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Mid-1990s Sega Document Leak Shows How It Lost the Second Console War To Sony (arstechnica.com) 35

An anonymous reader shares a report: Most of the changes on the Sega Retro wiki every day are tiny things, like single-line tweaks to game details or image swaps. Early Monday morning, the site got something else: A 47MB, 272-page PDF full of confidential emails, notes, and other documents from inside a company with a rich history, a strong new competitor, and deep questions about what to do next.

The document offers glimpses, windows, and sometimes pure numbers that explain how Sega went from a company that broke Nintendo's near-monopoly in the early 1990s to giving up on consoles entirely after the Dreamcast. Enthusiasts and historians can see the costs, margins, and sales of every Sega system sold in America by 1997 in detailed business plan spreadsheets. Sega's Wikipedia page will likely be overhauled with the information contained in inter-departmental emails, like the one where CEO Tom Kalinske assures staff (and perhaps himself) that "we are killing Sony" in Japan in March 1996.

"Wish I could get our staff, sales people, retailers, analysts, media, etc. to see and understand what's happening in Japan. They would then understand why we will win here in the US eventually," Kalinske wrote. By September 1996, this would not be the case, and Kalinske would tender his resignation. Not all of the compilation is quite so direct or relevant. There are E3 floor plans, nitpicks about marketing campaigns, and the occasional incongruity. There is a Post-It note stuck to the front of the "Brand Strategy" folder -- "Screw Technology, what is bootleg 96/97" -- that I will be thinking about for days.

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Mid-1990s Sega Document Leak Shows How It Lost the Second Console War To Sony

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  • But not enough to read almost 300 pages about why Sega failed. IDGAF.

  • by Ecuador ( 740021 ) on Thursday July 06, 2023 @12:55PM (#63662118) Homepage

    RTFA gets a new meaning when it's a 272 page PDF...
    I'll wait for posts on juicy bits or an executive sommary.

  • by DeplorableCodeMonkey ( 4828467 ) on Thursday July 06, 2023 @01:24PM (#63662202)

    The Saturn had a really stupid CPU setup compared to the PS1. If they'd just paid the price to have a single, real 32bit CPU (instead of a dual 16bit setup), they very well might have won that battle with Sony because they got there first and there'd have been no real differentiator in terms of which one was more developer friendly. As it actually happened, the Saturn was a terrible developer experience compared to the PS1.

    Ironically, if Microsoft had bit the bullet to make the 360 a massively suped up version of the original XBox, they'd have probably crushed the PS3 into the ground going into the XBox One. Between penny-wise, pound foolish build quality issues and breaking from x64 CPUs, they missed the opportunity to unite XBox and Windows gaming when Sony was most vulnerable.

    • by Can'tNot ( 5553824 ) on Thursday July 06, 2023 @01:58PM (#63662280)
      The PS1 is the reason why the Saturn was that way. Sega made a console to be the ultimate 2D platform, and then they got wind that Sony was pushing 3D and Sega didn't want to get left behind. So Sega added some junk for 3D and then pushed it out the door early at an excessive price point, on account of all the junk they added.

      It's really too bad. There weren't that many games on the PS1 which did 3D well, and that generation was rife with what would have been really good 2D games but which had 3D shoehorned in just to get on the bandwagon. There was definitely room there for a solid 2D console.
      • From what I can tell this is a false rumor. Sega always intended the Saturn to be a 3D console but they're approach to it was completely at odds with where the industry was going. Sony actually got away with doing that with the PlayStation 2 and the PlayStation 3 but Sega didn't have the market dominance to force their ideas down people's throats.

        We did get a few glimpses of what the Sega Saturn could really do and what it was intended for. Obviously there was virtual fighter 2 and power slave. And if y
        • Well, I got that story from The Ultimate History of Video Games. I thought that guy was pretty thorough, but it's a long book. If he got something wrong in it then he would still have a pretty good track record.
          • God I hate asking this because it it makes it sound like I'm sea lioning, but do you know what his sources are?

