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Why the Dreamcast Failed, Sega speaks out (Famitsu, translated by Polygon)

ThreeSixty

December 16, 2009. 4:00 AM. THE LIGHT FIELD is the force. The mind. That guides. Controls.
End production and go third party if old.

Why did the Dreamcast fail? Sega's marketing veteran looks back

Tadashi Takezaki, these days, works at Sega in the position of "head of project implementation department, president's office," which doesn't describe very well the things he's been involved with since joining up in 1993. A veteran of Sega's marketing and PR department in Japan, Takezaki was involved with the launch of both the Saturn and Dreamcast — Sega's final two home game consoles. He was also the man who wrote an emotional online message "to all Sega supporters" in January 31, 2001 to announce that Sega was halting Dreamcast production and becoming a third-party software company.

That certainly wasn't the plan back in 1998, when Sega launched a new system that did its best to learn from previous mistakes. "When we developed the hardware, we looked over the mistakes we made with the Saturn and completely reworked our approach," Takezaki recalled in an interview with Famitsu magazine published this week. "Developing for the Saturn and its two CPUs was difficult enough in itself, but the development environment was also chided for being too lacking. So we fully fleshed out our libraries to make development easier. Even today, the Dreamcast gets a lot of praise for its dev environment."

The Dreamcast was more than dev-friendly, though — it was also casual-friendly, going completely away from the hardcore gamer-oriented trend they established with the 16-bit Genesis and 32-bit Saturn. "We did our best to make the console approachable to a mass audience," Takezaki said, "from the system's design and coloring to the name itself. As a result, we went with a compact, simple design with a warm color scheme, something completely different in look from older Sega systems. I think it was the console that we took the most complete marketing approach with."

So why did the system fail? "In essence, it was a pure matter of cost," replied Takezaki. "It was because we were forced into a discount war when we were already losing money on system sales. Sony [whose PlayStation 2 came out March 2000 in Japan] was part of the team that developed the DVD standard, and they could develop a system around that completely internally with their own chips. Sega, meanwhile, was buying everything from outside companies, so it was at a distinct cost disadvantage. We couldn't easily cut costs on manufacturing, the software wasn't selling the numbers it used to, and then we were forced to discount the system."

It's hard enough to balance hardware costs with profits, but with everything Sega attempted in one go with the Dreamcast, the situation was even more dire than usual. "It's one of those things where the more consoles you sell, the more you lose, so we had to cover that with software sales," Takezaki explained. "But those sales weren't going up, and at the same time, we were busy trying to bring the idea of online gaming to users with the system. Our concept with the Dreamcast was to bring something new to gamers, to build an environment where they could connect with each other from around the world. Sega's whole business model was to build a userbase of cheap network devices, then provide services and products through the Internet; the Dreamcast was our ticket to making that dream come true."

A lot of people in the industry have commented that Sega perhaps pulled the trigger a few years too early with the Dreamcast and its online-centric design. Takezaki doesn't think so. "I think it was the right choice to aim for a net-centric strategy at that time," he said. "However, we went through with it even though our break-even was far too high for it to work. The idea of accessing the net for free at that time was simply fantastic, and we were the ones footing the bill, so in a weird way, Sega was the company paying out the most money for its users at the time."

Looking back, Takezaki sees the Dreamcast as an incredibly revolutionary system, but one that was probably destined to be Sega's last no matter how sales turned out. "I think the Dreamcast really symbolized the changing of the guard that took place around that time," he explained. "PCs really began to evolve and improve at a dizzying rate beginning then, and it made people begin to wonder if a console tuned exclusively for games had any chance of surviving any longer. Still, our experiments with network gaming led to things like Phantasy Star Online, and lots of people are still enjoying that series. The seeds we sowed with the Dreamcast are finally bearing fruit at this point in time. In some ways we were going by the seat of our pants, but it was part of the Sega credo at the time -- if it's fun, then go for it."

Source

Thought this was super interesting to have someone internal from Sega comment on the situation that resulted in the Dreamcast's failure. As heartbreaking to read as ever. AFAIK this take on the Dreamcast's failure is something new and original that we haven't really heard before. The article was published in Famitsu and translated by Polygon. Discuss.
 
