Background In the early 1990s, Sega had success with the
Genesis (known as the Mega Drive in most countries outside of North America), backed by aggressive advertising campaigns and the popularity of its
Sonic the Hedgehog series. Sega also had success with
arcade games; in 1992 and 1993, the new
Sega Model 1 arcade system board showcased
Sega AM2's
Virtua Racing and
Virtua Fighter (the first
3D fighting game), crucial to popularizing 3D polygonal graphics. It was developed by the same team that developed the
System 32 arcade board. Sato regrets that he did not go with the Model 1 arcade hardware as a base, as he was too concerned of leaving all the developers behind that were focused on sprites rather than 3D, which were the majority of developers. In 1993, Sega and the Japanese electronics company
Hitachi formed a joint venture to develop a new CPU for the Saturn, which resulted in the creation of the "SuperH
RISC Engine" (or
SH-2) later that year. The Saturn was designed around a dual-SH2 configuration. According to Kazuhiro Hamada, Sega's section chief for Saturn development during the system's conception, "the SH-2 was chosen for reasons of cost and efficiency. The chip has a calculation system similar to a DSP
[digital signal processor], but we realized that a single CPU would not be enough to calculate a 3D world." Although the Saturn's design was largely finished before the end of 1993, reports in early 1994 of the technical capabilities of
Sony's upcoming
PlayStation console prompted Sega to include another video display processor (VDP) to improve 2D performance and 3D texture mapping. Sega considered making CD-ROM-based and cartridge-only versions of the Saturn, but discarded the idea due to concerns over the lower quality and higher price of cartridge games. Silicon Graphics subsequently collaborated with
Nintendo on the
Nintendo 64. Publicly, Kalinske defended the Saturn's design: "Our people feel that they need the multiprocessing to be able to bring to the home what we're doing next year in the arcades." In 1993, Sega restructured its internal studios in preparation for the Saturn's launch. To ensure high-quality 3D games would be available early in the Saturn's life, and to create a more energetic working environment, developers from Sega's arcade division were asked to create console games. New teams, such as the
Panzer Dragoon developer
Team Andromeda, were formed during this time. In early 1994, the
Sega Titan Video arcade system was announced as an arcade counterpart to the Saturn. In April 1994,
Acclaim Entertainment announced it would be the first American publisher to produce software for the Titan. In January 1994, Sega began to develop the
32X add-on for the Genesis, as a less expensive entry into the
32-bit era. The 32X was approved by Sega CEO
Hayao Nakayama and widely supported by Sega of America employees. According to the former Sega of America producer Scot Bayless, Nakayama was worried that the Saturn would not be available until after 1994 and that the recently released
Atari Jaguar would reduce Sega's hardware sales. As a result, Nakayama ordered his engineers to have the system ready for launch by the end of the year. According to Sega of America research and development head Joe Miller, the 32X familiarized development teams with the dual SH-2 architecture also used in the Saturn. Because the machines share many parts and were prepared to launch around the same time, tensions emerged between Sega of America and Sega of Japan when the Saturn was given priority.
