The SEGA/CSK Years 1983-2001

I've thought about trying to do a Editorial on SEGA's CSK years 1983-2001, their current SEGASammy years 2004-Present and Orbi 2012-Beyond.



I guess I should start out this way. Well in September 1983, about a year after introducing their first home console SG-1000 which was basically the same chipset as the Coleco Vision, SEGA Enterprises annouced a $4 billion($40 if you adjust inflation) partnership with a Japanese investment subisdary of Paramount Pictures/Gulf Western called "CSK Enterprises, for overseas expansion of their core business, gaming and arcade amusements. With this investment, SEGA opened up arcades,3rd party software distrubution as well as an American division. In the middle of 1984, namely the great North American Gaming Market Crash. SEGA redesigned and updated their SG-1000 CPU with enhanced sprites and decided to call the design SEGA SG-1000 Mark II as a way to help the console compete against the merging Famicom: 

http://www.retrogamingconsoles.com/cons ... a-sg-1000/



In September 1984, SEGA/CSK assembled a R&D Amusement Team christened "Away-27" Consisting of 27 different male Japanese engineers for the development of project "Master System" further supercharging their already modestly popluar 8-CPU line SG-1000 designed with a "Z-80 Zilcon" Proccessor. SEGA named the Machine "Mark III" and launched it in Japan on July 12, 1985 3 months before Nintendo launched the Famicom in an American form called "Nintendo Entertainment System".

Mark III fared well, but it didn't have the market share Nintendo had.(They litterally ruled the 8-bit market with an Iron Fist.) To make the machine look like a great alternative to the NES, SEGA resdesigned Mark III and trademarked its codename for the overseas markets. Sega Master System was released in America on September 18, 1986 and in Europe in February 1987, because Nintendo held all of 3rd party software developers under strict contract From: February 1986 to December 1988, NES developers were only allowed to develop for Nintendo and were limited to publishing only a half dozen titles a year, SMS was robbed of the wealthy 3rd party support it deserved. The silver lining though, is that SEGA’s more technically superior 8 bit machine proved to be a great alternative to Nintendo and compared to the dated laughable Atari 7800 it was a good investment. SEGA’s loophole around Nintendo of America’s stingy contract was that most 3rd party publishers permitted SEGA to code and simply port a lot of NES hit titles over to Sega Master System.

In October 1986, facing more mounting competition in the 8 bit market with beloved Japanese Computer tech giant NEC jumping in the market with its dual 8-bit monster “PC Engine”, SEGA/CSK was ready to abandon the 8-bit market and was looking ahead into the 16-bit era. Away 27’s NEW cutting edge 16-bit arcade machine “System 16” needed a home counterpart. SEGA was lucky to find partners like Keyboard mogul Yamaha and cellphone pioneer Motorola in helping them acquire very cheap 16-bit hardware for a new home computer game console project codenamed “Mega Tech” and with strong hit 1st party titles like Phantasy Star, Girl’s Garden and Alex Kidd, SEGA felt confidence in its investment into the more technically superior 16 –bit line.


SEGA realizing the cheap conversion of its System 16 board, finally christened the console “Mega Drive” in 1988, it was launched in Japan on November 17, 1988 6 days after Super Mario Bros. 3 was released. And 1 year before it reached North American shores.

Sega of America still new saw a marketing future of their own with “Mega Drive” and wanted their own more marketable name for it. They decided this would be their hopeful beginning of console dominance and conceived the can’t miss, biblical moniker “Genesis”. Genesis was marketed as a true arcade console. (SEGA’s Arcade revenue remained strong until 1995) and SOA boasted its power over NES and Turbo Graphix 16. Genesis was released on September 1, 1989 , the console debut was very strong, selling 300,000 units its first week of availability. Nintendo decided to counter by awarding Americans the ability to play and own Super Mario Bros. 3 ahead of its worldwide February 1990 launch by launching it in the US time for the holiday season of 1989. The plan propelled the NES back to the top.

