When was the Sega Genesis made?

Released in 1988, the Genesis (known as the Mega Drive in Europe and Japan) was Sega's entry into the fourth generation of video game consoles. In mid-1990, Sega CEO Hayao Nakayama hired Tom Kalinske as CEO of Sega of America. Kalinske developed a four-point plan for sales of the Genesis: cut the console's price, develop games for the American market with a new American team, continue aggressive advertising campaigns, and ship "Sonic the Hedgehog" with the Genesis as a pack-in game. The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." Magazines praised "Sonic" as one of the greatest games yet made, and Sega's console finally took off as customers who had been waiting for the Super Nintendo Entertainment System (SNES) decided to purchase a Genesis instead.

Sega CD

The Sega CD, released as the in most regions outside North America and Brazil, is a CD-ROM accessory for the Sega Genesis video game console designed and produced by Sega as part of the fourth generation of video game consoles. It was released on December 12, 1991 in Japan, October 15, 1992 in North America, and 1993 in Europe. The Sega CD lets the user play CD-based games and adds hardware functionality such as a faster central processing unit and graphic enhancements. It can also play audio CDs and CD+G discs.

The main benefit of CD technology was greater storage, which allowed for games to be nearly 320 times larger than Genesis cartridges. This benefit manifested as full motion video (FMV) games such as the controversial "Night Trap", which became a focus of the 1993 Congressional hearings on issues of video game violence and ratings. Sega of Japan partnered with JVC to design the Sega CD and refused to consult with Sega of America until the project was complete. Sega of America assembled parts from various "dummy" units to obtain a working prototype. It was redesigned a number of times by Sega and licensed third-party developers.

While the Sega CD became known for several well-received games such as "Sonic CD" and "", its game library contained a large number of Genesis ports and poorly-received FMV games. 2.24 million Sega CD units were sold by March 1996, after which Sega discontinued the system to focus on the Sega Saturn. Retrospective reception is mixed, with praise for individual games and additional functions, but criticism for its lack of deep games, high price, and support from Sega.

By the early 1990s, compact discs were making significant headway as a storage medium for music and video games. NEC had been the first to use compact disc technology in a video game console with their PC Engine CD-ROM² System add-on in October 1988 in Japan (launched in North America as the TurboGrafx-CD the following year), which sold 80,000 units in six months. That same year, Nintendo announced a partnership with Sony to develop its own CD-ROM peripheral for the Super NES. Commodore International released their CD-based CDTV multimedia system centered in early 1991, while long-in-waiting CD-i from Philips finally arrived towards the end of that year.

Shortly after the release of the Genesis, Sega's Consumer Products Research and Development Labs led by manager Tomio Takami were tasked with creating a CD-ROM add-on for the system, which became the Sega CD. The Sega CD was originally intended to equal the capabilities of the TurboGrafx-CD, but with twice as much random-access memory (RAM), and sell for about JP¥20,000 (or US$150). In addition to relatively short loading times, Takami's team planned for the device to feature hardware scaling and rotation similar to that found in Sega's arcade games, which required the use of a dedicated digital signal processor (DSP). However, two changes made later in development contributed to the final unit's higher than expected price. Because the Genesis' Motorola 68000 CPU was too slow to handle the Sega CD's new graphical capabilities, an additional 68000 CPU was incorporated into the add-on. In addition, upon hearing rumors that NEC planned a memory upgrade to the TurboGrafx-CD, which would bring its available RAM from 0.5 Mbit to between 2 and 4 Mbit, Sega decided to increase the Sega CD's available RAM from 1 Mbit to 6 Mbit. This proved to be one of the greatest technical challenges during development since the CD's access speed was initially too slow to run programs effectively. The cost of the device was now estimated at $370, but market research convinced Sega executives that consumers would be willing to pay more for a state-of-the-art machine. Sega partnered with JVC, which had been working with Warner New Media to develop a CD player under the CD+G standard, to develop the Sega CD.

Up until the middle of 1991, Sega of America had been kept largely uninformed of the details of the project, without a functioning unit to test (although Sega of America was provided with preliminary technical documents earlier in the year). According to former Sega of America executive producer Michael Latham, "When you work at a multinational company, there are things that go well and there are things that don't. They didn't want to send us working Sega CD units. They wanted to send us dummies and not send us the working CD units until the last minute because they were concerned about what we would do with it and if it would leak out. It was very frustrating." Even though they were not provided a functioning unit, Latham and Sega of America vice president of licensing Shinobu Toyoda put together a functioning Sega CD by acquiring a ROM for the system and installing it in a dummy unit. Further frustrating the Sega of America staff was the construction of the add-on. "The Mega-CD was designed with a cheap, consumer-grade audio CD drive, not a CD-ROM," stated Scot Bayless, former Sega of America senior producer. "Quite late in the run-up to launch, the quality assurance teams started running into severe problems with many of the units—and when I say severe, I mean units literally bursting into flames. We worked around the clock, trying to catch the failure in-progress, and after about a week we finally realized what was happening," citing the need for games to use more time seeking data than the CD drive was designed to provide.

