Sega Dreamcast

Dreamcast was supposed to be Sega's comeback. Instead, it became Sega's farewell to the console business. During the early 1990s, Sega had been one of the most powerful names in video games. The Sega Genesis turned the company into Nintendo's primary rival in North America. Sonic the Hedgehog became a global character. For a time, Sega looked capable of permanently dividing the console market with Nintendo. Then came a series of costly mistakes. The Sega CD fragmented the Genesis audience. The 32X became notorious as a short-lived add-on. The Sega Saturn struggled badly in North America against Sony's PlayStation and Nintendo 64. By the time Sega began preparing Dreamcast, the company's reputation and finances had suffered enormously. Dreamcast needed to reset everything. And technologically, it largely did. The console launched in Japan in November 1998. Sega prepared a much larger campaign for North America. The date itself became part of video-game history: 9/9/99. The price: $199. Sega reportedly spent roughly $100 million marketing the American launch. The campaign worked. Consumers lined up for the system. More than 225,000 Dreamcasts reportedly sold during the first 24 hours in North America, generating almost $100 million in retail sales. Within weeks, sales exceeded half a million. The Dreamcast seemed to have given Sega the comeback it desperately needed. The hardware also offered genuinely forward-looking features. The North American Dreamcast included a modem. That made online functionality part of the console's identity years before online console gaming became standard. Players could browse the web and eventually compete online in games such as Phantasy Star Online. Its Visual Memory Unit, or VMU, was another unusual idea. The memory card included its own screen and controls. It could display information while inserted into a Dreamcast controller and could even function independently for simple games and applications. Dreamcast also developed an extraordinary software library. Soulcalibur demonstrated how closely home hardware could approach—and sometimes surpass—the arcade experience. Sonic Adventure brought Sega's mascot into a major 3D adventure. Crazy Taxi captured the energy of Sega's arcade heritage. Jet Set Radio combined stylized cel-shaded graphics with music and street culture. Shenmue attempted an astonishingly detailed interactive world. NFL 2K challenged established sports-game franchises. Phantasy Star Online helped demonstrate the potential of online console RPGs. Dreamcast was inventive. It was fun. It was increasingly loved. And it was in enormous trouble.

Dreamcast did not die because it was a bad console. It died because Sega could no longer afford the war. Years of disappointing hardware performance had severely weakened the company before Dreamcast even launched. The Saturn had performed poorly against Sony's PlayStation. Sega had also spent money and consumer goodwill on products such as the Sega CD and 32X. Dreamcast therefore entered the market carrying problems created long before the machine existed. Its spectacular American launch provided hope, but the momentum was difficult to maintain. Then Sony revealed the PlayStation 2. The PlayStation brand already possessed enormous momentum from the original system. PlayStation 2 also included DVD playback, an extremely attractive feature at a time when standalone DVD players remained relatively expensive. Anticipation for Sony's machine affected Dreamcast even before consumers could easily buy a PS2. Sega responded aggressively. It cut Dreamcast's price. It promoted online gaming. It continued releasing ambitious software. But the economics were becoming impossible. In January 2001, Sega projected its fourth consecutive annual loss. The company had sold far fewer Dreamcasts than it had hoped during the preceding months and still had enormous quantities of hardware in inventory. Meanwhile, the competitive situation was about to become even worse. Sony's PlayStation 2 was expanding. Nintendo's GameCube was coming. Microsoft was preparing to enter the console market with Xbox. Sega faced the prospect of financing another prolonged hardware battle against three enormous competitors. On January 31, 2001, the company made the historic decision. Dreamcast production would end. Sega would stop trying to compete as a console manufacturer and transform itself into a company that made games for multiple platforms—including machines produced by its former rivals. The Dreamcast's failure therefore marked something much larger than the discontinuation of one product. It ended Sega's career as a manufacturer of home video game consoles.

Dreamcast experienced one of the strangest transformations in video game history. It went from commercial failure to beloved classic. For many players, Dreamcast represents a version of Sega at its most creative. The company knew it was fighting for survival, and its games often seemed willing to take risks that safer companies might avoid. That environment produced an extraordinary catalog. Shenmue pursued a level of environmental detail that seemed excessive at the time but anticipated later open-world games. Jet Set Radio helped popularize cel-shaded graphics. Phantasy Star Online demonstrated that console players could inhabit persistent online worlds together. Dreamcast's built-in modem anticipated a future in which network connectivity would become expected console hardware. The VMU experimented with the idea of a second screen years before similar concepts appeared elsewhere. Even Sega's sports games left a permanent legacy. The NFL 2K series eventually evolved into the 2K sports brand, which became enormously important after Sega exited the hardware business. The console itself also became a symbol of the difference between commercial success and creative success. Dreamcast unquestionably failed at its most important business objective. It could not keep Sega in the console market. Yet many of the things Sega tried with Dreamcast pointed directly toward the future of gaming. Online connectivity. Persistent communities. Downloadable features. Unusual peripherals. Arcade-quality home experiences. Experimental visual design. Large interactive worlds. Dreamcast's lifespan was brutally short. Its influence wasn't. More than two decades later, players still debate what might have happened if Sega had possessed enough money and time to keep the Dream alive.