Virtua Fighter, a faithful port of the popular arcade game, sold at a nearly one-to-one ratio with the Saturn console at launch and was crucial to the system's early success in Japan. Boosted by the popularity of
Virtua Fighter, Sega's initial shipment of 200,000 Saturn units sold out on the first day. Sega waited until the December 3 launch of the
PlayStation to ship more units; when both were sold side by side, the Saturn proved more popular. After the holiday season, however, interest in the 32X rapidly declined. and sales exceeded 1 million within the following six months. There were conflicting reports that the PlayStation had a higher
sell-through rate, and the system gradually began to overtake the Saturn in sales during 1995. Sony attracted many third-party developers to the PlayStation with a liberal $10 licensing fee, excellent development tools, and the introduction of a 7- to 10-day order system that allowed publishers to meet
demand more efficiently than the 10- to 12-week
lead times for cartridges that had previously been standard in the Japanese video game industry. In March 1995, Sega of America CEO Tom Kalinske announced the Saturn's launch in the U.S. on "Saturnday" (Saturday), September 2, 1995. However, Sega of Japan mandated an early launch to give the Saturn an advantage over the PlayStation. At the first
Electronic Entertainment Expo (E3) in Los Angeles on May 11, 1995, Kalinske gave a keynote presentation in which he revealed the release price of (including a copy of
Virtua Fighter Sega had already shipped 30,000 Saturns to
Toys "R" Us,
Babbage's,
Electronics Boutique, and
Software Etc. for
immediate release. The announcement upset retailers who were not informed of the surprise release, including
Best Buy and
Walmart;
KB Toys, which was not part of the early launch, responded by refusing to carry the Saturn and its games. The Saturn's release in Europe also came before the previously announced North American date, on July 8, 1995, at
£399.99. The PlayStation launched in Europe on September 29, 1995; by November, it had already outsold the Saturn by a factor of three in the United Kingdom, where Sony had allocated £20 million of marketing during the holiday season compared to Sega's £4 million. The Saturn's U.S. launch was accompanied by a reported $50 million advertising campaign including coverage in publications such as
Wired and
Playboy. The early rescheduling yielded only six
launch games (all published by Sega) because most third-party games were scheduled around the original launch date.
Virtua Fighters relative lack of popularity in the West, combined with a release schedule of only two games between the surprise launch and September 1995, prevented Sega from capitalizing on the Saturn's early timing. and garnered favorable media in comparison to the Saturn version of Sega's
Daytona USA, which was considered inferior to its arcade counterpart. Namco, a longtime arcade competitor with Sega, Although the System 11 is technically inferior to Sega's
Model 2 arcade board, its lower price made it attractive to smaller arcades.
Tekken surpassed
Virtua Fighter in popularity due to its superior graphics and nearly arcade-perfect console port, becoming the first million-selling PlayStation game. On October 2, Sega announced a Saturn price reduction to $299. High-quality Saturn ports of the
Sega Model 2 arcade hits
Sega Rally Championship,
Virtua Cop, and
Virtua Fighter 2 (running at 60 frames per second at a high resolution) were available by the end of the year and were generally regarded as superior to competitors on the PlayStation. Notwithstanding a subsequent increase in Saturn sales during the 1995 holiday season, the games were not enough to reverse the PlayStation's decisive lead. Within its first year, the PlayStation secured over 20% of the entire U.S. video game market. On the second day, Sega announced it would match this price, though Saturn hardware was more expensive to manufacture.
Changes at Sega After the launch of the PlayStation and Saturn, sales of 16-bit games and consoles continued to account for 64% of the video game market in 1995. Sega underestimated the continued popularity of the Genesis, and did not have the inventory to meet demand. Nakayama's decision to focus on the Saturn over the Genesis, based on the systems' relative performance in Japan, has been cited as the major contributing factor in this miscalculation. Due to long-standing disagreements with Sega of Japan, On July 16, 1996, Sega announced that Kalinske would leave Sega after September 30, and that
Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America. A former
Honda executive, Irimajiri had been involved with Sega of America since joining Sega in 1993. Sega also announced that
David Rosen and Nakayama had resigned from their positions as chairman and co-chairman of Sega of America, though both remained with the company. These changes were accompanied by a softer image that Sega was beginning to portray in its advertising, including removing the "Sega!" scream and holding press events for the education industry. Marketing for the Saturn in Japan also changed with the introduction of
Segata Sanshiro (played by
Hiroshi Fujioka), a character in a series of TV advertisements starting in 1997; the character eventually starred in a Saturn game. Temporarily abandoning arcade development, Sega AM2 head
Yu Suzuki began developing several Saturn-exclusive games, including a
role-playing game in the
Virtua Fighter series. Initially conceived as an obscure prototype, "The Old Man and the Peach Tree", and intended to address the flaws of contemporary Japanese RPGs (such as poor
non-player character artificial intelligence routines),
Virtua Fighter RPG evolved into a planned 11-part, 45-hour "revenge epic in the tradition of
Chinese cinema", which Suzuki hoped would become the Saturn's
killer app. The game was eventually released as
Shenmue for the Saturn's successor, the
Dreamcast.