Sega announced the release of the Mega-CD in Japan for late 1991, and North America (as the Sega CD) in 1992. It was unveiled to the public for the first time at the 1991 Tokyo Toy Show, to positive reception from critics. The Mega-CD would go on to be released in Japan on December 12, 1991, initially retailing at JP¥49,800. Though the unit sold quickly, the small install base of the Mega Drive in Japan meant that sales declined rapidly after launch. Within its first year in Japan, the Mega-CD only sold 100,000 units. Third-party development of games for the new system suffered because Sega took a long amount of time to release software development kits. Other factors impacting sales included the high launch price of the Mega-CD in Japan and only two games available at launch.

On October 15, 1992, the Sega CD was released in North America, with a retail price of US$299. Advertising for the add-on included one of Sega's slogans, "Welcome to the Next Level". Though only 50,000 units were available at launch due to production issues, the add-on sold over 200,000 units by the end of 1992. As part of Sega's sales, Blockbuster LLC purchased Sega CD units for rental in their stores. The Mega-CD was launched in Europe in the spring of 1993, starting with the United Kingdom on April 2, 1993, at a price of GB£269.99. The European version of the add-on was packaged with "Sol-Feace" and "Cobra Command" in a two-disc set, along with a compilation CD of five existing Mega Drive games. Only 70,000 units were initially available in the UK, but 60,000 units were sold by August 1993. Emphasized by Sega of America, the benefits of the Sega CD's additional storage space allowed for a large amount of full motion video (FMV) games to be published for the add-on, with Digital Pictures becoming an important partner for Sega. After the initial competition between Sega and Nintendo to develop a CD-based add-on, Nintendo eventually canceled the development process of its own competing peripheral after having partnered with Sony and then with Philips to develop one.
Sega would go on to release the add-on's second model, the Sega CD 2 (Mega-CD 2), on April 23, 1993 in Japan at a price of JP¥29,800, It was released in North America several months later at the reduced retail price of US$229, with one of the system's best-selling games, "Sewer Shark", as a pack-in. Designed to bring down the manufacturing costs of the Sega CD, the newer model is smaller and does not contain the motorized disc tray used in the initial model. A limited number of games were also later developed that utilized both the Sega CD and the 32X add-ons, the latter of which was released in November 1994.

On December 9, 1993, the United States Congress began to hold hearings on video game violence and the marketing of violent video games to children. One of the games at the center of this controversy was the Sega CD's "Night Trap", a full-motion video adventure game by Digital Pictures. "Night Trap" had been brought to the attention of United States Senator Joe Lieberman, who said of the game, "I looked at that game, too, and there was a classic. It ends with this attack scene on this woman in lingerie, in her bathroom. I know that the creator of the game said it was all meant to be a satire of Dracula; but nonetheless, I thought it sent out the wrong message." Lieberman's research later went on to conclude that the average video game player at the time was between seven and twelve years old and that video game publishers were marketing violence to children. Similar issues were brought up in the United Kingdom, with former Sega of Europe development director Mike Brogan noting that ""Night Trap" got Sega an awful lot of publicity... Questions were even raised in the UK Parliament about its suitability. This came at a time when Sega was capitalizing on its image as an edgy company with attitude, and this only served to reinforce that image." Although experiencing increased sales as a result of the hearings, Sega decided to recall "Night Trap" and re-release it with revisions in 1994. Following these hearings, video game manufacturers came together in 1994 to establish a unified rating system, eventually materializing in the form of the Entertainment Software Rating Board used in North America.

As time passed, the releases of new CD-based consoles such as the 3DO Interactive Multiplayer rendered the Sega CD technically obsolete, reducing public interest in the add-on. In late 1993, less than a year after the system's launches in North America and Europe, the gaming media reported that Sega was no longer accepting in-house development proposals for the Mega-CD in Japan. In early 1995, Sega shifted its focus to the Sega Saturn and discontinued all advertising for Genesis hardware, including the Sega CD. Sega officially discontinued the add-on in the first quarter of 1996, saying that it needed to concentrate on fewer platforms and felt the Sega CD could not compete in the current marketplace due to its high price tag and outdated single-speed drive. The last two games scheduled to be released for the Sega CD, "Myst" and "Brain Dead 13", were subsequently cancelled. 2.24 million Sega CD units were sold worldwide, including 400,000 in Japan.

The Sega CD can only be used in conjunction with a Genesis system, attaching through an expansion slot on the side of the main console. Though the Sega CD is an add-on, it does require its own separate power supply. In addition to playing its own library of games in CD-ROM format, the Sega CD can also play compact discs, karaoke CD+G discs, and can also be used in conjunction with the 32X to play 32-bit games that utilize both add-ons. The second model, also known as the Sega CD 2, also includes a steel joining plate to be screwed into the bottom of the Genesis, as well as an extension spacer to work with the original model of the Genesis.

The main CPU of the Sega CD is a 12.5MHz 16-bit Motorola 68000 processor, which runs 5 MHz faster than the Genesis processor. It contains 1 Mbit of boot ROM, allocated for the CD game BIOS, CD player software, and compatibility with CD+G discs. 6 Mbit of RAM are allocated to data for programs, pictures, and sounds; 512 Kbit to PCM waveform memory; 128 Kbit to CD-ROM data cache memory; and an additional 64 Kbit are allocated as the backup memory. Additional backup memory in the form of a 1 Mbit Backup RAM Cartridge was also available as a separate purchase, released near the end of the system's life. Audio is able to be supplied through the Ricoh RF5C164, and two RCA pin jacks allow the Sega CD to output stereophonic sound separate from the Genesis. Combining stereo sound from a Genesis to either version of the Sega CD requires a cable between the Genesis's headphone jack and an input jack on the back of the CD unit. This is not required for the second model of the Genesis.

