History

 

Prior to development of the Saturn, the Sega Genesis was Sega's entry into the fourth generation of video game consoles. It was released in Japan as the Mega Drive in 1988, North America in 1989, and Europe as the Mega Drive in 1990. In mid-1990, Sega CEO Hayao Nakayama hired Tom Kalinske as CEO of Sega of America. Kalinske developed a four-point plan for sales of the Genesis: cut the price of the console, create a U.S.-based team to develop games targeted at the American market, continue aggressive advertising campaigns, and pack Sonic the Hedgehog in with the console. The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." Magazines praised Sonic as one of the greatest games yet made, and Sega's console finally took off as customers who had been waiting for the Super Nintendo Entertainment System decided to purchase a Genesis instead. However, the release of a CD-based add-on for the Genesis, the Sega CD (known as Mega-CD outside of North America), had been commercially disappointing.

 

Sega also experienced success with arcade games. In 1992 and 1993, the company's new Model 1 arcade system board showcased the 3D titles Virtua Racing and Virtua Fighter, which played a crucial role in popularizing polygonal graphics. The Model 1 was an expensive system board, and bringing home releases of its games to the Genesis required more than its hardware could handle. Several alternatives helped to bring Sega's newest arcade games to the console, such as the Sega Virtua Processor chip used for Virtua Racing, and eventually the Sega 32X add-on.

 

Development

 

According to Sega project manager Hideki Okamura, the Saturn project started over two years before the system was officially unveiled in June 1994 at the Tokyo Game Show. The name "Saturn" was initially the system's codename during development in Japan, but was ultimately chosen as the official product name. At the release of the 3DO Interactive Multiplayer by The 3DO Company in 1993, Sega of America president Tom Kalinske claimed, "We have a more powerful machine waiting in the wings, but the time's not ready yet."

 

In November 1993, Sony announced the release of the PlayStation. The PlayStation was intended to be a 3D-capable console, superior even to Sega's Model 1 arcade board.[5] When Sega learned of the PlayStation's capabilities, Sega CEO Hayao Nakayama is said to have approached his research and development department team members and criticized them for allowing Sony to develop a console more powerful than theirs. According to a Sega of Japan employee, "There had been rumors, but Sony's announcement took a lot of people by surprise. It wasn't just the technology that worried people; it was the fact that Sony was planning to enter a market that Sega thought it would have completely to itself." Sega apparently redesigned the Saturn in a short amount of time. Its new architecture was designed with two SH-2 processors, as well as two video display processors (VDP). According to Sega of Japan developer Kazuhiro Hamada, the SH-2 was chosen for cost and efficiency reasons. Its additional functions with its second VDP chip were designed to utilize effects similar to Mode 7 on the Super Nintendo Entertainment System (SNES). The newly redesigned Saturn's hardware and 3D capabilities were improved beyond the Model 1 and approached Sega's new Model 2 arcade board, which had not yet launched.

 

According to Kalinske, Sega of America "fought against the architecture of Saturn for quite some time". Seeking an alternative graphics chip for the Saturn, Kalinske attempted to broker a deal with Silicon Graphics, whose 3D graphics system was ultimately used in the Nintendo 64. Although Kalinske has stated that Sega of Japan refused the plan, Nintendo's Howard Lincoln claimed that "Mr. Nakayama wanted that technology as badly as [Nintendo President Hiroshi] Yamauchi, but Yamauchi got it." Kalinske, Sony Electronic Publishing's Olaf Olafsson, and Sony America's Micky Schulhof had previously discussed a joint "Sega/Sony hardware system" that never came to fruition.

 

Because the Genesis was starting to lag in its capabilities when compared to the SNES, Sega began to develop a stop-gap solution that would bridge the gap between the Genesis and the Saturn, serving as a less expensive entry into the 32-bit era. The decision to create a new system was made by Nakayama. According to former Sega of America producer Scot Bayless, Nakayama was worried that the Saturn would not be available until after 1994 and that the recently released Atari Jaguar would cut into Sega's hardware sales. As a result, Nakayama ordered his engineers to have a stop-gap ready for launch by the end of the year. The 32X would not be compatible with the Saturn, but Sega executive Richard Brudvik-Lindner pointed out that the 32X would play Genesis titles, and has the same system architecture as the Saturn. This was justified by Sega's statement that both platforms would run at the same time, and that the 32X would be aimed at players who could not afford the more expensive Saturn. According to Sega of America research and development head Joe Miller, the 32X served a role in assisting development teams for software to familiarize themselves with the dual SH-2 architecture also used on the Saturn.