            I don't really want to buy the book just for that, but I'd love to know if there are actual sources for that claim :)
            • All right, I have to apologize. I misremembered my source, that book says almost nothing about why the Saturn was the way it was. Here, I'll quote the whole section:

              "I think a lot of people are confused about that. I've heard a lot of people say, 'Oh gee, look at all these chips they've got.' Well, there's a reason for it and the reason is that our people feel that they need the multiprocessing to be able to bring to the home what we're doing next year in the arcades. That kind of power requires what we've got and we don't think the other machines can take advantage of."
              - Tom Kalinske, former CEO, Sega of America

              In theory, Saturn, which featured two Hitachi SH2 32-bit central processing chips, was more powerful than PlayStation. The truth was that the SH2 chips were somewhat inferior to the chip Sony had selected. There was even a rumor that Nakayama had selected the chip as a favor to a golf buddy. All rumors aside, programming Saturn was difficult, and allotting different operations to both of the processing chips proved nearly impossible. In an interview with the press, Sega star arcade-game designer Yu Suzuki openly admitted having trouble with the dual-processor design while working on the Saturn version of his hit game Daytona.

              Unless you believe the bit about Nakayama's golf buddy, this doesn't really explain anything. Sorry, I don't know where I heard what I heard above.

              On the plus side, it looks like there's an Ultimate History of Video Games volume 2, released in 2021. I'll have to get that.

        • Their approach was to do 3D with quads, or sprite-scaling. It was a hack leveraged by the tech they built for their 2D arcade machines, because that's what they knew and did well.

          If it was their intention to make the Saturn a 3D machine from the start, they did a really bad job of it, because even at the time, we all knew quads were the wrong approach for a "pure" 3D machine. 3DO made the same mistake. The Jaguar did 3D better, but it didn't have the hardware to do textures, and made do with gouraud shad

          • that's how the Model 2 arcade did it, and it was the most successful arcade board of all time. Seriously, Daytona is the best selling and highest grossing game in history, beating even Pac Man.

            I remember reading an interview with the guy who programmed NBA Jam for Jag saying he was pushing the console with that port, and he was no slouch of a programmer. I *think* John Carmack once said if the Jag had a few kilobytes of on die cache it would've hung with the playstation, but that design flaw doomed it.
        • The PS1 is the reason why the Saturn was that way. Sega made a console to be the ultimate 2D platform, and then they got wind that Sony was pushing 3D and Sega didn't want to get left behind. So Sega added some junk for 3D and then pushed it out the door early at an excessive price point, on account of all the junk they added.

          From what I can tell this is a false rumor. Sega always intended the Saturn to be a 3D console but they're approach to it was completely at odds with where the industry was going.

          saturn dev history can be pretty murky... but this is correct, and indirectly corroborated by hitachi's SP2 (saturn cpu) development history + the timeline of sega adding a second SP2.

          basically sega focused on 2d, and when mgmt got wind of ps1's 3d performance (and more importantly, the market buzz it was generating), they added a second cpu to bolster 3d performance.

          sega knew how to do 3d--remember they were basically the 3d arcade kings at that time... they just didn't prioritize it enough for the satu

      • by tlhIngan ( 30335 )

        It's really too bad. There weren't that many games on the PS1 which did 3D well, and that generation was rife with what would have been really good 2D games but which had 3D shoehorned in just to get on the bandwagon. There was definitely room there for a solid 2D console.

        Sony started enforcing the "all games must be 3D" as a licensing requirement for the PSX.

        The Saturn could do 3D just fine - except it was doing it as stretched quadrilaterals because Sega expected 3D to be using 2D sprites textured onto qu

      • by AmiMoJo ( 196126 )

        The Saturn was built with Sega 3D arcade ports in mind, so it was designed for 3D from the very start. The mistake Sega made was that it simply wasn't powerful enough initially. They thought that they would release cut-down versions of their arcade games, the same way they did for their previous 2D consoles.

