"299"
This single moment …
"299"
... made Sony a mega contender in the world of video games and set Sega in a tailspin.
This is how one number changed an industry.
It’s 1994, the height of the consoles wars..
Nintendo and Sega have won the 16-bit era.
But with 3D gaming about to break big, both Nintendo and Sega, along with Atari, 3DO and
Sony are positioning themselves for the 32 and 64 bit hardware race.
Nintendo is hard at work on the N64.
Both the 3DO and Atari’s Jaguar are already on the market in the United States.
Sony, the new kid on the block, was wowing developers with its cutting-edge console—the PlayStation
and its fancy dinosaur tech demo.
And then, there’s Sega.
This is when Sony’s success became tied to Sega’s struggles.
In the early 90s, Sega had become Nintendo’s biggest competitor
with the pairing of the 16-bit Genesis and its exclusive franchise, Sonic the Hedgehog.
But instead of using that momentum to fly, Sega started digging itself into a hole.
And that hole started, with the Sega CD.
This was an expansion meant to extend the life of the Genesis, but it hadn’t really clicked with players
And it was confusing Sega's spot in the market.
Ahead of the next console cycle, Sega’s leadership was especially concerned about
the Atari Jaguar.
Of course, at the time, Sega didn’t know this console would be Atari’s last.
They feared it would eat up the market share before the Saturn’s, sega’s next console,
released in the United States.
Here’s how Scot Bayless, a then Producer at Sega of America, summed up a conference call
with Sega of Japan CEO Hayao Nakayama in early 1994.
Sega of America and Sega of Japan had different plans on how to fend off the competition.
In Japan, Sega rushed to release the next-generation 32-bit console, the Sega Saturn.
But in America, Sega decided to keep digging their hole.
Instead of looking to the future, they released a stopgap,
the 32X, yet another Genesis add-on.
The Genesis had sold like gangbusters in the United States
with a market share hovering around 60% in North America.
But in Japan, Sega was in third place, trailing behind Nintendo and NEC.
Sega of America led development of 32X at the request of Sega of Japan, while the Japan
team focused on creating the Saturn.
Sega’s two divisions forced the company to divide its attention.
Fast forward to the end of 1994.
and the Sega Saturn is launching in Japan.
It sells out its initial units immediately.
and in a show of confidence, Sega holds onto its next shipment so it could coincide with the
PlayStation’s December 3rd release.
In that first, critical holiday season, the Saturn outsells the PlayStation by 200,000 units.
And in the US, the 32X also does well, selling half a million units.
Everything appeared to be going according to plan.
"WE ARE FIVE YEARS AWAY FROM ENTERING THE 21ST CENTURY"
But by the spring of 1995, Sega started to realize the hole they were in.
Sony’s charm offensive was working.
They were attracting developers with low licensing fees and well-designed development tools.
And their sales certainly weren’t slacking.
Sega had to do something.
And that brings us back to E3 1995, Los Angeles Convention Center
Sega took the stage first.
And back then it was literally "the" stage.
This was the first E3, after all – long before every publisher had their own separate press conference.
"We anticipate in the Sega Saturn's first full year in Japan will yield sales of 2.6 million..."
After going through the company’s financial data and the Saturn’s hardware specs,
Sega of America CEO Tom Kalinske showed off the console’s... eye catching ads.
"What else can go wrong?"
"Urgent synapse on line 2."
"It's the sphincter!"
"What's going on up there!?"
“I guarantee every 22-year-old in North America knows what a sphincter is...”
But Sega wasn’t about to finish their keynote talking about sphincters.
Sega believed they’d found a way to neutralize Sony’s Playstation and climb out of the hole they'd dug.
Instead, they dug even deeper.
“We started our rollout of the Sega Saturn yesterday”
"and we're at retail today."
This announcement stunned the audience.
The Sega Saturn wasn’t supposed to release in North America until the end of the year,
when Sony would be launching the PlayStation.
And following that shocking announcement was the price tag:
"retail price is between $399 and $449."
In today’s world, news like this wouldn’t be out of the ordinary.
Tech companies like Apple have made it commonplace to release products almost immediately after
they’re announced and with huge price tags.
You can see how this seemed like a good idea.
It wasn’t.
Many consumers were still saving up to purchase the console.
Not to mention, the premature release meant only six games were available at launch.
The plan wasn’t any better for retailers, who were either caught flat-footed trying
to promote Sega’s new console or excluded from the surprise launch altogether.
KB Toys was so blindsided that they decided to drop Sega entirely, giving the shelf space
to their competitors instead.
These distribution problems continued to follow Sega well into the lifecycle of its next console,
the Dreamcast.
And the plan definitely wasn’t great for developers.
The only games ready for the surprise early launch were Sega’s first party titles,
leading many 3rd party developers to wonder if the move was meant to boost sales for Sega’s games at the expense of their own.
at the expense of their own.
Sega may well have dug their own grave, but it wasn’t that shocking announcement that
put a nail in their coffin.
It was what happened next.
Following Sega’s presentation, Sony America chief Olaf Olafsson took the stage to
kick off the Sony press conference.
He didn’t go up there to wow the audience.
Instead, he gave an intentionally boring presentation — one that Sony Executive Phil Harrison
later revealed was 'deliberately staged'.
"I'm going to ask"
"Sony Computer Entertainment President of America, "
"Steve Race, to join me for"
"a brief presentation."
So now,
with the audience half a sleep, SCEA President Steve Race takes the podium.
to make history.
“$299.”
Sega was already struggling in America following
the launch of the 32X.
And the sudden early release of the Saturn would only make things harder.
But it was Sony who delivered the final blow, with just one number.
Their console would come later...
But one hundred dollars cheaper.
...If only they had learned their lesson.
“$499 US dollars”
"and $549 Canadian dollars"
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and watch more videos on the history of games
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way before Amazon's Alexa or Apple's Siri.
and if you wanna watch more videos about over the top rivalries,
check out SBNation's Beef History.
It turns out there's lots of entertaining beef in sports.
Who knew!