After the phenomenal success of Mario 3, Sega of America realized the company needed a mascot, meanwhile in Japan, Away 27 was very busy in R&D , first they developed the world’s first CD-ROM based arcade machine “System 24” and planned on developing a Laser Disc player/hybrid for the Mega Drive with the help of Pioneer. The “Mega LD” was planned to be a LD add on for Mega Drive. 

Early prototyping actually started in the Summer of 1989, but ballooning budgets, 1st party mismanagement as well as a project overpricing on manufacturing cost led to the project’s cancellation. And so in August 1990, Project” Mega LD” was scrapped, but not before SEGA authorized Pioneer to begin designing a fierce contender to the CD-I from what was left of the Mega CD project and just a year later with NEC’s R&D beginning to plan a exit from the gaming market authorized Pioneer to use PC Engine emulation.

And so by Summer 1990, SEGA found themselves back to square one. Something had to be done fast, the solution: Shift all focus back to System 24 as SEGA begin to learn the cheap,user friendly benefits of CD-ROM . As a cost cutting measure, Away-27 watered down the processing and sprite performance of System 24 with the newly dubbed “Mega CD” chipset design and rushed to JVC for access to dirt cheap CD-ROM tech and with the help of Sony as an OEM parts contractor(who at the time was also the OEM provider as a partner for Nintendo’s NEW Super Famicom console) got the “Mega CD” on wheels.

Meanwhile in San Francisco,CA Sonic Team’s young ambitious founder and Osaka tech student 24 year old Yuji Naka, his partner and friend 25 year old Naota Oshima and game storyboard writer Yashushi Yamaguchi(then 23) had been assembled top secretly by Sega to begin aggressive R&D for a company mascot , with the help of English speaking Americans at Sega Technical Institute who helped guide the 3 Japanese exchange students they all came up with a can’t miss concept: “A roly-poly blue rodent Hedgehog” dubbed “Sonic” after rejecting bizarre concepts for a mascot like “ugly Bulldog” to a “retarded American Wolf” idea all the way to a weird 1920s-esce “Splats The Bunny” concept.

Development of the game “Project Needlemouse” was swift, brief and a blast. The game was said to begin development in September 1990 and was completed in April 1991. At CES 1991, SEGA of America rolled out their new weapon that would finally dethrone the NES and give Mario the ultimate challenge; Sonic The Hedgehog. The game hit stores in the early summer just as the Genesis was beginning its second generation of its life and just as Nintendo begin test marketing the new Super Nintendo Entertainment System.

The rest, of course….is history.

Back in Japan, SEGA rolled out the surprise “Mega CD” attachment for Mega Drive, SEGA was hoping that the new hybrid would woo Japanese consumers away from the PC Engine who was messing with Sega’s console market share. Mega CD did just that when it launched in November 1991. Away 27 also soon found themselves with a lot of load to deal with, SEGA/CSK had struck an investment deal with Baltimore, Maryland based Defense Contractor Lockheed Martin with an estimated $1.2 billion dollar investment deal($4.5 if you adjust inflation) to provide new next generation graphical and technical gaming technology for SEGA’s Amusement department. LM’s contracted chipsets contained special polygon 3D technology called “Quadlateral” which had been used by NASA in the late 1980s and Away-27 sought out a successor to the long running successful System 16 arcade line.

In May of 1992, From all these chipsets came a design of three different 32-bit machines, 2D only 256,000 sprite processor dubbed “System 32” , primitive but still cutting edge at the time 3D polygon processor dubbed “Model 1” and the superior true 3D machine dubbed “Model 2”. From the 3, SEGA had the option to choose which they felt would be Mega Drive’s true successor. For a brief time, Away-27 focused primarily on “System 32” so much that they developed a Sonic trackball arcade game with the introduction of two prototype characters “Mighty The Armadillo” and “Ray The Flying Squirrel” and begin very brief development and design of “GigaDrive” a cartridge based 2D machine that SEGA originally planned on calling the “Sega Mars”(SEGA named all chipsets after the middle planets of the universe since the technology had been used by NASA.)