Though the Sega CD offers a faster processor, its main purpose is to expand the size of the games. Whereas ROM cartridges of the day typically contained 8 to 16 megabits of data, a CD-ROM disc can hold more than 640 megabytes of data, more than 320 times the storage of a Genesis cartridge. This allows the Sega CD to run games containing full motion video.

The Sega CD received several variations during its lifetime, of which Sega constructed three. The original model utilized a front-loading motorized disc tray and sat underneath the Genesis. Sega later released the second model of the Sega CD, which was redesigned to sit next to the Genesis console and featured a top-loading disc tray in place of the motorized tray of the original model. In addition to the add-on models, Sega also released the Genesis CDX (Multi-Mega in Europe). This console was a combination of the Genesis and Sega CD in one unit and initially retailed at US$399. Unique to this model was its additional functionality as a portable compact disc player.

Three additional system models were created by other electronics companies. Working with Sega, JVC released the Wondermega on April 1, 1992, in Japan, at an initial retail price of ¥82,800 (or US$620). The system was later redesigned by JVC and released as the X'Eye in North America in September 1994. Designed by JVC to be a Genesis and Sega CD combination with high-quality audio, the Wondermega's high price kept it out of the hands of average consumers. Likewise was the case with the Pioneer LaserActive, which was also an add-on that required an attachment developed by Sega, known as the Mega-LD pack, in order to play Genesis and Sega CD games. Though the LaserActive, developed by Pioneer Corporation, was lined up to compete with the 3DO Interactive Multiplayer, the combined system and Mega-LD pack retailed at nearly $1600, becoming a very expensive option for Sega CD players. Aiwa also released the CSD-GM1, a combination Genesis/Sega CD unit built into a boombox.

The Sega CD supports a library of over 200 games created both by Sega and an array of third-party publishers. Included in this library are six games which, while receiving individual Sega CD releases, also received separate versions that utilized both the Sega CD and 32X add-ons. Among the games released for the add-on were a number of FMV games, including "Sewer Shark" and "Fahrenheit". Well-regarded games include "Sonic CD", "" and "", "Popful Mail", and "Snatcher", as well as the controversial "Night Trap". Although Sega created "Streets of Rage" for the Genesis to compete against the SNES port of the arcade hit "Final Fight", the Sega CD received an enhanced version of the latter game that has been praised for its greater faithfulness to the arcade original. "" was noted for its impressive use of the system's hardware as well as its violent content. In particular, "Sonic CD" garnered critical acclaim for its graphics and new time travel elements, which improved upon the traditional "Sonic" formula. The Sega CD also received enhanced ports of games from the Genesis, such as "Batman Returns" and "Ecco the Dolphin".

Given the large number of FMV games and Genesis ports, the Sega CD's game library has been criticized for its lack of depth. Full motion video quality was substandard on the Sega CD due to poor video compression software and the system's limited color palette, and the concept never caught on with the public. According to Digital Pictures founder Tom Zito, "Sega CD could only put up 32 colors at a time, so you had this horrible grainy look to the images," though the system was able to put up 64 colors at one time. Likewise, most Genesis ports for the Sega CD featured additional full motion video sequences, extra levels, and enhanced audio, but were otherwise identical to their Genesis release. The video quality in these sequences has also been criticized as comparable to an old VHS tape.

Near the time of its release, the Sega CD was awarded Best New Peripheral of 1992 by Electronic Gaming Monthly. Four separate reviews scored the add-on 8, 9, 8, and 8 out of 10; reviewers cited its upgrades to the Genesis as well as its high-quality and expanding library of games. Later reception in 1995 by Electronic Gaming Monthly showed a more mixed response to the peripheral, with four reviewers scoring it 5 out of 10, citing its game library issues and substandard video quality. "GamePro" also criticized the weak games library and substandard video quality, noting that many of the games were simple ports of cartridge games with minimal enhancements and commenting that "The Sega CD could have been an upgrade, but it's essentially a big memory device with CD sound." They gave it a "thumbs sideways" and recommended that Genesis fans buy an SNES before even considering a Sega CD. Likewise, in a special Game Machine Cross Review in May 1995, "Famicom Tsūshin" scored the Japanese Mega-CD 2 a 17 out of 40.

