History of the Sega Dreamcast/Release
From Sega Retro
Japan's relationship with the Dreamcast is hard to judge, as its release is often considered to be premature. The Sega Saturn had been a successful venture for the company, and Japanese publishers failed to see the need for a new console, so when the system debuted on the 27th of November 1998 in Japan, the demand was perhaps less significant than in the West.
Sega's initial strategy was to run the two consoles in parallel, 2D games being housed on the Saturn and 3D on the Dreamcast, though this became less and less tennable as time went on.
Four titles were available at launch: July, Pen Pen TriIcelon, Virtua Fighter 3tb, and Godzilla Generations. Within three days 140,830 consoles had been sold (of the 150,000 available units, bearing in mind this figure includes promotional and development units). Virtua Fighter 3tb was the biggest seller (debuting second in the software charts of that week), followed by Godzilla (16th), Pen Pen (21st) and July (25th).
While a reasonable success for Sega in financial terms, the Dreamcast's Japanese launch was something of a disappointment. The vast majority of systems and games were pre-ordered weeks and months in advance, and the confusing reservation process alienated some retailers, who were subsequently forced to send non-reserved customers away. Furthermore, a lack of stock meant the system was effectively sold out before it had even launched - Shoichiro Irimajiri was reportedly dismayed that the firm had failed to distribute its 200,000 system target to retailers for the launch period, while others citied the low quantity (and lack of quality) of the four launch titles.
Sega put a lot of spin in its press releases - while the console was indeed sold out and shortages were common throughout the Christmas 1998 period (as "demand outstripped supply"), this was because of a shortage of PowerVR 2 graphics chips - manufacturer NEC being unable to produce enough components (about 30% of what was anticipated), and causing Sega's initial projection of 300,000 units sold over the period to be effectively halved. Sega is even thought to have threatened legal action against NEC.
The original plan was to release one game a week for four weeks following the launch, Blue Stinger on the 3rd of December, Geist Force on the 10th, Sonic Adventure on the 17th and the combined batch of Evolution, Incoming, Monaco Grand Prix: Racing Simulation 2 and Seventh Cross Evolution on the 23rd. However half of these titles were delayed at the last minute, many being pushed back to March 1999 and Geist Force being cancelled outright. Planned launch title Sega Rally 2 was also affected, being knocked back to January, while Sonic Adventure saw a two week delay.
However, roughly one in three consumers logged onto the internet using the bundled Dream Passport service, which greatly exceeded expectations.
Initial predictions by Sega were that the PlayStation 2 would debut in late 1999 (it was actually early 2000 in Japan). The aim was to attract as many developers as possible within a year to attempt to secure the Dreamcast as the number one consoles of its generation. A 1 million units sold target for March 31st was set by management, though Sega only managed 900,000, breaking the 1 million mark in May.
Keeping with the now long-running trend, Dreamcast releases were spread thin across the first half of 1999, to the point where the Nintendo 64 is thought to have out-performed Sega's new console. In the beginning of June, Sega held the Sega New Challenge Conference '99, and the console's price was lowered to ¥19,900, with the four launch games dropping to ¥1,990 (and changes coming into effect on the 24th). Sales rose by 10,000% and 65,000 units were sold in four days. A few months later, Sega got caught in a raid by Japanese officials for allegedly pressuring retailers to stick to that price.
The spike subsided and sales continued to be sluggish - the 1.1 million sales for the fiscal year of 1999/2000 (ending March 31st 2000) was missed, with Sega only managing to sell 950,000 units in Japan and 7.04 million pieces of software. Peter Moore, however announced at this time that there were roughly 330,000 Japanese members of the region's Dreamcast network.
Over the fiscal year ending March 31st, 2001, 450,000 Dreamcasts were sold in Japan alongside 4.75 million software units.
With the Mega Drive, Sega had identified the US and Europe as the largest video game markets. With the Saturn and Dreamcast, they felt (perhaps wrongly) that Japan was the key territory. As such, like the Saturn, the Dreamcast was subjected to many games exclusive to Japan, along with numerous exclusive peripherals and special Dreamcast models.