Soon after, The immense success of Sonic was recognized by SEGA and the contestant cries for a sequel were heard loud and clear. Sega of Japan asked Yashushi Yamaguchi to create a cute and lovable sidekick for Sonic, Ray was originally considered as a new friend for Sonic, was rejected and discarded. So Yamaguchi hearing about his favorite Japanese myths about magical foxes that grow Tails every millennium created a two tailed kid brother sidekick he christened “Miles Prower”. Yuji Naka had grown accustomed to STI, so much that he moved to California and devoted his time and energy to them.

Sonic 2’s expectations were extreme, and Sonic Team knew that so they pitched in to quickly and hurridly prep the game for the holiday season of 1992. STI had actually developed a beta of the game, but it was somehow hacked and Sonic Team had to quickly design the game as quick as possible. SEGA wanted the game not to miss the 1992 Christmas season since they were confident it would do for them what Super Mario Bros. 3 had done for Nintendo three years earlier. SEGA of Japan begin shifting all of its entire focus to its 32-bit line, as they heard reports of NEC prepping a 32-bit machine of their own and about the 3DO. Most of its management was sure that weak 3D and mostly 2D was the way to go, after all they had learned that 3DO wasn’t that capable of 3D as initially thought. So, SEGA of Japan sold off all of Mega CD’s patents to Sega of America who was ready to release the hybrid themselves, confident that SEGA of America’s newly formed R&D department “Sega Amusements USA” would handle SEGA CD’s marketing with the right judgment. But SOA was too immersed in the FMV multimedia craze so instead of marketing SEGA CD as stand alone hybrid alternative to Genesis, they marketed it alongside 3DO and the disastrous CD-I. SOA had also purchased patents from the abandoned VHS console project from 1988 developed by Hasbro and Radio Shack “NEMO” and as a result most of the FMV games developed for it ended up on the SEGA CD.

Sonic 2 and SEGA CD launched on November 24, 1992. Sonic 2 was a massive hit and helped paved the way for Sonic to reach across the board as a serious and recognizable mascot. Yuji Naka was also finally convinced to leave SEGA of Japan as SOA offered him a large salary for handling all executive production of all STI Genesis projects. SEGA CD was a hit but not a huge success it would take most of 1993 for it to resonate.

Nintendo and Sony had started a CD-add on project together for Super Famicom/Super NES in 1991 called “Nintendo Disc” or “Super Famicom CD” or “Super CD”. Sony wanted most creative control of the 2nd party side of the project so much that they codenamed it the “ Playstation” The partnership was going fine until 1993. Nintendo had become convinced a partnership with Philips a NON Japanese and Russian electronic was the way to go to get the project done faster. Sony despised their old partner, they knew CD-I and Nintendo associating its name with it was a terrible idea. And so in May 1993, Nintendo booted Sony off the project, only then soon to learn that Philips had no interest in helping develop the CD project but instead was using Nintendo, trying to use their name to sell the godwaful CD-I. By the time Nintendo realized this and tried to make amends with Sony, they were too late. Sony took their patents from the project and decided to turn it into their OWN console feeling betrayed and frustrated at Nintendo.

After Sonic 2’s success, in February 1993, SEGA FINALLY gave Away 27 the green light to begin development of a Model 1 based console it was codenamed “Project Aurora” and Hayao Nakayama SEGA’s CEO insisted that nobody outside of SEGA of Japan know of its existence. Sega Amusements USA”works was not notified and they themselves begin to learn of 3DO and became quite fearful. About 5 months of swift development of “Aurora” which was to be cartridge based, capable of 300,000 polygons and would have been slightly weaker than Playstation. The console was to be named “SEGA Jupiter”. In the middle of 1993, SEGA also learned about a Nintendo Super NES successor codenamed “Reality or Atlantis, soon after 3DO was announced, SA USA scrambled for information and knowledge about Genesis/MD’s successor. 

Since Sega of Japan was hush hush and since Tom Kalinkse SOA’s COO reported “I was told a more technically superior system to 3DO is in the works, but I have no idea what it is, nor do I have a single clue what exactly is going on behind its development”. SA USA then secretly exported System 32 boards over to the US and from there learned of “GigaDrive/Mars” seeking out their own design of the chipset. Sega Amusements USA had also looked into helping SOA expand the successful 16-bit market in America, and also designed their own version of V-tech dubbed the “PICO”. Ideas were plenty for a MARS design, then in June 1993, someone at SA USA designed a cartridge attachment to the Genesis literally drawn up on a Napkin with a pencil. 

