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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 extremely, extremely involved with, shape the direction of this platform, and hire a new team of people and restructure Sega. That, to me, was a grand opportunity.»
—Bernie Stolar, on his joining Sega of America.
Despite the launch of the PlayStation and Saturn, sales of bit games and consoles continued to account for 64% of the video game market in  Sega underestimated the continued popularity of the Genesis, and did not own the inventory to meet demand. Sega was capable to capture 43% of the dollar share of the U.S.
video game market and sell more than 2 million Genesis units in , but Kalinske estimated that «we could own sold another , Genesis systems in the November/December timeframe.» Nakayama’s decision to focus on the Saturn over the Genesis, based on the systems’ relative performance in Japan, has been cited as the major contributing factor in this miscalculation.
Due to long-standing disagreements with Sega of Japan, Kalinske lost most of his interest in his work as CEO of Sega of America. By the spring of , rumors were circulating that Kalinske planned to leave Sega, and a July 13 article in the press reported speculation that Sega of Japan was planning significant changes to Sega of America’s management team. On July 16, , Sega announced that Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America, while Kalinske would be leaving Sega after September 30 of that year. A previous Honda executive, Irimajiri had been actively involved with Sega of America since joining Sega in  Sega also announced that David Rosen and Nakayama had resigned from their positions as chairman and co-chairman of Sega of America, though both men remained with the company.Bernie Stolar, a previous executive at Sony Computer Entertainment of America, was named Sega of America’s executive vice president in charge of product development and third-party relations. Stolar, who had arranged a six-month PlayStation exclusivity deal for Mortal Kombat 3 and helped build shut relations with Electronic Arts while at Sony, was perceived as a major asset by Sega officials. Finally, Sega of America made plans to expand its PC software business.
Stolar was not supportive of the Saturn due to his belief that the hardware was poorly designed, and publicly announced at E3 that «The Saturn is not our future.» While Stolar had «no interest in lying to people» about the Saturn’s prospects, he continued to emphasize quality games for the system, and subsequently reflected that «we tried to wind it below as cleanly as we could for the consumer.» At Sony, Stolar opposed the localization of certain Japanese PlayStation games that he felt would not represent the system well in North America, and advocated a similar policy for the Saturn during his time at Sega, although he later sought to distance himself from this perception. These changes were accompanied by a softer image that Sega was beginning to portray in its advertising, including removing the «Sega!» scream and holding press events for the education industry.
Marketing for the Saturn in Japan also changed with the introduction of «Segata Sanshiro» (played by Hiroshi Fujioka) as a character in a series of TV advertisements starting in ; the character would eventually star in a Saturn video game.
Temporarily abandoning arcade development, Sega AM2 head Yu Suzuki began developing several Saturn-exclusive games, including a role-playing game in the Virtua Fighter series. Initially conceived as an obscure prototype «The Ancient Man and the Peach Tree» and intended to address the flaws of contemporary Japanese RPGs (such as poor non-player characterartificial intelligence routines), Virtua Fighter RPG evolved into a planned part, hour «revenge epic in the tradition of Chinese cinema», which Suzuki hoped would become the Saturn’s killer app. The game was eventually released as Shenmue for the Saturn’s successor, the Dreamcast.
Sega released the Saturn in Japan on November 22, , at a price of ¥44,Virtua Fighter, a loyal port of the favorite arcade game, sold at a almost one-to-one ratio with the Saturn console at launch and was crucial to the system’s early success in Japan. Though Sega had wanted to launch with Clockwork Knight and Panzer Dragoon, the only other first-party game available at launch was Wan Chai Connection. Fueled by the popularity of Virtua Fighter, Sega’s initial shipment of , Saturn units sold out on the first day. Sega waited until the December 3 launch of the PlayStation to ship more units; when both were sold side-by-side, the Saturn proved more popular.
