Introduction

Starting as early as 1994 but becoming plainly evident to all by 1995, Sega of Japan once again moved to reassert itself as the dominant force within Sega's corporate structure. Its executives had long resented the arrival and marketing tactics of Tom Kalinske, president of Sega of America, who had indeed brought Sega to the pinnacle of its success but only at great expense. Sega now had no cash reserves of which to speak and was operating under a mountain of debt that continued to increase with each quarter. While this was not troubling news to Kalinske and his staff - after all, deficit spending was and continues to be a staple of the American economy - it caused a great deal of concern with his more conservative-minded Japanese peers. They simply could not understand the American business axiom of "spending your way into a profit." They felt that Kalinske was fumbling Sega's transition from 16-bit to 32-bit systems in the one market that mattered the most, so they began to work on Sega CEO Hayao Nakayama, Kalinske's boss, in order to convince him that Kalinske's tactics would inevitably ruin the company. They knew that Sega had to get its act together fast in order to make the 32-bit console transition successfully - one that was as a matter of fact already underway - and were thoroughly convinced that only they could provide Sega with the proper guidance in this new market. Sega of America would be a useful tool and its talents could indeed be tapped as the company's impending 32-bit console transition commenced, but that was all. No more American meddling. Sega of Japan was taking back the reins of power, and it would brook no discontent from the West.

That was the plan, anyway. What happened next was quite predictable and should have surprised no one.

There is an oft-quoted verse from the Holy Bible that can be found at Proverbs 16:18. It goes like this in the King James Version: "Pride goeth before destruction, and a haughty spirit before a fall." Sega had by now fallen into the same trap that had been the bane of its predecessors, Atari and Nintendo. It was caught in a culture of corporate arrogance. The blame for this rests largely on Sega of Japan, although it must be said in all fairness that both Sega of America and Sega of Europe played right along with it almost to the end. They blustered and swaggered (and spent) along with the best of the Japanese peers, thus adding their own fingerprints to Sega's impending woes. It was only when Sega was approaching the brink that key company personnel in the West realized what was happening and tried to stop it, but by then it was too late. Sega of Japan was not listening and absolutely refused to hear what they had to say - and it was they who now held sway with Nakayama, not Kalinske and the West. This internal dissent over Sega's future meant that the company could never approach the 32-bit nextgen market in the same unified manner that it had successfully assaulted the 16-bit market, and it would eventually culminate in a series of self-destructive mistakes from which the company never recover. Sega, the company that had once led the rest of the videogame market towards the next generation of videogames, would now put itself through a self-destructive fall just as big and swift as its earlier meteoric rise to fame.

The unfortunate console that got caught in this sad series of events is the oft-maligned Sega Saturn, arguably the best and most sophisticated 32-bit dedicated videogame console to ever hit the market. The sad story of how it went from media darling to kamikaze console within two years of its launch has never been told in full until now. It is a troubling tale of how an inferior and less sophisticated system managed to surpass it and capture the hearts and minds of the masses, thanks largely to savvy marketing on the part of its vendor and just as much to one tragic blunder after another from the one company who by all accounts should have been the industry leader. Those of you who are familiar with Atari's fall from grace and the humbling of Nintendo will doubtless see many parallels in the story of Sega and the Saturn. Even in the videogame industry, the words of George Santayana hold true: "Those who fail to learn from the past will repeat it."

Sit back, reader, and brace yourself for a brush with the dark side of Sega. It is not a pretty story, nor is it meant to be ... for the truth can be ugly, and the truth often hurts.

The Shape Of Things To Come

The 32-bit revolution in home video gaming actually got underway in 1993 thanks to an old ally of Sega's from back in the Genesis days. Trip Hawkins, president of Electronic Arts, was one of the industry players who had anticipated the move from cartridges to CD-ROMs and wanted a piece of the action. Backed by the consortium of AT&T, Matsushita, Samsung, and Goldstar and promoted with all the flair for which he was known, Hawkins was able to bring the industry's first dedicated 32-bit videogame console to market just in time for the holiday shopping season. It was known as the 3DO, named after the Hawkins-founded start-up company that developed the design spec. The 3DO was supposed to showcase the future of home videogame consoles - small footprint, CD-ROM storage, 32-bit architecture, programmer-friendly environment, and so on. Each partner in the 3DO consortium produced their own custom versions of the console, although all built them around the common 3DO spec. Hawkins had high hopes for his baby, and sincerely believed that had beat both Sega and Nintendo to the punch in the next round of the console wars. Unfortunately, Hawkins and his backers were in for a major reality check. The astronomically high price of the 3DO when first released (about US$700) meant that very few consoles ever sold. Add to that the major public relations hype from other, more established players in the videogame industry prepping their new 32-bit systems for market and almost no control over the development of its software base, and it is a wonder that the 3DO console managed to last as long as it did. "Trying to be all things to all people doomed the 3DO system to a schizophrenic existence, and ultimately, to extinction," notes C|NET Gamecenter's Jason D'Aprille, and he sums it up just about as well as anybody. As for 3DO itself, it was only on the U.S. market for about two years and overseas a little longer despite having one of the most balanced yet diverse software lineups to ever grace any videogame system.

Meanwhile, Nintendo was engaged in a war with former technology partner Sony over a SNES-based CD-ROM console that it had wanted to bring to market. Back in 1988, Nintendo had contracted Sony to develop a "Super Disc" drive for the 16-bit SNES. This device would later be revealed to the world as the SNES PlayStation, or just PlayStation for short. Nintendo's intent had been to ship the system's CD-ROMs inside a custom caddy complete with an SNES-style lockout chip - a convoluted approach that would have ensured it retained control over the process. Sony understandably balked at this idea - it wanted to put the lockout chip in the CD-ROM drive controller, inside the console, and leave the games alone. This move would also open up the production process, and Sony quietly made plans to license production of PlayStation games to anybody they wanted. Sony president Olaf Olaffson first announced the PlayStation at the 1991 Summer Consumer Electronics Show (CES) in Chicago, proudly proclaiming that "... Sony intends to broadly license it to the [whole] software industry]." This was anathema to Nintendo CEO Hiroshi Yamauchi, who had no intention of letting Nintendo losing control over any part of the process. He conspired with Sony's rival Philips to publicly humiliate Sony the following day at the show. In a public press conference held at 9:00 am sharp, Nintendo's Howard Lincoln announced that it had instead signed a deal with Philips for its new CD-ROM system. The stated reason? Since Philips had invented CD-ROM technology, it could offer superior workmanship. The real reason? Nintendo refused to relinquish control of any part of its proprietary hardware. If Nintendo was going to release a CD-ROM based console on the market, then people would have to come to Nintendo to license it - not some ambitious third-party licensee. "Nintendo believes in a standard - our standard," Yamauchi later said of the affair. Sony saw it differently. "They stabbed us in the back," Olaffson told one of his confidants. The resultant legal and technical hopscotch that Nintendo would be forced to play over the affair pretty much assured that it would not be able to bring a decent CD-ROM system to market in time to ride the crest of the 32-bit wave. Instead, they would have to develop a completely new system from the ground up, launch it after everybody else's systems had already hit the market, and pray that their marketing prowess and company's public reputation would sell the new system for them. Nintendo was unconcerned, though - they thought they had derailed Sony's ambitions for good and went blithely ahead with making money. They were wrong ... quite wrong.

Realizing that revenge is a dish best served cold, to quote an old Arabian proverb, Sony decided to use the experience it had already gained with developing for everybody else and instead release its very own console. It knew what the developers wanted - a simple yet powerful console that was easy to program - and it knew what gamers wanted - a good, cheap system. It had lots of money and lots of connections within the third party community. While it had never attempted to field its own console before, the fact that Sony knew the field of battle and how to negotiate it put the company in a far better position than had been the lot of NEC back in the 16-bit days. About a year after the CES debacle, Sony's Ken Kuratagi was put charge of a top-secret in-house project aimed at developing a brand new 32-bit videogame console from scratch. It had to be cheap to make and sell, yet powerful enough to handle complex 3D graphics of the kind that were becoming increasingly common in videogames. Sony scored a major coup by getting Namco into its console fold early on, but then again Namco needed no prodding - it was still looking for ways to burn Nintendo over the MegaDrive development affair back in 1990. At the same time, Sony quietly made arrangements with perhaps the most powerful pool of videogame programmers outside of Japan - Europe's third-party community - to develop launch titles for its new system. Psygnosis was perhaps the most prominent of this lot, for it enjoyed a worldwide reputation for its development hardware and software. Soon, like Namco halfway around the world, Psygnosis began developing its own showcase titles for Kuratagi's still-secret wonderbox.

So where does Sega fit in all of this?

Like everybody else, Sega began conceiving its own nextgen consoles back in the early 1990s. It is believed that Sega's first official spec for a 32-bit home videogame console was drawn up in the back half of 1992. There is a lot of confusing information regarding Sega's earliest 32-bit console plans; however, at least one specific console concept existed that can in all fairness be said to be the direct ancestor of the Saturn. This was the GigaDrive, as it was known in-house and referenced by some of the industry trades of the day. The name was a wordplay on Sega's earlier success, the 16-bit MegaDrive (Genesis), thus implying a system that would be even more powerful than its venerable ancestor. GigaDrive would differ from MegaDrive in more than just internal horsepower, though. Using its experience with Mega CD (Sega CD), Sega decided that now was the time to abandon the traditional ROM cartridge format for delivering console videogames. GigaDrive would be Sega's first-ever dedicated CD-ROM based console - as opposed to Mega CD (Sega CD), which had for all intents and purposes been an expensive add-on peripheral. Sega knew that CD-ROM delivery for videogames was the wave of the future, so its new 32-bitter was designed to use CD-ROMs right from the start. Like almost all of Sega's arcade and console systems, GigaDrive was developed by Hideki Sato and his Sega engineering teams. The date of GigaDrive's inception is significant - this was 1992-1993, so Sega geared GigaDrive as a system specifically designed to better the 3DO, the only other 32-bit console available at the time. It is believed that a small number of working GigaDrive prototypes were actually built during 1993 in various forms to test the workability of the new console design. It was also during this time that the name of the console was changed from GigaDrive to that by which we know it today.

Mention the name Saturn to anyone and they will most likely instantly conjure up a mental image of the great gas giant that lies beyond the asteroid belt. The sixth planet of our Solar System and the second largest, Saturn was bright enough to have been discovered by early astronomers thousands of years ago. It was named for the leader of the Titans in Greek mythology, the one who is supposed to have fathered the race of the gods. Its trademark ring system was first observed by telescope by Galileo in 1616, and is the chief feature by which the planet is best remembered. Because of this, it is often considered to be the most beautiful planet in the Solar system. Made of millions of gravity-trapped asteroids, pieces of interstellar ice, and other such cosmic debris, these rings appear as a giant disc encircling the planet's equator when viewed from distant Earth. One cannot think of Saturn without also visualizing that great spinning disc of ice. Perhaps this is why Sega of Japan chose that name for their system - it was the planet of the giant disc, and that mental image would help reinforce the fact that the console would be using the new storage media of CD-ROM instead of cartridges. Even the console logos for both East and West pay subtle tribute to the planet.