SEGA of Japan entered into JAMMA 1993 in August with lots of optimism about “Aurora/Jupiter” and its arcade counterpart Model 1 and the phenomenally powerful Model 2. Model 1 turned out NOT to be the talk of the town, Japanese amusement consumers saw Model 1 as weak, lousy, primitive and technically inferior to other arcade manufacturers although they were wowed by Model 1’s flagship game “Virtua Fighter”. The spectators were impressed with Model 2 though and sold on its technology. And so, orders were soon given to junk Jupiter’s chipset and start work on a Model 2 based design finally dubbed “Saturn” but inexpensive cheap full Model 2 powered parts were a little harder to find and remaining in cartridge form made Saturn look more low budget than 3DO. The solution was to simply use off-the-self, run of the mill watered down Model 2 components that split Model 2’s power in half. Also in a effort to make System 32 style 2D ports easy as pie, SEGA assembled a dual 32-bit Hitachi Super H design and design 2 core 3D engines that like I said split Model 2’s power in half pushing an average of 500,000 polygons per second. 


After the Saturn design that SEGA had chosen received a CD ROM format, SEGA of Japan finalized its chipset in November 1993 but soon after they received a rude awakening: On December 31, 1993, Sony announced the formation of a gaming hardware and software division: Sony Computer Entertainment International and publicly confirmed that they were developing their own CD based console “Playstation” or “PSX”. When Away-27 and Hayao Nakayama learned of its specs a stand alone 3D polygon machine that used a Japanese based 3D engine called “Trilateral” and that the machine was capable of processing simple looking textures and backgrounds, they begin to regret not putting enough effort into finding a Model 2 chipset that was arcade perfect and became frustrated when the development kit for Saturn’s early design showed that it was very difficult just to program ROMs using the Dual Super H mechanism, that most developers could only get the single engine to run which looked inferior compared to Playstation. Nakayama had never been let down by his Away-27 staff before and for a moment he felt like he had been.
1994 kicked off with another bombshell, in January Nakayama sent both the Jupiter and “GigaDrive” patents and chipsets(not yet knowing that Sega Amusements USA had already obtained GD and System 32 chips) and gave orders for Sega of America to finalize the “Sega Jupiter” prototype and sell it as a stand alone cartridge system in time for the Holiday season of 1994, it was then that Nakayama learned of an American designed “Mars” that SA USA had codenamed “Genesis 32X” or “Sega 32X”. 


He of course HATED the idea , so much that he told Joe Miller Sega Amusements USA’ lead R&D Officer NOT to release the 32X and to immediately scrap the project. SA USA refused to listen and Nakayama begin to contemplate firing Joe Miller but instead sternly WARNED Sega of America that the idea of another Genesis attachment would prove to be disastrous and would damage the company’s image. Nakayama was so offended by 32X that he nearly considered not launching the Saturn in the US and delayed its development kit.


Away 27 tried to save face with Saturn, and succeeded somewhat. As they studied PSX, they begin to learn more about the visual superiority of Trilateral and that despite being more powerful than Playstation, Model 2’s engine simply was too different and too complex, also key 3D features, anti aliaing, flat shading,frosting,light sourcing weren’t available in Quadlateral, so they developed a solution of adding new converters and chip to Model 2 that fixed these problems called “CRX”, to aide developers into utilizing Saturn’s 3D engines, SEGA learned that selling a backup graphics cartridge with it would help the system’s processors utilize extra power and than when pushed to it limits, DID look better than PSX, Model 2 itself despite its inferiority, still was more powerful than PSX and with the right design and programming proved to outshine Playstation. SEGA of Japan begins preparing for Saturn’s Japanese launch, they couldn’t stop Sega of America from churning out the disastrous 32X nor could they stop them from downplaying the Saturn.

