Continued from Part 2
Chapter 11 - The Dream Becomes A Nightmare.
Sega's momentum with the Dreamcast started to slowly decline in Japan by Late 1999, with 1,000,000 sold, and in The U.S. by Early 2000, with 2,000,000 in sold.
Poor
Japanese sales contributed to Sega's 42.88 billion Yen ($404 million)
consolidated net loss in the fiscal year ending March 2000, which
followed a similar loss of 42.881 billion yen the previous year and marked
Sega's third consecutive annual loss. Although Sega's overall
sales for the term increased 27%, and Dreamcast sales in North America
and Europe greatly exceeded the company's expectations, this increase
in sales coincided with a decrease in profitability due to the
investments required to launch the Dreamcast in Western markets and poor
software sales in Japan.
By 2000, Dreamcast sails came to a screeching halt, as most Japanese Youth were saving their Money for the Upcoming Sony Playstation 2 and the Nintendo Gamecube. In The U.S., things were a Bit brighter for Sega. Due to a chip shortage, Sony was unable to launch enough PS2's to satisfy demand, so the Dreamcast continued it's momentum....at least, for a short while.
Peter Moore became the president and chief
operating officer of Sega of America on May 8th 2000. He said that
the Dreamcast would need to sell 5 million units in the U.S. by the end
of 2000 to remain a viable platform, but Sega ultimately fell short of
this goal with some 3 million units sold. The Hype for Sony's Playstation 2 was too strong.
Eventually, Sony and Nintendo held 50 and 40 percent of the US video game market by the end of 2000, respectively, while Sega held only 10 percent.
According to former Sega of America vice president of communications
Charles Bellfield, Dreamcast software sold at an 8-to-1 ratio with the
hardware, but this ratio "on a small install base didn't give us the
revenue ... to keep this platform viable in the medium to long
term.
In
2000, Sega and CSK Corporation chairman Isao Okawa replaced Shoichiro Irimajiri
as president of Sega. Irimajiri had been replaced as a result of
Sega's financial losses. Okawa had long advocated that Sega
abandon the console business. His sentiments were not unique; Sega
co-founder David Rosen had "always felt it was a bit of a folly for them
to be limiting their potential to Sega hardware", and Stolar had
previously suggested that Sega should have sold their company to
Microsoft.
In September 2000, in a meeting with Sega's Japanese executives and the heads of the company's major Japanese game development studios, Moore and Bellfield recommended that Sega abandon its console business and focus on software, prompting the studio heads to walk out.
On November 1st, 2000, Sega changed its company name from Sega Enterprises to Sega Corporation. In December 2000, The New York Times (know known as the rotten apple shit-rag) reported that Nintendo and Sega were holding discussions regarding a potential $2 billion buyout, though the two companies denied this; a Sega spokesman called the report "absolutely outrageous".
Okawa talked to Microsoft about a sale or merger with their new Xbox division, but those talks failed. Forbes has speculated that the Nintendo buyout discussions could have been to put pressure on Microsoft to acquire Sega.
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Chapter 12 - Destruction and Reconstruction
On January 23rd, 2001, a story ran
in Nihon Keizai Shimbun claiming that Sega would cease production of the
Dreamcast and develop software for other platforms. After initial
denial, Sega of Japan put out a press release confirming they were
considering producing software for the PlayStation 2 and Game Boy
Advance as part of their "new management policy".
On January 31st, 2001, Sega announced the discontinuation of the Dreamcast after March 31st and the restructuring of the company as an official third-party developer (ala capcom and konami). Sega also announced a Dreamcast price reduction to $99 to eliminate its unsold inventory.
After a further reduction to $79, the Dreamcast was cleared out of stores at $49.95. The final Dreamcast unit manufactured was autographed by the heads of all nine of Sega's internal game development studios and given away with 55 first-party Dreamcast games through a competition organized by GamePro magazine.
Isao Okawa, who had previously loaned Sega $500 million in the summer of 1999, died on March 16th, 2001; shortly before his death, he forgave Sega's debts to him and returned his $695 million worth of Sega and CSK stock, helping the company survive the third-party transition.
