The Dreamcast is a bit of an odd beast. Coming on the heels of the unpopular Sega Saturn, the Dreamcast was meant to be a simple console built with off-the-shelf parts and released in late 1998. The Nintendo 64 was already tough competition (1996). Ultimately, the Dreamcast fell out of the public eye in the early 2000s as the Playstation 2, Xbox, and Gamecube were all released with incredible fanfare just a few years later. In some sense, Sega’s last console is a footnote in gaming history.
But despite not achieving the success that Sega hoped for, the Dreamcast has formed a small cult following, because as we know, nothing builds a cult-like following like an untimely demise. Since its release, it has gained a reputation for being ahead of its time. It was the first console to include a modem for network play and an easy storage solution for transferring game data between consoles via the VMUs that docked in the controllers. It had innovative and classic games such as Crazy Taxi, Jet Set Radio, Phantasy Star Online, and Shenmue. Microsoft even released a version of Windows CE with DirectX allowing developers to port PC games to the console quickly.
We see our fair share of console hacks here on Hackaday, but what is the ultimate legacy of the Dreamcast? How did it come to be? What happened to it, and why did so much of Sega’s hopes ride on it?
Opportunity in the Video Game Crash of 1983
The Dreamcast was Sega’s last actual console, marking the end of an eighteen-year-long march of Sega home consoles. But why was this the last console? Why did so much of Sega’s hopes ride on this one piece of hardware? To understand that, we need to go back to the console wars. An excellent resource for this is the book Console Wars by Blake Harris, which tells the story (with some artistic liberties) of the former Mattel VP Tom Kalinske and his journey as CEO of Sega of America during the Saturn and the Genesis. The video game crash of 1983 in America wiped out US companies like Atari, leaving the door open for the likes of Japanese companies such as Nintendo and Sega.
Before 1979, games were primarily made by companies exclusively for their console. This all changed with Activision, a company formed by former Atari employees upset that their names wouldn’t appear in the credits of a game. After that, third-party developers exploded out of nowhere, and by 1983 everyone was trying to get in on the gold rush.
The market became confused and saturated to the point that people stopped buying games and retailers stopped carrying them. Even the more prominent third-party game developers often had the same game for different platforms with massive differences in quality and graphics. Games with the same name by the same developer varying drastically led to customer confusion. The American video game market was a mess.
Enter Nintendo. Nintendo was determined not to make the same mistakes and sought to reel in third-party developers. They established firm contracts that prevented developers from moving their games to other platforms and ensuring each game released on the console met their quality standard. This led to tremendous success, quickly locking most console developers into tight contracts and commanding almost the entire US console market by 1986.
So when Sega tried to market their Genesis system in the US (1989), most developers had exclusive contracts with Nintendo. Tom Kalinske of Sega USA set out to create a new title to re-launch the Genesis, called “Sonic the Hedgehog.” Combined with clever marketing, seeking out new developers who previously didn’t make console games, and a cut in the price for the console, Sega went on to out-sell the NES (released 1985), breaking Nintendo’s complete dominance of the home video game console market in the US at the time. Even when the SNES debuted to the international market (in 1991), the Sega Genesis out-sold it two-to-one in 1991. By January 1992, Sega controlled 62% of the home console market — the first time Nintendo was not the dominant leader since 1985.
So Sega of the early 1990s was at this incredible high, a literal market leader with a promising future. However, cracks were beginning to show. Sega of Japan wanted to move to the new Saturn console in the summer of 1995, despite complaints from Sega of America that the current Genesis was still selling just fine. The console launched to high praise. But, ultimately, underwhelming machine performance, a small game library, and a problematic launch schedule led to the Saturn being less than the stellar success Sega needed.
A Last Hope: A Dreamcast
Just four years after the Saturn was released, they released the Dreamcast in 1998. Market leaders just three years ago, they were now the third-place company. In addition, a price war with Sony’s PlayStation had caused Sega to lower the price on the Saturn to match it, despite the Saturn having much more expensive custom components.
This drained Sega’s coffers, which meant that the Dreamcast would have to be designed around off-the-shelf hardware. The decision to include a modem (at an estimated $15 extra cost to the BOM) becomes all the more interesting in this light.
Despite a disappointing launch in Japan, the extra time leading up to the North American launch allowed Sega of America to develop more games for the Dreamcast. Sega smoothed retail relations, and retailers started stocking more inventory in hopes of a successful launch. The Dreamcast sold over 225,000 units in under 24 hours and over 500,000 over the next few weeks. Europe showed similar sales figures. By Christmas of 1999, Sega had climbed to 31% of the North American market share. It seemed as though bright days were ahead for Sega. The dark shadow of the Saturn had passed, and they would regain their standing. But the console market moved faster.
Sony announced the PlayStation 2, Nintendo began to hype their fantastic next-gen console, and Microsoft announced their intention to join the console wars. Electronic Arts, a long-standing Sega partner, announced it wouldn’t develop games for the Dreamcast. As a result, Sega had to cut R&D budgets and shut down some of the online servers that powered the Dreamcast’s online experience. On January 31st, 2001, Sega declared itself to be a software-only shop and cut the price of the Dreamcast to sell off any remaining inventory. Game releases continued until 2002, and they continued to repair consoles until 2007. The innovative dial-up SegaNet, an internet provider, geared towards Dreamcast systems, shut its doors in 2003.
The Legacy
So, where does that leave the Dreamcast? It is a buried relic of the past, held aloft by the promises of what it could have been: powerful hardware and an online gaming experience that never found the widespread adoption that consoles today enjoy. Ultimately, it just couldn’t compete with the next generation of consoles: Xbox, PS2, and Gamecube.
While most of the hacking love goes to the more popular consoles, we still see some exciting and unique hacks on the Dreamcast here at Hackaday. The RAM has been augmented to 32MB, and folks have brought the online experience back with a Raspberry Pi. There are still a few Dreamcast fans out there, and they’re going to keep hacking.
[Editor’s note: we corrected a few things about the timeline that could be confusing to readers].
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