Retrospective reception of the Sega CD is mixed, praising certain games but criticizing its low value for money and limitations on the benefits it provides to the Genesis. "GamePro" listed the Sega CD as the 7th-worst selling video game console of all time, with reviewer Blake Snow noting that "The problem was threefold: the device was expensive at $299, it arrived late in the 16-bit life cycle, and it didn't do much (if anything) to enhance the gameplay experience." Snow went on to note, however, that the Sega CD did have in its library "the greatest "Sonic" game of all time" in "Sonic CD". IGN's Levi Buchanan criticized Sega's implementation of CD technology for the Genesis, noting, "What good is the extra storage space if there is nothing inventive to be done with it? No new gameplay concepts emerged from the SEGA CD—it just offered more of the same. In fact, with few exceptions like "Sonic CD", it often offered some of the 16-bit generation's worst games, like "Demolition Man"." Jeremy Parish of USgamer pointed out that "Sega was hardly the only company to muddy its waters with a CD add-on in the early '90s" and highlighted some "gems" for the system, but cautioned "the benefits offered by the Sega CD had to be balanced against the fact that the add-on more than doubled the price (and complexity) of the [Genesis]." Writing for "Retro Gamer", Damien McFerran cited various reasons for the Sega CD's limited sales, including the add-on's high price, lack of significant enhancement to the Genesis console, and lack of ability to function without a console attached. "Retro Gamer" writer Aaron Birch, however, defended the Sega CD and wrote that "the single biggest cause of the Mega-CD's failure was the console itself. When the system came out, CD-ROM technology was still in its infancy and companies had yet to get to grips with the possibilities it offered... quite simply, the Mega-CD was a console ahead of its time."

The poor support for the Sega CD has often been criticized as the first link in the devaluation of the Sega brand. Writing for IGN, Buchanan described an outside perspective on Sega's decision to release the Sega CD with its poor library and console support, stating, "[T]he SEGA CD instead looked like a strange, desperate move—something designed to nab some ink but without any real, thought-out strategy. Genesis owners that invested in the add-on were sorely disappointed, which undoubtedly helped sour the non-diehards on the brand." In reviewing for "GamePro", Snow commented that "[the] Sega CD marked the first of several Sega systems that saw very poor support; something that devalued the once-popular Sega brand in the eyes of consumers, and something that would ultimately lead to the company's demise as a hardware maker."

Former Sega of America senior producer Scot Bayless attributes the unsuccessful market to a lack of direction from Sega with the add-on. According to Bayless, "It was a fundamental paradigm shift with almost no thought given to consequences. I honestly don't think anyone at Sega asked the most important question: 'Why?' There's a rule I developed during my time as an engineer in the military aviation business: never fall in love with your tech. I think that's where the Mega-CD went off the rails. The whole company fell in love with the idea without ever really asking how it would affect the games you made." Sega of America producer Michael Latham offers a contrasting view of support for the add-on, however, stating "I loved the Sega CD. I always thought the platform was under-appreciated and that it was hurt by an over-concentration of trying to make Hollywood interactive film games versus using its storage and extended abilities to make just plain great video games." Former Sega of Europe president Nick Alexander commented on the Mega-CD, saying "The Mega CD was interesting but probably misconceived and was seen very much as the interim product it was. I am afraid I cannot recall the sales numbers, but it was not a success."

Released in 1988, the Genesis (known as the Mega Drive in Europe, Japan and Australia) was Sega's entry into the fourth generation of video game consoles. In mid-1990, Sega CEO Hayao Nakayama hired Tom Kalinske as president and CEO of Sega of America. Kalinske developed a four-point plan for sales of the Genesis: lower the price of the console, create a U.S.-based team to develop games targeted at the American market, continue aggressive advertising campaigns, and sell "Sonic the Hedgehog" with the console. The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." Magazines praised "Sonic" as one of the greatest games ever made, and Sega's console finally took off as customers who had been waiting for the Super Nintendo Entertainment System (SNES) decided to purchase a Genesis instead. However, the release of a CD-based add-on for the Genesis, the Sega CD (known as Mega-CD outside of North America), was commercially disappointing.

Sega Saturn

The is a 32-bit fifth-generation home video game console developed by Sega and released on November 22, 1994 in Japan, May 11, 1995 in North America, and July 8, 1995 in Europe. The successor to the successful Sega Genesis, the Saturn has a dual-CPU architecture and eight processors. Its games are in CD-ROM format, and its game library contains several arcade ports as well as original games.

Development of the Saturn began in 1992, the same year Sega's groundbreaking 3D Model 1 arcade hardware debuted. Designed around a new CPU from Japanese electronics company Hitachi, another video display processor was incorporated into the system's design in early 1994 to better compete with Sony's forthcoming PlayStation.

The Saturn was initially successful in Japan, but failed to sell in large numbers in the United States after its surprise May 1995 launch, four months before its scheduled release date. After the debut of the Nintendo 64 in late 1996, the Saturn rapidly lost market share in the U.S., where it was discontinued in 1998. Having sold 9.26 million units worldwide, the Saturn is considered a commercial failure. The failure of Sega's development teams to release a game in the "Sonic the Hedgehog" series, known in development as "Sonic X-treme", has been considered a factor in the console's poor performance.

Although the Saturn is remembered for several well-regarded games, including "Nights into Dreams", the "Panzer Dragoon" series, and the "Virtua Fighter" series, its reputation is mixed due to its complex hardware design and limited third-party support. Sega's management has been criticized for its decisions during the system's development and discontinuation.

Sega also experienced success with arcade games. In 1992 and 1993, the new Sega Model 1 arcade system board showcased Sega AM2's "Virtua Racing" and "Virtua Fighter" (the first 3D fighting game), which played a crucial role in popularizing 3D polygonal graphics. In particular, "Virtua Fighter" garnered praise for its simple three-button control scheme, with strategy coming from the intuitively observed differences between characters that felt and acted differently rather than the more ornate combos of two-dimensional competitors. Despite its crude visuals—with characters composed of fewer than 1,200 polygons—"Virtua Fighter"'s fluid animation and relatively realistic depiction of distinct fighting styles gave its combatants a lifelike presence considered impossible to replicate with sprites. The Model 1 was an expensive system board, and bringing home releases of its games to the Genesis required more than its hardware could handle. Several alternatives helped to bring Sega's newest arcade games to the console, such as the Sega Virtua Processor chip used for "Virtua Racing", and eventually the Sega 32X add-on.