A current console landscape with Sega still in the game could've been so amazing for gaming about now. Such a sad demise.

*salute*
 
As a PC Gamer, I very much enjoy the Sega-as-third-party Age.

However, I really miss Samba de Amigo, and the Wii version just wasn't the same.
 
It's a real shame that Sega couldn't maintain its loss-leading strategy.

The Dreamcast allowed Sega to present a very, very strong first-party lineup.
 
The Dreamcast failed because Sega ran out of money.

Systems don't often succeed because they blowup right when released, they succeed because companies keep pouring in millions in on them to make sure they stay afloat no matter what. With the exception of the Playstation 2 and Wii (and MAYBE the Xbox 360) this is pretty much the case for all modern systems. The 3DS was a failure until Nintendo put in a strong marketing campaign, lowered the price, and added Mario Kart. Hell one could say the same with the DS. The Xbox was literally paid for for its position. The Playstation 3, Vita, and Wii U were all dead on arrival and had/is having/is going to have, their owners pour in millions upon millions to have them stay afloat. The Dreamcast failed because Sega ran out of money pure and simple. If the Dreamcast was owned by Nintendo, Sony, or Microsoft the system would have been out for at least another three years.
 
salute.jpg


Phantasy Star Online, Crazy taxi, ShenMue, Virtua Fighter 3 I love this console so much.
 
Sega's name when it came to being a console maker played a big role in it. They'd just come off of quicky dropping support for multiple add-ons and the Saturn. So right away people were going to be nervous about whether or not they should invest hundreds of dollars into a new piece of hardware from them.
 

Fewr

Member
The Dreamcast failed because Sega ran out of money.

Systems don't often succeed because they blowup right when released, they succeed because companies keep pouring in millions in on them to make sure they stay afloat no matter what. With the exception of the Playstation 2 and Wii (and MAYBE the Xbox 360) this is pretty much the case for all modern systems. The 3DS was a failure until Nintendo put in a strong marketing campaign, lowered the price, and added Mario Kart. Hell one could say the same with the DS. The Xbox was literally paid for for its position. The Playstation 3, Vita, and Wii U were all dead on arrival and had/is having/is going to have, their owners pour in millions upon millions to have them stay afloat. The Dreamcast failed because Sega ran out of money pure and simple. If the Dreamcast was owned by Nintendo, Sony, or Microsoft the system would have been out for at least another three years.

Hmm.. I remember the "it's thinking" marketing programme was pretty strong. It also had a decent price, and amazing games.

Also, you are not considering the high rate of piracy in your explanation.
 
The Dreamcast failed because Sega ran out of money.

Systems don't often succeed because they blowup right when released, they succeed because companies keep pouring in millions in on them to make sure they stay afloat no matter what. With the exception of the Playstation 2 and Wii (and MAYBE the Xbox 360) this is pretty much the case for all modern systems. The 3DS was a failure until Nintendo put in a strong marketing campaign, lowered the price, and added Mario Kart. Hell one could say the same with the DS. The Xbox was literally paid for for its position. The Playstation 3, Vita, and Wii U were all dead on arrival and had/is having/is going to have, their owners pour in millions upon millions to have them stay afloat. The Dreamcast failed because Sega ran out of money pure and simple. If the Dreamcast was owned by Nintendo, Sony, or Microsoft the system would have been out for at least another three years.

It is very possible that Sega might have decided that being a third-party developer would have made more net profit for the company.

Even if they did have the capital to sustain it for three more years, there clearly was the "we're ready to go third-party" attitude in the Sega offices at that time. Just look at how Takezaki was talking about the "changing of the guard" and how the Dreamcast was "probably going to be Sega's last console no matter how the sales were."

Companies don't pump tons of money into a product for years and years if they plan on making it their last console ever...they plan on growing the brand with the goal of long-term profits.
 

SMT

this show is not Breaking Bad why is it not Breaking Bad? it should be Breaking Bad dammit Breaking Bad
Now they're rationalizing why their OLD console failed. I think someone's looking to re-enter the console race.

That's always how it starts, ''It didn't do good because of that [...] the next one will be better!''.
 

Jubern

Member
I read a six or seven pages long ass article a couple of months ago, about the failure of the Dreamcast. Anyone knows what I'm talking about? This is basically the abridged way of it.
 
