Sometimes the reason something fails can be more informative than the reasons something succeeds. The reasons the Dreamcast failed are more informative than why it was successful because it illustrates that great games aren’t enough to win the console war. Sega designed a fantastic console, backed it with quality software, established years’ early internet-based infrastructure, and still lost the console war to Nintendo and Sony.
Console dominance is more than just the quality of software available for it.
Dreamcast launched in Japan November 1998 and North America in September 1999. The Dreamcast was Sega’s last console before they left the hardware industry. Dreamcast was a powerful console for its time; 128-bit processor, 16 MB of RAM, had built-in modem for internet based play, etc. The games for Dreamcast were incredible. Having built-in internet connectivity was revolutionary at the time. By any metric you can use to measure success as a console, Dreamcast was a successful console. Commercially, Dreamcast was a failure and resulted in Sega canceling all further hardware developments.
Dreamcast sold 10 million worldwide until it’s discontinuation in 2001. Playstation sold over 100 million. Playstation 2 sold over 150 million the year Dreamcast was canceled. These numbers showcase just how big of a fail Dreamcast was. Dreamcast failed because by the time it was released the market had already picked a winner of the console wars; Sony.
What Was Good About the Dreamcast?
Dreamcast was ahead of its time technologically. It offered internet-based gaming capabilities before internet was a standard fixture on consoles. Games like Phantasy Star Online showed that console players wanted internet-capabilities. Dreamcast offered internet multiplayer before PlayStation’s even had this feature.
Dreamcast games were fantastic. Shenmue showcased a large scale adventure game and what could be done with the current technology. Jet Set Radio showed that cel-shading wasn’t just a joke and went on to influence games for years to come. Soul Calibur was a port, but an arcade-quality port. Power Stone showed there was a market for creative multiplayer fighters. Skies of Arcadia was a great JRPG. Dreamcast had great diversity in high quality games. Dreamcast had the games that should have been enough to commercially succeed.
Dreamcast controller was well put together. Also included was the VMU (Visual Memory Unit). VMU was a small LCD screen built into the Dreamcast’s memory card. Memory card plugged into the top of the controller. Essentially this allowed the user to pull out the memory card and view information from the games while playing them. Dreamcast controllers felt great and modern.
Sega went all out with their efforts for the Dreamcast. They believed in the product and formed relationships with 3rd parties to make sure they would have quality titles. Sega supported the Dreamcast as much as any company can before launching it. From a game and marketing standpoint, Sega did everything they could to ensure the Dreamcast would succeed.
Why Did the Dreamcast Fail?
Despite all of the above, it didn’t matter. The market had already decided who would win the console wars years before Dreamcast launched. PlayStation had won the previous console cycle. Developers already liked Sony and their relationship with Nintendo. Stores were already selling PlayStation games. Parents were used to the PlayStation brand. By the time Dreamcast launched the market had already chosen.
DVD was another factor that hurt Dreamcast on launch. Playstation 2 launched with a built-in DVD drive, this was a huge deal in 2000 when DVD players were $300+. Dreamcast used GD-ROM, a proprietary medium. In hindsight, it’s obvious Sega should of included DVD functionality with Dreamcast, but at the time they were focused on making games for the console instead. Consumers bought PS2 because of its low cost DVD playback capabilities. Dreamcast couldn’t offer this value to consumers.
When Dreamcast was released in 1999, PlayStation 2 had already been announced to release in 2000. Knowing a better console would be out, retailers didn’t want to invest in stocking Dreamcast. Gamers waited to buy Dreamcast until PS2 released. Developers were making PlayStation 2 games. Dreamcast was entering a market where someone had already won.
Timing of PlayStation 2’s announcement was perfect for them and worst case scenario for Sega. Including DVD functionality with Dreamcast would have been insanely valuable, but in 1999 it was anyone’s guess if DVD’s were going to catch on in the next couple years. If Sega waited a year to launch Dreamcast, who knows if Playstation would of announced a PS2 at all.
Many major publishers jumped at the chance to give little to no support for Dreamcast shortly after its release. Electronic Arts was not committed to releasing games for Dreamcast at its launch. EA was busy making PlayStation games. For EA to support Dreamcast, they would be taking resources from its very profitable PlayStation division. Eventually most major game publishers decided it would be better to support the current market leader rather than risk it on the new comer.