 

Launch

 

A first model Japanese Sega Saturn unitSega released the Saturn in Japan on November 22, 1994, at a price of JP¥44,800. Virtua Fighter, a nearly indistinguishable port of the popular arcade game, sold at a nearly 1:1 ratio with the Saturn hardware at launch and was crucial to the system's early success in Japan. In addition to Virtua Fighter, Sega had wanted the launch to include both Clockwork Knight and Panzer Dragoon, but the latter wasn't ready in time.[19] Within the first two days, the Saturn sold over 250,000 units. Meanwhile, the 32X was released on November 21, 1994 in North America, December 3, 1994 in Japan, and January 1995 in PAL territories, and was sold at less than half of the Saturn's launch price. After the holiday season, however, interest in the 32X rapidly declined.

 

In early 1995, Sega of America president Tom Kalinske announced that the Saturn would launch in the U.S. on "Saturnday", (Saturday) September 2, 1995. Kalinske was skeptical about the timing of the Saturn's launch, feeling that the 16-bit Genesis market was still strong and the newer 3DO and Atari Jaguar were not successful. Sega of Japan, however, was determined to beat the PlayStation to market. At the first Electronic Entertainment Expo (E3) in Los Angeles on May 11, 1995, Kalinske gave a keynote presentation for the upcoming Saturn in which he revealed the release price at US$399, and described the features of the console. Kalinske also revealed that Sega had already shipped 30,000 Saturns to Toys "R" Us, Babbage's, Electronics Boutique, and Software Etc. for immediate release. This announcement upset retailers that were kept out of the loop.[9] Sony subsequently unveiled the retail price for the PlayStation, with speaker Steve Race taking the stage, saying "$299", and walking away to applause.

 

The Saturn's release in Europe also came before the previously announced North American date, on July 8, 1995, at a price of GB₤399.99. Because of the early launch, the Saturn had only six games (all Sega-made) available to start as most third party games were slated to be released around the original launch date. By September 1995, Sega of Japan had several ports of games from its popular Model 2 arcade board ready for release, including Virtua Cop, Sega Rally Championship, and Virtua Fighter 2, helping sales for the Saturn. Kalinske unveiled more titles releases at E3 in 1996, including Sonic X-treme, Virtua Cop 2, and Nights into Dreams..., as well as the NetLink, a modem and Internet service.

 

Changes at Sega

 

"I thought the world of [Hayao] Nakayama because of his love of software. We spoke about building a new hardware platform that I would be very, very involved with, shape the direction of this platform, and hire a new team of people and restructure Sega. That, to me, was a great opportunity."—Bernie Stolar, on his joining Sega of America. In 1993, Sega restructured its internal studios in preparation for the Saturn's launch. To ensure high-quality 3D games would be available early in the Saturn's life, and to create a more energetic working environment, developers from Sega's arcade division were instructed to create console games. New teams, such as Panzer Dragoon developer Team Andromeda, were formed during this time.

 

By the end of 1995, Sega was supporting five different consoles—Saturn, Genesis, Game Gear, Pico, and the Master System—as well as the Sega CD and Sega 32X add-ons. In Japan the Mega Drive had never been successful, and the Saturn was outselling the PlayStation, so Sega Enterprises CEO Hayao Nakayama decided to force Sega of America to focus on the Saturn. While this made perfect sense for the Japanese market, it proved to be a disastrous move in North America and Europe: the market for Genesis games was much larger than for the Saturn, but Sega was left without the inventory or software to meet demand. By contrast, Nintendo concentrated on the 16-bit home console market, as well as its successful handheld, the Game Boy, and as a result Nintendo took in 42 percent of the video game market dollar share, despite not launching a 32-bit console to compete directly with Sony's PlayStation and Sega's Saturn. Due to Sega's decision to cut support to its 16-bit business to focus on the Saturn, Nintendo was able to capitalize by its continued focus on the SNES and the Game Boy from 1995 onward. While Sega was still able to capture 43 percent of the dollar share of the U.S. video game market as a whole, Nakayama's decision undercut the Sega of America executives.

 

On July 15, 1996 it was announced that Sega of America CEO Tom Kalinske had resigned, reportedly due to lang-standing disagreements with Sega of Japan. Within the same week, David Rosen and Nakayama resigned from their positions over Sega of America, though they remained with the company. Nakayama assembled a new management team for Sega of America led by Shoichiro Irimajiri as chairman and CEO and Bernie Stolar as executive vice president in charge of product development and third-party relations. Stolar, however, was not supportive of the Saturn due to his belief that the hardware was poorly designed. Knowing that the Saturn had little support from third-party developers and hardware that was difficult to work with, Stolar emphasized quality games for the Saturn and prevented localization of some titles from Japan in order to improve the console's image in North America. This was accompanied by a lighter image that Sega was beginning to portray in its advertising, including removing the "Sega" scream and holding press events for the education industry. Marketing in Japan for the console had also changed, with the introduction of Segata Sanshiro as a character in Japanese advertisements for the console in 1997 and 1998. Temporarily abandoning his arcade roots, Yu Suzuki of Sega AM2 began developing several Saturn-exclusive games, including Virtua Fighter RPG. Suzuki hoped the latter, "a revenge epic in the tradition of Chinese cinema", would be the Saturn's killer app. Development was eventually shifted to the Saturn's successor, the Dreamcast, as the game evolved into Shenmue.