Development of the Saturn was supervised by Hideki Sato, Sega's director and deputy general manager of research and development. According to Sega project manager Hideki Okamura, the Saturn project started over two years before the system was showcased at the Tokyo Toy Show in June 1994. The name "Saturn" was the system's codename during development in Japan, but was chosen as the official product name. "Computer Gaming World" in March 1994 reported a rumor that "the Sega "Saturn"... will release in Japan before the end of the year" for $250–300.

In 1993, Sega and Japanese electronics company Hitachi formed a joint venture to develop a new CPU for the Saturn, which resulted in the creation of the "SuperH RISC Engine" (or SH-2) later that year. The Saturn was designed around a dual-SH2 configuration. According to Kazuhiro Hamada, Sega's section chief for Saturn development during the system's conception, "the SH-2 was chosen for reasons of cost and efficiency. The chip has a calculation system similar to a DSP [digital signal processor], but we realized that a single CPU would not be enough to calculate a 3D world." Although the Saturn's design was largely finished before the end of 1993, reports in early 1994 of the technical capabilities of Sony's upcoming PlayStation console prompted Sega to include another video display processor (VDP) to improve the system's 2D performance and texture-mapping. CD-ROM-based and cartridge-only versions of the Saturn hardware were considered for simultaneous release during the system's development, but this idea was discarded due to concerns over the lower quality and higher price of cartridge-based games.

According to Kalinske, Sega of America "fought against the architecture of Saturn for quite some time". Seeking an alternative graphics chip for the Saturn, Kalinske attempted to broker a deal with Silicon Graphics, but Sega of Japan rejected the proposal. Silicon Graphics subsequently collaborated with Nintendo on the Nintendo 64. Kalinske, Sony Electronic Publishing's Olaf Olafsson, and Sony America's Micky Schulhof had discussed development of a joint "Sega/Sony hardware system", which never came to fruition due to Sega's desire to create hardware that could accommodate both 2D and 3D visuals and Sony's competing notion of focusing on 3D technology. Publicly, Kalinske defended the Saturn's design: "Our people feel that they need the multiprocessing to be able to bring to the home what we're doing next year in the arcades."

In 1993, Sega restructured its internal studios in preparation for the Saturn's launch. To ensure high-quality 3D games would be available early in the Saturn's life, and to create a more energetic working environment, developers from Sega's arcade division were asked to create console games. New teams, such as "Panzer Dragoon" developer Team Andromeda, were formed during this time.

In January 1994, Sega began to develop an add-on for the Genesis, the Sega 32X, which would serve as a less expensive entry into the 32-bit era. The decision to create the add-on was made by Nakayama and widely supported by Sega of America employees. According to former Sega of America producer Scot Bayless, Nakayama was worried that the Saturn would not be available until after 1994 and that the recently released Atari Jaguar would reduce Sega's hardware sales. As a result, Nakayama ordered his engineers to have the system ready for launch by the end of the year. The 32X would not be compatible with the Saturn, but Sega executive Richard Brudvik-Lindner pointed out that the 32X would play Genesis games, and had the same system architecture as the Saturn. This was justified by Sega's statement that both platforms would run at the same time, and that the 32X would be aimed at players who could not afford the more expensive Saturn. According to Sega of America research and development head Joe Miller, the 32X served a role in assisting development teams to familiarize themselves with the dual SH-2 architecture also used in the Saturn. Because both machines shared many of the same parts and were preparing to launch around the same time, tensions emerged between Sega of America and Sega of Japan when the Saturn was given priority.

Sega released the Saturn in Japan on November 22, 1994, at a price of ¥44,800. "Virtua Fighter", a faithful port of the popular arcade game, sold at a nearly one-to-one ratio with the Saturn console at launch and was crucial to the system's early success in Japan. Though Sega had wanted to launch with "Clockwork Knight" and "Panzer Dragoon," the only other first-party game available at launch was "Wan Chai Connection". Fueled by the popularity of "Virtua Fighter", Sega's initial shipment of 200,000 Saturn units sold out on the first day. Sega waited until the December 3 launch of the PlayStation to ship more units; when both were sold side-by-side, the Saturn proved more popular.

Meanwhile, Sega released the 32X on November 21, 1994 in North America, December 3, 1994 in Japan, and January 1995 in PAL territories, and was sold at less than half of the Saturn's launch price. After the holiday season, however, interest in the 32X rapidly declined. 500,000 Saturn units were sold in Japan by the end of 1994 (compared to 300,000 PlayStation units), and sales exceeded 1 million within the following six months. There were conflicting reports that the PlayStation enjoyed a higher sell-through rate, and the system gradually began to overtake the Saturn in sales during 1995. Sony attracted many third-party developers to the PlayStation with a liberal $10 licensing fee, excellent development tools, and the introduction of a 7- to 10-day order system that allowed publishers to meet demand more efficiently than the 10- to 12-week lead times for cartridges that had previously been standard in the Japanese video game industry.