Hmm.. I remember the "it's thinking" marketing programme was pretty strong. It also had a decent price, and amazing games.

Sega had enough money to push the system during its launch years but after that it just slowly started to dwindle.


Also, you are not considering the high rate of piracy in your explanation.
Doesn't mean shit. The PS2, PSX, and DS all had as high, if not higher, rates of piracy then the Dreamcast.

It is very possible that Sega might have decided that being a third-party developer would have made more net profit for the company.

Even if they did have the capital to sustain it for three more years, there clearly was the "we're ready to go third-party" attitude in the Sega offices at that time. Just look at how Takezaki was talking about the "changing of the guard" and how the Dreamcast was "probably going to be Sega's last console no matter how the sales were."

Companies don't pump tons of money into a product for years and years if they plan on making it their last console ever...they plan on growing the brand with the goal of long-term profits.

I agree but to me its just acceptance. Sega just didn't have the finances to compete with Microsoft, Sony, or even Nintendo anymore.
 
dat launch lineup

Sonic Adventure
AeroWings
AirForce Delta
Blue Stinger
Expendable
Flag to Flag
The House of the Dead 2
Hydro Thunder
Monaco Grand Prix
Mortal Kombat Gold
NFL 2K
NFL Blitz 2000
Pen Pen TriIcelon
Power Stone
Ready 2 Rumble Boxing
Soulcalibur
TNN Motorsports Hardcore Heat
Tokyo Xtreme Racer
TrickStyle
Virtua Fighter 3tb
 

SMT

this show is not Breaking Bad why is it not Breaking Bad? it should be Breaking Bad dammit Breaking Bad
DS had like the highest piracy ever and was the second best selling console of all time

It had a ton of games, Dreamcast, all you needed to do was burn the cd lol, but not many games to sustain it.

Also, not many people were as savvy with computers back then, now everyone knows how to drag and drop, that sustained the DS.

Heck, grandma and grandpa can do drag and drop with ease.

Before, if you were burning a cd that wasn't music, you were deemed a knowledgeable geek.
 
Sega had enough money to push the system during its launch years but after that it just slowly started to dwindle.

Sega's support for the system lasted even less than that...after the holiday season in 2000, when the console had only been out in the USA / Europe for little more than a year, Sega just abruptly gave up on the console.

If it had been any other major company, they really would have given the poor Dreamcast more of a chance.
 

yogloo

Member
Sega had enough money to push the system during its launch years but after that it just slowly started to dwindle.



Doesn't mean shit. The PS2, PSX, and DS all had as high, if not higher, rates of piracy then the Dreamcast.



I agree but to me its just acceptance. Sega just didn't have the finances to compete with Microsoft, Sony, or even Nintendo anymore.
Dream cast piracy was every man's piracy. You only need a boot disk. Ps2 and psx needed a mod chip.
 

Mikey Jr.

Member
A current console landscape with Sega still in the game could've been so amazing for gaming about now. Such a sad demise.

*salute*

Ohh for sure. So many great systems like the Sega CD, the 32x, the Saturn.....

Sega kinda deserves the fate they got with all this garbage they released.
 
Sega's support for the system lasted even less than that...after the holiday season in 2000, when the console had only been out in the USA / Europe for little more than a year, Sega just abruptly gave up on the console.

If it had been any other major company, they really would have given the poor Dreamcast more of a chance.

Exactly launch years. You have to keep in mind that the Dreamcast launched in 1998 (crazy right?) in Japan technically and 1999 in the West. So it was pushed for like two and a half years before they said "fuck it!"

Ohh for sure. So many great systems like the Sega CD, the 32x, the Saturn.....

Sega kinda deserves the fate they got with all this garbage they released.
All I see from this list is an awesome add-on, an awesome console, and an add-on that was two years too late.
 
Exactly launch years. You have to keep in mind that the Dreamcast launched in 1998 (crazy right?) in Japan technically and 1999 in the West. So it was pushed for like two and a half years before they said "fuck it!"

Oh I know that...in fact, it was the poor launch sales of the Dreamcast in Japan that heavily determined the console's early demise.
I'm just saying that it was pulled so ridiculously quickly in the West that you can't even use the term "launch years" to describe Sega's faith in the system for every country besides Japan.

