August 28, 2000

Is Sega Losing Faith In The Dreamcast?

Click To Enlarge Image There can be no denying that Sega are having a tough time with the Dreamcast. So far this month (August) there have been no less then six major titles cancelled for the system including Colin McRae Rally 2.0 (Codemasters), UEFA Striker 2001 (Rage), Road To El Dorado (Ubisoft), Messiah (Shiny), Baldur's Gate (Bioware) and Croc 2 (Argonaut). However more worrying then the demise of these games is the announcement that both Argonaut and Codemasters will no longer develop titles for the system, and you can be guaranteed there will be more deserters by years end. But what next? Are Sega abandoning their own system? The answer awaits....

Current Situation

Sega has been in debt since the failure of the Saturn in the mid 1990's. Since the demise of that system (outside Japan at least) they had a couple of very quiet years and even developed some titles including Sega Rally 2 and Virtua Fighter 2 on the PC. The companies debts have accumulated greatly over they years and they need to pay back millions of dollars very soon. The Dreamcast was to be the companies savior and while it is slowly starting to turn a profit for them, after the expensive but successful launch, the number of units being sold today is nowhere near the numbers required to return Sega to stability which it had during the Megadrive era.

Surprisingly Sega still lose money on every Dreamcast system sold, and rely on software sales to make a profit. Still, you still need to sell hardware to sell the software. In Japan hardware sales are abysmal to say the least. In the week from July 24 to 31 the Dreamcast sold only 3,777 units which compares to 79,514 units for the Playstation 2. Even the Bandai Wonderswan handheld system managed to shift 5,173 units. America and Europe are little better. After the systems successful launch sales have declined rapidly despite a string of quality titles such as Sega Bass Fishing, Resident Evil: Code Veronica, Rayman 2, Dead Or Alive 2 and Crazy Taxi. In fact sales in America have dropped as low as 34,000 units for the entire month.

Click To Enlarge Image While the systems sales have been slow the software has also suffered. Even quality titles such as Ferrari F355 Challenge, which received scores above 80% in most Japanese Magazines, haven't even managed sales of 20,000 units since its release in Japan almost a month ago. This compares to sales of 276,313 for Mario Party in its first week on sale for the N64 and 2,474,612 sales of Final Fantasy IX since its Japanese release earlier this year. Even sales of Shen Mue: Yokosuka are yet to top the 1 million mark in Japan, something which is still to be achieved by any Dreamcast game.

As you can see Sega are in dire straights. Sales figures are still well below Sega's expectations and now there seems to be an exodus from the system by game publishers. Developers love the system. It's easy to program for and the Dreamcast is quite a powerful unit. However, due to poor sales publishers are reluctant to put their development and marketing money behind the games, and Sega can hardly afford to market their own 1st party titles let alone 2nd or 3rd party.

Something has to be done, and fast. Many people would agree that Sega's arcade games are second to none and their home conversions rarely fall below spot-on. But the Dreamcast failure has forced a rethink of strategy and there are some surprising results.

Where to now?

Sega are running out of options fast. With the Playstation 2, Nintendo Gamecube and Xbox all due out within the next 12 months the future doesn't look any brighter for the Dreamcast. One potential savior which Sega have been talking about since launch is the online gameplay. However with Japan the only country to have more then Chu Chu Rocket available there isn't much time for the public to embrace online gameplay before bigger systems take the limelight. Sega are obviously looking for other options, and have started changing their operations.

One of the first things that Sega did to try and return a profit was to break the AM development teams away from the parent company to form independent companies. Each of these separate companies will now act independent from each other and Sega forcing them to become accountable for the bottom line. Each of these companies will have to report to Sega's parent company, CSK. The AM divisions have also changed their names to the following;
AM1 > Wow
AM3 > Hit Maker (Virtual On: Oratorio Tangram)
AM4 > Amusement Vision
AM5 > Sega Rosso (Daytona USA 2)
AM6 > Smile Pit (Jet Set Radio)
AM7 > Over Works
AM8 > Sonic Team (Sonic Adventure)
AM9 > United Game Artists (Space Channel 5)

Click To Enlarge Image However, the biggest news is that SEGA'S TITLES ARE BEING DEVELOPED FOR THE PLAYSTATION 2. Yes, you read that correctly. Sega have licensed out some of their titles for development on the Playstation 2. So far Acclaim has secured the rights to develop both Crazy Taxi and "a zombie action game". This "zombie action game" is actually Zombie Revenge although it can't be called that yet due to ongoing licensing negotiations.

These games are both being handled by Acclaim in-house and as Daniel Armstrong, the Marketing Assistant at Acclaim Australia stated "Crazy Taxi is being developed by our Cheltenham studios. Zombie's Revenge is being developed by our Teesside Studios.". However it was a follow up statement from Daniel that was interesting regarding Sega's future plans. Namely;
"Sega are not being shy about getting on board with PS2".
Who knows how many other titles are being developed for the Playstation 2?

Apparently Acclaim are also in early negotiations to develop 18 Wheeler American Pro Trucker on the Playstation 2, although a lot will depend on the result of the first two titles. Whether or not this third game is developed remains to be seen, but one thing is certain, Sega are looking towards the future, and obviously the Playstation 2 is seen as a great moneymaker.

The Summary

Sega are obviously a troubled company at the moment. The Dreamcast is under performing and with the Nintendo Gamecube, Microsoft Xbox and Sony Playstation 2 only around the corner it seems that Sega may be loosing faith in their little white box, not as a great piece of hardware, but as a system that is selling well enough to return strong profits. Don't get me wrong there will be plenty more great games, and the Dreamcast probably has at least 3 more great years ahead of it, but Sega aren't going to risk their company on it.

Don't expect Sega to release their games on anything other then the Dreamcast first. Crazy Taxi and Zombie Revenge will have been out on the Dreamcast for about 18 months by the time they hit the Playstation 2 in mid 2001 and will have exhausted all potential Dreamcast sales. Releasing older titles on the Playstation 2 will inject much needed cash into the company as well as strengthen the companiesí brand name to those who haven't visited the local arcade recently or owned a Dreamcast.

Will we end up seeing titles such as Sonic, Virtua Fighter or Shen Mue on the Playstation 2? I would highly doubt it. These are the franchises that Sega built its empire upon over the decades and I can't see the games being let out of the stable that easily. If Sega want to remain competitive in the future, they must hold onto these titles. Then again, Crazy Taxi was one of the biggest titles on Dreamcast this year.....

Obviously this article is going to create a lot of emotional responses. Of course you can reply to me and your letters may go into the new Letters page on Future Games. E-mail me at :