In March 1995, Sega of America CEO Tom Kalinske announced that the Saturn would be released in the U.S. on "Saturnday" (Saturday) September 2, 1995. However, Sega of Japan mandated an early launch to give the Saturn an advantage over the PlayStation. At the first Electronic Entertainment Expo (E3) in Los Angeles on May 11, 1995, Kalinske gave a keynote presentation in which he revealed the release price of US$399 (including a copy of "Virtua Fighter"), and described the features of the console. Kalinske also revealed that, due to "high consumer demand", Sega had already shipped 30,000 Saturns to Toys "R" Us, Babbage's, Electronics Boutique, and Software Etc. for immediate release. The announcement upset retailers who were not informed of the surprise release, including Best Buy and Walmart; KB Toys responded by dropping Sega from its lineup. Sony subsequently unveiled the retail price for the PlayStation: Sony Computer Entertainment America president Steve Race took the stage, said "$299", and then walked away to applause. The Saturn's release in Europe also came before the previously announced North American date, on July 8, 1995, at a price of ₤399.99. European retailers and press did not have time to promote the system or its games, harming sales. After the PlayStation's European launch on September 29, it had already outsold the Saturn by a factor of three in the United Kingdom by early November 1995, where it was reported that Sony allocated ₤20 million to market the system during the holiday season compared to Sega's ₤4 million.

The Saturn's U.S. launch was accompanied by a reported $50 million advertising campaign that included coverage in publications such as "Wired" and "Playboy". Early advertising for the system was targeted at a more mature, adult audience than the Sega Genesis ads. Because of the early launch, the Saturn had only six games (all published by Sega) available to start as most third-party games were slated to be released around the original launch date. "Virtua Fighter"'s relative lack of popularity in the West, combined with a release schedule of only two games between the surprise launch and September 1995, prevented Sega from capitalizing on the Saturn's early timing. Within two days of its September 9, 1995 launch in North America, the PlayStation (backed by a large marketing campaign) sold more units than the Saturn had in the five months following its surprise launch, with almost all of the initial shipment of 100,000 units being sold in advance, and the rest selling out across the U.S.

A high-quality port of the Namco arcade game "Ridge Racer" contributed to the PlayStation's early success, and garnered favorable media in comparison to the Saturn version of Sega's "Daytona USA", which was considered inferior to its arcade counterpart. Namco, a longtime arcade competitor with Sega, also unveiled the Namco System 11 arcade board, based on raw PlayStation hardware. Although the System 11 was technically inferior to Sega's Model 2 arcade board, its lower price made it attractive to smaller arcades. Following a 1994 acquisition of Sega developers, Namco released "Tekken" for the System 11 and PlayStation. Directed by former "Virtua Fighter" designer Seiichi Ishii, "Tekken" was intended to be fundamentally similar, with the addition of detailed textures and twice the frame rate. "Tekken" surpassed "Virtua Fighter" in popularity due to its superior graphics and nearly arcade-perfect console port, becoming the first million-selling PlayStation game.

On October 2, 1995 Sega announced a Saturn price reduction to $299. High-quality Saturn ports of the Sega Model 2 arcade hits "Sega Rally Championship", "Virtua Cop", and "Virtua Fighter 2" (running at 60 frames per second at a high resolution) were available by the end of the year, and were generally regarded as superior to competitors on the PlayStation. Notwithstanding a subsequent increase in Saturn sales during the 1995 holiday season, the games were not enough to reverse the PlayStation's decisive lead. By 1996, the PlayStation had a considerably larger library than the Saturn, although Sega hoped to generate interest with upcoming exclusives such as "Nights into Dreams". An informal survey of retailers showed that the Saturn and PlayStation sold in roughly equal numbers during the first quarter of 1996. Within its first year, the PlayStation secured over 20% of the entire U.S. video game market. On the first day of the May 1996 E3 show, Sony announced a PlayStation price reduction to $199, a reaction to the release of the Model 2 Saturn in Japan at a price roughly equivalent to $199. On the second day, Sega announced it would match this price, though Saturn hardware was more expensive to manufacture.

In spite of the launch of the PlayStation and the Saturn, sales of 16-bit hardware/software continued to account for 64% of the video game market in 1995. Sega underestimated the continued popularity of the Genesis, and did not have the inventory to meet demand for the product. Sega was able to capture 43% of the dollar share of the U.S. video game market and sell more than 2 million Genesis units in 1995, but Kalinske estimated that "we could have sold another 300,000 Genesis systems in the November/December timeframe." Nakayama's decision to focus on the Saturn over the Genesis, based on the systems' relative performance in Japan, has been cited as the major contributing factor in this miscalculation.

Due to long-standing disagreements with Sega of Japan, Kalinske lost most of his interest in his work as CEO of Sega of America. By the spring of 1996, rumors were circulating that Kalinske planned to leave Sega, and a July 13 article in the press reported speculation that Sega of Japan was planning significant changes to Sega of America's management team. On July 16, 1996, Sega announced that Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America, while Kalinske would be leaving Sega after September 30 of that year. A former Honda executive, Irimajiri had been actively involved with Sega of America since joining Sega in 1993. Sega also announced that David Rosen and Nakayama had resigned from their positions as chairman and co-chairman of Sega of America, though both men remained with the company. Bernie Stolar, a former executive at Sony Computer Entertainment of America, was named Sega of America's executive vice president in charge of product development and third-party relations. Stolar, who had arranged a six-month PlayStation exclusivity deal for "Mortal Kombat 3" and helped build close relations with Electronic Arts while at Sony, was perceived as a major asset by Sega officials. Finally, Sega of America made plans to expand its PC software business.