Whatever the reason, the fact that they already had a console coming to market named after one planet (Project Mars, aka the 32X) and now were going to release another (Project Saturn) led many industry reporters at the time to conclude that Sega was naming all of its new systems after the planets in the Solar System. Thus was born the myth of the "planet projects," although it must be said in all fairness that Sega went ahead and played along with it. They knew their reputation with both the industry and gaming public was not what it once had been, so the decision was made to accept any free publicity that came along. If that meant perpetuating an unfounded myth, then fine - and with that, other consoles in the "planet series" (Venus, Jupiter, Neptune, Pluto) also made their public appearance in like fashion.

What most gamers today fail to realize is that the Saturn which Sega of Japan conceived and prepared for market back in 1993 was not the console that eventually made it to market in 1995. The original Saturn spec as it has been described in some accounts seems to owes most of its design to two of Sega's newest arcade boards at the time. Both Sega System32 and its immediate successor, the famous Sega Model 1 arcade board, were based around the 32-bit NEC V60 16 MHz CPU. Both designs had single CPUs and single VDPs, with fairly straightforward design architecture. System32 was Sega's ultimate 2D videogame board, whereas Model 1 had been developed exclusively for videogames with 3D polygonal graphic engines. Only four videogames were ever made for Model 1 before Sega quickly proceeded to its successor (the more powerful Sega Model 2), but all four were the best 3D arcade games available at the time and one of them in particular - Yu Suzuki's Virtua Fighter - quickly gained a worldwide following. Basing its home systems on proven arcade hardware was a time-honored concept with Sega, and they were not about to stop now.

There is a lot of debate as which of these two boards actually served as the basis for the original Saturn; however, there is little debate that the Saturn as originally designed was far less powerful than it is now. Reports from the day indicate that Sega of Japan originally intended the Saturn to be the ultimate 2D videogame console, with 3D games more or less an afterthought. 3D hardware was quite expensive to produce and vend at that time, as Sega knew all too well, and this factor tends to weigh in favor of a System32-influenced original Saturn. Even so, assuming that the original Saturn was intended to handle 3D games from the onset and matched the more powerful specs of the Model 1 board, with its then-revolutionary 3D graphics capabilities, you still wind up with a single-processor design that was far less capable than what Saturn eventually became.

So how did the Saturn proceed from its original, fairly simple single processor architecture to "the mess" it eventually became? That is a very good question, and it is quite a story in and of itself.

Back To The Drawing Board

The period from October 1 to December 31 of the year 1993 would prove to be crucial for all of the major players concerned in the 32-bit incarnation of the videogame industry's so-called "nextgen wave."

Matsushita, the parent company of Panasonic, would release the very first version of the 3DO to its American customer base in October of that year. Japan and Europe got theirs the following March. The system itself would not prove to be all that successful in comparison to the others of its generation, but a sudden proliferation of Oriental adult-themed 3DO software would aid in boosting Far East console sales toward respectable levels. While many other titles in many other genres would be produced, it would be adult software, coupled with the non-restrictive development policies behind the system, that would eventually be one of the chief reasons why the 3DO would manage to do as well as it did despite its many other problems. It is perhaps the greatest irony in the entire 3DO saga.

Nintendo, the resurgent ruler of the videogame roost, would abruptly cancel its SNES "Super Disc" drive system the following month, offering no official explanation as to its sudden change of mind. This came in the wake of continued assurances from the company that it had definite plans for CD-ROM media and was continuing development of the system. By this time, Nintendo executives had realized that they had missed their chance to join the 32-bit revolution at its most critical juncture. Since their competitors would be fighting it out on the front end of the nextgen wave, the best thing for them to do was to batten down the hatches and ride it out until their own new system, Project Reality (aka the N64), would be ready for market. It would be the last of the nextgen systems to arrive, no earlier than 1995 or 1996 at best estimates, but the company would have time to refine its design and learn from its competitors' mistakes. It was a good thing that Nintendo had the deepest pockets of any player in the field save newcomer Sony, because it was going to be a very long wait for a nextgen Nintendo console.

Sega was now the number two player on the field but still wielded its worldwide reputation for programming excellence. November of 1993 saw the arcade debut of Yu Suzuki's Virtua Fighter, arguably the most revolutionary fighting game to hit the videogame industry since the debut of Capcom's Street Fighter 2 franchise. While the setup and gameplay itself were really nothing new, the full-screen, full-color, fully rendered 3D polygonal graphics were and blew just about everybody away. Nobody had really talked about arcade hardware until Virtua Fighter came along, but all of a sudden the term "Sega Model 1" was on just about every gamer's reverent lips. It was no wonder that Sega also got a lot of attention when it announced its new 32-bit Saturn home console that same month. As announced, the original Saturn was to be the ultimate 2D gaming powerhouse, with a "modest" 3D polygon capability. It had better be more than "modest," most gamers prayed, but there was a reason for this. 3D hardware like the Model 1 was expensive, and Sega wanted to keep the cost of the system down. The company had no intention of going though the same tribulations that Trip Hawkins and his 3DO backers were currently suffering. In the months that followed, Sega's Virtua Fighter would become the new holy grail of fighting games and it seemed obvious to all that Sega must have a Saturn port in the works. It would make an ideal launch title for the system, given its popularity. A lot of eager gamers began to quietly sock away their cash for Sega's new box, praying that Saturn's "modest" 3D capability would be sufficient for a good port of their favorite arcade fighter. All they could do was wait ... and hope.

November of 1993 also saw Sony make its formal entry into the 32-bit console sweepstakes. It announced the formation of a new company division, Sony Computer Entertainment (SCE), responsible for the corporation's computer-related ventures. The first project on the drawing boards of SCE was their new 32-bit videogame console, which was revealed to be already under development. Referenced variously as "PSX" or "PS-X" in many trade reports of the day, this was the system that would eventually be renamed the Sony PlayStation. The name was a thumbing of the nose at Nintendo for all the trouble that they had caused Sony, and now it would be the latter's turn to suffer. Sony had the money, they had the marketing muscle, but most importantly, they knew had the machine and the software to go with it. The official system specs were released in December of 1993, and just about everybody's jaw dropped once they realized what Ken Kuratagi and his team had wrought. PlayStation was a jack-of-all-trades, with top-of the line integrated RISC architecture that bettered anything that was or would be available on the market at that time. Its 2D graphics outstripped those of the SNES, its 3D graphics were as good as or better than anything that Sega's arcade offerings or high-end PCs had to offer, its speed easily outpaced the aging Genesis, its ability to do both complex 2D and 3D processing appeared to be unmatched, and its double-speed CD-ROM drive meant faster loading times than its aging and quirky competition from Sega and NEC. Best of all, the development libraries that Sony already had on hand for potential third-party supporters made the new console dreadfully easy to program - and that gave the Sony PlayStation greater appeal within the videogame industry than Trip Hawkins and his 3DO team ever dreamed. Sony was hoping to win away developer support from Sega and Nintendo, the latter in particular, and they succeeded. As 1994 began to unfold, one third-party vendor after another began to express public support for the new kid on the videogame block and what he had to offer them.

It has been said that when Hayao Nakayama finally realized just what Ken Kuratagi and his fellows had created, he called his entire R&D department up to Sega "flag country" and proceeded to give them the ass-chewing of their lives. One Sega staff member at the time would later recall that Nakayama "was the maddest I have ever seen him." Nakayama had obtained a copy of the design specs for Sony's new PlayStation and had compared them to Sega's own Saturn. That was why he took the time to bawl out his own R&D staff. He knew beyond a shadow of a doubt that they had blown it as far as Sega's chances of seizing the 32-bit market for its own, just as it had done with the 16-bit market a mere five years before. Sega was now in trouble. Big trouble.

What was the problem? Raw 3D processing power. That was the problem with Saturn.

You will recall that the Saturn as originally designed was not the 3D powerhouse that it subsequently became. Remember, the original spec appears to have been originally designed around the 16 MHz NEC V60, a traditional CISC-type CPU that had been the first 32-bit microprocessor widely available in Japan. In contrast, the PlayStation was built around a 33 MHz MIPS R3000A, a faster and improved version of the R2000 RISC-type microprocessor that Silicon Graphics had been using in its SGI workstations for years. The NEC V60 was rather obscure, whereas the MIPS R3000A was by now one of the mainstay processors in the CAD/CAM industry. It had replaced its venerable ancestor, the R2000, on the budget end of the scale and was in use in such notable graphics workstations as the Silicon Graphics Iris Indigo. Sony had been working with and manufacturing MIPS processors for years, so its engineers were fully aware of what the R3000A could do and how to do it. It was with this in mind that Sony's public relations department hyped the console's theoretical limits for all they were worth. The PlayStation's Geometry Transfer Engine, specifically designed by Sony engineers for the console, supposedly gave PlayStation the ability to crunch 66 million instructions per second (mips), tossing out a theoretical maximum of 1.5 million flat-shaded triangular polygons and 500,000 texture-mapped and light-sourced polygons per second (pps). As given, those figures were more than double the maximum capability of Sega's vaunted Model 1 arcade board. While programmers who actually knew the hardware vociferously argued about Sony's numbers (and some still do), they were not the ones looking at the paperwork. Ill-informed industry reporters and boardroom corporate types were, and the numbers Sony gave them seemed to lead to an inescapable conclusion. Sega's Saturn, as announced, was more than outclassed by the PlayStation. As it seemed to stand, Saturn wasn't even in the running anymore insofar as the 32-bit race to glory was concerned. It appears to have been with those numbers in mind that Nakayama promptly charged Sega's engineers with the daunting task of fixing the Saturn's problems in less than a year ... or else. While he may not have entirely agreed with the rationale and reasoning of his superior, nevertheless Hideki Sato and a handpicked team of 27 Sega engineers (known as the "Away Team") began work immediately on creating a brand new system to replace the inadequate concept of old.

