Poorly Timed Great Plans: The Failure of the Sega Saturn & Dreamcast

in #sega4 years ago (edited)

The increasing proliferation of technology makes it difficult to anticipate trends and shifts in the market and culture in which the tech is used. Large organizations often develop plans that would seem to have logical foundations and statistical reinforcement to suggest the plan is the right direction, however in many cases this line of thought has proven to be unfounded. One example of this was the release of the Sega Saturn, which by all accounts was a great direction for the Sega company but the quickly shifting market and competitor actions resulted in the decision to create the Saturn becoming the decision that doomed Sega to fail as a corporation (Eres et al., 2014).

After releasing its first console the SG-1000 in 1983 in direct competition with the Nintendo Entertainment System, Sega did not gain much market share until the release of the Sega Master System in 1985 (Eres et al., 2014). After learning from the mistakes of the SG-1000 and the success of the Master System, Sega released the Genesis in 1988 in Japan but did not release it worldwide until 1990 (Eres et al., 2014). As Sega had aimed the Genesis more at adults to refine its market share, the Genesis had a significantly more adult-oriented marketing strategy than the competitor's Super Nintendo (Eres et al., 2014). 1994 saw the video game industry generate over $10 billion in market revenue, Sega decided to refine its market strategy to focus specifically on "Generation X" in order to start mixing media to establish more referential dialogue between content produced on different mediums (Forster & Oppermann, 1996). As the competition in the home gaming console arena ramped up, Sega decided to shift the company towards a CD-ROM based gaming system to increase the capacity for games to have better visual effects as well as the capacity to have games with more content available (Eres et al., 2014).

While Sega's plan for releasing the Saturn would have looked good from within the company's perspective as well as based on previous market research and trend analysis, the timing of the release of the Sony Playstation as well as the the Nintendo 64 killed any potential for Sega to build momentum in Saturn sales (Eres et al., 2014). As the Saturn was a sharp pivot for the company after the brief release and failure of the 32X, the timing of the Saturn release was put on a schedule that put it in direct competition with the $100 cheaper Playstation (Eres et al., 2014). After Sega struggled to keep up with competitors, it had lost $267.9 million and gotten rid of 30% of its workforce by 1997 (Eres et al., 2014).

Sega's problem had not been that the forecasting was wrong and more-so that the competitors simply brought a cheaper product that delivered the same quality to the user, they decided to shift their attention for what their forecasts anticipated to be the sixth generation of console wars that would be soon arriving (Eres et al., 2014).

Sony had taken a risk on the Playstation by selling the console at a loss at $299 in order to gain market share to make profit on the games, Sega took into account the market reactions to console pricing, game availability, and quality of games produced to develop the strategy for their sixth-generation system (Eres et al., 2014). They decided to take a calculated risk and release the Dreamcast, only to have Sony release the Playstation 2 a year later with DVD support and exclusive games that ultimately became the last foray for Sega in the console wars (Eres et al., 2014). Ultimately, it was not poor planning or calculations that caused Sega's console failures as their plans were supported by statistics and market research at every turn. It was the unpredictable factors that are always present that killed both the Saturn and the Dreamcast.

References:

Eres, B., McMurrian, R., Matulich, E., & Budd, N. (2014). Sega Corporation: The dream and the plan to rise above. Journal of Business Cases and Applications, 11, 1.

Forster, W., & Oppermann, T. (1996). Sega game applications: Consoles, games and development possibilities. In The information superhighway and private households (pp. 183-194). Physica-Verlag HD.

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