Stolar was not supportive of the Saturn due to his belief that the hardware was poorly designed, and publicly announced at E3 1997 that "The Saturn is not our future." While Stolar had "no interest in lying to people" about the Saturn's prospects, he continued to emphasize quality games for the system, and subsequently reflected that "we tried to wind it down as cleanly as we could for the consumer." At Sony, Stolar opposed the localization of certain Japanese PlayStation games that he felt would not represent the system well in North America, and advocated a similar policy for the Saturn during his time at Sega, although he later sought to distance himself from this perception. These changes were accompanied by a softer image that Sega was beginning to portray in its advertising, including removing the "Sega!" scream and holding press events for the education industry. Marketing for the Saturn in Japan also changed with the introduction of "Segata Sanshiro" (played by Hiroshi Fujioka) as a character in a series of TV advertisements starting in 1997; the character would eventually star in a Saturn video game.

Temporarily abandoning arcade development, Sega AM2 head Yu Suzuki began developing several Saturn-exclusive games, including a role-playing game in the "Virtua Fighter" series. Initially conceived as an obscure prototype "The Old Man and the Peach Tree" and intended to address the flaws of contemporary Japanese RPGs (such as poor non-player character artificial intelligence routines), "Virtua Fighter RPG" evolved into a planned 11-part, 45-hour "revenge epic in the tradition of Chinese cinema", which Suzuki hoped would become the Saturn's killer app. The game was eventually released as "Shenmue" for the Saturn's successor, the Dreamcast.

As Sonic Team was working on "Nights into Dreams", Sega tasked the U.S.-based Sega Technical Institute (STI) with developing what would have been the first fully 3D entry in its popular "Sonic the Hedgehog" series. The game, "Sonic X-treme", was moved to the Saturn after several prototypes for other hardware (including the 32X) were discarded. It featured a fisheye lens camera system that rotated levels with Sonic's movement. After Nakayama ordered the game be reworked around the engine created for its boss battles, the developers were forced to work between 16 and 20 hours a day to meet their December 1996 deadline. Weeks of development time proved fruitless after Stolar rescinded STI's access to Sonic Team's "Nights into Dreams" engine following an ultimatum by "Nights" programmer Yuji Naka. After programmer Ofer Alon quit and designers Chris Senn and Chris Coffin became ill, the project was cancelled in early 1997. Sonic Team started work on an original 3D "Sonic" game for the Saturn, but development was shifted to the Dreamcast and the game became "Sonic Adventure". STI was disbanded in 1996 as a result of changes in management at Sega of America.

Journalists and fans have speculated about the impact a completed "X-treme" might have had on the market. David Houghton of GamesRadar described the prospect of "a good 3D "Sonic" game" on the Saturn as "a 'What if...' situation on a par with the dinosaurs not becoming extinct." IGN's Tavis Fahs called "X-treme" "the turning point not only for Sega's mascot and their 32-bit console, but for the entire company", but noted that the game served as "an empty vessel for Sega's ambitions and the hopes of their fans". Dave Zdyrko, who operated a prominent Saturn fan website during the system's lifespan, said: "I don't know if ["X-treme"] could've saved the Saturn, but ... "Sonic" helped make the Genesis and it made absolutely no sense why there wasn't a great new "Sonic" title ready at or near the launch of the [Saturn]". In a 2007 retrospective, producer Mike Wallis maintained that "X-treme" "definitely would have been competitive" with Nintendo's "Super Mario 64". By contrast, "Next Generation" reported in late 1996 that the game did not compare well to contemporary competition, and would have harmed Sega's reputation if it had been completed and released. Naka stated that he was relieved by the cancellation, as the game "wasn't looking very good from my perspective".

From 1993 to early 1996, although Sega's revenue declined as part of an industry-wide slowdown, the company retained control of 38% of the U.S. video game market (compared to Nintendo's 30% and Sony's 24%). 800,000 PlayStation units were sold in the U.S. by the end of 1995, compared to 400,000 Saturn units. In part due to an aggressive price war, the PlayStation outsold the Saturn by two-to-one in 1996, while Sega's 16-bit sales declined markedly. By the end of 1996, the PlayStation had sold 2.9 million units in the U.S., more than twice the 1.2 million Saturn units sold. The Christmas 1996 "Three Free" pack, which bundled the Saturn with "Daytona USA", "Virtua Fighter 2", and "Virtua Cop," drove sales dramatically and ensured the Saturn remained a competitor into 1997.

However, the Saturn failed to take the lead. After the launch of the Nintendo 64 in 1996, sales of the Saturn and its games were sharply reduced, while the PlayStation outsold the Saturn by three-to-one in the U.S. in 1997. The 1997 release of "Final Fantasy VII" significantly increased the PlayStation's popularity in Japan. As of August 1997, Sony controlled 47% of the console market, Nintendo 40%, and Sega only 12%. Neither price cuts nor high-profile game releases proved helpful. Reflecting decreased demand for the system, worldwide Saturn shipments during March to September 1997 declined from 2.35 million to 600,000 versus the same period in 1996; shipments in North America declined from 800,000 to 50,000. Due to the Saturn's poor performance in North America, 60 of Sega of America's 200 employees were laid off in the fall of 1997.