There is a common myth within the videogame community nowadays that all Sega did in their attempt to fix the Saturn's problems was just slap in another CPU and an extra VDP. While this is true in a sense, that is only part of the story and does not even give lip service to the real fact of the matter. The end result of Nakayama's dictate was that the Saturn was more or less torn apart and redesigned from the ground up in a concerted effort to create a system that compete with the PlayStation on its own level. There wasn't time to be picky and carefully craft an all-new, highly integrated 32-bit design using the best components available like Sony had done. The announced launch of the Saturn was less than a year away (November 1994, in fact), and Sony was due to release the PlayStation at the same time. If Sega went with the Saturn as originally designed, then they would be slaughtered by Sony as soon as both systems launched. A redesigned Saturn that could successfully compete with the PlayStation was going to have to be made from off-the-shelf parts using whatever Sega had available in order to meet deadline, and this where the concept of parallel processing enters the picture. The Away Team chose this as the most expedient shortcut towards getting a redesigned yet decently priced 32-bit console out the door in the shortest amount of time. Instead of the single NEC V60, they went with dual Hitachi SH-2s in parallel - supposedly as a favor to an old golfing buddy of Nakayama's. Instead of the single VDPs of the earlier arcade boards, they went with beefed-up dual VDPs - each of which could be programmed for dedicated tasks. If this strikes you as odd, please bear in mind that parallel processing was an old concept to Sega's engineers. Many of Sega arcade hits from the 1980s, such as AfterBurner II and OutRun, utilized twin Motorola MC68000s in their board design. The Mega CD (Sega CD) can in fact be said to be Sega's first-ever dual processor console, since its internal MC68000 worked in tandem with the MC68000 of its host MegaDrive (Genesis) console. The Saturn was to be Sega's first purpose-built dual-processor console. This was in direct opposition to a proposal that was already on the table from Tom Kalinske and his staff from over at Sega of America. They had contacted Silicon Graphics, one of the companies behind the PlayStation's 3D graphics capabilities, and had come up with an alternative, single-chip simplistic design that they were convinced could compete with PlayStation on its own terms. To their surprise, Nakayama overruled them in favor of the Away Team's proposal. He had been unimpressed by a demonstration of the technology arranged by Kalinske, remaining convinced that Sato's dual-processor concept was actually the more flexible choice of the two. His decision left a bad taste in Kalinske's mouth, who sensed even at this early point that Saturn was going to be a doomed venture. "The Japanese are making the decisions for the U.S. market," he later grumbled, "and they do not know what they are doing."

Unfortunately, Sega's decision to convert Saturn into a dual-processor system wound up create nightmares for third-party developers early on. The parallel processing issue, with regard to both the dual CPUs and dual VDPs, was probably the first real problem to manifest itself with the Saturn. The theory was simple enough - individual system tasks could be broken down and split among the various processors for greater processing efficiency - but it was no easy task to get all that hardware properly synched and singing in harmony, especially for an industry that was not used to the concept. The academics might have been playing with parallel processing for years, but not so the rest of the videogame industry. Sega was one of the few players on the field who had experience with the concept, but not so the new bloods at the software houses. Many of these developers would eventually content themselves with using just one of each of Saturn's CPUs and VDPs, thus limiting the system resources available to them and making their games far less than they could have been. Even when these types did manage to pull off a good game, they would argue that the extra coding effort involved in "working around Saturn's architecture" eventually resulted in a 25% drop in overall system efficiency due to shared resources, thus reducing the chief benefit that parallel processing was supposed to be. The good Saturn coders maintained that this was complete nonsense - a poor excuse put up by "crap programmers" who didn't know how to manage the Saturn's "beautiful design" - but these few lone voices tended to be drowned out by the rest. It was the opinion of most programming experts at the time, including the likes of Sega's Yu Suzuki and Bullfrog's Peter Molyneux, that the only effective way to produce a good, fast game on Saturn that could compete with a comparable PlayStation title was by programming in pure assembler. The following quote on the matter by Sega's own Yu Suzuki comes courtesy of NextGen magazine.

Trying to program for two CPUs has its problems. Virtua Fighter uses a different CPU for calculating each character. The two CPUs start at the same time but there's a delay when one has to wait for the other to catch up. One very fast central processor would be preferable. I don't thank that all programmers have the ability to program two CPUs - most can only get about one-and-a-half times the speed you can get from one SH-2. I think that only one out of 100 programmers are good enough to get that kind of speed out of the Saturn.

On the other hand, Sony had made things easy on the third parties by setting up its development libraries in the C programming language instead of assembly language, so most of the "crap programmers" naturally gravitated toward the system that was easier to code. So did a lot of their employers, too - much to the chagrin of the real programmers, who continued to argue (and many maintain to this day) that Saturn's dual processing design made it the better of the two machines. Saturn may have been the equal of, perhaps superior in some ways to, Sony's Playstation at the assembly language level, but Sony had effectively changed the field in its own favor. Thanks to its canned development libraries for the PlayStation, videogame programmers were happily becoming adjusted to coding in C and not messing with assembler anymore. Most didn't want to go back, which left only the real or old-school types to wrestle with the untapped potential of Saturn's dual-processor architecture.

The problem of Saturn's twin VDPs also had its own unique issues insofar as the console's graphics capabilities were concerned. In theory, Saturn now had the exact same 3D processing capability as the PlayStation, significantly more 2D sprite capability than Sony's box, and far more graphics computational capability than Kuratagi's creation. These facts tended to get lost in the shuffle whenever the console specs are compared side-by-side. Also, the word had gotten out thanks largely to the videogame magazines of the day that the VDPs that Sega used for its hardware did not perform 3D processing in the same manner as everybody else's in the industry. They calculated surfaces in "quads" (four-sided sections) instead of "polys" (three-sided sections); thus any simple comparison of polygon count wasn't really worth the paper it was printed on. In theory, using quads instead of polys gave the Saturn a 3D processing boost; but supposedly developers used to standard polys found it quite difficult to readjust their mindset for Sega's quads. Videogame magazines such as GamePro and Game Informer took this comparison and ran it for all it was worth, thus building public perception that Saturn's graphics hardware was actually inferior to that of PlayStation. It simply was not true, and the comparison itself was flawed thanks to a basic misconception of how each machine performed its graphics processing. Both Saturn and PlayStation worked with quads; however, the vagrancies of the PlayStation's GTE tended to "tear" and "warp" its quads, hence the tendency of its programmers to stick with polys. Saturn was fully capable of doing polys; however, it had been designed to achieve its best performance with quads and its programmers were encouraged to work with quads instead of the less efficient polys. Actually, the real difference between the two systems was not in how many megahertz their CPUs could crank or how many vertices their GPUs could count. It was in the effects that each added to the graphics they generated on-screen.

There were many things that the Saturn could accomplish through pure software alone thanks to its raw processing power - texturing and shading, lighting effects, MPEG playback - but few programmers bothered to learn how to do it when Sony's "canned" libraries and built-in hardware were already there waiting for them to exploit without effort. Saturn's twin VDPs could even be independently programmed for dedicated tasks, but this was an ability that would eventually go practically unexploited due to the programming difficulties in properly tasking and synching them. Only rarely would third-party Saturn efforts compare favorably to their PlayStation cousins once full-blown development for both systems got underway, and it would be long after launch time before Sega could release an software developer's kit (SDK) that could truly permit developers to start unlocking Saturn's deep resources. That would prove to be the heart of the matter - proper parallel processing requires a suitably developed and exploited programming environment, and it was one that simply was not available for the typical programmer before and in the year after Saturn was officially launched. Sega simply did not have time to create a good parallel programming environment prior to bringing the Saturn to market, and its third party licensees did not have the resources available to properly exploit the system in their first-generation efforts. On the other hand, Sony made damn sure that the PlayStation's development environment was set up and ready to exploit as soon as physically possible, so most software companies were able to literally hit the ground running even with an army of the so-called "crap programmers" that the real codeheads tend to deride. The lack of a sophisticated programming environment was a fatal flaw that was built into the Saturn from the start. If Sega had somehow managed to find the time instead of putting this task off for about a year ... well, things might have gone quite differently than they did. Veteran programmer Steve Palmer, author of the classic sports videogame NBA Jam and currently working with Pitbull Syndicate, who developed for both systems during their entire respective lifetimes, sums up the Saturn development problem quite well.

[Sega] gave us exactly what we wanted; [however,] the industry changed at exactly the same time, [so] we no longer had a choice in the matter. Things suddenly had to be finished yesterday. Sega could not have foreseen this change .... [Most of the third-party crowd] couldn't get it to do what they wanted it to do quickly enough, so they didn't bother. It's amazing, because it didn't require much effort to get the machine to perform on a [PlayStation] level. Programmers being programmers, though, they probably were not happy unless they felt they were pushing the machine, and it seemed like too much effort to do that.

To learn to program the Saturn was to learn the machine. To learn to program the [PlayStation] was to learn C. Learning C is much easier than learning the hardware of a new machine, and with the Saturn, there was a lot of hardware to learn .... There was not enough time for people to learn the hardware. The same would have been true of the [PlayStation], except you didn't need to learn how to talk to the [hardware]. The libraries took care of that for you. Sega's approach was to release hardware documentation for every aspect of the Saturn. That was understandable - it was the way everyone had done it before, and it's what programmers were used to, but the industry had changed. Video games were no longer a "niche" market, and the "big boys" had moved in. Time is money. Nobody was given the time to learn new hardware anymore.

By the time Hideki Sato and his fellow engineers at Sega got through with it, the redesigned Saturn had become a machine that on paper was fit to compete with PlayStation. However, that same redesign had resulted in a system with a higher shelf price than Sega would have preferred, and it was now a console that had lost its previously close-knit and programmer-friendly design architecture for the sake of market expediency. These twin issues would lead to all sorts of future problems once the Saturn itself finally cleared the prototype phase and headed for the production lines.

It is now May of 1994. The American videogame industry is abuzz with news about the 32X, the end result of Project Mars and the current darling of the U.S. videogame community. Rave reviews about the new system and its up and coming games fill the trades, and it looks like Sega of America just might be able to hold its own against Nintendo's Donkey Kong Country threat.

In the meantime, though, the Japanese press is excitedly talking about the two new 32-bit CD-based videogame consoles that will be coming out in the fall. One will be from upstart Sony. It is an unknown commodity, this ... PlayStation ... but it certainly looks promising. The other is from Sega, a tried and true veteran of the console wars, and the company's reputation for gaming excellence precedes the brand-new system that it is about to unveil to the public.

Enter the Sega Saturn.

Locked And Loaded

While Sega of Japan was busy scrambling to rebuild Saturn from the ground up, the videogame industry was abuzz with rumors about the impending console war. No less than nine new systems from various vendors were either already out or were in the release pipeline, yet quite prominent among these was Sega and its Saturn. Anybody in the videogame industry who had half a brain correctly surmised that Sega would be the only real competitor to Sony and its new wonderbox during the next two or three years despite the best efforts of the rest. Sega had the reputation, the programming expertise, and an established market niche to provide their 32-bit console its initial beachhead. The only thing Sony had at this point was hype, but lots of it. Yes, things were looking good for Sega in 1994. If it played its cards right, got the Saturn ready in time, got it out the door with a decent selection of software, and gave it that necessary killer app to boot, then it could stop the Sony dark horse before it even left the starting gate.

February of 1994 saw the Asian gaming press go wild with speculation about the Saturn's gaming capabilities, and a lot of the American trades began to pick up on these stories. Gordon Craick of Frontier Console Magazine, an Internet videogame fan effort, was busy monitoring these as well as the few reports that were now beginning to appear in Western trades. He went so far as to predict that the Sega Saturn would have the home console market sewn up by the end of 1996. It was a prediction of which he would later regret the making.

March was a key month for Saturn. By this time, Sega's engineers had the console redesign finished and had already shipped a number of working prototypes along with the system's first SDKs to selected third-party developers all across Japan. An initial set of specifications about these prototypes were released by Sega of Japan to the videogame public. While limited in their description of the Saturn hardware, one can already note the drastic changes that had taken place from the simpler GigaDrive concept mere months before.

