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Why Did Sega Stop Making Consoles?

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Sega Corporation is a Japanese multinational video game developer and publisher headquartered in Shinagawa, Tokyo. Its international branches, Sega of America and Sega Europe, are respectively headquartered in Irvine, California, and London. Sega made game consoles including Genesis, Saturn, Dreamcast, and add-ons Sega CD and Sega X32. 

So Why Did Sega Stop Making Consoles?

Sega ended up taking its audience for granted and began to worry more about beating their competitors instead of worrying about the gamers who would play the games. The gamers did not like the direction Sega was moving so they started buying other consoles. This as well as many other reasons ended up putting Sega out of the console business. 

If you would like to know more about why Sega stopped making consoles, then keep reading or check out this video!

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Sega Genesis

The video game world at the time was dominated by Sony, Microsoft, and Nintendo. In the early nineties, Sega produced the most significant selling console in the world, the Sega Genesis. 

The Sega Genesis was an incredible system when it launched in 1989. Featuring hit franchises such as Sonic and Mortal Kombat, the console was able to go toe-to-toe with the SNES — an impressive feat when you look at all the series only available on Nintendo’s system. 

The Genesis was no slouch in the games department. Not only was it home to exclusives such as Streets of Rage 2 and Altered Beast, it also made use of a unique subscription service called Sega Channel. This gave owners rotating access to some of the best titles the system had to offer, much like PlayStation Now and Xbox Game Pass do today.

Poor Communication            

The communication between Sega of Japan and Sega of America was poor. Both companies used to disagree about how to run things, and they could rarely face each other. Although Sega of Japan had to let Sega of America do what was needed, most of the power was on Japan’s shoulders.

Complicated Software

Sega of America was waiting for Sega of Japan to develop the new hardware. When It was finally finished, the final product was a complicated device. It was hard to work with and a big challenge for developers.

Missed Opportunities

  • Sega of America tried to purchase a different console. One made by Silicon Graphics was found. This new console was better in speed, graphics, and audio, but the Sega of Japan let the request fall on a deaf ear. This set Sega of Japan had turned down was good enough for Nintendo and, at last, formed the infamous Nintendo 64.
  • Sony was searching for a partner to work with on a new project. The idea was to produce the hardware together and then manufacture games for it in person. Each company was to collect money they individually made. Sega of Japan was not in agreement of the idea, so the alliance was never formed. Sony had no other option but to manufacture the console alone because even Nintendo had already turned them down.
  • As Sega moved on with the Saturn console, Sega decided to cut off any other plans remaining for the Genesis. They also cut off the 32X and Sega CD.

Sega Dreamcast

Sega Dreamcast was launched in America in 1999, and it was a massive hit. It had 18 launch topics to choose from and broke the record for the company and gaming industry. Only a year later, PlayStation 2 was released. The competition was fierce, and Dreamcast could not handle it. The sales for the Dreamcast plummeted.       


Sega ran television spots non-stop, advertising the Dreamcast in anticipation of its launch. The console was innovative and influential, but the advertising didn’t focus on the right selling points. Instead, they ran with the slogan, “It is thinking.”

Many industries mocked the slogan because it didn’t accurately point out the importance of Sega’s Dreamcast, and the meaning of the proverb itself was not clear. When Microsoft entered the console war, they targeted most of their games. Their marketing showed the console’s power. Sega didn’t attract a long lasting interest in their console, and advertising was a key culprit.

Financial Issues

After Dreamcast was successfully launched in northern America, the sales steadily dropped despite low prices. The price dropped to increase competition with Sony, but it caused the console to sell at a significant loss. Sega could not stand these losses as their low sales in Japan added little to their revenue stream. Had the console been built cheaper, they likely could have gotten away with selling it at a lower price early on.

Deciding to go for expensive components was not as successful as Sony’s inexpensive build which was able to be sold at a lower price while attracting a vast audience.

Lack Of Accessories

The lack of a second stick on the right side of the system gave the controller the appearance of being left behind from the PlayStation’s Dual Shock controller. Sony launched its dual-stick controller, so Sega had no reason not to include a second analog stick. The Dreamcast was missing a critical component when comparing the controllers side by side.

Third-Party Support 

Third-party support is an essential factor in a gaming platform’s success. EA sports, Square Soft, and Rock Star North refused to support the Dreamcast. They said the console was difficult to develop games for and many companies decided it was worthless producing titles for the Dreamcast.

Large Controller

The primary reason for the Dreamcast flopping in Japan was the controller’s size. Japanese customers preferred a small controller. Sega didn’t redesign the Dreamcast’s controller and its large size  was a detriment to sales in Japan.

Even in North America the controller’s scope was criticized. But in Japan, it was where it hurt Sega the most. Because there was no profit from Japan, the only other option was to rely on the North American market. The decision to discontinue the Dreamcast was entirely reached due to financial losses. The redesigning of the controller might have helped the situation at least a little bit, but Sega decided to just let the console die.

Negative Momentum

The console featured friendly titles such as Soul Calibur, yet it failed to sell. This can largely be attributed to the energy of the company, as gamers were let down by the Saturn, and many no longer desired to support Sega no matter how good the console might have been.

Launched Windows

Dreamcast was not released at a good time as it arrived in between console generations, which caused confusion and reduced its appeal.

Besides Dreamcast having great features such as a memory card, online play controller, fun games, etc. there was a big problem. The first Dreamcast was hacked and quickly became pirated. The other thing was the massive lack of brand loyalty.

Competition between Sega North America and Sega Japan was fierce because Sega Japan had more capital compared to other countries.

EA tried to help Sega by offering a partnership but Sega turned them down. Sega wouldn’t let EA publish sports games since Sega already had their own sports games. Once Microsoft and Sony saw what took place to Sega when they wouldn’t play ball with EA, they both accepted EA’s offer.


The former CEO of Sega said they had a choice of making game consoles for a few more years or file for bankruptcy or stop then and live to fight another day. It was the worst for him because he had to fire countless employees in order to keep the company running.

Sega now programs certain games though they have a pretty lousy track record.