While SEGA/CSK was faring well financially throughout 1994, trouble was brewing. The company became more and more divided as the direction it wanted to go hardware wise. Sega of America WASN’T ready for Saturn and knew nothing about Playstation, they begin to sell themselves on their own awful idea and underestimated faithful Genesis and SEGA CD consumers, after Nintendo released a 2D rendered platformer for its now 2 generation Super NES Donkey Kong Country in the summer of 1994, Yuji Naka begin to tire of Sega of America’s mismanagement and longed to be back home in Japan, in 1993 his genius helped STI continue to make Sonic a household name, he and STI were able to reunite with Sonic Team for Sonic 3 in which SEGA wanted released halfway as an early Spring SKU, STI and Sonic Team then put energy and effort into Sonic The Hedgehog 3 splitting the game with a side project of half the game “Sonic & Knuckles” featuring the new playable character “Knuckles The Echidna” released on October 18,1994, the game was not only STI and Sonic Team’s final project together, it was also the last strong commercial hit for Sonic.
Unbeknownst to Naka, STI had secretly begin R&D on a Sonic 32X project a year earlier codenamed “Sonic Mars”. Naka had already begin testing a new game of his own he considered releasing for the “Genesis” and “SEGA CD” he nicknamed “Sonic Crackers. 


When he learned of the 32X, Naka like Nakayama DESPISED the idea and wanted no part of it. STI had wanted Naka to release the game on 32X, he refused. Away 27 then begin development of a powerful 64-bit arcade chipset “Model 3”, they considered using a single core Trilateral chipset called “System 64” but soon learned of Nintendo’s strong interest in it and yielded it over to Nintendo who swiped it up for Super NES/Super Famicom’s successor codenamed “Ultra 64”. SEGA gave into Nintendo because they discovered that “Reality” had been scrapped.


The SEGA Saturn was publicly unveiled on May 13,1994 at the Spring TGS. Japanese consumers also got a glimpse of early prototype Playstation but were sold on Saturn’s technical superiority and better more complex design. Development kits for Saturn had been sent out in Japan in February and SEGA begin its test marketing on September 23, 1994 and finally launch countryside 6 weeks later on November 5,1994, the first 3rd party titles shipped exactly two weeks later. Saturn’s launch in Japan was strong. 200,000 units were sold in 24 hours and 390,000 in just 5 days. Playstation finally launched December 3, sales were modest but Saturn sales were stronger.


Sega of America finally launched its 32X on November 1, 1994. The launch proved to be a fiasco. Most 3rd party developers were behind schedule, the unit itself was considered too expensive $180($300 if adjust inflation) most of the units were poorly manufactured, poorly built and defective. Most developers knew nothing on how to utilize System 32’s power since Skunkworks designed the 32X WITHOUT its own processor. The chips inside the unit were found to be completely incompatible with Genesis. The unit built itself was a mess and majority of its launch titles looked like piss poor watered down Genesis ports tending to look EVEN worse than Super NES. And faithful SEGA consumers were too invested in Genesis and SEGA CD to even bother. Also gamers were more excited about Saturn and Playstation and felt compelled to wait. Sega Amusements USA wasn’t done yet, Sega of America foolishy sold off Mega Drive’s patent design which allowed them to develop a portable version of the Genesis called “Nomad”. After the 32X disaster, Yuji Naka had enough and so in November 1994, he packed his bags and returned to Japan, and rejoined Sonic Team.

Tom Kalinske and his staff were complete unprepared for Saturn. They knew SEGA of Japan would have it ready for fall of 1995 and when they realized the 32X was a failure, they tried to save face with “Knuckles Chaotix” which used leftover sprites from “Sonic Crackers” since Naka had abandoned the project since he felt it was time to give Sonic a much needed break. But 32X’s fate was sealed as the game proved to be the final nail in the coffin. Kalisnke received the prototype for US NTSC Saturn in February 1995, he was not really sure how to sell the idea to 3rd party publishers who at the time had just picked up Sony Playstation prototype kits and had grown to enjoy the machine’s easy-to-program design. Sega of America heavily waived the option of launching “Sega Neptune” GigaDrive’s finalized name, but they realized it was too late. And so in May 1995, shortly after the beta Saturn begin rolling off of assembly lines 4 months ahead of its September release, Kalinske ordered the batch of Saturns to be rushed out to retailers and slapped a $400 price tag on them for price fixing and the hopes of extra profit, bad idea. Saturn’s Japanese price point was 35,200 yen($350) there was no need to overprice the machine.