There was never a plan to launch the Dreamcast in the US simultaneously with Japan. Instead, Sega forced Western consumers to wait ten months, to both analyse the situation in their home market, and so as not to repeat the mistakes with the Sega Saturn. The US launch was therefore set on the 9th of September 1999 (9/9/99) - perhaps the most famous console launch date of all time.
Shoichiro Irimajiri claimed the delay was to allow the Dreamcast to launch with wider variety of games (it ended up being 4 (JP) vs. 18 (US)) - the first time a Sega console would launch with "enough" titles. There were big plans, but with lackluster Japanese sales for much of the first half of 1999, Sega of America initially kept quiet about their upcoming system.
The Dreamcast began to be teased in the summer of 1999, through a strange and potentially ineffective "it's thinking" marketing campaign. While the orange swirl and launch date were in sight, the console was not, leading potential customers to wonder what was thinking. It has been suggested that if you were not following events in the gaming industry, you might not even realise during this period that Sega were releasing a video games console (or indeed, if Sega were even involved).
In fact, in their New York test market, only 45% of the demographic the television adverts were aimed at knew that a "Dreamcast" was coming, but very few knew what a Dreamcast was. Print adverts were equally confusing - the "weather map" for example showed a Dreamcast swirl off the East coast of America, meant to symbolise an "oncoming storm". Unfortunately for Sega, storms already look like this, so it was perceived that Sega had spent thousands of dollars on drawing some clouds.
Nevertheless Dreamcast pre-orders were said to be around the 200,000 (or 250,000) mark (potentially rising closer to a 300,000 figure; some of which were back-dated six months in advance of launch) - roughly twice (or three times) the amount of pre-orders for the original PlayStation in 1995 and enough for Sega to claim it was the most anticipated video game console in history. Its year long delay also came with some advantages - games such as Blue Stinger and Sonic Adventure were able to be improved for their Western releases, while others such as the critically panned Godzilla Generations were not released in the US at all.
Strictly speaking the first person to receive an official American Dreamcast (and "first party Sega games for life") was the winner of a Sonic the Hedgehog lookalike contest Sega of America held roughly a month before launch. For everyone else, 15,000 retail stores across the nation were given stock for launch and 400 took part in special Dreamcast launch parties. Sega hired some celebrities and sponsored the MTV music awards, all as part of an initial $100 million advertising campaign.
The Dreamcast (alongside its eighteen launch games and accessories) took in $97,904,618.09 USD on the first day of launch in North America. All 705 branches of Toys 'R' Us had sold out of Dreamcasts by 1PM. 514,000 machines in the first two weeks, nearly 400,000 of which were in the first four days (at which point sales had risen to $132 million). Sega were quick to point out that $97 million is more than Star Wars: The Phantom Menace brought in its opening weekend (roughly $65 million) and Apple's iMac computer, although it wasn't yet making a profit.
The launch was not without problems - there were a string of defective discs concerning Sonic Adventure, Blue Stinger and Ready 2 Rumble Boxing, originating from a specific processing plant which prefixed its disc codes with "92". Otherwise the period was viewed as a success, and does not appear to have been significantly affected by the PlayStation release of Final Fantasy VIII, launched on the same day. Sega also struggled to keep up with demand, with consoles, VMUs and controllers all in short supply.
Over a million machines were sold in North America in just over two and a half months (or 11 weeks - according to Peter Moore, the milestone was reached on Tuesday 23rd November). This meant the Dreamcast was the fastest selling video games machine in North America of all time.
However, initial sales failed to make significant inroads into the PlayStation's market share. Instead, it was the Nintendo 64 that suffered - with Electronics Boutique claiming being N64s were being traded in for Dreamcasts at three times the rate of Sony's console. Sonic Adventure and SoulCalibur topped the Dreamcast sales charts, though the out-right winner over the first few weeks is thought to have been NFL 2K.
Sega of America actually changed its name (temporarily) to "Sega of America Dreamcast, Inc." in support of the machine.