Meanwhile, Sega released the 32X on November 21, in North America, December 3, in Japan, and January 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. , Saturn units were sold in Japan by the finish of (compared to , PlayStation units), and sales exceeded 1 million within the following six months. There were conflicting reports that the PlayStation enjoyed a higher sell-through rate, and the system gradually began to overtake the Saturn in sales during  Sony attracted numerous third-party developers to the PlayStation with a liberal $10 licensing fee, excellent development tools, and the introduction of a 7- to day order system that allowed publishers to meet demand more efficiently than the to week lead times for cartridges that had previously been standard in the Japanese video game industry.
In March , Sega of America CEO Tom Kalinske announced that the Saturn would be released in the U.S.
on «Saturnday» (Saturday) September 2,  However, Sega of Japan mandated an early launch to give the Saturn an advantage over the PlayStation. At the first Electronic Entertainment Expo (E3) in Los Angeles on May 11, , Kalinske gave a keynote presentation in which he revealed the release price of US$ (including a copy of Virtua Fighter), and described the features of the console. Kalinske also revealed that, due to «high consumer demand», Sega had already shipped 30, Saturns to Toys «R» Us, Babbage’s, Electronics Boutique, and Software Etc.
for immediate release. The announcement upset retailers who were not informed of the surprise release, including Best Purchase and Walmart;KB Toys responded by dropping Sega from its lineup. Sony subsequently unveiled the retail price for the PlayStation: Olaf Olafsson, the head of Sony Computer Entertainment America (SCEA), summoned Steve Race to the stage, who said «$», and then walked away to applause. The Saturn’s release in Europe also came before the previously announced North American date, on July 8, , at a price of £ European retailers and press did not own time to promote the system or its games, harming sales. The PlayStation launched in Europe on September 29, ; by November, it had already outsold the Saturn by a factor of three in the United Kingdom, where Sony had allocated £20 million of marketing during the holiday season compared to Sega’s £4 million.
The Saturn’s U.S.
launch was accompanied by a reported $50 million advertising campaign that included coverage in publications such as Wired and Playboy. Early advertising for the system was targeted at a more mature, adult audience than the Sega Genesis ads. Because of the early launch, the Saturn had only six games (all published by Sega) available to start as most third-party games were slated to be released around the original launch date.Virtua Fighter‘s relative lack of popularity in the West, combined with a release schedule of only two games between the surprise launch and September , prevented Sega from capitalizing on the Saturn’s early timing. Within two days of its September 9, launch in North America, the PlayStation (backed by a large marketing campaign) sold more units than the Saturn had in the five months following its surprise launch, with almost every of the initial shipment of , units being sold in advance, and the relax selling out across the U.S.
A high-quality port of the Namco arcade game Ridge Racer contributed to the PlayStation’s early success, and garnered favorable media in comparison to the Saturn version of Sega’s Daytona USA, which was considered inferior to its arcade counterpart. Namco, a longtime arcade competitor with Sega, also unveiled the Namco System 11 arcade board, based on raw PlayStation hardware. Although the System 11 was technically inferior to Sega’s Model 2 arcade board, its lower price made it attractive to smaller arcades. Following a acquisition of Sega developers, Namco released Tekken for the System 11 and PlayStation.
Directed by previous Virtua Fighter designer Seiichi Ishii, Tekken was intended to be fundamentally similar, with the addition of detailed textures and twice the frame rate.Tekken surpassed Virtua Fighter in popularity due to its superior graphics and almost arcade-perfect console port, becoming the first million-selling PlayStation game.
On October 2, , Sega announced a Saturn price reduction to $ High-quality Saturn ports of the Sega Model 2 arcade hits Sega Rally Championship,Virtua Cop, and Virtua Fighter 2 (running at 60 frames per second at a high resolution) were available by the finish of the year, and were generally regarded as superior to competitors on the PlayStation. Notwithstanding a subsequent increase in Saturn sales during the holiday season, the games were not enough to reverse the PlayStation’s decisive lead. By , the PlayStation had a considerably larger library than the Saturn, although Sega hoped to generate interest with upcoming exclusives such as Nights into Dreams.