The premature launch made Sega of America the laughing stock at the first ever E3 show, Sony then rolled it is price tag for Playstation’s September 9, 1995 launch of just $300 while Kalinske’s long winded smile vanished from his face. 3rd party developers were insulted by SOA’s poor management and poor decision to rush the Saturn so much that they begin to abandon SEGA. The poor US launch of Saturn dismayed Away-27. Nakayama was about ready to fire Kalisnke and SEGA/CSK begin to see its overseas revenue Amusement Arcade sales and market penetration begin to decline. SEGA/CSK entered 1996 between a rock and a hard place. But saw a silver lining: Nintendo’s newly dubbed consistently delayed “Nintendo 64” still used cartridges as a result, 3rd party publishers in Japan were turned off by the space limitation and the console proved to be even more difficult to program than Saturn. Also Model 3’s AOU debut was the talk of the town, but SEGA/CSK became more concerned about preserving Saturn’s success in Japan that they overlooked trying to fix Sega of America’s poor management,Nakayama preparing to retire FIRED Tom Kalinske and appointed a new comer former Sony Electronics head Bernard Stolar( a sad and strange irony for SEGA as Naoya Tsurumi SOJ’s VP in Marketing begin to express his doubts in hiring an employer from a rival company.) Tsurumi was far from correct as Stolar would become the entire company’s Achilles Heel.

The times for SOA got worse, Stolar was a disaster, a control freak. He forced SOA to focus heavily on its aging 16 bit market and continued to invest in all of SEGA’s other platformers even the virtually dead 32X and dying SEGA CD. Stolar personally disliked the Saturn and saw it fit to personally insult its userbase with poor investments such as poor treatment of 3rd party developers, forcing SOA not to export many sleeper hit Japanese Saturn title, and went out of his way to make sure US Saturn owners had the weakest most inferior of library titles compared to Playstation and the BRAND NEW Nintendo 64. STI had also begin to feel the sting of Stolar to the point where they completely disbanded as the “Sonic Mars now Sonic Xtreme Saturn” project was going nowhere. Mike Wallis Executive Producer and Chris Senn Lead Programmer & Chris Coffin Lead Level Designer were the last three men standing as throughout 1996, STI slowly dissolved as many of its employers were moving on from the company. 

Coffin made completing the game his life. Single handedly programming, coding the game himself, actually literally moving into the STI office building in Redwood City, CA, refusing to eat, working 12 hours a day on the game and putting his life on the line just to complete the game. Wallis felt awful watching Senn’s health decline and begin to look for loopholes in trying to finish the game. At first he contacted Yuji Naka and Sonic Team and asked them if Senn could use the engine for “Nights Into Dreams”. Naka refused and expressed his hate for the project and loathing for Stolar, in July 1996, Wallis found a Billiard style engine that made use of Saturn’s 3D engine called “Sonic Pool” programmed by Peter Morawiec a STI 3D engine designer who had been trying to get his own Sonic Saturn project on wheels, but Morawiec felt reluctant to allowing his engine to be used for an unrelated project so in September 1996 after 3 long years, Wallis finally told Bernie Stolar that the project was cancelled, that Chris can’t do it.
Meanwhile in Japan, after Managing SEGA for 30 years, Hayao Nakayama retired uneven about SEGA/CSK’s own future as a close friend of his and Hitachi Marketing Officer Soichiro Iwajiri took over operations. Iwajiri was pragmatic, he had no idea that SOA was suffering from poor management and saw it fit to make Saturn a much more appealing console to 3rd party developers, he begin R&D to help more programmers learn how to ultilize Saturn’s power and appointed Yu Suzuki AM2 Founder and Virtua Fighter creator to Head R&D software trailer. Suzuki’s team would help solve the mystery on to how to get Saturn to push FULL Model 2 visuals by training developers how to properly program Saturn’s 2 3D engines. And so as Saturn continued to thrive in Japan, SEGA of America continued to drive itself in the ground as Stolar decided the best bet to met the Holiday ’96 Sonic Quota is to port Sonic 3DBlast a European developed Sonic Genesis title to the Saturn. The game itself was left with bad reviews and poor sales.