Sega Saturn Prototype Specifications as of March 1994
Courtesy of Sega of Japan official press release

Component Description Processors ARM-type RISC CPU running at 29.1 MHz Graphics 24-bit color palette (16.8 million colors) Sound 8 channel digital/16 channel synthesized 16-bit stereo Storage Triple-speed CD-ROM drive (450-500 kb/sec transfer rate)

NOTE: The absence of the dual CPUs in this spec appears to be a printing slip on Sega of Japan's part.

A target release date of September 1994 was set for a Japanese launch and March 1995 for Western shores. The Sega public relations machine also went into full spin mode about this time and would continue nonstop for months, touting the capabilities of its new 32-bit console and the system's superiority to the company's own Model 1 arcade board. While tacitly admitting that the console they had announced "would not be quite as powerful as Sony's machine," nonetheless they also let it be known that ports of Virtua Fighter and Virtual Racing, both highly regarded Model 1 arcade games, would be released for Saturn as launch titles. Sega fans around the world breathed a collective sigh of relief and began socking away even more quid. The rumored price of Sega's newest console was steep - supposedly US$400-500 - but if it was already planning to release its best current arcade games for the box, well then ... cool! Word had also leaked that Sega was planning some kind of upgrade path for Genesis owners so they could catch the 32-bit wave, and that was even more cool. The Sega engine seemed to be hitting on all cylinders as it churned along towards the nextgen systems.

In April, a number of mainstream videogame magazines leaked what they believed to be an exclusive scoop concerning Sega's 32-bit consoles plans. They revealed to the world the existence of Project Jupiter, surmising that that it would be a less sophisticated version of the revamped Saturn based on tried-and-true cartridge technology instead of the CD-ROM format. What they did not know was that their so-called "confidential sources" had apparently confused ongoing work concerning the 32X over at Sega of America with an entirely new system. This appears to have been due to the fact that both 32X and the revised Saturn had somewhat similar system architecture. The 32X design had been pretty well solidified by this time into the twin Hitachi SH-2 spec that Sega of Japan engineers had ardently pushed, so somebody with some inside contacts at Sega of America probably did some crafty guesswork and tried to put two and two together. Unfortunately, they came out with a result of three and not four, but it was to be expected. Sega of Japan may have trusted its American division to some extent insofar as the 32X was concerned, but it was playing everything Saturn as close to its chest as possible. So goes the rumor mill in the videogame industry - the nub of truth at the heart of the matter may be about something else entirely. In an ironic twist, the 32-bit surmises of the gaming mags at this point would eventually materialize the following year as the never-released Neptune 32-bit console, itself a derivant of the ill-fated 32X.

The end of spring brought with it the 1994 Summer Consumer Electronics Show (CES), held 23-25 June at the Chicago Hilton in Chicago, Illinois. Sega had been expected to use the show to formally announce its 32-bit gaming plans, but instead sat out most of the weekend's events save for some low-key 32X hype. Instead, the console part of the show was stolen by a resurgent Nintendo and its latest videogame, Rare's Donkey Kong Country. Nintendo also used the opportunity to let the rest of the industry know that it would be sitting out the 32-bit console wars. Its newest system, Project Reality, would not launch until well after both the Saturn and PlayStation, and it had a smoke-and-mirrors demonstration read of what its newest system would be like. Nintendo's new console would be unlike those from Sega and Sony in two important aspects. First, it would be a 64-bit system as opposed to a mere 32-bit one. Second, Nintendo was opting to stick to cartridges instead of CD-ROMs for its delivery system. The control freak corporate mindset at Nintendo had very good reasons for doing this - CD-ROMs were dreadfully easy to copy, and Nintendo could squeeze extra blood out of the turnip by maintaining control over the game manufacturing process via the use of cartridges. The industry eagerly accepted Nintendo's decision to skip the leading edge of the new console war, but there was a lot of grumbling about their choice of format. Meanwhile, though, Sega Saturn engineers breathed a collective sigh of relief. One less formidable competitor to worry about now. Besides, the corporate types were saving their Saturn ammunition for a later time.

With the Summer CES now behind them, Sega's Japanese executives went back home and focused themselves on the next few months. Every day was now critical in the weeks leading up to Saturn launch day. So much to do ... and so little time.

The Sega Saturn was officially launched in Japan on 22 November 1994. National interest in actually owning an arcade-perfect copy of Sega's Virtua Fighter had created a marked interest among Japanese gamers in Sega's new system - so much that over 120,000 Saturn's had already been put on preorder and lines began forming at the stores a couple of days prior to launch date. At one store, over 500 people were waiting in line for two days, hoping to grab one of Sega's new consoles before they all sold out. All of this was taking place despite an initial asking price of ¥44800 (US$490). It was the steepest price ever for a Sega console, and that without a pack-in title. Sega of Japan was ready for the anticipated rush, though - or thought it was. It had over a quarter of a million Saturn's ready for immediate sale, along with an equal number of copies of Virtua Fighter.

Every single Saturn console that Sega of Japan had on hand sold within two days.

The Japanese launch of the Saturn has been called the most successful for one of its systems that Sega would ever enjoy in its home country. The Sega Saturn led the market in console sales for the next six months, thanks largely to Virtua Fighter and despite the launch of the Sony PlayStation about one week later on 2 December 1994. According to official Sega of Japan figures, Saturn wound up outselling the PlayStation Japan by an almost 2-to-1 margin during those first six months. The Japanese videogame press was ecstatic, and so were Sega's accountants. It seemed that the 32-bit wave was going to break Sega's way. All was going to plan. There was nothing to fear from Sony's little grey box.

There was just one problem with this picture. Sega's figures were not what they seemed.

You see, Sega of Japan had followed the industry standard practice of using the number of consoles sold to retailers as the basis for its purported launch success. It wasn't their fault - everybody did it and still does - but it gave a distorted picture of just how well the Saturn was actually selling during those first six months. What they should have done was figure out the number of consoles sold through to customers. It would have shown something quite different. The Sony PlayStation, the new kid on the block, was actually the more popular of the two new nextgen systems among Japanese gamers. Sony has claimed that as many as 97% of the PlayStations that were being distributed to vendors were winding up in the homes of Japanese consumers, while more conservative independent analysts assign a figure of 85-90%. In stark contrast, at least one-third of all the Saturn's that Sega was shipping remained behind on retail shore shelves, gathering dust as the weeks rolled by. Why? Lack of Saturn software. Virtua Fighter was pretty much the only game in the Saturn launch lineup worth buying. Other big titles such as Panzer Dragoon and Daytona USA were experiencing production delays, and consumer disgruntlement with this development had also helped boost PlayStation Sales. A number of American industry watchers picked up on these small yet important facts, but their cautious warnings were for the most part drowned out by Sega's own hype and dutiful media repetition of same. This small oversight concerning the sales figures didn't really matter to Sega's board of directors - after all, the consoles had sold and it didn't care who had paid for them so long as they got their money. In the mind of Nakayama and his fellow executives, Saturn had indeed been a smashing success, and they felt confident that they could pull it off again in the world's most profitable videogame market - the highly coveted prize known as the United States.

This would be yet another mistake in Sega's Saturn debacle. It would prove to be a crucial one, and it would not be their last.

Trial By Fire

The year 1995 opened with high hopes and expectations by those in the videogame industry for the arriving 32-bit nextgen wave. This time, there would be an audience ready and waiting for it, one that had been weaned on a steady diet of videogame fare for years. It would be the fourth generation of videogame consoles in the United States in less than two decades, yet it promised the most sophisticated consoles yet. For the first time, the machines would be sufficiently powerful enough to recreate, and possibly surpass, the 3D visual experiences that were by now common fare with high-end personal computers and arcade videogames of the day. To quote the words of GamePro magazine, "The dreams of the '80s will come true in the '90s as the technological limits that have held back hardware are overcome during the next several years. Say hello to 32-bit, 64-bit, and higher-bit systems with standard features like 3D capability, full-motion video, 16 million colors, graphics coprocessors, voice recognition, and more." The first 32-bit console that could successfully capture these experiences in a manner that completely captivated its audience would be the one that would win the second great console war. All it needed was a decently affordable price, a good software base, and one or more killer apps to finish off the package. To borrow a common backhills expression, which of the major players "would be firstest with the mostest?" The early birds had come and were already in the process of going due to broad consumer rejection. Now it was time for the big boys to arrive, and their first showdown was scheduled to take place at a brand-new electronics show to be held in the U.S. that spring. The very first Electronics Entertainment Expo, aka E3, would be held at the Los Angeles Convention Center on 11-13 May 1995. It promised to be one helluva a show, with many a computer and electronics vendor who felt they had been slighted by the various CES events of years past ready to strut their stuff for all it was worth. Many videogame industry watches were predicting that the vendor whose system triumphed at E3 would go on to dominate the home console market for the rest of the year ... and perhaps the rest of the cycle, too.

Sega entered the U.S. market sweepstakes hot off of its Saturn launch success in Japan and itching to do battle with its rivals on turf it felt it practically owned. To that end, it released the Saturn White Paper in order to bring everybody up to speed on what it felt was its latest and greatest achievement. Here are some of the more significant quotes from the opening of that rather remarkable document:

Sega will leave no room for debate by providing the ultimate gaming experience with Sega Saturn. Once consumers compare the next-generation game systems, Sega Saturn will prove to be the hands-down choice.

[Saturn] was introduced in Japan in November 1994 and is on a steep curve to sell more than 2 million units in its first year. Sega has designed the Sega Saturn from the silicon up to transport consumers into an entirely new realm of interactive entertainment. The Sega Saturn makes it possible for software to immerse players in stunningly realistic worlds of 3D modeled graphics, dynamic perspective with ever-changing points-of-view, true 3D audio, and gameplay speed that far surpasses the most powerful multimedia PC.

More than any other video game maker, Sega has its finger on the pulse of the consumer and is able to transform raw technology into major fun for millions of people. No one else combines a 40-year arcade history with a wildly successful in-house publishing effort. Add to this Sega's solid relationships with third-party developers, who will add depth and dimension to Sega's own game library for Sega Saturn. All told, the Sega Saturn game development universe involves hundreds of creative and innovative programmers intent on taking the Sega Saturn (and its players!) to the limits of immersive experiences.

It's the only home system to use state-of-the-art "massive parallel processing," which provides immersive, first-person gameplay .... Think of the limited musical range of a one-man band (ala the competing single-processor systems) versus the symphonic possibilities of a fully scored orchestra. There's no comparison.

Because the technology is similar to that of Sega's Titan arcade system, Sega Saturn also paves the way for hot game titles to migrate from Sega's interactive theme parks to its commercial arcade systems down to the home-based Sega Saturn system.

"Huh?" you might ask. "Titan? What's that?" You see, Sega of Japan had been so tickled with themselves the way that the Saturn redesign had turned out that they turned right around and converted their work back into yet another arcade board. It was the same thing they had done with the Genesis years earlier, only this time they were producing a monstrously powerful 32-bit parallel processing arcade board that could give its own Model 2 a run for its money. The Sega Titan arcade board, aka ST-V, was essentially nothing more than a retooled Sega Saturn that conformed to the industry-standard JAMMA board design save in one important aspect - Titan had more RAM than did a stock Saturn. This may not seem important now, but the issue of the Saturn's available RAM will rise again as we continue reviewing its history. Take heed, because Titan would prove to be one of the most versatile arcade boards in Sega's arsenal. More videogames would be produced for or converted to the Titan architecture than any other arcade board in Sega's history to date. It is an important factor to consider once you take into account Sega's announcement of Titan migration plans in the Saturn White Paper.

