THE FALL OF THE SEGA DREAMCAST Innovation Case Study

By Cary M. Robinson

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 1 PURPOSE OF STUDY The purpose of this study is to explore the process of innovation by looking at the development and diffusion of the Sega Dreamcast. A branch of the Sega Corporation, this video game console lived a short span, as its failure was the relevant factor that led to Sega’s withdrawal from the consumer console business.

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 2 WHY THIS TOPIC? A former video-game fanatic and Sega game console owner, I selected this “proclaimed” innovation because I was interesting in discovering the reason why the Sega Dreamcast was not a successful product.

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 3 INNOVATION An innovation is the useful application of a new idea or method (Crawford 1983). Every innovation begins with an idea and is formed after this idea is envisioned, produced, and marketed successfully (Kilby 1978).

Individual Characteristics •Innovativeness -Originality: the aspect of created or invented works by as being new or novel, and thus can be distinguished from reproductions, clones, forgeries, or derivative works. •Reliance on others as a source of information •Early adopter threshold (Creswell) •Need-for-change/cognition

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 4 THE “INVENTION”

The Dreamcast is a video game console made by Sega, and is the successor to the Sega Saturn. The Dreamcast was the first entry in the sixth generation of video game consoles and was released in late 1998, before its contemporaries — Sony's PlayStation 2, Microsoft's Xbox and the Nintendo GameCube. Sega discontinued the Dreamcast in North America in March 2001 and withdrew entirely from the console hardware business, making it the company's last console. However, support of the system continued in Europe and Oceania until the end of 2002, as well as in Japan, where consoles were still sold until 2006 and new licensed games continued to be released. Platform: Sega Dreamcast Industry: Video Game Manufacturing Innovative Area: Technological Advancement Innovation Type: Incremental

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 5 THE “INVENTION”

According to Bernie Stolar, former President and CEO of Sega of America, the Dreamcast was discontinued because the new chairman of Sega wanted the company to focus on software. Despite its short lifespan, the Dreamcast was widely hailed as ahead of its time, and is still held in high regard for pioneering online console gaming—it was the first console to include a built-in modem and Internet support for online play. As of 2010, the console is still supported through various homebrew video game releases.

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 6 DRIVING FORCE The Dreamcast was released in November 1998 in Japan; on September 9, 1999 in North America and on October 14, 1999 in Europe. Despite problems with the Japan launch, the system's launch in the United States was successful. In the United States alone, a record 300,000 units had been pre-ordered and Sega sold 500,000 consoles in just two weeks. Sega confirmed that it made US $98.4 million on combined hardware and software sales with Dreamcast with its September 9, 1999 launch. Four days after its launch in the US, Sega stated 372,000 units were sold bringing in US $132 million in sales. Highly demanded launch titles such as Soul Calibur, Sonic Adventure, Power Stone, and Hydro Thunder (only available for this platform) helped Dreamcast succeed in the first year. Sega Sports titles helped fill the void left by a lack of Electronic Arts sports games on the system. Dreamcast sales grew 156.5% from July 23, 2000 to September 30, 2000 putting Sega ahead of the Nintendo 64 in that period.

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 7 SWARM CREATIVITY Microsoft Corporation collaborated with Sega Enterprises Ltd. for the production of the Dreamcast platform. As a result of the collaboration, Microsoft will provided an optimized version of the Microsoft® Windows® CE operating system with integrated DirectX® services as the operating system for use with Dreamcast.

The Microsoft and Sega collaboration marked a leap forward in game console technology in 1999. Dreamcast included an advanced hardware technology in 3-D graphics, sound and input devices, as well as an on-board modem to support Internet access and network gaming. The inclusion of Windows CE with DirectX provided a flexible, versatile development environment, supported by Microsoft development tools, that eases title development and makes possible true cross-platform title compatibility with Windows-based PCs. The result was a powerful platform that enabled creative and technical advances in video games during this period.

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 8 USER GROUPS Early Adopters: 1. Owners of previous Sega game consoles (Genesis, Saturn) 2. Home platform owners

Laggards: 1. Arcade game players 2. Trial players 3. Sale seekers 4. Christmas gift providers

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 9 INNOVATION ATTRIBUTES RANKING

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 10 CONCLUSION Although Sega had much success with both arcades and home consoles, poor sales and profit losses due the production of Dreamcast. This platform was introduced to the market as a improved product of an existing concept, relying on the Sega Saturn, as well as other platforms as a source of information, and eventually declined from this peak. Because there are other victorious “inventions” that exist, it can be concluded that there are no unsuccessful innovations, but a large number of unsuccessful inventions.

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 11 THANK YOU!

By Cary M. Robinson

Cary M. Robinson - DMGT 702-02 - Prof. Stokes Jones 12 REFERENCES

Gloor, Peter A. Swarm Creativity. New York: Oxford University PRess, 2006.

Kilby, Jack. IEEE Transactions on Consumer Electronics, Vol. CE-25, No. 1 (1979): xii- xvi.

Rapid Response Team, Waggener Edstrom Worldwide. Microsoft, Sega Collaborate on Dreamcast: The Ultimate Home Video Game System . 21 May 1998 .

Rogers, Everett M. Diffusion of Innovations. New York: Free Press, 1995.

Tsukento. Dreamcast 2 - Nothing but a Dream . 6 August 2008. .

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