As part of this restructuring, nearly one-third of Sega's Tokyo workforce was laid off in 2001.
Sega was officially destroyed, but would eventually rebuild sometime after becoming a 3rd party developer.
Sega would soon make amends with Nintendo and begin creating games for it's Game Cube and Game Boy Advance systems. By March 31st, 2002, Sega had five consecutive fiscal years of net losses and didn't recover until 2003.
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Epilogue - The Answer To The Question
Now for the answer to the Question posed by this series - What Destroyed Sega? The Answer - Sega of Japan!
If it wasn't for them and Hayao Nakayama's Hard-assness and unwillingness to Listen to Tom Kalinske and Sega of America, Sega might not have been destroyed And might have been Stronger today And, likely, in the Console business for a bit longer.
Let's look at what I mean.
- If it wasn't for Nakayama and Sega of Japan, the Sony Playstation, which decimated them in the 32-Bit Wars, Wouldn't have Existed. Why? How? Because, they Rejected a Partnership with Sony to create a CD Add-On or System. Had they embraced Sony and canned the Sega CD, Sega would have little competition in the Late 90s and Be Financially Healthy. Thus, preventing their downfall. Instead, they created The Flop known as Sega CD, while Sony created their Hit Playstation.
- Sega America was comfortable with Just the Sega Genesis and wanted to wait another year for the Sega Saturn, but Sega of Japan and Hayao Nakayama insisted and forced them to create that Horrible 32X Add-On, which not only was a mess of wires in the back, but also required it's own plug. Plus some games required the Sega CD to play. Had Nakayama showed patience, the 32X wouldn't have existed and Sega's rep wouldn't have been damaged because of it.
- Because of the early American launch of The Sega Saturn, The system died prematurely in the States. All because of Hayao Nakayama's paranoia towards the popularity of Sony's Playstation (which exists because of Him,btw.). Had Nakayama remained level headed, the Saturn would've launched on it's originally intended Launch Date and survived through out the rest of the 90's. And on toppa that, Localizers and Western Developers, who were supposed to have their games launch with the System, would actually Get that chance. But No. NO. Nakayama Had to be a Paranoid Loser and force Sega of America to launch the System too early with very few Launch titles. And at $399, 100 bucks more expensive than the Playstation, The Sega Saturn never stood a chance in North America.
- Speaking of the Saturn, Sega of Japan did very little to help Sega of America with the struggling System in the U.S. Ignoring the Biggest and Best Market was a Huge Mistake. Seriously, Sega of America could've used a Segata Sanshiro of their own. I guess SoA could've gotten Adam West or Mr. T to be their equivalent? Had Sega Japan lent more of a hand, The Sega Saturn and Sega's reputation would've been salvaged.
- The Sonic X-treme Incident. Sega of Japan left Sega of America to work on the game alone instead of Helping them. As a result, the game was Canceled and the Saturn went without an Original Sonic Title. I'll talk more about Sonic X-treme at a later day and time. Had the 2 Sega's worked together, Sonic X-treme Would've been released and, maybe, been a hit.
- Sega was forced out of the console business early, thanks to Sega of Japan. Had the Sega Saturn been a Success in America, The Dreamcast would've launched much later And Maybe, been improved. There's also the chance that Sega would've stayed in the console race a bit longer. Making it a Fatal 4-Way between Itself, Nintendo, Sony, and Microsoft. Or a Triple Threat, if Microsoft decided Not to enter the console race itself.
So there's your definitive answer on What Destroyed Sega?. I'll admit, even though it would've been interesting to see what Sega could've been, had their Japanese Bosses Not screwed things up, I kinda like Sega as a 3rd Party company. As I'm a Huge Supporter of a Super Mario/Sonic The Hedgehog crossover. And I liked playing as Sonic in Super Smash Bros.
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And that concludes my "What Destroyed Sega" Special. Hope you all enjoyed.
Until Next Time, Punch a Nazi, Kick a Commie, Resist Modern Attitudes, and Stay Gold.
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