 

In 1997, Sega entered into a short-lived merger with Japanese toy maker Bandai. Bandai subsequently called off the merger, citing "cultural differences" between the two companies. That same year, the first GameWorks entertainment complexes opened in a joint collaboration between Sega, DreamWorks, and Universal Studios.

 

Sonic X-treme

 

Following the completion of Sonic & Knuckles in 1994, Sega began work on its next game in the Sonic the Hedgehog franchise. Development of the game was started by Sega Technical Institute, a U.S.-based developer that had worked on several previous Sonic games. It was originally developed for several other Sega game consoles prior to the Saturn, such as the Sega 32X. The game's design changed significantly and evolved beyond what the struggling Sega 32X was capable of, so the game was shifted to the Saturn. The Saturn version of the project was initially developed separately by two teams in parallel starting in the second half of 1995. One team—led by designer Chris Senn and programmer Ofer Alon—was in charge of developing the main game engine, while the other team—led by programmer Chris Coffin—worked on the "free-roaming, ‘arena-style’" 3D boss engine. Senn and Alon's "fixed-camera side-scroller" with the ability "to move freely in all directions" was similar to Bug! and featured a fish-eye camera system (called the "Reflex Lens") that gave players a wide-angle view of the action.[34] Levels appeared to move around Sonic.

 

In March 1996, Sega of Japan representatives, including CEO Hayao Nakayama visited STI headquarters to evaluate the game's progress. They were unimpressed by the main game engine, although they reportedly watched an outdated version. Conversely, they were so impressed by the boss engine that they requested the entire game be reworked to be like that instead. To achieve this in time for the strict December 1996 deadline, Coffin's team was moved into a place of isolation from further company politics and worked sixteen hours a day. Since their approach was similar to the Nights into Dreams... game engine, they requested access to it as a starting point. However, engine creator Yuji Naka reportedly threatened to leave the company if it was used.

 

Senn and Alon had initially continued on with their game engine, undeterred by their work's original rejection, hoping to pitch it Sega's PC division. However, it was eventually rejected again, prompting Alon to leave Sega. Meanwhile, Coffin—who had been overworking to get the project out—came down with pneumonia. This solidified the fact that the game could not be released in time and as a result the project was cancelled. For the 1996 holiday season, Sega instead decided to concentrate on a port of the Genesis title Sonic 3D Blast, and Sonic Team's Nights into Dreams... Sonic Team started work on an original 3D Sonic title for the Saturn (which eventually became Sonic Adventure), but development was ultimately shifted to the Dreamcast. According to Naka, remnants of the project can be seen in the compilation Sonic Jam.

 

Decline

 

Sega's financial trouble in the 1998–2002 time periods. This financial data came from their Annual Reports. After the launch of the Nintendo 64, sales of the Saturn and Sega's 32-bit software were sharply reduced. As of August 1997, Sony controlled 47 percent of the console market, Nintendo controlled 40 percent, and Sega controlled only 12 percent. Neither price cuts nor high profile game releases were proving fruitful to the Saturn's success. As a result, the console market of the Saturn was dominated by the PlayStation and the Nintendo 64, leaving the Saturn behind. At E3 in 1997, Bernie Stolar stated during his keynote that "The Saturn is not our future..." which some have cited as an example of the Osborne effect. Combined with Sega's recent history of short-lived consoles, particularly the Sega CD and 32X, Sega's reputation was further damaged by the announcement. Sega announced its final games for the North American market on March 14, 1998, and by its discontinuation had sold 2 million Saturn consoles in the region, compared to 10.75 million PlayStation consoles sold by Sony at that time. The Saturn would last longer in Japan and Europe. In Japan, the console sold 6 million units, compared to the 3.5 million of Sega's previous console, the Genesis.[46] 971,000 consoles were sold in Europe by the beginning of 1998.

 

"I believe if we look at [the Sega] Saturn, it was a system that shouldn't have been launched. It was too difficult to develop for therefore the games were not fun and the games weren't there. This isn't a matter about hardware, this is about software. Software has always driven hardware. You don't have the software, the hardware will fail."—Bernie Stolar, former president of Sega of America giving his assessment of the Saturn in 2004. Selling only 9.5 million units worldwide, the Saturn is considered a commercial failure. By March 1998, Sega reported losses of $309 million on the Saturn, and had begun to focus on a new developmental project, the Dreamcast. According to Stolar, his decision to abandon the Saturn was due to Sega's losses and his desire to rebuild with a new team. During 1998, Sega took an additional $450 million loss. The decision to abandon the Saturn effectively left the Western market without Sega games for over a year. Though Sega announced the Saturn's successor as "Dural" (later "Katana", then Dreamcast) on May 21, 1998, information about the new console was leaked to the public before the last Saturn games made it to the shelves. The Dreamcast would later be released on November 20, 1998 in Japan and in the fall of 1999 in North America.