        When they say what the Playstation was capable of, they decided that they needed to boost the Saturn's performance. They added a second video chip and second CPU, but it made the system difficult to get

    • by _merlin ( 160982 ) on Thursday July 06, 2023 @02:31PM (#63662378) Homepage Journal

      Saturn isn't dual 16-bit. The SH-2 is a 32-bit CPU with a compact instruction encoding. ARM's Thumb mode is inspired by the SH-2 instruction encoding.

      The problem was, as the other commenter said, the Saturn was the wrong console for the late '90s. It was the ultimate evolution of Sega's "2.5D" hardware using fancy rotate/zoom effects. You can see its evolutionary heritage in various arcade systems: Hang On, Out Run, X board, Y board, System 32, System H1. In the same way that the Mega Drive was supposed to bring the excitement of the System 16 arcade platform home, the Saturn was supposed to bring home the excitement of the Sega sprite scalers.

      The trouble is, it was too late. The market wanted "real 3D" games, enabled by hardware texture mapping, Gouraud shading, and geometry transform support. The Saturn could be kind of roped into doing 3D using one texture per quad (or untextured quads), and doing all the geometry calculations on the CPU(s), but that wasn't what it excelled at.

      The Saturn did OK in Japan, but when Sega launched it in the US up against the PlayStation, it was like, "Look! I can do 3D, too! Really!" but it was clear it couldn't match the PlayStation on those kinds of games.

      • by AmiMoJo ( 196126 )

        The use of quads was a big issue for porting games to the Saturn. The only real option was to design the game for quads from the start. That's why Tomb Raider uses them, even on the Playstation and Windows ports.

        Anything initially designed for the Playstation or Windows was probably going to use triangles, so porting to the Saturn would require re-making all the 3D models. A series of Sega arcade ports wasn't enough to save it, it needed better 3rd party support from Western developers.

        The Sega 32X was the

    • by rsilvergun ( 571051 ) on Thursday July 06, 2023 @02:32PM (#63662380)
      The Sega Saturn had two 32-bit Hitachi sh2. The only thing 16 bit in the Saturn was the sound chip and the only people that ever really use it for anything but sound or the studio treasure because they have this weird affinity for the Motorola 68000 so they would occasionally code a graphic effect that ran off it just because they could and because they're absolutely bad shit crazy programmers.

      The architecture was no more complex than the PlayStation 2 or 3 the difference was that Sega didn't own the market so they couldn't Force developers to adapt.

      In some ways it's kind of too bad because if you look at some of the work being done by Homebrew nowadays it's absolutely the same with the Sega Saturn could do. There's a tech demo of the first level of unreal ported to the Saturn. It's a pretty accurate port running on hardware that would have cost about 1/10th. And of course if you look up power slave you really see what the Saturn could do in terms of raw graphics even at the time.

      I do think Sega would have been better off if they had just signed a deal with either Sony or silicon graphics. But hindsight is 20/20. The real problem is the Japanese division held all the cards and they decided to assert control. So we got things like a couple of amazing soccer games but we never got an even halfway decent football game. Meanwhile the PlayStation had a superb football game at launch (NFL game day) . It was pretty clear the Japanese division was pissed that the American division ran reigns around them during the Sega Genesis era and decided they were going to do well in Japan at the expense of the American division where most of the money could be made.

      They did get their win in Japan. The Sega Saturn slaughtered the Nintendo 64 there but it absolutely killed the company.
      • The Sega Saturn slaughtered the Nintendo 64 there

        That's a bit of a myth. The Saturn did beat the Nintendo 64 in Japan, but only by a hair. See here. [wikipedia.org]

        Saturn: 5,800,000 units
        N64: 5,540,000 units

        • it took the N64 until 2004 to reach that number —when did they stop selling saturns anyway, 1998?
          • Even so, it's reasonable to assume the bulk of both systems was sold early on. And so they were too close to call it a slaughter. Unlike in the US, where it was eleven to one.

