The Rise and Fall of The Dreamcast: A Legend Gone Too Soon
The Sega Dreamcast. A legendary games console that came and went too soon. Sporting better graphics than any other console on the market at the time, even trumping the later released Playstation 2 in terms of textures, anti-aliasing, and image quality, the Dreamcast is remembered as being a pioneer of the gaming world, introducing a series of industry firsts and leaving a mark so profound that fans are still hankering for a sequel.
So why is it seen as a failure? With so many revolutionary feats surrounding the console, why did the Dreamcast have one of the shortest lifespans in video game history, and, more tragically perhaps, how did it lead to Sega's departure from the home console market? The truth lies somewhere between mismanagement and uncertainty.
Not only was it the first console with advanced 128bit architecture, which Sega claimed, allowed for evolutionary capabilities that enabled it to grow and change to match advances in technology, but it boasted the title of being the first-ever console to include internet capabilities, with a built-in modem that allowed gamers to play online. Hell, it even had an extensive gallery of launch titles and platform exclusives such as Shenmue, which along with a groundbreaking advertising campaign, catalysing a North American release that broke retail records, landing it in the Guinness World Records as the most revenue generated in the entertainment industry in a span of 24 hours.
Special issue cover art for The Official Dreamcast Magazine, 1999 via/Twitter
Sega Saturn
In 1997, in order to rectify the substandard release of the Sega Saturn, which sold 9.26 million units worldwide compared to its competitor, the Nintendo 64, which sold 32.93 million, Sega’s President, Shoichiro Irimajiri contracted two teams to come up with the design for their new console. In Japan, he enlisted Sega Saturn designer, Hideki Sato and hardware developer PowerVR (formerly known as VideoLogic) to come up with a new chipset design for the Dreamcast with the goal of one-upping Nintendo and propelling the gaming world into the 128bit era.
Hideki Sato with the Sega Megadrive via/Twitter
Codenamed “Dural” (after the character from Sega AM2's Virtua Fighter series), the design utilised the Hitachi SH4 CPU architecture in conjunction with the PowerVR2 graphics processing unit, manufactured by the Japanese company NEC. The design was a major step up for Sega, allowing for better graphics and faster processing power than the Saturn, with Sato going so far as to implement a “water-based cooling system” to prevent overheating after hours of gameplay in an early version - an innovative addition which was later replaced with more generic heat pipes.
One of the Saturn’s downfalls was the fact that it ended up being more expensive to build than to sell, costing roughly $380 to produce and as low as $300 to buy at retail price (reduced from $400 to compete with the Sony Playstation). Thus, when designing the Dreamcast, Sega concentrated on utilising economically efficient parts, such as the PowerVR2, to sustain the console’s profitability.
PowerV2DC(315-6226-X1) for Sega Dreamcast via/WikiCommons
Used all the way up to the Dreamcast’s final version, the NEC-built graphics card was lauded for its efficient processing power and an innovative tile-based rendering solution which prevented polygons that weren’t on-screen to be rendered, thereby reducing CPU overhead.
In a 2009 interview with Gamasutra, Charles Bellfield, former Sega VP of communications (1998-2000) and VP, strategy & corporate affairs (2000-2003), explained that the PowerVR solution, while unconventional for developers at the time, was, in theory, a high performance and low-cost solution. Later adding that “Sega's relationship with NEC, a Japanese company, probably made a difference too.”
COMPETITION FROM ACROSS THE PACIFIC: RIVAL DREAMCAST DESIGNS
Yet, across the Pacific, a rival team was put together to create a competing design for SEGA’s next console. Consisting of only eleven members, the US-based team at the American graphics card company, 3Dfx, were initially kept a secret from Sato. Led by IBM alumnus Tatsuo Yamamoto and tasked with creating something which upped the processing power of previous consoles but also included an easy-to-develop-for operating system (another pitfall of the Saturn).
3Dfx Voodoo 3 Graphics Card Artwork
Utilising a custom Voodoo graphics card, Yamamoto and his team created their version of the Dreamcast, codenamed Black Belt. Supported by the newly recruited Sega of America Chief Operating Officer, Bernie Stolar, the system was highly regarded, boasting better graphics and higher processing power than Sato’s design, with reports suggesting that the chipset managed to exceed Sega's expectations in terms of size, performance and cost.