Sales of the Dreamcast caused Sega to adjust their sales projections for the US. Bernie Stolar had originally put a target for 1.5 million units for March 31st, 2000 - this target was moved forward to December 31st, 1999 and a new 2 million target was put in for March 31st.
1.5 million Dreamcasts were sold by January 2000 - slightly later than Peter Moore's projection, but far earlier than Stolar's. However, it was not a Dreamcast victory - 1.9 million Nintendo 64s were sold during Q4 1999, and 3.3 million PlayStations.
Sega's commitment to putting the Dreamcast online cannot be underestimated. Shortly before launch a deal was struck with networking giant AT&T, who would provide the online infrastructure to Sega in return for being the Dreamcast internet service provider of choice. Users could subscribe to one of three tiers of online usage (the top, $21.95/month "unlimited" plan coming with a free Dreamcast Keyboard) which would cover everything internet-related, including the future prospect of online multiplayer.
Roughly 2.5 million Dreamcasts were thought to have been sold in the US by March 31st, 2000, with 13.83 million pieces of software. Within five months of launch, the Dreamcast held roughly 20% of the US video game market.
Mid-2000 saw the hardware to software ratio for the Dreamcast at a respectible 8:1.
By August 2000 (with a full launch on September 7th) Sega were offering their own ISP, SegaNet, for low-latency online play geared specifically for Dreamcast consoles. Sega even offered free Dreamcasts (with a Dreamcast Keyboard, or $200 for those who already owned the console) to those who signed up with the service, in an effort to greatly increase the Dreamcast install base (the caveat being users had to sign up for minimum of two years at $21.95 per month).
Alternatively, users buying a Dreamcast between June 4th and August 31st 2000 were eligible for a $50 "connectivity bonus", should they sign up for one month's worth of SegaNet access.
Problems arose when the PlayStation 2 started to make headlines, first with its successful Japanese launch (also towards the back-end of 1999) and then its subsequent US release. In Sega's absense the PlayStation brand had become a driving force in the video game industry, so much so that many were prepared to hold back from buying a Dreamcast, anticipating that Sony's console would serve their needs better. On the day Sony announced the US launch date and price for the PS2, Sega enhanced their SegaNet deal, now giving users a $50 rebate to spend on games.
Sales of the Dreamcast slowed over the summer, and by August 2000 rumours were beginning to circulate that retailers Wal-Mart would stop stocking the system (as space was needed for the upcoming PlayStation 2 launch) unless the price dropped to $149.
But while the PS2 ran roughshod over the Dreamcast in Japan, the US launch was more controversial - in Sega camps the PlayStation 2 was seen as a more expensive unit with a weaker initial library of games, and yet it went on to break records.
On the 31st of August, 2000, Sega dropped the the price of the Dreamcast to $149.99, partly to counter the PlayStation 2 launch, and in turn leading to a 156.5% increase in sales and a 29.9% market share (versus the PlayStation on 49% and the Nintendo 64 on 20.8%). A target was put in place to reach 4.5 million - 5 million units sold by March 2001.
Sony's launch was dogged by supply and distribution problems, a higher price tag (which was exaserbated by the low stock levels - auction sites were offering PS2s for as much as $800), so Sega held out for the so called "PlayStation 2" effect - dissatisfied consumers opting for the cheaper Dreamcast as an alternative. This never quite happened as intended - US retail concerning electronic goods was unusually low in the week after Thanksgiving, as people waited out the crowds.
In fact, the Dreamcast only sold 463,750 units in December 2000, versus 515,000 (original) PlayStations and 640,000 Nintendo 64s. According to NPD figures the Dreamcast was responsible for 22% of the North American console sales in 1999 (PlayStation 48%, Nintendo 64 30%), but this had fallen to 15% in 2000 (PlayStation (and PlayStation 2) 47%, Nintendo 64 37%).
Nevertheless Sega of America ran a short campaign mocking Sony as a two page spread in GameWeek, on postcards, and reportedly, on the side of a truck which drove around Electronic Arts' headquarters in Redwood City, California.
At the announcement of the Dreamcast's discontinuation at the end of January 2001, 3 million Dreamcasts had been sold overall. On February 4th, 2001, the price of the Dreamcast was cut again to $99.95 ($149 CND).