      • I was going to say the same thing but fact-checked first. "At the time of introduction, SuperH was notable for having fixed-length 16-bit instructions in spite of its 32-bit architecture. Using smaller instructions had consequences: the register file was smaller and instructions were generally two-operand format. However for the market the SuperH was aimed at, this was a small price to pay for the improved memory and processor cache efficiency. Later versions of the design, starting with SH-5, included both
    • This is a lot of companies that stick to what they know even if everyone else is moving on. So for a 16-bit pixel oriented graphics is what you're great at and you ignore that everyone else is moving to more colors and 3D, or there's suddenly a market out there for games that aren't two controllers in front of a TV where two siblings fight each other. Not just in games but you see this lots of places where the cash cow is getting old and you don't have replacements for it yet.

      Similar, I had an Amiga compu

    • It's more complicated than that. The Saturn was based around the same sprite-scaling tech they had developed for their arcade machines, and that means meshes had to be rendered as quads. That requires some programming trickery and is way harder than the polygons used by the PS1. It's a total hack, and was certainly not competitive. The Saturn also had a DSP tacked on for 3D translations, because they didn't have the foresight to add dot-product instructions into the CPU, like Sony and Nintendo did. The

  • Looking at the old Sega ads they had plastered on basically every name-brand kids cereal box at the time, she probably did just to avoid them brainwashing me into wanting a Sega Game Gear :)

    Probably a smart move... those suckers would eat AA batteries like candy.

  • My favorite is the CEO saying the Saturn's are selling so fast in Japan the numbers can't be "measured accurately".
  • It was powerful where it mattered and was developer-friendly. It was the first console to target grown-ups, which made it more cool than the competition. Behind itself it had Sony's name, technological expertise and financial power. Plus, it was easily piratable. People just didn't want anything else back then.
  • by Dan East ( 318230 ) on Thursday July 06, 2023 @03:47PM (#63662638) Journal

    There's not any huge bombshells in here - nothing like private internal executive emails and the like. It's a packet from their marketing department containing hard numbers and strategy.

    At least from a marketing perspective, Sega saw the writing on the wall and did their best to combat it, at least from a marketing perspective. They acknowledge the Playstation was a better looking console than the Saturn, had better customer perception (it coming out months after the Saturn gave the impression it was more advanced), was "cooler", etc. They reduced price of the Saturn twice ($399 -> $349 -> $299) to match the Playstation, but because it debuted at a higher price ($100 more than the Playstation) most consumers continued to think the Saturn cost more.

    They had stats showing every major retailer (Walmart, Target, Best Buy, various toy-stores, etc) and how Sony had far more demo / playable units than Sega did. For example, all 2,100 Walmarts had interactive Sony displays, and 0 interactive Sega.

    It looks like they knew that previous mistakes and confusion had cost them brand recognition (32x etc).

    They acknowledged they had issues with Playstation games being a better quality.

    Here's an excerpt:

    SEGA SATURN KEY ISSUES
    JANUARY 1996
    ISSUES/RECOMMENDATIONS POTENTIAL IMPACT ON QUOTA
    Pricing. Sony is rumored to change the H/W price on the PlayStation to $249 in April/May.
    Given a $50 H/W price differential, PlayStation could once again outsell Saturn 7:1 with the launch of U64 in April/May at $249, Sega Saturn could become the #3 system.

    PlayStation continues to outsell Sega Saturn due to quality of S/W library and perceived price differential.
    Push "Big 3" titles and continue to reinforce H/W price. Work w/SOJ (Sega of Japan) to agree to maintain H/W pricing parity with PlayStation and to be competitive with U64 at launch.

    3rd Party support of Sega Saturn is waning due to PlayStation early success. Crystal Dynamics and EA may stop future Saturn development.
    Prioritize top 5 - 3rd parties (EA, Acclaim, Konami, Virgin, Crystal Dynamics & Interplay) and the top 10 3rd party titles. Offer support co-marketing, and other incentives to encourage their development and prioritization of Sega Saturn.

PURGE COMPLETE.

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