Sega Black Belt, otherwise known as the Saturn 2 via/Techeblog
However, as in all things business, politics thwarted production, and when 3Dfx announced the design in 1997, during their initial public offering (IPO), in which the company were legally obligated to reveal details of their contract with Sega, the Japanese video game giant backed out; citing an irreversible breaching of contract which angered a slew of Sega executives. “They said they looked at 3Dfx, but decided against it,” said former vice president of Electronic Arts, Bing Gordon, speaking to Gamasutra. “They went with some other 3D chip that we had never heard of, and they went with a weird processor. We looked at this and asked ourselves, ‘Why did they make these choices? It's gotta be some kind of political thing because these are dumb choices.’”
“Is 3Dfx here to stay?” – Interview with 3Dfx’s Greg Ballard in Next Generation, October 1997 edition
Stolar suggests that while he fought for the use of the American-built model, Sega was more concerned with the breach of privacy, deciding to use Sato’s model for the basis of the Dreamcast: “I felt the US version, the 3Dfx version, should have been used. Japan wanted the Japanese version, and Japan won … I lost that argument.” 3Dfx later sued Sega over a breach of contract, settling out of court in 1998.
Despite numerous reports stating that the Black Belt was the more powerful system of the two, Yamamoto’s project was quickly derailed, and the decision to move forward with Sato’s “Dural” was implemented, renaming the project “Katana” and announcing it publicly on September 7, 1997.
Sega “Katana” Developer Box for the Dreamcast via/WikiCommons
While strewn with development hurdles, Sega had finally settled on the console of their dreams. Sending out the “Katana” development kit to game developers across the globe and turning the wheels of what should have been their most successful console.
WHAT MAKES THE DREAMCAST TICK
On the surface, the Dreamcast seems not too dissimilar from other consoles at the time. With two buttons, one for power, one to open the CD drive, four controller ports and its iconic red swirl (blue, if you’re in Europe) on the top.
The Sega Dreamcast
The controller itself was pretty standard too, consisting of a D-Pad, two bumpers, a start button, an analogue stick and four buttons on the right. However, it was in the memory stick where the Dreamcast’s originality fully surfaced, a strange visual memory unit (VMU), which connected to its controller and worked as both an auxiliary display during normal gameplay and allowed for certain minigames to be played. You could also connect two cards together from the top and exchange game data, making the memory unit a uniquely innovative aspect of what was already a highly original console.
Visual Memory Unit (VMU)
Other peripherals included the Fishing Rod, a keyboard, mouse and a microphone, informing the innovative design of the console while capitalising on its interconnectivity. Users could browse the web and play games online, essentially establishing the first-ever console-computer hybrid, a staple aspect of most contemporary consoles.
It seemed that with the Dreamcast’s ramped up graphics, which were better than anything seen prior in the home console market, and its capacity for internet play, Sega was set for one of the most successful lifespans of any console yet. So what the hell happened?
THE DREAMCAST IS RELEASED
After the initial launch of the Dreamcast in Japan in 1998, Sega managed to sell all its units within the first 24 hours. Priced at JP¥29,800 (about $290), Sega’s plan to outshine its competitors seemed to be succeeding.
A Japanese Advertisement for the “Sega Dreamcast - Release Date”
However, with only four games available at launch, one of which was a visual novel, the company soon suffered a backlash from fans, many of whom reportedly began handing in the console in favour of the Sony PlayStation.
Sony Playstation
While Virtua Fighter 3tb was a huge arcade hit in Japan, the long-awaited Sonic Adventure, a key selling point for the Dreamcast, wasn’t set to release until a few weeks later. While outselling the console in pre-orders due to its hype, the company soon suffered a lack of chipsets, resulting in a delay in restocking the system in stores. Due to this, the company failed to sell the desired number of consoles, shifting under 900,000 of their 1,000,000-unit goal.