Over the fiscal year ending March 31st, 2001, 1.78 million Dreamcasts were sold in North America alongside 13.65 million software units.
Production of North American Dreamcasts ceased in November 2001, with the last shipments made on the 23rd.
Despite this, the Dreamcast is seen to have been more successful than the Sega Saturn (and Sega Master System) in this region.
Much like North America, the Sega Saturn was out of the picture by 1998, considered to have been a "failure" and no longer a viable platform for video game development. Like the US, this gave competitors an almost two year advantage over Sega, squeezing its market share to around 3%.
The UK, being the largest games market in Europe, was again the centre of attention for much of Sega's European operations, with a £60 million marketing budget for Christmas 1999. The PlayStation had been ahead since 1995, but rather than being challenged significantly by the Nintendo 64, extended its lead with blockbusters such as Gran Turismo, Final Fantasy VII and Metal Gear Solid, owning a 75% share of the UK market by the Dreamcast's launch.
Nintendo was still in the race, but was beginning a long-running trend of having very little software to choose from - only about 120 N64 titles were available on the UK market by mid-1999, though the system had been on sale since March 1997.
Roughly 50 Dreamcast games had been greenlit for a European release by July 1999.
After long speculation about whether the European Dreamcast would have a built-in modem, the system was given the same 1999-09-09 release date as in the US... before it was subsequently pushed back to the 23rd of September, and then at the last minute, the 14th of October 1999. The delay was reportedly down to BT's handling of the Dreamarena service, having to negotiate with telecoms providers in mainland Europe, and such was the commitment to online Sega Europe refused to release the console until this service was done.
While not as cryptic as the advertising seen in the US, European adverts decided to emphasis the "lifestyle" of the Dreamcast machine, which meant very few games on display. An "up to six billion players" slogan had to be dropped after the UK's Advertising Standards Authority ruled that the system did not yet support online play. This led to Sega ditching its choice of advertising agency (and by extension, any advertising campaigns over the launch period) until a couple of months down the line (starting with Sega Bass Fishing).
This was not the only time Dreamcast advertising was forced off the airwaves - stereotyping continental rivals in a bid to advertise online play was pulled after the ITC ruled it could incite racial hatred.
The Dreamcast was priced at £199.99 in the UK - the cheapest video game console release on record (though on import US and Japanese machines would have costed around £150 and £130, respectively). Sega held a launch party on the 5th September at the Commonwealth Institute in Kensington, with Jean François Cecillon and Shoichiro Irimajiri as guest speakers. Various celebrities were also present, including Jo Guest and Verne Troyer. Sega also made donations to Great Ormond Street Children's Hospital for asking people to shave their heads for £10.
There were various festivities during the launch night, notably boxers Chris Eubank and Nigel Benn fighting for the first time since 1993... through Ready 2 Rumble Boxing. 3,000 uses registered on Dreamarena in the first 24 hours.
In response to the Dreamcast's launch, Sony lowered the price of its PlayStation to £79.99.
Initial European sales figures looked healthy, with over 100,000 machines sold in Europe on launch day alone (42,000 of those being UK pre-orders) and over 185,000 in the first weekend. Software and accessories-wise, Sonic Adventure topped the UK charts with 85,000 units sold followed by Sega Rally 2 at 75,000. 145,000 VMUs were sold alongside 90,000 additional controllers. By Christmas weekly hardware sales in the UK were doubling that of the Nintendo 64, though were significantly less than the cheaper PlayStation. Dreamcast games were also retailing for about £40 - £20 less than some of the N64 big hitters such as Donkey Kong 64.
Not all regions performed up to expectations. Only 40,000 Dreamcast were sold at launch in Germany (despite some retailers launching the system two days early), far short of the predicted sales figures of 80,000-100,000 units.
Sega Europe set a target of one million units sold by May 2000. About 500,000 had been sold by Christmas, and the Dreamcast was responsible for about 5.4% of video game console sales (including handhelds) in 1999 (Game Boy 9.1%, Nintendo 64 15.4%, PlayStation 69.4%, others 0.7%).