Meanwhile, over in Japan, arcade gamers were already going ga-ga over Virtual Fighter 2, the latest and best incarnation of Yu Suzuki's famed Sega fighting game. If the graphics had been impressive before, the power of Sega's new Model 2 board made this go-round practically shine. No one was surprised when a Saturn port was announced, and many a proud Japanese gamer began saving their precious yen yet again for yet another Saturn game ....

On 9 March 1995, Sega of America issued an official press release concerning the impending U.S. launch of the Sega Saturn. The console would make its official U.S. debut on 2 September 1995. It claimed internal figures showing that Saturn sales in Japan had exceeded 500,000 units in the first month alone, outselling the Sony PlayStation by a 30% margin, and predicted that Saturn would go on to sell 1 million units in Japan by April and 2 million by the end of the year. Sega itself was described as "... a nearly US$4 billion company known as a leader in interactive digital entertainment media with operations on five continents" and much ado was made about "the company's superior product line." Curiously, no definite price point was officially set for Saturn even at this late date; however, most analysts predicted that it would be in the US$400-500 range. It was a bit steep, to be sure, but Sega promised a lot for its new system.

Shortly thereafter, yet another delegation from Japan paid its respects at Sega of America headquarters. Paid its respects is probably not the correct term; arrived to give Nakayama's latest marching orders was probably more like it. The 32X debacle had caused Kalinske's Japanese masters to begin reasserting control of what they considered to be their errant American underlings. Sega of Japan was concerned about the growing PlayStation hype. Sony was rumored to be planning a massively expensive pre-launch marketing campaign to make sure that the PlayStation got plenty of media exposure for its upcoming launch that fall. Nakayama was taking no chances - he was convinced that Sega needed to strike the first blow and hopefully knock Sony out of the running before PlayStation could get up a full head of steam. Why? Sony had deep pockets; Sega didn't. Sony could easily outspend Sega in a marketing war; therefore, Sega would have to beat them on product alone. With this in mind, Nakayama ordered Sega of America to accelerate the U.S. launch of the Saturn and bring it to market at the first available opportunity. The price of the Saturn in the U.S. would remain unchanged - about US$400 or so. Kalinske vehemently objected, as did practically everybody at Sega of America. All of them, in one form or another, were trying to tell Nakayama the same thing: "It's too early to launch the Saturn in America. The price is too high, and we have practically no software for it." Both Nakayama and the rest of Sega's corporate board of directors refused to listen, for Sega of Japan was by now calling the shots. The future of Sega was at stake and the odds were long. Since Sega could never conceivably outspend Sony, they had to find a way to outsell them. Such a move required a daring stroke, one that would gain instant market attention. An early launch of the Saturn in the U.S. would do just that; furthermore, it would give the console valuable lead time in this new market that was still anybody's for the taking. Saturn had proven itself in Japan against PlayStation, it seemed, so there was no reason not to expect the same in America. Sega of Japan did not want Saturn to suffer the same fate as the 32X - a fiasco for which some personally blamed Kalinske. The pleas of Sega of America was overruled by Nakayama, and from that point forward Kalinske and his staff would have practically no say in managing the affairs of Sega's U.S. market interests.

E3 opened on 11 May 1995 with representatives from every part of the computer and electronics spectrum. Consumers, retailers, developers, vendors, they were all there - including such celebrity notables as William Shatner, Steven Spielberg, and George Lucas. As it turned out, the pundits had been right all along. The very first day of E3 would prove the most critical one all year in the ensuing console war. Tom Kalinske, Sega of America CEO, was scheduled to give the first keynote address, scheduled for 0830 that morning. He remarked on the arrival of the nextgen wave in his speech, noting that the combined advertising costs for all three of the major players (Nintendo, Sega, Sony) could approach US$250 million, with another US$100 million on top of that handled by retailers selling the systems in question. He then sprang the surprise on E3 that Sega had been planning for two months. Sega was still going to officially launch the Saturn on 2 September as originally announced; however, it would start shipping the console today. As a stunned audience listened, Kalinske put on his best pitchman demeanor and informed them that Saturn would be available effective that day for the low retail price of US$399. Over 30,000 Saturn's had already been distributed to a select list of four major retailers: Toys 'R' Us, Babbage's, Software Etc., and Electronics Boutique. He then went on to tout the merits of Sega's newest console and its software base - Virtua Fighter was indeed a U.S. launch title, and over twenty other Saturn titles by Sega and other parties were in development for the new system. He reminded his audience of Sega's reputation for excellence, and left little doubt that Sega believed it had a winner in the Saturn. After Kalinske finished his presentation, a pleased audience showered him with applause and he breathed a sigh of relief. He had done the best he could given the circumstances, and so it was with crossed fingers that he now yielded the platform to his rival.

Next up was Sony president Olaf Olaffson, there to give the second keynote address of E3. His listed topic was the future of videogames; but he was really there to tout the virtues of Ken Kuratagi's PlayStation and the place it would earn in the growing 32-bit console market. About two-thirds of the way through his address, he interrupted himself to call up Steve Race, one of the PlayStation's designers and president of Sony Computer's newly formed U.S. subsidiary, to tell the audience more about the PlayStation. Race walked up to the podium, a thick sheaf of papers in hand, and the crowd braced itself for a long and boring technical dissertation. Instead, Race laid the papers down on the podium, leaned into the microphone, and said just one thing: "US$299." The audience exploded with applause and Race was treated to a standing ovation. Both Race and Olaffson smiled as the applause and cheers continued. They took quiet pleasure in noting the reaction of Kalinske and the Sega delegation, who were looking rather uncomfortable and nervous. Later would see an surprise appearance at the Sony booth by none other than pop music sensation Michael Jackson, former Genesis pitchman but now helping Sony advertise its new system. The Sega delegation left the festivities in a rather unsettled mood, and they had every right to be. E3 was supposed to have been Sega's for the taking, yet Sony had just managed to steal the show.

And as for the others? 3DO teased the industry with plans and a mock-up of its M2 64-bit upgrade, but that was all that would ever come of it. The company was sinking fast, and its console would be effectively off the videogame radar screen by the following year. Nintendo announced that Project Reality, now renamed the Ultra 64, was practically ready but conceded that it could not launch until April of 1996 at the earliest due to production issues. The only other player in the nextgen sweepstakes, the Atari Jaguar, was rapidly dying due to a lack of good software and what it had to offer at E3 seemed only to confirm that sad fact. No, there were only going to be two players in the console game for 1995 - and both had already shown their hand.

E3 1995 was a disaster for Sega in more ways than one. Since Sony had effectively stolen the nextgen console limelight, it now had the videogame industry's complete attention and thus was in a better position to market the PlayStation. Nakayama's mad rush to beat Sony to market in the U.S. meant that Saturn was effectively left high and dry. Sega may have had a limited number of consoles, but where was the software? It had the original Virtua Fighter, but little more. In fact, only one or two more games would be released for Saturn between 11 May and 2 September, causing Saturn's to sit on retail store shelves unsold and thereby rendering useless the five-month market lead that Sega of Japan had so desperately desired. On top of that, Sega's sudden rush to market had caught both retailers and developers completely off-guard. Kay Bee Toys, one of the nation's largest retailers, was incensed that it had not made Sega's short list for the early Saturn launch and promptly announced that it would neither sell nor support the system. It was a loss that Sega could ill afford given its poor financial position. The suddenness of the U.S. launch also meant that Sega and its third party support were left scrambling as they tried to rush their various Saturn projects to market as fast as it could. The immediate aftereffect of this would be a lot hurried, buggy Saturn games during that first critical year on the market that would inevitably suffer in comparison to comparable PlayStation titles. In contrast, Sony of America would make sure that it would not repeat Sega's mistake; PlayStation would have a stellar lineup of over a dozen titles ready immediately at launch, instead of having to wait five or six months for the rest of the market to catch up as it was having to do with Sega's Saturn.

Another reason why Saturn went largely unsold during this crucial period was the high price. Sega had just committed the same mistake as did Trip Hawkins with the 3DO in pricing the Saturn too high for its intended market. There was a good reason for this, of course - Sega's shallow pockets - but it was of no help when Sony pulled the rug out from under them at E3. By pricing the PlayStation US$100 less than the Saturn, Sony was making its product more accessible to cash-strapped consumers. Its lower price point ultimately made PlayStation more attractive, since it gave the impression that one was getting "more bang for the buck" than with the more expensive Saturn, a machine that for all intents and purposes didn't look or play any better than Sony's new box. As one wag at the time put it, "Why pay more for less, when Sony is doing more with less?"

The fact that it wound up launching the Saturn in America far earlier than it had originally intended also meant that Sega had no time to properly advertise the console. Instead of the well-planned and co-coordinated multimedia efforts over a period of months by which Sega had gained its reputation in the West, i.e. the "Sega scream," potential customers were hurriedly treated to the newly commissioned "Theatre of the Eye." It would win a Silver Clio award for its production values, but by and large it was largely ignored by consumers. In contrast, Sony's subsequent ad campaign would eventually enjoy the favor of both consumers and critics alike and basked in the praise it received, both self-induced and showered upon it by the gaming magazines. It would use the following five months to promote its new console with all the media muscle at its disposal in one of the largest and most expensive advertising campaigns of its day.

Sega had made its big play at E3 and not only lost, but lost badly. Sony would hold the spotlight from now on.

The following month, back over in Japan, Sony made a sudden move that cause the Japanese market to start turning in its favor. It announced that it would soon be releasing a new version of the PlayStation that would sell for 25% less than the current model. The new PlayStation was actually the cheaper American version retrofitted for the Japanese market, but Japanese gamers didn't care. The news of a cheaper PlayStation was welcomed by almost everyone, as the country's economy was in recession and the downturn had hit the videogame market particularly hard. It was not welcome news to Sega, however, whose higher priced Saturn was still maintaining a comfortable lead in console sales over its rival at this point. Nakayama had no choice but to authorize the reduction of the Saturn's price by 20% and watch the red ink begin to flow across Sega's ledgers. Saturn was still in the lead in Japan, with 1.3 million units sold to retailers as of June 1995, but PlayStation was not far behind with 1.2 million units sold. Sony was beginning to catch up.

Sega had an ace up its sleeve, however, and it hoped that its worldwide console sales would improve dramatically as a result. In July of 1995, Sega of Japan unveiled the Saturn port of Yu Suzuki's Virtua Fighter 2 at the Omacha Toy Show in Tokyo. The show attendees were stunned by what they saw. While the first Virtua Fighter port had gained a bit of a reputation for being buggy and dropping the odd polygon or surface here and there, the Saturn port of Virtua Fighter 2 was dead-on accurate. It truly showed off the processing power of the Saturn in a way no previous Saturn title had yet done, and the word got out that this was the "real" Virtua Fighter that gamers had wanted all along. It would not be long before Virtua Fighter 2 would be released in Japan, and it would also make its Western debut as quickly as market conditions permitted. Virtua Fighter 2 would go on to become the best-selling Saturn title of all time, with some 1.7 million copies sold worldwide - almost double the numbers for its ground-breaking predecessor.

