A lot of the gamers think they know exactly why SEGA had to abandon the console manufacturing business. But even SEGA fans may not know every detail. One X user named SuperSisi has prompted us to analyze SEGA's biggest mistakes that caused them to quit the console manufacturing business, so I'm gonna follow her advice and explain why SEGA had to quit manufacturing consoles to restructure themselves to being a third-party developer to release their games on non-SEGA platforms. But before we actually answer why SEGA has quit the console business to restructure themselves to being a third-party developer, we need to talk about the only things that were sold poorly.
First off, SEGA has released the SEGA CD. The SEGA CD plays games that use discs. The one that serves as a tech demo on how the SEGA CD works was Sonic the Hedgehog CD. However, upon release, reception was mixed with praising certain games, but criticizing its value for money and limited upgrades. It has become a dumpster fire of an add-on SEGA has developed that the SEGA CD's fate has been sealed because of its mixed reception.
Over to the 32X. It is another add-on for the SEGA Genesis as a low cost option for 32-bit games. The 32X was also met with poor reception to be criticized for its poor quality that it failed to attract third-party developers and consumers, its weak library, market fragmentation of the Genesis and poor marketing. SEGA sold 800,000 32X units and the rest at huge discounts until it was discontinued as they shifted their focus on the Saturn.
So, the SEGA Saturn is the 5th generation console that uses 64-bit games came out in 1994 in Japan and 1995 in North America. The console is successful in Japan, but failed in North America because of its 1995 rush here. The Saturn's game library was met generally with praise, but it was criticized for having a rushed 1995 release date and lacking a key Saturn-exclusive Sonic title, Sonic X-treme. The Japanese and American divisions exacerbating strategic chaos, which was caused by the Saturn's success in Japan and failure in America.
Now, if you don't know what Sonic X-treme is, it was a 3D platformer for the Saturn. This game uses open levels like Bug!. The storyline of this game follows Sonic's journey to stop Dr. Robotnik from stealing the six magic rings from Tiara Boobowski and her father and use them for evil.
However, it was cancelled because both teams behind this game were crippled two months before the deadline as SEGA announced in early 1997. It was after SEGA instead concetrated on making Nights Into Dreams and a port of the Genesis game, Sonic 3D Blast and the compilation, Sonic Jam for the 1996 holiday season. Because of an original Sonic the Hedgehog game like Sonic X-treme's cancellation and absence, the Saturn became a commercial failure and was slid into a bad Juju land.
Fortunately, there are later Sonic titles that use elements from X-treme, like Sonic Lost World and Sonic Frontiers. The concepts from the cancelled project do belong to SEGA, so they could use them for a brand new Sonic game, including the art of Tiara Boobowski, who seems to be Sonic's first love interest before Amy Rose and Sally Acorn. But that was way before Spyro the Dragon came out to have open levels akin to Sonic X-treme and before Spyro 2: Ripto's Rage! released to have Elora serve as Spyro's love interest and it's something that Sonic X-treme could have if SEGA had materialized it instead of cancelling it.
While the Saturn became a commercial flop due to its lack of a key original Sonic title, it ended up in the top three with the PS1 and Nintendo 64, which is not bad. After the Saturn was discontinued in North America in 1998, SEGA went on to move on to their next console, the SEGA Dreamcast.
The Dreamcast came out in 1998 in Japan and 1999 in North America and other countries. You probably didn't realize what made the Dreamcast so special. It was praised for innovation and its great library of games, including original Sonic platforming games. Not only SEGA didn't make a SEGA Pluto or whatever the name of the next console after Dreamcast. They knew that the Dreamcast would be their last console before they restructure themselves into being a third-party developer after it also slid into a bad Juju land with the Saturn, so we have to answer this question. Why did SEGA abandon the hardware market and restructure themselves as a third-party developer to release games on non-SEGA platforms, and what has caused the Dreamcast to fail and discontinue in 2001?
There is one obvious reason. The Dreamcast's commercial failure was caused by the PS2's launch being the eye of the storm SEGA was in. When the Dreamcast has launched, it was off to a rousing start for online play, until in 2000, Sony came along with the exceptional launch of the PS2. It has ruined SEGA's reputation as Sony was financially able to do everything SEGA couldn't that the PS2 became renowned in sales, even at launch.
Can you even believe that SEGA blatantly struggled on the Dreamcast so hard? The PS2 has nailed the grand slam with selling an outstanding number of units at launch. Sony made a nearly perfect developer-friendly console that has great games and key games exclusive to their platform. This exposed a HUGE reason why SEGA had to quit the console manufacturing business to restructure themselves into being a third-party developer in the software business because they were caught in the eye of the storm being the PlayStation 2's exceptional launch.
I have looked more into this and it turns out that SEGA wasn't the first company that restructured themselves as a third-party developer because of the Dreamcast's commercial failure because there are two companies that did this before SEGA did, like the 3DO Company and Atari. They are first two companies that restructured themselves into becoming third-party developers to release games on non-3DO and non-Atari platforms following the failures of the 3DO platform and the Atari Jaguar. It was clearly dunked on.
Now, I say that it's easy, but it's not. Shifting from being a console manufacturer to being a third-party developer is extremely difficult. They had to call it quits on manufacturing consoles and reorganize tech to develop games and release them on other consoles.
SEGA's shift from the console business to being a third-party developer comes with Microsoft taking their place as the console manufacturer for their first console, the original Xbox, to succeed what SEGA has failed with the Dreamcast. Following SEGA's shift to being a third-party developer after the Dreamcast dropped the ball because of the PS2's launch going off to a blazing start, they began porting their games that were released on the Dreamcast to the GameCube like Sonic Adventure 2 and Crazy Taxi. It became a starting point for SEGA being a third-party developer.
It turned out well that they went on to release games not on the GameCube, but other non-SEGA platforms in the 6th generation-era and beyond like Sonic Heroes, the first new Sonic title they ever released since their shift to being a third-party developer. Super Monkey Ball and Jet Set Radio Future would be launch titles for the GameCube and original Xbox. So far, SEGA releasing their games on non-SEGA consoles, even on this generation, went well so far and will never return to the old console manufacturing business following the failures of the 32X, Saturn and Dreamcast.
SEGA didn't have the time to come up with strategies or urge EA and SquareSoft to develop games to keep the Dreamcast alive because Sony has ruined their reputation. In fact, the Dreamcast's fate was sealed, it was reported that the PS2's overwhelming launch sales is a great sign that Sony was able to financially do everything SEGA couldn't because of the fact that the PS2 is developer-friendly and became the bestselling console of all time. It did well in both the American and Japanese markets that many third-party developers, including SEGA, were able to develop and release their games well on it without losing money. And if you were in the eye of the storm of the other console's launch, guess what you're doing almost every day! Imagine if your reputation was ruined. When your console gets off to a great start in your console manufacturing business, your foe's console launch has skyrocketed in sales and you had to restructure your business to being a third-party developer to release games on other platforms.
And it wasn't just the PS2 that became the most popular console, but the PS1 as well, Sony's very first console that is turning 31 years old soon. If you want to know more about the PS1 and PS2's spectacular launch sales and how both of them became a grand slam, I have the link to the post that covers it all.
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