Cancellation of Sonic X-treme was canceled, and the lack of a fully 3D Sonic the Hedgehog'' platformer became a significant factor in the Saturn's
commercial failure. As
Sonic Team was working on
Nights into Dreams, It featured a
fisheye lens camera system that rotated levels with
Sonic's movement. After Nakayama ordered the game be reworked around the
engine created for its boss battles, the developers were forced to work between 16 and 20 hours a day to meet their December 1996 deadline. Weeks of development were wasted after Stolar rescinded STI's access to Sonic Team's
Nights into Dreams engine following an ultimatum by
Nights programmer
Yuji Naka. After programmer Ofer Alon quit and designers Chris Senn and Chris Coffin became ill,
Sonic X-Treme was cancelled in early 1997. STI was disbanded in 1996 as a result of changes in management at Sega of America. Naka said he had been relieved by the cancellation, because the game was not promising. the company retained control of 38% of the U.S. video game market (compared to Nintendo's 30% and Sony's 24%). In part due to an aggressive
price war, The Christmas 1996 "Three Free" pack, which bundled the Saturn with
Daytona USA,
Virtua Fighter 2, and
Virtua Cop, drove sales dramatically and ensured the Saturn remained a competitor into 1997. However, the Saturn failed to take the lead. After the launch of the Nintendo 64 in 1996, sales of the Saturn and its games were sharply reduced, and the PlayStation outsold the Saturn by three-to-one in the U.S. in 1997. The game helped push PlayStation sales ahead of the Saturn in Japan, after the PlayStation and Saturn had been very close in Japan prior to the game's release. As of August 1997, Sony controlled 47% of the console market, Nintendo 40%, and Sega only 12%. Neither price cuts nor high-profile game releases proved helpful. Reflecting decreased demand for the system, worldwide Saturn shipments during March to September 1997 declined from 2.35 million to 600,000 versus the same period in 1996; shipments in North America declined from 800,000 to 50,000. Due to the Saturn's poor performance in North America, 60 of Sega of America's 200 employees were laid off in late 1997. Following five years of generally declining profits, Due to a 54.8% decline in consumer product sales (including a 75.4% decline overseas), the company reported a net loss of ¥43.3 billion () and a consolidated net loss of ¥35.6 billion (). Shortly before announcing its financial losses, Sega announced that it was discontinuing the Saturn in North America to prepare for the launch of its successor. The Saturn lasted longer in Japan, with Irimajiri announcing in early 1998 that Sega would continue supporting the Saturn in Japan after its successor was released. Between June 1996 and August 1998, a further 1,103,468 consoles and 29,685,781 games were sold in Japan, giving the Saturn a Japanese
attach rate of 16.71 games per console, the highest of that generation. As of February 1997, the attach rate was four games per console worldwide. Rumors about the upcoming Dreamcast, spread mainly by Sega, were leaked to the public before the last Saturn games were released. The Dreamcast was released on November 27, 1998, in Japan and on September 9, 1999, in North America. The decision to abandon the Saturn effectively left the Western market without Sega games for over one year. Sega suffered an additional ¥42.881 billion consolidated net loss in the fiscal year ending March 1999 and announced plans to eliminate 1,000 jobs, nearly a quarter of its workforce. Worldwide Saturn sales include at least the following amounts in each territory: 5.75 million in Japan (surpassing Genesis sales of 3.58 million there), 1.8 million in the United States, 1 million in Europe, and 530,000 elsewhere. With lifetime sales of 9.26 million units, the Saturn is considered a
commercial failure, although its install base in Japan, where it did better than the West, surpassed the Nintendo 64's 5.54 million, where it became Sega's highest-selling home console. The Saturn ultimately shipped more than 6 million units in Japan. Lack of distribution has been cited as a significant factor of the Saturn's failure, because the system's surprise launch had damaged Sega's reputation with key retailers. Conversely, Nintendo's long delay in releasing a 3D console and damage to Sega's reputation caused by poorly supported Genesis add-ons are considered major factors allowing Sony's establishment in the video game market. ==Technical specifications==