An informal survey of retailers showed that the Saturn and PlayStation sold in roughly equal numbers during the first quarter of  Within its first year, the PlayStation secured over 20% of the entire U.S. video game market. On the first day of the May E3 show, Sony announced a PlayStation price reduction to $, a reaction to the release of the Model 2 Saturn in Japan at a price roughly equivalent to $ On the second day, Sega announced it would match this price, though Saturn hardware was more expensive to manufacture.
Released in , the Genesis (known as the Mega Drive in Europe, Japan and Australia) was Sega’s entry into the fourth generation of video game consoles. In mid, Sega CEO Hayao Nakayama hired Tom Kalinske as president and CEO of Sega of America.
Kalinske developed a four-point plan for sales of the Genesis: lower the price of the console, create a U.S.-based team to develop games targeted at the American market, continue aggressive advertising campaigns, and sell Sonic the Hedgehog with the console. The Japanese board of directors initially disapproved of the plan, but every 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 ever made, and Sega’s console finally took off as customers who had been waiting for the Super Nintendo Entertainment System (SNES) 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 exterior of North America), was commercially disappointing.
Sega also experienced success with arcade games. In and , the new Sega Model 1 arcade system board showcased Sega AM2’s Virtua Racing and Virtua Fighter (the first 3Dfighting game), which played a crucial role in popularizing 3D polygonal graphics. In specific, Virtua Fighter garnered praise for its simple three-button control scheme, with strategy coming from the intuitively observed differences between characters that felt and acted differently rather than the more ornate combos of two-dimensional competitors.
Despite its crude visuals—with characters composed of fewer than 1, polygons—Virtua Fighter‘s fluid animation and relatively realistic depiction of distinct fighting styles gave its combatants a lifelike presence considered impossible to replicate with sprites. 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 of the Saturn was supervised by Hideki Sato, Sega’s director and deputy general manager of research and development.
According to Sega project manager Hideki Okamura, the Saturn project started over two years before the system was showcased at the Tokyo Toy Show in June The name «Saturn» was the system’s codename during development in Japan, but was chosen as the official product name.Computer Gaming World in March reported a rumor that «the Sega Saturn will release in Japan before the finish of the year» for $–
In , Sega and Japanese electronics company Hitachi formed a joint venture to develop a new CPU for the Saturn, which resulted in the creation of the «SuperH RISC Engine» (or SH-2) later that year. The Saturn was designed around a dual-SH2 configuration.
According to Kazuhiro Hamada, Sega’s section chief for Saturn development during the system’s conception, «the SH-2 was chosen for reasons of cost and efficiency. The chip has a calculation system similar to a DSP [digital signal processor], but we realized that a single CPU would not be enough to calculate a 3D world.» Although the Saturn’s design was largely finished before the finish of , reports in early of the technical capabilities of Sony’s upcoming PlayStation console prompted Sega to include another video display processor (VDP) to improve the system’s 2D performance and texture-mapping. CD-ROM-based and cartridge-only versions of the Saturn hardware were considered for simultaneous release during the system’s development, but this thought was discarded due to concerns over the lower quality and higher price of cartridge-based games.
According to Kalinske, Sega of America «fought against the architecture of Saturn for fairly some time». Seeking an alternative graphics chip for the Saturn, Kalinske attempted to broker a deal with Silicon Graphics, but Sega of Japan rejected the proposal. Silicon Graphics subsequently collaborated with Nintendo on the Nintendo  Kalinske, Sony Electronic Publishing’s Olaf Olafsson, and Sony America’s Micky Schulhof had discussed development of a joint «Sega/Sony hardware system», which never came to fruition due to Sega’s desire to create hardware that could accommodate both 2D and 3D visuals and Sony’s competing notion of focusing on 3D technology. Publicly, Kalinske defended the Saturn’s design: «Our people feel that they need the multiprocessing to be capable to bring to the home what we’re doing next year in the arcades.»