Sega was also in horrible financial standing. Sega had been losing money for years leading up to Dreamcast’s release. Saturn, the console before Dreamcast, was a failure. Sega was in bad financial position before Dreamcast even released. This poor financial situation hurt Sega’s ability to market Dreamcast. It also prevented Sega from providing good incentives for developers to create software for Dreamcast. Finally, it prevented Sega from taking the losses they would of incurred if the console didn’t launch at full speed.
Timing of Release
As you can tell timing was not Dreamcast’s friend. Launching a console in 1999 when a better console was going to be released the following year was catastrophic for Dreamcast. People simply told each other “wait for the PS2” and Dreamcast never gained any real momentum. Stores that sold Dreamcast ended up ordering too much inventory of it. Which was another reason people avoided buying Dreamcast.
Timing of the DVD issue couldn’t of been worse for Dreamcast. Although in the long run including DVD functionality with Dreamcast would be necessary for success. In 1999 it was unknown if DVD technology was going to take off by the time next generation consoles launched. Had Dreamcast been released just one year sooner or later DVD’s might not of been a standard item in every households.
Lastly, United States was in a recession during the early 2000’s which led to consumers spending less money. This led to less consumer spending which hurt Dreamcast’s chance at survival in a market dominated by companies who already had your attention.
What The Dreamcast Could’ve Done Differently
Could Dreamcast have done anything different to prevent themselves from failing? Maybe. Delaying the console a year would of made Dreamcast’s launch seem less desperate. Including DVD capability with Dreamcast would of given Dreamcast something PS2 didn’t offer. Securing EA’s exclusivity would of given Dreamcast the games that mattered. If Sega had more money, they could of given developers larger incentives to make games for Dreamcast.
But these are all if’s and’s or but’s. The real reason Dreamcast failed was because Sony PlayStation took too big of a lead in the console wars for Dreamcast to catch up to.
Lessons We Can Learn From Dreamcast
There are many things we can learn from Dreamcast’s failed attempt at winning the console wars. Great software does not guarantee success as a console. Relationships between developers and console manufacturers matter. The timing of a console can make or break your sales. Also just luck plays a big role in this business.
Legacy of the Dreamcast
Sega ended up quitting the hardware business because of how bad Dreamcast failed. Instead of continuing to go toe-to-toe with Sony and Nintendo, Sega became a 3rd party game developer. Sega saving money by not having to create their own hardware. Not having to spend money on research, development, manufacturing, and marketing for a console. Also Sega may of been in more financial turmoil if they didn’t quit the hardware business. By Sega quitting hardware development, Sega most likely saved a lot of money.
Dreamcast has one of the biggest and passionates community’s out of all consoles. There are still users creating mods and games for Dreamcast to this day. Dreamcast was Sega at there best; creating innovative products and caring about gamers. Dreamcast failing at business does not take away from the great product they’ve given us.
Dreamcast shows us that great games and innovation does not guarantee success. Dreamcast had better online gaming capabilities than its competition did. Dreamcast had better and more innovative games than its competitors. Dreamcast was aesthetically pleasing and innovated for the future. Yet, Dreamcast was nothing more than a footnote in history because Sony PlayStation took too big of a lead.
Lets see what else we can learn from Dreamcast…
Just because you have a great product does not mean you will succeed. There are many factors that need to line up correctly to achieve success. Games matter, hardware matters, third-party support matters, timing in the market matters, and even the economy matters. When all these factors line up, you have success. When one or more of these factors fail, you have greatness to fail.
Dreamcast wasn’t a poorly designed console. Dreamcast was an amazing console released at a time when the market had already decided. That is the sad lesson we can learn from Dreamcast. Sega proved they were just as good a competitor as Sony and Nintendo were. Heck they even topped them with some of the innovations found on Dreamcast. Yet they still lost to both Nintendo and Sony. Why? Because that is how markets work and as a new challenger your ability to take market share from a leader is limited.
Joe’s a history teacher who treats the console wars like actual history. A lifelong Sega devotee from Phoenix, he writes with passion, humor, and lingering heartbreak over the Dreamcast. Expect strong opinions, bad puns, and plenty of “blast processing.”
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