It was one year, and that was it. Dreamcast...discontinued, right after its 2nd holiday season. Just like that.

It would be like Nintendo discontinuing the Wii U right after Holiday 2013.
 

cj_iwakura

Member
I recall hearing the DC did better in the US than Japan, but I know that isn't saying much.\

EA not supporting it didn't help either. If you wanted to play Madden you needed a PS2.

They wanted exclusive NFL game rights on the DC. Sega told them no way.

One of their ballsier moves.
 
I find it crazy that the system had PS2 graphics and it launched a bit less than 2 years earlier than it. That's insane. Sega really were wizards with hardware. Dreamcast, MegaDrive, and (while too early) Nomad were a testament to that.

It would be like Nintendo discontinuing the Wii U right after Holiday 2013.

I was just about to use that example.
 
Dreamcast was a great console. It's too bad Sega's executives had bungled the 32x and Saturn so badly, especially in the US (Saturn did well in Japan).
 

Mikey Jr.

Member
Two out of three ain't bad. I love the Sega CD and Saturn. Haters gon hate.

Yeah, I'm gonna hate. They fucked consumer after consumer again and again. Releasing the Sega CD, then dumping it. Then releasing the 32x, then dumping it. Then releasing the Saturn......and according to wiki, it was out for 3 years before being discontinued.

What a track record! Fuck em'. I'm surprised anyone trusted them with the Dreamcast after that series of debacles. I sure as hell didn't.

Keep them in software.

Ohh yeah, also the Dreamcast was out for 2 years. Hahaha.

And people want them in the console space?
 
I find it crazy that the system had PS2 graphics and it launched a bit less than 2 years earlier than it. That's insane. Sega really were wizards with hardware. Dreamcast, MegaDrive, and (while too early) Nomad were a testament to that.



I was just about to use that example.

Oh the can of worms you just unleashed....
 
I recall hearing the DC did better in the US than Japan, but I know that isn't saying much.\

Oh yes.

Dreamcast, first four months + holiday season, USA:
~1.48 million units sold to consumers

Dreamcast, first four months + holiday season, Japan:
~0.56 million units sold to consumers

Generally speaking, the Dreamcast did a MUCH better job in the USA than in Japan.

It was actually Japan's very, very poor Dreamcast sales that really did it in for the console.

By early 1999 (four months after launch), the Dreamcast was doing Wii U-level numbers in Japan. It got a price cut in June, but that didn't help, and by January 2000 sales of the Dreamcast were again in Wii U-level territory.

Not to mention, Holiday 1999 was absolutely pathetic for Dreamcast, so third-party support was dying domestically.
By August 2000 the Dreamcast started going below Wii U numbers in Japan...fizzling out at rock bottom in Holiday 2000 before getting discontinued January 2001.

Really, the Japanese did not care about the Dreamcast at all...it was quite dead in that territory.
 

cj_iwakura

Member
Yeah, I'm gonna hate. They fucked consumer after consumer again and again. Releasing the Sega CD, then dumping it. Then releasing the 32x, then dumping it. Then releasing the Saturn......and according to wiki, it was out for 3 years before being discontinued.

What a track record! Fuck em'. I'm surprised anyone trusted them with the Dreamcast after that series of debacles. I sure as hell didn't.

Keep them in software.

Ohh yeah, also the Dreamcast was out for 2 years. Hahaha.

And people want them in the console space?

Did you play any of those consoles?
 

Tain

Member
I find it crazy that the system had PS2 graphics and it launched a bit less than 2 years earlier than it. That's insane. Sega really were wizards with hardware. Dreamcast, MegaDrive, and (while too early) Nomad were a testament to that.
I think Genesis vs SNES is more impressive than Dreamcast vs PS2. I'd say they're closer tech-wise (with the Genesis being ahead in more important ways than the few ways the Dreamcast was ahead of the PS2) with a similar time gap.
 

Yawnier

Banned
There was a really good documentary on G4TV years ago about Sega's downfall in the hardware business and the Dreamcast specifically, might be on Youtube somewhere but I recommend it to anyone who can find it.
 
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