In , 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 asked to create console games. New teams, such as Panzer Dragoon developer Team Andromeda, were formed during this time.
In January , Sega began to develop an add-on for the Genesis, the Sega 32X, which would serve as a less expensive entry into the bit era. The decision to create the add-on was made by Nakayama and widely supported by Sega of America employees. According to previous Sega of America producer Scot Bayless, Nakayama was worried that the Saturn would not be available until after and that the recently released Atari Jaguar would reduce Sega’s hardware sales.
As a result, Nakayama ordered his engineers to own the system ready for launch by the finish of the year. The 32X would not be compatible with the Saturn, but Sega executive Richard Brudvik-Lindner pointed out that the 32X would frolic Genesis games, and had 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 to familiarize themselves with the dual SH-2 architecture also used in the Saturn. Because both machines shared numerous of the same parts and were preparing to launch around the same time, tensions emerged between Sega of America and Sega of Japan when the Saturn was given priority.
Cancellation of Sonic X-treme
Main article: Sonic X-treme
As Sonic Team was working on Nights into Dreams, Sega tasked the U.S.-based Sega Technical Institute (STI) with developing what would own been the first fully 3D entry in its favorite Sonic the Hedgehog series.
The game, Sonic X-treme, was moved to the Saturn after several prototypes for other hardware (including the 32X) were discarded. It featured a fisheye lens camera system that rotated levels with Sonic’s movement. After Nakayama ordered the game be reworked around the engine created for its boss battles, the developers were forced to work between 16 and 20 hours a day to meet their December deadline. Weeks of development time proved fruitless after Stolar rescinded STI’s access to Sonic Team’s Nights into Dreams engine following an ultimatum by Nights programmer Yuji Naka. After programmer Ofer Alon quit and designers Chris Senn and Chris Coffin became ill, the project was cancelled in early  Sonic Team started work on an original 3D Sonic game for the Saturn, but development was shifted to the Dreamcast and the game became Sonic Adventure. STI was disbanded in as a result of changes in management at Sega of America.
Journalists and fans own speculated about the impact a completed X-treme might own had on the market.
David Houghton of GamesRadar described the prospect of «a excellent 3D Sonic game» on the Saturn as «a ‘What if’ situation on a par with the dinosaurs not becoming extinct.»IGN’s Travis Fahs called X-treme «the turning point not only for Sega’s mascot and their bit console, but for the entire company», but noted that the game served as «an empty vessel for Sega’s ambitions and the hopes of their fans». Dave Zdyrko, who operated a prominent Saturn fan website during the system’s lifespan, said: «I don’t know if [X-treme] could’ve saved the Saturn, but Sonic helped make the Genesis and it made absolutely no sense why there wasn’t a grand new Sonic title ready at or near the launch of the [Saturn]». In a retrospective, producer Mike Wallis maintained that X-treme «definitely would own been competitive» with Nintendo’s Super Mario 64.Next Generation reported in tardy that X-treme would own harmed Sega’s reputation if it did not compare well to contemporary competition. Naka said he had been relieved by the cancellation, feeling that the game was not promising.
From to early , although Sega’s revenue declined as part of an industry-wide slowdown, the company retained control of 38% of the U.S.
video game market (compared to Nintendo’s 30% and Sony’s 24%). , PlayStation units were sold in the U.S. by the finish of , compared to , Saturn units. In part due to an aggressive price war, the PlayStation outsold the Saturn by two-to-one in , while Sega’s bit sales declined markedly. By the finish of , the PlayStation had sold million units in the U.S., more than twice the million Saturn units sold. The Christmas «Three Free» pack, which bundled the Saturn with Daytona USA, Virtua Fighter 2, and Virtua Cop, drove sales dramatically and ensured the Saturn remained a competitor into 
However, the Saturn failed to take the lead.
