Dreamcast
Released in 1988, the Sega Genesis (known as the Sega Mega Drive in Japan, Europe and Brazil) was Sega's entry into the fourth generation of video game consoles. Selling 30.75 million units worldwide, the Genesis was the most successful console Sega ever released. The successor to the Genesis, the Sega Saturn, was released in Japan in 1994. The Saturn was a CD-ROM-based console that displayed both 2D and 3D computer graphics, but its complex dual-CPU architecture made it more difficult to program for than its chief competitor, the Sony PlayStation. Although the Saturn debuted before the PlayStation in both Japan and the United States, its surprise U.S. launch—which came four months earlier than originally scheduled—was marred by a lack of distribution, which remained a continuing problem for the system. Moreover, Sega's early release was undermined by Sony's simultaneous announcement that the PlayStation would retail for US$299—compared to the Saturn's initial price of $399. Nintendo's long delay in releasing a competing 3D console and the damage done to Sega's reputation by poorly supported add-ons for the Genesis (particularly the Sega 32X) allowed Sony to establish a foothold in the market. The PlayStation was immediately successful in the U.S., in part due to a massive advertising campaign and strong third-party support engendered by Sony's excellent development tools and liberal $10 licensing fee. Sony's success was further aided by a price war in which Sega lowered the price of the Saturn from $399 to $299 and then from $299 to $199 in order to match the price of the PlayStation–even though Saturn hardware was more expensive to manufacture and the PlayStation enjoyed a larger software library. Losses on the Saturn hardware contributed to Sega's financial problems, which saw the company's revenue decline between 1992 and 1995 as part of an industry-wide slowdown. Furthermore, Sega's focus on the Saturn over the Genesis prevented it from fully capitalizing on the continued strength of the 16-bit market.
History of Sega
In what has been called "a brief moment of remarkable creativity", in 2000, Sega restructured its arcade and console development teams into nine semi-autonomous studios headed by the company's top designers. Studios included United Game Artists, Hitmaker, Smilebit, Overworks, Sega AM2, Sonic Team, WOW Entertainment, Amusement Vision, and Sega Rosso. Sega's design houses were encouraged to experiment and benefited from a relatively lax approval process. This resulted in games such as "Rez","The Typing of the Dead", "Seaman", and "Segagaga". Sega also revived franchises from the Genesis era, such as "". AM2 developed what Sega hoped would be the Dreamcast's killer app, "Shenmue", a "revenge epic in the tradition of Chinese cinema." Incorporating a simulated day/night cycle with variable weather, non-player characters with regular schedules, and the ability to pick up and examine detailed objects (also introducing the Quick-time event in its modern form), "Shenmue" went over budget and was rumored to have cost Sega over $50 million. As the first fully 3D platforming game starring Sega's mascot, Sonic the Hedgehog, Sonic Team's "Sonic Adventure" was considered "the centerpiece of the [Dreamcast] launch". "Adventure" garnered criticism for technical problems including erratic camera angles and glitches, but was praised for its "luscious" visuals, "vast, twisting environments" and iconic set pieces. It has been described as the "Sonic" series' creative apex. However, it failed "to catch on with players in nearly the way that [Nintendo's] "Mario 64" had done", perhaps due to a perceived lack of gameplay depth. In sports, Visual Concepts' "NFL 2K" football series and its "NBA 2K" basketball series were critically acclaimed. Additionally, with the release of Sega's NAOMI arcade system board, the focus of the arcade divisions shifted to produce titles that could easily be ported to the Dreamcast.