Bernie Stolar with the Dreamcast
In order to regain some of their losses, Sega decided to drop the price of the console to $199 for the North American release, hoping to spark a boost in software purchases. Yet, while the release of Soul Calibur did manage to secure 17% of Sega’s shares, the console became unprofitable, and more expensive to build than sell, mirroring one of the key issues of the Saturn. This was made worse when EA, one of Sega’s main developers for the Saturn, refused to support the Dreamcast, demanding exclusive rights to sports games on the console. Citing a rift between him and former Electronic Arts CEO, Larry Probst, Stolar explains that his recent purchase of 2K developer, Visual Concepts, prevented him from accepting EA’s demands:
“Larry came to me and said, ‘Bernie, we’ll do Dreamcast games, but we want sports exclusivity.’ I said, ‘You want to be on the system with no other third-party sports games?’ I looked at him and said, ‘You know what? I’ll do it, but there’s one caveat here: I just bought a company called Visual Concepts for $10 million, so you’ll have to compete with them.’ Larry says, ‘No, you can’t even put them on the system.’ I said ‘Then Larry, you and I are not going to be partners on this system.’”
Sega was in a state of near-financial crisis, dropping shares, losing partners, and lacking games. But with the lead up to the North American release, things started to pick up, due in large to a unique advertising campaign, and the memorable launch date of 9/9/99.
IT’S THINKING: THE DREAMCAST’S INGENIOUS ADS AND NORTH AMERICAN LAUNCH
Created by Brian Bacino, former Creative Director at respected advertising house Foote, Cone & Belding, the famously weird “It’s Thinking” advertisements, along with the memorable release date, were carefully designed works of marketing gold, working to catapult the Dreamcast into North American homes. Capitalising on the console’s innovative capabilities, the campaign utilised a weird cyberpunk vibe to accentuate the futuristic design choices of the Dreamcast.
It was through this marketing campaign that the Dreamcast exploded across North America, selling over 500,000 units in just over two weeks.
And while Bacino’s campaign certainly helped to spread the word about Sega’s new console, much of the Dreamcast’s early success can be attributed to its impressive launch gallery, which included titles such as Soulcalibur, Ready 2 Rumble Boxing and of course, Sonic Adventure.
It seemed Sega had learned its lesson from the lacklustre Japanese release of the console and ensured to have 19 titles prepared for the Dreamcast’s American release, yet the truth of the matter is that there was another monster on the horizon: the Sony Playstation 2. On paper, a superior console, with DVD playing capabilities, larger memory space and an in-built modem, Sega was aware of the hype for Sony’s sophomore console and determined to develop and nurture a loyal fanbase for the Dreamcast months before the release of the Playstation 2.
Stolar spoke to IGN about Sony’s upcoming console, stating that:
“On paper, Sony's machine sounds impressive. But the fact is it's still on paper. [...] While Sony is working to create that hardware, Sega will already be in the marketplace with Dreamcast building our installed base and developing an impressive library of games.”
Stolar’s arrogance mirrored Sega’s hasty rollout, pushing ahead with the Dreamcast’s promotion and selling 1.2 million units in the US by the end of 1999, proving that there was an appetite for the system in Western markets. Little did they know that Sony’s delayed release of the Playstation 2 would actually benefit the rival console, giving its developers more than a year and a half to get cracking on games to support the system.
A RIVAL ENTERS THE RING: THE SONY PLAYSTATION 2 AND THE XBOX
Selling over 600,000 units in just over 24 hours on launch in Japan, the Sony Playstation 2 took the reins of the Japanese market and put the record-breaking success of the Dreamcast on the back burner. In an effort to combat Sony’s bouldering success, Sega decided to focus its efforts on the North American market, having sold double the amount of units there than in Japan. As stated by former President of Sega of America, Peter Moore, “you have to fish where the fish are biting.” Yet while the pool of fish was indeed wide and hungry, the hype for the Playstation 2 was beginning to take root.
To make matters worse, in March of 2000, Microsoft announced the Xbox, another console which, like the Playstation 2 (and unlike the Dreamcast) required no external modem to use the internet. In a last-ditch effort to bolster consumer incentives, Sega announced SegaNet, the company’s own internet service which allowed for fast online gaming and web browsing for only $21.95 a month. Moreover, with the purchase of a two-year subscription, consumers would receive a Dreamcast and keyboard for free. Yet, with the North American release of the Playstation 2 looming, and the announcement of the Nintendo GameCube in September of 2000 to further put a boot in SEGA’s butt, the lifeblood of the Dreamcast was beginning to drain.