In the meantime however, Saturn made a forgettable debut in Europe and quickly died. Nobody in the Old World was interested in Sega's new 32-bitter. The machine cost too much and there was no software for it. Most of the continent's Sega faithful preferred their MegaDrives (or in some cases their beloved Master Systems), so Saturn went practically nowhere. Sega's older systems would continue to outsell Saturn in Europe until they were officially discontinued; but even then, Saturn was never able to come out from under the shadow of its mighty predecessors of old.

The fall of 1995 would prove to be one of the most eventful in the entire history of videogames. It would see a onetime giant commit the greatest videogame-related blunder in its entire history to date. It would see another giant introduce a new piece of software that would forever change the personal computer industry. It would see the new kid on the block begin to assert itself as the new ruler of the videogame realm. Finally, it would see a former great begin its long and painful slide down the slippery slope into market oblivion.

Nintendo, whose own nextgen N64 would not be ready for market until 1996, went ahead and introduced a new videogame system anyway. This was the Virtual Boy, created by GameBoy inventor Gunpei Yokoi. Officially launched on 21 August 1995, Virtual Boy was ostensibly the successor to Nintendo's wildly popular 8-bit handheld. What it wound up being was the greatest product failure to ever bear the Nintendo label. Inspired by all of the experimentation that was happening with virtual reality headsets at the time, Virtual Boy was a system with a built-in red-on-black 3D stereoscopic LCD viewer into which you looked while playing its games. It was a truly original idea; unfortunately, it proved quite difficult to market and many gamers complained of frequent headaches after using the system. The system soon gained the nickname of "Virtual Dog" among derisive Western critics and would eventually prove to be an near-total failure in all markets. The Virtual Boy fiasco would eventually cost Gunpei Yokoi his job, as he was forced to tender his resignation the following year once the dismal 1995 sales figures became clear.

Of more importance was the launch of Microsoft Windows 95, aka Win95, on 24 August 1995. It was an event marked by all of the hoopla, promotion, hype, and media buzz usually reserved for videogame products. It was well deserved, though, because users of IBM compatible personal computers were finally getting the kind full-blown, multitasking, multithreading graphical operating system to which users of the Apple Macintosh had been accustomed for years. What was largely overlooked by the general public, although not missed by the development community, was the inclusion of the DirectX graphical programming environment. For the first time, PC game codes now had a good, unified standard supported by any Win95 configured hardware or software upon which to base their efforts. This something which the Mac community still sadly lacked, and many would cast envious eyes at the DirectX-based PC games that would come in later years. Sega immediately announced its support for Win95, due in part to its growing relationship with Microsoft, and set up its SegaSoft subsidiary in America to undertake the task of porting hit Saturn titles into the Win95 environment. Over three dozen SegaSoft efforts would appear over the next five years, bringing some much-needed income to a corporation that was being hard hit back on the console front.

The Sony PlayStation made its official U.S. debut on 9 September 1995, and what a debut it was. First was the price of the console - US$299 as promised. Second was the number of outlets vending it - over 12,000 by most estimates. Third was a monstrous US$40 million advertising campaign across all major media outlets with the catchphrase "U R NOT E" (i.e. "You Are Not Ready"). Fourth was the launch lineup itself - 17 games available for immediate purchase, including three that would shortly become legend among console gamers. While Sony did not include any pack-in titles with its new console, same as Sega, the PlayStation launch lineup was by far more rounded and impressive than had been Saturn's.

Did anybody still consider Sega's Virtua Fighter a threat when you could play Namco's Battle Arena Toshinden, which almost every major media outlet within the videogame industry (and some without) were loudly proclaiming to be the superior fighting game? Okay, so what if Sega had Virtua Racing and Daytona USA? PlayStation had Namco's Ridge Racer, which indeed lived up to all of its hype of being the best-looking and best-playing 3D racer available. To top it off, where but the PlayStation could you play WipeOut, a futuristic racing game by Psygnosis the likes of which had never been seen on a console before? Saturn would eventually get its own port of WipeOut, but not until long after it had enjoyed a tremendously successful run on the PlayStation. Together, these three games were judged by all to be PlayStation's killer apps at launch time. All of a sudden Saturn was looking rather obtuse and rough in comparison with its supposedly inferior graphics and obviously limited software base - leastways in the eyes of all but the Sega faithful. That deadly combination of low price combined with killer apps, both right off the bat at launch, proved to be the critical combination for guaranteed Sony success. Sony sold just over 100,000 PlayStations in only two days, earning console launch revenues in excess of US$45 million. Sega of America tried to counter with what would turn out to be the forerunner of its Saturn Three-In-One software deals, bundling Clockwork Knight and Sega Worldwide Soccer along with a Virtua Fighter voucher along with every Saturn sold. It didn't help. PlayStation sales continue to skyrocket, while the poor Saturn stumbled along in the rear.

Sega did manage to rally itself just in time for Christmas, however, with the near-simultaneous release of three of its hottest arcade conversions at the time: the road racer Sega Rally, the gun shooter Virtua Cop, and Yu Suzuki's Virtua Fighter 2. It also gave away free copies of Virtua Fighter Remix (a rehash of the original but with VF2 quality graphics) to every Saturn owner for the asking in order to make up for the many complaints about the original. This inspired bit of software releases managed to boost Sega's market presence enough so that it was able to finish 1995 a comfortable second in the 32-bit wars. Sega's last-minute success would be sour grapes, though, in comparison to the humbling it had just endured at its own game. Many had predicted earlier that Sega was going to come out on top at the end of 1995, but things did not turn out quite the way they foresaw or Sega had planned.

Who took the number one spot in the nextgen console market of 1995? The newcomer - the Sony PlayStation.

By the time 1995 came to its close, it was obvious to one and all that Sony was in the console business to stay. Sega, the company that had launched the opening salvos in the second great console war, came out the other side with an installed U.S. Saturn user base of some 120,000 systems and a small but growing software library of some 25-30 titles. On the other hand, Sony - the new kid in town - crossed the finish line in grand style with an installed U.S. user base of some 300,000 consoles and a growing software library of some 50+ titles. While Sega loyalists were still scratching their heads, wondering where were all the Saturn games, new PlayStation owners were buying four games with every console sold. Sega had taken seven months to sell less than half as many systems as Sony had sold in only three. As for Nintendo, while it may have outsold them both with its SNES lineup, that was based on a shrinking market share dedicated to gaming technology that everybody knew could not compete and would not be there the following year, once the 32-bit systems finally got up to full speed. The Sony PlayStation was the big story of the 1995 holiday season, and it was fast becoming the darling of many a nextgen advocate.

Sega had without question blown its one and only chance to seize the 32-bit market for its own. As a result, it saw its profits for the back half of 1995 drop to a mere US$110 million, down from the US$165 million it had earned during the same period the year before. It would only get one more chance to try and regain its lost market share in the coming year, but it was facing long odds in a rapidly changing market. This was the same situation that Nintendo had faced in 1991, when Sega had come along with the Genesis and knocked the then-reigning king of the industry off its throne. Now it was Sega's turn on the wheel of pain. It was they who were playing catch-up to an underdog who was beating them at their own game.

Talk about role reversal!

Nakayama's Choice

Near the end of 1995, once it became apparent that the Sony PlayStation was poised to seize the lead in the 32-bit console sweepstakes, Sega CEO Hayao Nakayama made a decision that would shape the course of Sega's finances for years to come. He was the man in the big chair. It was his call, and his alone. Nobody else could make this decision for him. The aging Genesis could no longer hold its own against the superior software offerings of Nintendo and its Super NES. Both Sega CD and the 32X had effectively bombed, costing Sega millions of dollars in lost resources and revenue. Sega's handheld efforts (Game Gear, Nomad) and its educational venture (Pico) were going nowhere fast. Only the Saturn seemed to offer some hope of rescuing Sega's failing fortunes. It had done surprisingly well at launch in Japan, a market in which Sega had never taken the lead before. Saturn had floundered in the U.S. against the PlayStation, but there was still time for it to make a comeback. Most voices within the videogame industry agreed that 1996 would be the critical year in the second great console war. Sega still had an outside chance of winning, but only if it focused its resources instead of spreading them across multiple systems. With these and many other factors in mind concerning Sega's current financial standing and flagging fortunes, Nakayama made a fateful choice that would forever shape Sega's destiny.

In October of 1995, Nakayama made the decision to put all of Sega's eggs into one basket. Sega announced that it was canceling all of its other consumer systems and focusing exclusively on the Saturn. Sega's 32-bitter would be the company's flagship console from now on.

There is one question that has dogged Sega loyalists concerning the Saturn and its misfortunes, and it is this: did Nakayama make the right choice in backing the Saturn as Sega's sole console? The answer is not as easy as it may seem, and one must put aside the wisdom that inevitably comes with hindsight and try to see things as he saw them during that time. Sega's arcade divisions were still going strong, but its console sales were floundering against both Nintendo and Sony. That was an ever-worsening load on Sega's bank accounts that was causing the company's profit margins to begin an inexorable slide downward. Nakayama couldn't just sit around and let Sega get clobbered one piece at a time, wielding multiple systems against better financed rivals whose product lines were considerably narrower. He had to make a choice, and Saturn was the row he chose for Sega to hoe. The 32-bit market had not quite yet gained its momentum, but all the signs were there that it was coming fast. Whoever took the lead in 1996 would win the second great console war, barring none. Sega simply did not have the ready cash and company resources of a multimillion dollar international conglomerate like Sony to continue as it was doing. In order to win, it would have to focus its efforts on a minimum product base and push it for everything it was worth. Nakayama's choice was a desperate gamble, but these were desperate times, and Nakayama was a desperate man.

Nakayama's decision to cancel all other Sega consoles in favor of Saturn was the best thing that could have ever happened to Sega in its Japanese homeland. Sega had never been strong there until Saturn made its debut. All of a sudden, Sega of Japan had the number one console on the market and held a healthy lead over all competitors. Sony and its PlayStation were catching up fast; however, Sega of Japan would now be able to commit its full resources in order to attempt to stem the Sony tide. Most objective industry observers in Japan and a fair number of Western ones credit Nakayama's choice with saving the Saturn in Japan. Thanks to his decision, Saturn probably got an extra year of life in its home market that it might not have otherwise obtained. Nakayama's move ensured that Sega would retain its market lead long enough to gain a newfound measure of respect in its homeland and build a legacy in Saturn software it might not have had under other circumstances.