After the launch of the Nintendo 64 in , sales of the Saturn and its games were sharply reduced, while the PlayStation outsold the Saturn by three-to-one in the U.S. in  The release of Final Fantasy VII significantly increased the PlayStation’s popularity in Japan. As of August , Sony controlled 47% of the console market, Nintendo 40%, and Sega only 12%. Neither price cuts nor high-profile game releases proved helpful.
Reflecting decreased demand for the system, worldwide Saturn shipments during March to September declined from million to , versus the same period in ; shipments in North America declined from , to 50, Due to the Saturn’s poor performance in North America, 60 of Sega of America’s employees were laid off in the drop of 
«I thought the Saturn was a error as far as hardware was concerned. The games were obviously terrific, but the hardware just wasn’t there.»
—Bernie Stolar, previous president of Sega of America giving his assessment of the Saturn, in 
As a result of Sega’s deteriorating financial situation, Nakayama resigned as president in January in favor of Irimajiri. Stolar subsequently acceded to president of Sega of America. Following five years of generally declining profits, in the fiscal year ending March 31, Sega suffered its first parent and consolidated financial losses since its listing on the Tokyo Stock Exchange. Due to a % decline in consumer product sales (including a % decline overseas), the company reported a net loss of ¥ billion (US$ million) and a consolidated net loss of ¥ billion (US$ million).
Shortly before announcing its financial losses, Sega announced that it was discontinuing the Saturn in North America to prepare for the launch of its successor. Only 12 Saturn games were released in North America in (Magic Knight Rayearth was the final official release), compared to in  The Saturn would final longer in Japan and Europe.
Rumors about the upcoming Dreamcast—spread mainly by Sega itself—were leaked to the public before the final Saturn games were released. The Dreamcast was released on November 27, in Japan and on September 9, in North America. The decision to forsake the Saturn effectively left the Western market without Sega games for over one year. Sega suffered an additional ¥ billion consolidated net loss in the fiscal year ending March , and announced plans to eliminate 1, jobs, almost a quarter of its workforce.
Worldwide Saturn sales include at least the following amounts in each territory: million in Japan (surpassing the Genesis’ sales of million there), million in the United States, 1 million in Europe, and , elsewhere. With lifetime sales of million units, the Saturn is considered a commercial failure, although its install base in Japan surpassed the Nintendo 64’s million. Lack of distribution has been cited as a significant factor contributing to the Saturn’s failure, as the system’s surprise launch damaged Sega’s reputation with key retailers. Conversely, Nintendo’s endless delay in releasing a 3D console and damage caused to Sega’s reputation by poorly supported add-ons for the Genesis are considered major factors allowing Sony to acquire a foothold in the market.
Featuring a entire of eight processors the Saturn’s main central processing units are two Hitachi SH-2 microprocessorsclocked at MHz and capable of 56 MIPS. It contains a Motorola 68EC running at MHz as a sound controller; a custom sound processor with an integrated Yamaha FH1 DSP running at MHz capable of up to 32 sound channels with both FM synthesis and bitPCMsampling at a maximum rate of kHz; and two video display processors, the VDP1 (which handles sprites, textures and polygons) and the VDP2 (which handles backgrounds). Its double-speed CD-ROM drive is controlled by a dedicated Hitachi SH-1 processor to reduce load times. The System Control Unit (SCU), which controls every buses and functions as a co-processor of the main SH-2 CPU, has an internal DSP running at MHz. The Saturn contains a cartridge slot for memory expansion, 16 Mbit of work random-access memory (RAM), 12 Mbit of video RAM, 4 Mbit of RAM for sound functions, 4 Mbit of CD buffer RAM and Kbit (32 KB) of battery backup RAM. Its video output, provided by a stereo AV cable, displays at resolutions from × to × pixels, and can display up to millioncolors simultaneously. The Saturn measures mm ×mm ×83mm (in ×in ×in).