1997 entered in with SOA struggling, SOJ trying to salvage its worsening financial situation(SEGA/CSK’s arcade revenue was disappearing and had started to feel the sting of the worldwide arcade decline in late 1994) Ironically SOJ’s intervention of Saturn’s dismal US sales by overriding Bernie Stolar’s anti-Export policy called “Five Star” helped improve Saturn sales in North America and Iwajiri begin to finally realize that Stolar was a major liaibilty to the company. So much that he begin putting together the pieces of developing Saturn’s successor and secretly gave Sega Amusements USA the choice of finding their own chipset for Saturn’s successor. He told his staff once the project was being prepped for Stateside release that Bernie Stolar would be effectively fired from SEGA. Needless to say SEGA of Japan took over Saturn’s North American distribution and marketing in early 1997, a lucky move for them since this plan helped improve Saturn and gave US gamers a reason to still believe it had life left in it. But leave it to Bernie to make things personal as he did everything he could to ruin US 3rd party relations with Sega. And so in March 1997, Away 27 finally got to work again for the first time in 3 years to begin work on Model 2’s arcade successor and Saturn’s successor. Sega Amusements USA designed their own chipset code named “Black Belt” while Away developed their more cheaply inexpensive “Katana” and Naomi chipset. Game sites and magazines had begin reporting in August of 1997 that SEGA was working on a new console that was supposed to be 64-bit but unbeknownst to them, SEGA was experimenting with 128-bit machines NOT 64. 

Sega Amusements USA Black Belt design consisted of a Intel Pentium II Klamath CPU and a 3Dfx Voo doo Graphics chip, and Panosonic DVD ROM; after being evaluated by Away 27, Soicihro Iwajiri was too scared of using a chipset that would had made the new console $300 and instead decided Away 27’s Katana design a 128 bit Microprocessor designed for Toyota and Honda EIM’s the Hitachi Super H SH-2 4 32-bit with a NEC Imagination Techologies Power VR 2 was the way to go. And so in February 1998, SEGA/CSK rejected the superior “Black Belt” chipset for the more convenient “Katana” chipset. After hurridly preparing its debut, SEGA named the new arcade board “NAOMI”(New Arcade Operation Machine Idea) and christened its console variant “Dreamcast” combining the hybrid “Broadcast” with “Dream”.


SEGA planned on rolling out Dreamcast in Japan in February 1999, the strategy was after developing their more easy to code CD ROM format which tripled the capacity of standard CD ROM they called “GD-ROM” was to launch the console in Japan at the start of 1999 ahead of Sony Playstation’s successor “PSX2” SEGA/CSK had FULL knowledge of Playstation’s successor being in development and was sure they had made the right investments. Dreamcast was displayed behind closed doors at E3 1998, but when game journalist Steve Copland foolishly reported on what he was shown and violated SEGA’s NDA by revealing to MSNBC what he saw, the cover was blown on the new system. But thankfully prior to that in January 1998, SEGA finally pulled the plug on all seven of its platformers worldwide, Genesis,SEGA CD,Sega 32X,Sega Pico and Sega Nomad and soon after Dreamcast was leaked to Sega of America, Bernie Stolar immediately made plans to abandon the Saturn as quickly as possible.
Dreamcast was ignored by the gaming press for pretty much most of the summer of 1998 and SEGA of Japan still focused energy on Saturn, but after a strong TGS, and despite healthy Saturn sales in Japan, Soichiro Iwajiri made a strange & BOLD move by announcing that Dreamcast would be available for test marketing in time for the holiday season of 1998. The machine’s sudden Black Friday 1998 release proved to be a clunker, the system suffered from mechanical problems, the 4 launch titles for it: Sonic Adventure,Pen Pen Tricelon, and Godzilla 1998 all suffered from terrible glitches and unfinished gameplay and compared to SEGA Saturn’s solid 1998 library paled in comparison. And so the Dreamcast launched was a fiasco and Japanese consumers felt insulted by SEGA’s ill advised marketing move. 1999 rolled in with complete and utter skeptics for Dreamcast as most pundits begin to feel the writing was on the wall for SEGA. Soichiro Iwajiri finally decided it was time to do something, THEY couldn’t ruin Dreamcast’s stateside launch so he immediately sent orders to Yuji Naka to fly to California to fix Sonic Adventure, told his staff Bernie Stolar would be FIRED just before the second quarter of 1999, and made calls and contacts with SEGA of America to aggressively market the Dreamcast. Sega of America begin to invest $18 million into a new advertising TV, Internet campaign called “It’s Thinking” and at E3 1999 finally begin to receive attention and hype once many game consumers and journalist begin to play Dreamcast and looked at its strong launch lineup as well as 3rd party developers stating on how user friendly its development kit was people begin to fall in love with Dreamcast but secretly wondered if SEGA had a strategy to counter Playstation 2. Finally after Dreamcast was the talk of the town at E3, SEGA of Japan FINALLY fired Bernie Stolar in June 1999 and hired former 3DO Marketing Officer Peter Moore.