What of the United States, the single most profitable market in the worldwide videogame industry and the only one that really mattered in the second great console war? Almost every U.S. market expert agrees that Nakayama's decision was the wrong one for the wrong market. Sega had quite a public reputation to uphold. It enjoyed a unique relationship with older gamers that Sega of America president Tom Kalinske and his staff had been diligently building for years. These were the ones who had grown up playing videogames and now had the resources to buy their own systems and software instead of looking to their parents for cash. These were the gamers who would form the backbone of the 32-bit console niche in the U.S. market, and it was this group that Sega of America had courted so long in an effort to win their confidence. They were ready for Sega's nextgen system, provided it was a real console and not another knock-off like the 32X. Even so, many of them had a considerable investment in their Genesis and were quite prepared to keep spending money on it until the Saturn software situation firmed up. Nakayama's choice effectively pulled the rug out from under its American customer base. They had just gone through two years of new and expensive Sega add-ons and peripherals for Genesis, and now there would be no way for them to continue supporting their favorite Sega console. Those who simply could not afford the high-priced Saturn and what few games could be found were quite willing to spend their money on new Genesis titles for another year, but now they would never get the chance. Nakayama's move forced the hand of American gamers nationwide. They wanted the best bang for their buck, but Sega seemed no longer willing to provide it. Instead, it was breaking its promises and commitments to its customer base seemingly as fast as it made them. It had said it would continue to support Genesis, but now it had changed its mind seemingly at whim, with no thought as to how the Sega faithful felt. "Those S.O.B.s at Sega!" many U.S. Sega fans began to say to themselves. "They're going to pay for being such arrogant asses." It was a growing crisis in vendor-consumer relations that would come to its head soon enough.

It should also be noted that Nakayama's choice was an unmitigated disaster for Sega's fortunes in Europe. Ever since it began its Western export operations, Europe had been Sega's for the taking. First the 8-bit Master System and then the 16-bit MegaDrive had ruled the videogame roost in the Old World, and Sega's legacy was as venerated among videogamers as the Amiga was among computer hackers. Nakayama's abrupt move came at the worst possible time for Sega of Europe, for Saturn had just been launched and still had not yet established its own following in Sega's traditional Western stronghold. Old-school Sega loyalists from across the continent felt like they had been stabbed in the back, and they let it be known by refusing en masse to take up the Saturn in place of their older consoles. Instead, they stuck to their MegaDrives, or in some extreme cases their hoary Master Systems, and the Saturn quickly fell of the radar in Europe. It has been estimated that only a million or so Saturn's were sold in the whole of Europe from 1995 to 1998, the official lifespan of the system over there, and that was because most gamers simply refused to buy it. Instead, they went to other vendors who seemed less arrogant and pricey, and the seemingly inexpensive Sony PlayStation with its bevy of fairly affordable games was all the excuse they needed to jump ship. Sega lost the European market thanks to Nakayama's choice, and would never retake the whole of the continent again so long as Sega remained in the console business.

It must be said in all fairness that Sega's Western branches knew what was happening, could see what was coming, and did everything they could to sway Nakayama from his chosen course of action. Sega of America president Tom Kalinske was highly vocal in his objections during the increasingly frequent visits that Nakayama was now beginning to make with him. Nakayama simply overruled him time and again. Lesser Sega of America executives also found the opportunity to speak out in their opposition, such as Paul Rioux and Michael Lantham. Nakayama ignored them. Even Shinobu Toyoda, Nakayama's own hand-picked American market liaison, who knew that market better than any of Sega's Japanese executives, could see what was happening and managed to work up enough nerve to question his superior's decision. His opinion was cast aside just like those of his Western colleagues, because Sega of America was no longer in control of its own destiny. The situation was practically identical over in Europe, although the names of the players were different. Sega of Japan was now in effect running the company, and it was they who were going to call the shots on anything and everything Saturn. As for the rest of Sega, it could go screw itself. The West was making Sega lose money. Only Sega of Japan, in its own eyes, had the product and vision to save the corporation from financial ruin. Michael Lantham would later recount his memory of those days for Steven Kent, who recorded his recollection in his book The First Quarter: A 25-Year History of Video Games.

Tom knew that the 16-bit business was going to be there. Paul Rioux knew it and so did Shinobu Toyoda, but Japan refused to believe. They were convinced [it was not], and they would not listen to Tom. They would not listen to Paul. They would listen to no one and they absolutely bullied the U.S. into launching the system. It very much compromised their ability to keep the 16-bit business.

Hindsight is a dreadfully easy science once all the facts are known, and now is the time to share the final course in this bitter meal. Most videogame historians have noted that Tom Kalinske and his colleagues were absolutely right in their assumptions the entire time. The 16-bit market was still there and remained viable for another full year while the 32-bit market came up to steam. By throwing out the baby with the bathwater and abandoning the Genesis/MegaDrive in the West, Nakayama ensured the very subsequent financial ruin of Sega that he was trying so desperately to avoid. Nakayama didn't have to cancel all of Sega's systems like he did. He could have kept Sega's 16-bit software ventures going for one more year, farming out the hardware side to the many third parties that were already expressing interest. The money that could have been made from another year's worth of 16-bit videogame sales and support would have gone a long way towards making up the huge operating deficits that Saturn was already incurring on Sega. Instead, Nintendo got the 16-bit market all to itself for another year and wound up outselling both Sega and Sony by the end of 1996. Also, the friendly relationship that Sega had long enjoyed with its Western customer base would have been easily saved and more gently shepherded towards the Saturn than it was. Nakayama could have saved Sega a lot of subsequent heartache by reining in the culture of corporate arrogance that was by now quite prevalent at Sega of Japan, but it was too late. He had the dreaded disease himself, and the only proven cure for such an affliction is the school of economic hard knocks. Alas, we will never know what might have been had Nakayama chosen differently. History is the tale of what was, not what might have been. Nakayama made his choice, and by his decision Saturn became Sega's sole home videogame console. It was on that choice that Sega's fortunes would subsequently turn.

The fateful year of 1996, the one would indicate who was going to win the second great console war, got off to an ominous start for Sega. The numbers were now in from the U.S. holiday shopping season the year before, with the Sony PlayStation outselling the Sega Saturn by a factor of about 1.5-to-1. What was more disturbing was the software numbers, where Sega had hoped to make up its high Saturn development costs. Sega software simply wasn't selling, leastways not in the brisk manner that Sony's was moving. To make matters even worse, second and third quarter earnings results for fiscal year 1995 were now in, and they too were low. Instead of the US$163 million that Sega had originally projected, Sega actually earned only US$110 million during that period. It was still a profit, true, but a downward trend in Sega's financial statements was beginning to manifest itself. Sega was going to have to sell a lot of Saturn's and even more Saturn software in order to reverse that trend before it took root and grew. Nevertheless, Sega of Japan was smug in its belief that it could meet the challenge. It had the machine. It had the tools. It had the brains. Most of all, it had its own arrogant self-confidence. "This dent that PlayStation is making in Saturn is just a temporary thing," they assured themselves. "Once the true power of the Saturn is unleashed on the gaming public, they will see the light."

The months leading up to the next E3 industry trade show saw a bevy of Saturn announcements began to fly thick and fast from Sega. Chief among these was the release of an improved Saturn SDK to videogame developers, featuring the brand-new Sega Graphics Library v2.0. For the first time, Saturn developers would be able to begin tapping the hidden powers of the console in earnest, causing many a committed Saturn licensee to salivate at the prospect. Sega also announced a swarm of Saturn titles for impending release, as it had no intention of being reduced to playing catch-up to Sony and its PlayStation library. Some of the promised titles in the new Saturn lineup for 1996 might ring a bell: Marvel Super Heroes, Daytona USA, Tomb Raider, Enemy Zero, Three Dirty Dwarves, Gun Griffon, and so on. Chief among these was Yuji Naka's first videogame since his Sonic days on the Genesis - NiGHTS: Into Dreams, a 3D platformer that held a lot of promise for the apple in Sega's eye. "We are completely convinced that this title will do for Sega Saturn what Sonic the Hedgehog did for Genesis," said Tom Kalinske at a press briefing on behalf of his Japanese masters, but even he still had enough spark left at this point to be genuinely excited about Naka's latest creation. Sega also made history in announcing that Saturn would be the first Internet-capable console on the market. The opening of the Internet to the general public the previous year, which until then had long been the domain of government and academic types, caused a sudden surge of interest in long-distance, multi-user networking among the Internet savvy. Multiplayer online gaming was the Holy Grail of this crowd, and Saturn would be the first console to tap this previously nonexistent market. One final announcement that went largely overlooked at the time was that Sega was forming a new internal subsidiary in order to port popular Saturn titles to personal computers. Sega of Japan was taking no chances - it wanted all the market share it could get.

One of the most glaring hardware deficiencies of the Saturn at this time and one that had been quickly seized upon by its detractors was the lack of dedicated MPEG decoding hardware. PlayStation had a rudimentary form of this built into the system, permitting playback of MPEG-quality streaming video direct from CDs, and its supporters constantly harped on the lack of such support in the Saturn. Most programmers at the time knew that Saturn had enough horsepower to perform MPEG decoding through software alone, but this mattered little to those who were always looking to find ways of slamming Sega's system - and these were ever-growing in number. It got to the point where Sega of Japan had enough and revealed plans for an add-on hardware MPEG decoder for Saturn. It had been planned ever since the design of the system was finalized back in 1994, but at least the news caused the pundits to cease their growing Sega sarcasm ... if only for a while.

By the end of March, Sega of Japan had succeeded in coming up with a cheaper version of the Saturn, integrating most of system firmware onto a single ASIC chip and thus easing the console's excessive production costs. Rumors began to run rampant that Sega would eventually lower the cost of the system to US$200. The actual drop was to US$300, which was not as much as U.S. gamers would have liked; nevertheless, sluggish console sales began to pick up. Some retailers noted that their Saturn sales had increased by as much as 50% as a direct result of the price drop. This pleased Sega of Japan, and it confidently predicted that it would sell 5 million of the new Saturn's by the end of the year and had already sold a half-million Saturn's in the troubled U.S. market. Sega's claims were met with hoots and jeers by most industry observers, who calmly pointed out that Saturn's software base had yet to catch up to PlayStation despite the announcements and there were still an awful lot of Saturn consoles sitting unsold on store shelves. "Besides," they added, "your claims are for consoles sold to retailers. Sony has sold 1 million PlayStations to date, and all of those are sitting in customer's homes. Yours aren't." As might be expected, Sega of Japan ignored them and went right on, full steam ahead, with its plans. Things seemed to be going so well that by May, Nakayama was confidently predicting that Sega would reassert its market presence and end the year with a ¥34 billion (US$330 million) net profit.