It was sold packaged with an instruction manual, one control pad, a stereo AV cable, and its V AC power supply, with a power consumption of approximately 15W.
«One extremely quick central processor would be preferable. I don’t ponder every programmers own the ability to program two CPUs—most can only get about one-and-a-half times the speed you can get from one SH I ponder that only 1 in programmers are excellent enough to get this helpful of speed [nearly double] out of the Saturn.»
—Yu Suzuki reflecting on Saturn Virtua Fighter development
The Saturn had technically impressive hardware at the time of its release, but its complexity made harnessing this power hard for developers accustomed to conventional programming. The greatest disadvantage was that both CPUs shared the same bus and were unable to access system memory at the same time.
Making full use of the 4kB of cache memory in each CPU was critical to maintaining performance. For example, Virtua Fighter used one CPU for each character, while Nights used one CPU for 3D environments and the other for 2D objects. The Visual Display Processor 2 (VDP2), which can generate and manipulate backgrounds, has also been cited as one of the system’s most significant features.
The Saturn’s design elicited mixed commentary among game developers and journalists. Developers quoted by Next Generation in December described the Saturn as «a genuine coder’s machine» for «those who love to get their teeth into assembly and really hack the hardware», with «more flexibility» and «more calculating power than the PlayStation».
The sound board was also widely praised. By contrast, Lobotomy Software programmer Ezra Dreisbach described the Saturn as significantly slower than the PlayStation, whereas Kenji Eno of WARP observed little difference. In specific, Dreisbach criticized the Saturn’s use of quadrilaterals as its basic geometric primitive, in contrast to the triangles rendered by the PlayStation and the Nintendo  Ken Humphries of Time Warner Interactive remarked that compared to the PlayStation, the Saturn was worse at generating polygons but better at sprites. Third-party development was initially hindered by the lack of useful software libraries and development tools, requiring developers to record in assembly language.
During early Saturn development, programming in assembly could offer a two-to-fivefold speed increase over higher-level languages such as C.
The Saturn hardware is extremely hard to emulate. Sega responded to complaints about the difficulty of programming for the Saturn by writing new graphics libraries which were claimed to make development easier. Sega of America also purchased a United Kingdom-based development firm, Cross Products, to produce the Saturn’s development system. Despite these challenges, Treasure CEO Masato Maegawa stated that the Nintendo 64 was more hard to develop for than the Saturn.Traveller’s Tales’ Jon Burton felt that while the PlayStation was easier «to get started on you quickly reach [its] limits», whereas the Saturn’s «complicated» hardware had the ability to «improve the speed and glance of a game when every used together correctly». A major criticism was the Saturn’s use of 2D sprites to generate polygons and simulate 3D space.
The PlayStation functioned similarly, but also featured a dedicated «Geometry Transfer Engine» that rendered additional polygons. As a result, several analysts described the Saturn as an «essentially» 2D system.
Several Saturn models were produced in Japan. An updated model in a recolored light gray (officially white) was released at ¥20, to reduce the system’s cost and lift its appeal among women and younger children. Two models were released by third parties: Hitachi released the Hi-Saturn (a smaller model equipped with a car navigation function), while JVC released the V-Saturn. Saturn controllers came in various color schemes to match diverse models of the console. The system also supports several accessories.
A wireless controller powered by AA batteries uses infrared signal to connect. Designed to work with Nights, the Saturn 3D Pad includes both a control pad and an analog stick for directional input. Sega also released several versions of arcade sticks as peripherals, including the Virtua Stick, the Virtua Stick Pro, the Mission Analog Stick, and the Twin Stick. Sega also created a light gun peripheral, the Virtua Gun, for shooting games such as Virtua Cop and The Guardian, and the Arcade Racer, a wheel for racing games.
A first-model Japanese Sega Saturn unit