The Rock and Bill Gates at the 2001 Xbox Reveal
A small sliver of hope came when Sony suffered a shortage in shipments of the Playstation 2 in the US, an opportunity exacerbated by a lack of launch titles for the Sony console and a price difference of over $150 (at the time, the Playstation 2 was priced at $299 while the Dreamcast was reduced to $149). During the 2000 holiday season, Dreamcast units surged, yet in January of 2001, the console was eventually discontinued.
With surplus inventory stacked up, Sega determined that due to a lack of sales, and a market quickly overloaded by competing devices with similar capabilities, there was no need to produce any more consoles.
SEGA LEAVES THE HOME CONSOLE MARKET
In 2001, Sega announced that they would be pulling out of the hardware business, officially stating that they would now only be making games for third-party platforms. With many new games still releasing for the Dreamcast, and even a few accessories such as a broadband adapter, Sega decided that the console was on its way out.
Sega Consoles Through The Years
After less than two years in the North American market, the Dreamcast was quickly axed, marking the end of Sega’s 18-year lifespan in the home console market.
MORE HURDLES FOR THE DREAMCAST
Taking 22 months to sell only 6.5 million Dreamcasts compared to Sony’s 15 months to sell over 10 million Playstation 2s, it was clear that despite SEGA’s best efforts, their console just wasn’t able to maintain its hype. And while inspiring the creation of Microsoft’s Xbox, which Moore went on to develop, and essentially pioneering the now multi-billion dollar industry of online gaming, it seemed that the Dreamcast came and left before its time.
The Iconic Dreamcast Opening
However, it’s through the cutting-edge efforts of Sega that the Dreamcast’s legacy has been solidified as one of the most innovative consoles of a generation. A forward-thinking, highly original device that despite enjoying a banging launch gallery, an iconic marketing campaign and a few industry firsts (the revolutionary PowerVR2 and the aforementioned internet capabilities), couldn’t get over the haphazard blunders made by the Saturn, with Sega rushing towards a release that could likely have benefitted from a longer development cycle and a streamlining of marketing efforts.
Additionally, the fact that the Dreamcast lacked third-party support further enabled its downfall, unable to heal the wounds left when Sega burnt sports developer EA during the development of the console, with the company’s replacements by 2K struggling to make the same cultural impact as games such as Fifa and Madden.
EA Sports Logo (1993)
NFL 2K2 (2001)
Another hurdle for the Dreamcast was the fact that its games were easily pirated. During the development of the console, a new technology was beginning to make waves in the PC industry: CD burners, allowing users to transfer data from CD-Roms to the computer with ease. Hacker groups online started to rip images of the Dreamcast’s GD-Roms via the serial port and the broadband adapter, transposing images that could be placed on normal CDs. Due to the Dreamcast’s ability to play CD-Roms, many of the console’s games began to circulate wildly, leaving an increasingly large dent in the company’s sales. It was early days in the digital world, and SEGA was unequipped to handle such a monumental rise in game piracy.
Sonic Adventure and Jet Set Radio
THE DREAMCAST’S LEGACY
As of 2007, the Dreamcast had sold only 10.6 million units, falling short of Sony and Microsoft by a landslide. While sporting an incredible selection of iconic games including the slick Jet Set Radio, the manic Crazy Taxi and the legendary Shenmue, unfortunately, the system which pioneered the use of internet connectivity, propelled gaming marketing into the world of the weird (an aspect later picked up by Sony and Nintendo), was unable to sustain itself for longer than three years. A uniquely designed console that has gone down in history as the gaming gem which came and left, in the blink of an eye, or the swirl of a dream.
And while Sega has maintained itself solely through software over the years since, a 2018 announcement by company president Ian Curran suggests that a sequel to the Dreamcast has been in development since 2016. Whether or not this console ever sees the light of day is up for debate but as of now, Curran is convinced that, like the Dreamcast itself, “Dreamcast 2 will revolutionize the gaming industry.”
Let’s hope Curran’s dream plays out smoothly, unlike the nightmare that plagued the launch and eventual derailment of the Dreamcast.
About the Author:
Writer, screenwriter and lover of all things media, Simon Jenner explores stories through art and culture. Connect with him for articles about film, anime, gaming and more.
Edited by Ora Margolis