Perhaps the one fly in the ointment was the absence of more big-name third-party developers in the Saturn fold. Oh, there were plenty to be sure - Altus, Capcom, Eidos, GameArts, Working Designs, and so on - but two whose names were synonymous with software excellence had refused to back Sega's latest console venture. Namco had been one of the original MegaDrive third-party developers, but this time Namco CEO Masaya Nakamura had instructed his subordinates not to support the Saturn. It was his judgment that Sony and its PlayStation were better for Namco than Sega and its Saturn, which goes a long way to explain why Namco had signed on as one of Sony's first third party developers. Their presence was sorely missed over in the Sega fold, where Namco's best arcade conversions (now appearing on PlayStation) would have been right at home next to Sega's own. The other prominent holdout was SquareSoft, who had almost single handedly brought the RPG genre out of the shadows with its Final Fantasy franchise. Square was still under contract to Nintendo, but franchise creator Hironobu Sakaguchi was already fretting over the lack of storage space in SNES videogame cartridges. Even as Square was readying its final SNES RPG for market, Super Mario RPG, Sakaguchi convinced his superiors at SquareSoft that only the CD-ROM format could give him the kind of artistic freedom he needed, and that the Sony PlayStation was the best of the new 32-bit consoles to realize his gaming visions. Square's defection would forever earn them Nintendo's deepest ire, but it was a heaven-sent opportunity for Sony upon which they quickly seized. As for Sega? It was never seriously in the running to get a Square-produced RPG on the Saturn, but Square's eventual defection to Sony would eventually spur its own efforts and that of its licensees in developing Saturn RPGs. Theirs was an effort that would result some two years later in the greatest single Saturn RPG ever created and one of the all-time RPG gaming classics ... but let us not get too far ahead of ourselves, shall we?

Despite all of the activity on Sega's part, though, the PlayStation continued in its gradual eclipsing of the Saturn. By the end of April 1996, Sony could rightfully claim to have sold through to customers over 7 million consoles worldwide. Sega's own Saturn numbers were nowhere close to that figure save in Japan, where its 5 million units (sold to retailers, mind you) kept it barely ahead in Japan as far as the 32-bit console race was concerned over there. It was with its recent market successes firmly in hand that Sony decided it was time to give Sega another serving of humble pie. It was also time for Sony to deal with Nintendo, for the sleeping giant was finally braving its way into the turbulent nextgen waters. The 1996 E3 would be another industry trade show that few who participated would ever forget.

The Second Annual Electronic Entertainment Expo (E3) was held 16-18 May 1996 in Los Angeles, California. Once again, the setting was the Biltmore. This time, though, there would be a major difference. Instead of keynote addresses, each participating vendor would hold its own conference, and there would also be a series of general conferences in which everybody could participate. No repeating of Sony's upstaging of Sega the previous year on the very first day of the show. Once again, the major players in the videogame industry were prepared to do battle despite the change in format. Each held what it believed to be its ace up its sleeve and none of them were determined to be the odd man out. E3 1995 had shown who was going to lead the nextgen console revolution. E3 1996 would show who was going to take it for their very own.

First off the bat was Nintendo, whose long-delayed N64, formerly known as Project Reality, was finally ready to do battle with the other big boys. The console had made an impressive debut in Japan a mere month before, and Nintendo was taking no chances with the now-volatile U.S. market. True to form, they held their own exclusive press conference the day before E3 officially started, at which Nintendo of America chairman Howard Lincoln officially unveiled his company's newest console. Also available were working copies of Shigeru Miyamoto's Super Mario 64, LucasArt's Star Wars: Shadows of the Empire, Iguana's Turok: Dinosaur Hunter, and Nintendo's own Wave Race 64, among others. All had graphics that trounced the best that either Sega and Sony could offer, and Nintendo's newest Mario game was everything its fans had demanded and more - except it was in full-blown 3D this time around. Nintendo of America vice president Peter Main went on to give a lecture about the future of the U.S. videogame market as viewed through his company's eyes. Right now, Sony controlled 80% of the nextgen market as opposed to Sega's 20%. Those numbers would change significantly once the US$250 N64 entered the fray on 30 September. By the end of 1997, Main claimed, Nintendo and its N64 would once again dominate the U.S. market with a hefty 53% share, leaving Sony in second place with only 39%. The remaining 8%? Sega, or what would be left of it after Nintendo cleaned its clock. "Sega is not much of a threat," Main is reported to have laughed in response to a reporter's question. As for what was left of Virtual Boy, it was quietly tucked away in a corner, soon to be relegated to the scrapheap of videogame history.

Sega was not about to take this sitting down, and it had long know of Nintendo's plans for its new console. It had the second largest booth of the show (next to Nintendo's, of course), and a half-dozen or so new Sega software titles were prominently featured for E3. The first was, of course, Yuji Naka's NiGHTS: Into Dreams for Saturn, with working copies on display in Sega's booth available for anyone who stopped by. Visitors were impressed by Naka's largely successful attempt at pulling off a pseudo-3D platformer on the notoriously difficult-to-program Saturn, and word soon spread that NiGHTS was going to be a must-have title for Saturn owners. Next up was the Virtua Fighter franchise, soon to debut in its third incarnation in the arcades. The new VF3 promised to shatter all records for polygon counts, and the early alpha shown running on the new Sega Model 3 arcade board at E3 was the show-stopper as far as the 3D gaming crowd was concerned. Rumors of a Saturn port began in earnest as soon as the show started and would continue for many months, but in the meantime Sega would have the chan-style Virtua Fighter Kids on Saturn for those who took their fighting games with some humor in stride. Another 3D arcade game that also won praise at the Sega booth was the mech fighter Virtua On, which according to reports featured some of the smoothest animation seen to date in a 3D videogame. Sega's third party developers were also present, fielding working copies of over a dozen new Saturn games in almost every software category, but it was yet another Sega title that wound up on the lips of all those who left the Sega booth during the show. Featured prominently on a large sign inside the Sega booth and running on several pre-rendered video sequences was the game that Sega fans had been praying and hoping beyond hope would show up on Saturn before long. "What was it?" you ask? Sonic X-Treme - the very first 3D Sonic game scheduled for release by Sonic Team on the Saturn. The all new 3D characters and environments were impressive while at the same time staying true to Sonic's colorful roots on the Genesis. News about Sonic X-Treme almost made folks forget about the other two Sonic offerings that Sega was also fielding - Sonic 3D Blast for Genesis and Sonic: The Fighters for the arcades.

This time, Sony had not one but two aces up its sleeve, one each aimed at Nintendo and Sega. Sony executive vice president Jim Whims kicked off Sony's presence at E3 by promptly announcing that the price of the PlayStation would be reduced again to a mere US$200. While chiefly aimed at Nintendo and the N64, who were caught completely off-guard just as Sega had been the year before, the pricing announcement also sent Sega reeling and feeling for its bank book. That was not all. Sony had only half the booth space of Sega, but they had about three times as many playable games on display, and one of these was aimed directly at Sega's heart. Naughty Dog's Crash Bandicoot was a direct rip-off of Sega's beloved Sonic franchise, right down to the impatience and cocky attitude of its marsupial hero. Critics charged the game with being too derivative, in no way comparing to Super Mario 64's obvious technical excellence or the Sonic franchise's tradition of outstanding gameplay, yet Sony's new 3D platformer proved to be one of the hits of the show. It also had abstract, artsy graphics similar to Sonic but easily matching the best that Nintendo could currently offer on the N64. Together with its new lower price point and expanded software base, Sony was in an even better position to strut its wares than it had been the year before. This time, they were a proven commodity. This time, the industry was giving them the respect they were long overdue, and they let their rivals know it posthaste. On the third day of E3, Sega spokeswoman Angela Edwards was carrying signs trumpeting Sega's recent US$300 price adjustment for the Saturn when she was approached by a Sony employee. He looked her signs and sneered, "You're pathetic!"

So who won the battle of E3 1996? Sony ... yet again.

Sega had no choice but to drop the price of the Saturn to US$200 before the end of E3 in order to meet Sony's price. It was a reduction that they simply could not afford. Sega would now begin to seriously hemorrhage cash as it fought just to keep pace with its better financed and resourced rival. As for Nakayama, he did not really care what Nintendo was doing nor could he have afforded to do anything about it even if he could have. Sony was the one wiping the mat with Sega, not Nintendo. Perhaps he gained some small solace in the realization that Sony's "calculated game of chicken," as industry reporter Steven Kent so aptly put it, would also stop even ambitious Nintendo in its tracks before it ever became a threat. We may never know. What we do know is that Nakayama felt a radical change in Sega marketing tactics was now required.

On 30 May 1996, Sega of America officially booted the marketing firm of Goodby, Berlin, and Silverstein - creators of Sega's famous "Sega scream" ad campaign - on the direct orders of Sega CEO Hayao Nakayama. With them would also go the Sega scream itself despite Sega's calm assertions to the contrary. In its place would come a new campaign promoting a kinder, gentler Sega - one more family-friendly and less prone to its antagonistic stance of old. To say longtime Sega fans were horrified by the change would be an understatement. To them, it seemed that Sega had deliberately turned its back on the rebellious image on which the company had proudly stood for the past four years. They had no way of knowing that it was not Sega of America's fault, that it had no say in the matter, that it was receiving its marching orders from the Land of the Rising Sun. All they knew was that the old Sega was gone. In its place was a new, more arrogant Sega with a track record of broken promises and overpriced, under supported hardware. Is it any wonder that even more former Sega gamers began bolting the ranks? It was yet another nail that Sega of Japan was remorselessly driving into in the Sega coffin - and worst of all, it either didn't know or didn't care. It knew what was best for the U.S. market, and those stupid Americans had better come to their senses pretty quick.

By this time, Tom Kalinske had finally reached the limits of his patience and endurance with Sega of Japan. Reduced to a constantly overruled figurehead, a mere shadow of the proud corporate spokesman that had make Sega of America into the success story that it became, he no longer cared what was going to happen. He had no say, so why should he? He knew what needed to be done in order to give Saturn a fighting chance in the U.S., but Sega of Japan would not let him do it. Instead, they heaped upon him all of the ire and blame for Sega's past and present problems, even though he actually had very little to do with most of them. So Sega of Japan though it knew what was best for North America? Fine. They would have to learn their lessons the hard way, just as he had done with Mattel years before. He would not be around to become a victim of the train wreck that he knew was inevitably approaching. Already rumors were rampant in the industry that he was getting ready to move on to better things. It was just a question of the date.

On 15 July 1996, Sega of America president Tom Kalinske officially tendered his resignation, and most of his staff at Sega of America would soon follow him out the door. The news sent shock waves across the industry, and it apparently caused a few within Sega itself. No less a figure than company founder David Rosen followed suit the next day in support of Kalinske, resigning his long-time chairmanship of Sega of America as his way of expressing his dismay at the way Kalinske and his staff had been treated. As for Sega CEO Hayao Nakayama, he acknowledged the move his longtime colleague and friend by resigning his own position as co-chairman of Sega of America, going back to directly managing Sega of Japan's affairs. Replacing Kalinske as Sega of America president would be one Bernie Stolar, one of the oldest and most controversial executives in the videogame industry and fresh from a royal row with former employer Sony. Assuming the chairmanship of Sega of America would be the irrepressible Shoichiro Irimajiri, a former Honda CEO and longtime automobile industry executive who had signed on with Sega only three years before. "We are sorry to see Tom leave Sega, but he has left us in a strong position in the marketplace," Irimajiri would later say to reporters. "I am excited to be taking a more active role at Sega of America now. We're looking forward to an extremely favorable holiday season." Kalinske's opinion was quite different. "Nobody could have succeeded in marketing that thing," Kalinske later confided to the Wall Street Journal about the Saturn. By September, Kalinske had also resigned his largely ceremonial seat on the board of directors and severed all ties with Sega for good.

It was the first major shakeup in Sega's corporate structure in years. It would not be the last.

On to Part 2 . . .

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