The Dreamcast supposedly signaled SEGA's return to form, coming in with some outstanding features and amazing games. Instead, the Dreamcast turned out to be SEGA's last home console, leaving the company with a net loss of over $400 million.
So, why did the Dreamcast fail despite being a good console? Let's take a look.
What Was the SEGA Dreamcast?
The Dreamcast was SEGA's fifth and final home console, which it launched in Japan in 1998, and in North America and Europe in 1999. The Dreamcast was the first console in the sixth console generation, which also gave us the PS2, Xbox, and GameCube—though the Dreamcast didn't live long enough to compete with the latter two consoles.
People praise the Dreamcast nowadays for being ahead of its time—it gave gamers a true arcade experience right at home. The Dreamcast had some memorable games like Crazy Taxi, Jet Set Radio, and Soulcalibur, and starred the cult hit Shenmue. The Dreamcast was also capable of online play, being the first console with a built-in modem to connect to the internet, and had some exceptional accessories that really made the arcade experience come to life.
Despite its strengths, the Dreamcast never caught on. It was a commercial failure for SEGA, selling around 9 million units, and the company discontinued the Dreamcast in March 2001, less than 3 years into its lifespan.
Why Did the SEGA Dreamcast Fail?
Three main reasons led to the Dreamcast's failure: its lack of identity, its entertaining yet shallow games, and the PS2.
Although various pitfalls plagued the Dreamcast, such as gamers overlooking its support for online gaming and people could easily pirate the Dreamcast's games, these three factors were ultimately what led to the Dreamcast's premature lifespan.
1. SEGA Buried the Dreamcast's Identity Amongst Its Hardware Releases
The Dreamcast failed because of a few different factors, but none were more significant than SEGA itself. Poor management decisions were the key reason that the Dreamcast never got the recognition it deserved.
One of its many mistakes, SEGA made the Dreamcast's identity incredibly unclear amongst its other home hardware releases. SEGA released a string of devices from 1989 to 1999: the SEGA Genesis (1989), the SEGA CD (1992), the SEGA 32X (1994), the SEGA Saturn (1995), and then the Dreamcast (1999).
This confused gamers as to what the point of each SEGA device was—were they accessories or distinct consoles? And what made them stand out from the competition?
Each successive release after the SEGA Genesis was also sub-par, with the SEGA CD and SEGA 32X being some of the worst games consoles of all time. Poor game libraries, bad marketing, and a lack of distinct features were what most gamers now attributed to SEGA, especially in the wake of the excellent PS1 and Nintendo 64. So, when the Dreamcast hit shelves, gamers were very unsure about whether to get it, given SEGA's string of commercial failures.
With its lack of identity in the wake of SEGA's poor decisions, the Dreamcast didn't have a fighting chance against the competition, which is sad given that it wasn't a bad console.
2. Gamers Were Looking for a More In-Depth Gaming Experience
As mentioned earlier, the Dreamcast had some fantastic games. Soulcalibur, Jet Set Radio, Crazy Taxi, Power Stone, Shenmue, Sonic Adventure—the Dreamcast wasn't lacking in fun titles.
The problem is, a lot of the Dreamcast's games offered shallow experiences in a time when gamers were looking for more in their games. For example, the PS1 featured the likes of Metal Gear Solid, Resident Evil, Spider-Man (2000). These titles offered more to gamers than the Dreamcast's set of games, delivering engaging narratives and distinct gameplay.
Despite their good graphics and performance, the Dreamcast's games were still of the arcade era, which was slowly giving way to more in-depth gaming experiences.
3. The PS2 Cemented Itself as the Console to Buy
The PS2 was the final nail in the coffin for the Dreamcast.
Sony announced the PS2 before the Dreamcast even launched in North America and hype for it built immediately. It was simply better in every way, with much greater hardware, more in-depth games, and the ability to function as a DVD player—an outstanding feature that sold the PS2 to non-gamers.
People were excited to see what Sony's follow-up would be to the PS1. And, given a choice between buying a Dreamcast now or waiting next year to get a PS2, gamers were happy to wait. And it showed—the PS2 is still the best-selling console of all time, with over 155 million units sold.
The PS2 also brought about the Xbox, which Microsoft created in order to compete with Sony, and Nintendo's GameCube was on the way. In 2000, Sony launched the PS2, and Microsoft and Nintendo announced their consoles. So, a year after the Dreamcast's launch, the console was already well behind the competition.
The PS2 led the sixth console generation, despite the Dreamcast having a head start, and people saw it as the console to buy and to beat. Most gamers forgot the Dreamcast soon after the PS2's launch and the announcements of the Xbox and GameCube.
What Could SEGA Have Done Differently With the Dreamcast?
Thinking of its various mishaps, what could SEGA have done differently to ensure the Dreamcast's success? Assuming that the Dreamcast's design would largely stay the same, here are a few options.
Firstly, SEGA should never have released the SEGA CD, SEGA 32X, and potentially the SEGA Saturn. SEGA didn't make these products distinct enough to justify being purchased, and they all negatively affected gamers' opinions of the Dreamcast before it even launched. The Dreamcast should've been SEGA's next release, following the successful SEGA Genesis, and could've launched in place of the SEGA Saturn as a true 3D console with some terrific arcade games.
That being said, the Dreamcast could've also offered a more diverse range of games, and it lacked that one game or franchise that branded it a must-buy console. Sure, the Dreamcast had figureheads (Sonic) and franchises (Soulcalibur), but most of its games stayed in the arcade era and there weren't any new, fleshed-out gameplay experiences or narratives. The Dreamcast stubbornly offered more of the same, but it sorely lacked a game with the caliber of Resident Evil or Halo.
Had these two things happened, the Dreamcast would've stood a better chance at success amongst the competition. It's looked upon fondly now, but in the context of when it launched, it was easy to write the Dreamcast off as yet another lukewarm SEGA console that couldn't match the quality of the upcoming competition.
The Dreamcast Is a Console That Didn't Deserve to Fail
Had things been different, the Dreamcast could've been a hit with audiences around the world.
Yet, the failure of the Dreamcast was a product of its lost identity, lack of intuitive and in-depth games, and SEGA's dwindling reputation as a hardware manufacturer against Sony's rising status as one.
In the end, the Dreamcast is the golden example of a console that failed, but didn't deserve to.
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