hedgehog to offer: innovative fire-fighting game Burning Rangers and flight adventure Nights Into Dreams being prime examples.

PlayStation grabbed an exclusivity deal with Square to secure the hugely popular Final Fantasy series and dominate the role-playing genre. But Saturn had old ally Treasure and its wonderful Guardian Heroes. It also had Camelot Software Planning and the superlative Shining Force series. And it had its own groundbreaking fantasy strategy title Dragon Force. Thanks to its 2D capabilities, Saturn also got the best of the 1990s fighting games including the Street Fighter Alpha series and the prescient X-Men: Children of the Atom, which cemented the relationship between Capcom and Marvel that would lead to the excellent "Vs" series.

Interviewed recently by the website Sega Nerds, Kalinske is adamant about how much that early US launch cost Sega: "Had we waited until we had more and better games, launching with all retailers instead of with a few, with marketing that could reach every player, we would have been much more successful, even if that meant waiting for a late October or November launch."

There was, of course, another possible outcome. In the early '90s, after Sony had developed a CD-Rom drive for Nintendo's SNES console only to be rebuffed at the last minute, Sega of America approached Sony about working together on a new machine.

Sony had its own game development studio, Sony Imagesoft, based in California and it was making games for the Sega Mega CD. A relationship was there. Kalinske saw the benefit, he understood both the marketing and development talent that Sony could bring. He saw Nintendo waiting in the wings with its next machine - which would become the N64. He thought an alliance could win out. But according to him, Sega Japan turned it down outright.

But even without that deal, the Saturn was a fascinating, difficult and brilliant machine. It had interesting, beautiful games, it experimented with online play and digital downloads through its NetLink modem, it provided a platform for some emerging industry names such as Tetsuya Mizuguchi ( Rez, Lumines) and Hideo Kojima (the Saturn had excellent versions of his Snatcher and Policenauts titles), and it housed fabulous experiments (such as the chaotic 10-player Bomberman). But Sega of Japan blinked too early; after a good domestic launch it showed its hand in the US too early, allowing PlayStation to beat it straightaway on price alone.

What the company didn't see was the roots of a prevailing trend, away from arcade conversions and traditional role-playing adventures and towards a much wider console development community with fresh ideas about gameplay and structure.

Within two years, we'd see the release of Grand Theft Auto and Tomb Raider, games that had no arcade origins or conventions to adhere to. The open world was coming in more ways than one and Sony leapt at it with open arms (and development budgets). But Sega stumbled and all was lost.

No, the gunfight was already over. History beckoned and it would not be kind.

The Guardian