But before he left, Stolar made sure bridges with large 3rd party companies were burned. EA was interested in developing Madden for Dreamcast but back in August 1998, Stolar pissed off EA telling them their franchise was inferior to SEGA Sports and that Dreamcast “didn’t need Madden” EA not supporting Dreamcast was a huge crushing blow to Sega of America.
After test marketing Dreamcast through the now defunct Hollywood Video on July 13,1999, SEGA Dreamcast was officially launched on Thursday September 9,1999 for $200. The launch proved to be very successful selling 300,000 pre orders in 24 hours and selling a total of 700,000 units its first week in America. The US version of Sonic Adventure was also a sleeper hit but DC’s main seller was its cutting edge arcade perfect port of Soul Calibur which sold over a million copies alone in 1999. Meanwhile in Japan, Iwajiri’s pragmatic behavior lead to the near complete bankruptcy of CSK. Who’s net worth had went to $40 billion in 1983 to just $3 billion in 1998 in just a 15 year period. Dreamcast Japanese sales were lackluster, which Saturn remain strong, SEGA/CSK invested a quarter billion alone into add on gimmicks like DVD player add ons,Zip Flash disc Drives,Cameras, LCD Watches, e.t.c by the fall TGS, SEGA of Japan begin to talk of becoming a mostly software company but Iwajiri had one more ace in the hole: To keep Dreamcast going and to assure SEGA doesn’t leave the hardware business immediately, SEGA/CSK talked to various companies like Mircosoft,(soon after, they learned of Mircosoft’s Xbox game system) Toshiba,Hitachi,NEC on distributing 2nd party Dreamcasts ala 3DO, this was the plan for 2000 as well as giving the Dreamcast NAOMI 2 chips which would have help DC stay strongly competitive against the upcoming Xbox and Nintendo 64 successor Dolphin which later became Gamecube, but in May 2000, Iwajiri was demoted to marketing officer and CSK’s Chief Isao Okawa took over as SEGA’s new president and CEO. His immediate agenda: turn SEGA Enterprises LTD into SEGA Corporation , make SEGA a game publisher and shutter and disband Away 27. Which is exactly what he did soon after taking over.

Although the overhype of Playstation 2 ended up being weighed down by shortages, SEGA of America was determined to save Dreamcast, and while SEGA of Japan wanted to save DC too, Okawa was ready to give up and told his company he was doing so in mid 2001. Mostly everyone else at SOJ begged and petitioned Okawa to follow Iwajiri’s plan which would have had SEGA invest $500 million out of its own pocket, but Okawa having just recently been diagnosed with Lung Cancer, just threw in towel and so in December 2001, Dreamcast ended prematurely. SEGA fans worldwide had petitioned across the globe for SEGA not to give up.

So there you have it, SEGA’s 18 year run with CSK in a nutshell.