By March 31st, 2000, 1.04 million consoles and 3.99 million pieces of software had been sold across Europe.
Despite being noticeably smaller than Japan and the US, the Dreamcast library was widely praised in the UK, likely as a result of decisions not to publish games that fared poorly in other regions. However, despite this Sega had a hard time selling software - very rarely did a Dreamcast game make it into the weekly top 20 sales charts, and while a typical first-party Sega game could appeal to the gaming press, its new ideas and untested intellectual properties were sidelined by the general public, which typically opted for brands it knew on the PlayStation.
On 8 September 2000, Sega Europe reduced the price in the UK to £149.99 in response to the arrival of the PlayStation 2. UK distributors Gem Distribution went one step further, packaging the Dreamcast alongside an Encore DV-450S DVD Player (MSRP £229), ChuChu Rocket! and DVD vouchers for £299 - the same price as a PS2. The package debuted on the 1st November. The DV-450S is a more capable DVD player than the PlayStation 2, with multi-region disc support and MP3 playback.
But despite delays, hardware shortages, a higher price point and limited array of launch software, Sony's machine, complete with the backing of many third-party publishers (and 300+ games announced for the system before launch), ultimately eclipsed the Dreamcast within six months of sale.
After news of the impending cancellation of the Dreamcast in 2001, the system's price was lowered to £99.99 on the 14th of February, leading to a surge in Dreamcast sales and a reported 5,000 consoles sold in the UK per week. With the launch of Skies of Arcadia in April, software prices were capped at £29.99 too.
Over the fiscal year ending March 31st, 2001, 930,000 Dreamcasts were sold across Europe alongside 4.83 million software units.
The Dreamcast lasted longer in Europe than in North America, and was officially discontinued completely in the spring of 2002.
Australia and New Zealand
The Australian region the launch was labeled a disaster by many fans of Sega. Ozisoft, the official Sega distributor in Australia, only managed to output nine launch titles despite the late release date (November 30, 1999), none of which were first party products. Apparently Sega-developed software had been held in customs (for failing to disclose the country of origin on its labels) and could not reach store shelves by the release date (which included Dream On demo discs, which had to be picked up by customers at a later date).
With no VMUs or other peripherals on the market, it seemed that after what seemed like infinite delays, Australian fans deserved better. Moreover no Australian advertising campaign came into force until the system had been released - the general public could have easily been taken unaware.
The Dreamcast took a while to get online in Australia. Having only signed an ISP contract the day before launch, all online services were delayed until March 2000 (although this ironically wasn't a problem, as the promised internet access discs were among the software held up in customs)). A deal between Telstra and Ozisoft saw comma.com.au become the default Dreamcast homepage, powered by a similar Dreamkey service to Europe.
Generally the console isn't thought to have done well in Australia (some stores were reporting single-digit sales in the first few days), with retailers such as The Games Wizards pulling the system within six months of sale.
New Zealand were never given the opportunity to play games online.
Tectoy, who had been responsible for distributing Sega consoles in Brazil since the Sega Master System, brought the Dreamcast to Brazil on October 4, 1999. The majority of games were repackaged titles imported from the US, and the console was not particularly successful.
Breaking from the tradition of partnering with Samsung, in South Korea the Sega Dreamcast was reportedly distributed by Hyundai, the company who, curiously, had carried Nintendo products in the country during the 90s. Unlike the rest of the world, the Dreamcast arrived late in South Korea and was priced as a budget console competing against the PlayStation 2 and Xbox. 25,000 units were shipped before Hyundai cancelled the project for unknown reasons. South Korean Dreamcasts were supposedly bundled with modem cables to take advantage of the system's online services.
Some Korean developers were reportedly developing games for the Dreamcast before the plug was pulled. Arcturus and White Day, both eventually released on the PC, were once set to be released on the console.
By August 2000, 400,000 Dreamcasts had been sold in Taiwan.
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- Press release: 2000-08-14: GigaMedia and Sega.com Asia Ltd to Further Partnership Discussion For Building On-line Gaming Services in Taiwan