As a result of Sega's deteriorating financial situation, Nakayama resigned as president in January 1998 in favor of Irimajiri. Stolar subsequently acceded to president of Sega of America. Following five years of generally declining profits, in the fiscal year ending March 31, 1998 Sega suffered its first parent and consolidated financial losses since its 1988 listing on the Tokyo Stock Exchange. Due to a 54.8% decline in consumer product sales (including a 75.4% decline overseas), the company reported a net loss of ¥43.3 billion (US$327.8 million) and a consolidated net loss of ¥35.6 billion (US$269.8 million).

Shortly before announcing its financial losses, Sega announced that it was discontinuing the Saturn in North America to prepare for the launch of its successor. Only 12 Saturn games were released in North America in 1998 ("Magic Knight Rayearth" was the final official release), compared to 119 in 1996. The Saturn would last longer in Japan and Europe. Rumors about the upcoming Dreamcast—spread mainly by Sega itself—were leaked to the public before the last Saturn games were released. The Dreamcast was released on November 27, 1998 in Japan and on September 9, 1999 in North America. The decision to abandon the Saturn effectively left the Western market without Sega games for over one year. Sega suffered an additional ¥42.881 billion consolidated net loss in the fiscal year ending March 1999, and announced plans to eliminate 1,000 jobs, nearly a quarter of its workforce.

Worldwide Saturn sales include at least the following amounts in each territory: 5.75 million in Japan (surpassing the Genesis' sales of 3.58 million there), 1.8 million in the United States, 1 million in Europe, and 530,000 elsewhere. With lifetime sales of 9.26 million units, the Saturn is considered a commercial failure, although its install base in Japan surpassed the Nintendo 64's 5.54 million. Lack of distribution has been cited as a significant factor contributing to the Saturn's failure, as the system's surprise launch damaged Sega's reputation with key retailers. Conversely, Nintendo's long delay in releasing a 3D console and damage caused to Sega's reputation by poorly supported add-ons for the Genesis are considered major factors allowing Sony to gain a foothold in the market.

Featuring a total of eight processors the Saturn's main central processing units are two Hitachi SH-2 microprocessors clocked at 28.6 MHz and capable of 56 MIPS. The system contains a Motorola 68EC000 running at 11.3 MHz as a sound controller, a custom sound processor with an integrated Yamaha FH1 DSP running at 22.6 MHz capable of up to 32 sound channels with both FM synthesis and 16-bit PCM sampling at a maximum rate of 44.1 kHz, and two video display processors, the VDP1 (which handles sprites, textures and polygons) and the VDP2 (which handles backgrounds). Its double-speed CD-ROM drive is controlled by a dedicated Hitachi SH-1 processor to reduce load times. The Saturn's System Control Unit (SCU), which controls all buses and functions as a co-processor of the main SH-2 CPU, has an internal DSP running at 14.3 MHz. The Saturn contains a cartridge slot for memory expansion, 16 Mbit of work random-access memory (RAM), 12 Mbit of video RAM, 4 Mbit of RAM for sound functions, 4 Mbit of CD buffer RAM and 256 Kbit (32 KB) of battery backup RAM. Its video output, provided by a stereo AV cable, displays at resolutions from 320×224 to 704×224 pixels, and is capable of displaying up to 16.77 million colors simultaneously. Physically, the Saturn measures. The Saturn was sold packaged with an instruction manual, one control pad, a stereo AV cable, and its 100V AC power supply, with a power consumption of approximately 15W.

The Saturn had technically impressive hardware at the time of its release, but its complexity made harnessing this power difficult for developers accustomed to conventional programming. The greatest disadvantage was that both CPUs shared the same bus and were unable to access system memory at the same time. Making full use of the 4 kB of cache memory in each CPU was critical to maintaining performance. For example, "Virtua Fighter" used one CPU for each character, while "Nights" used one CPU for 3D environments and the other for 2D objects. The Saturn's Visual Display Processor 2 (VDP2), which can generate and manipulate backgrounds, has also been cited as one of the system's most important features.

The Saturn's design elicited mixed commentary among game developers and journalists. Developers quoted by "Next Generation" in December 1995 described the Saturn as "a real coder's machine" for "those who love to get their teeth into assembly and really hack the hardware", with "more flexibility" and "more calculating power than the PlayStation". The Saturn's sound board was also widely praised. By contrast, Lobotomy Software programmer Ezra Dreisbach described the Saturn as significantly slower than the PlayStation, whereas Kenji Eno of WARP observed little difference between the two systems. In particular, Dreisbach criticized the Saturn's use of quadrilaterals as its basic geometric primitive, in contrast to the triangles rendered by the PlayStation and the Nintendo 64. Ken Humphries of Time Warner Interactive remarked that compared to the PlayStation, the Saturn was markedly worse at generating polygons but markedly better at sprite-based graphics. Third-party development was initially hindered by the lack of useful software libraries and development tools, requiring developers to write in assembly language to achieve good performance. During early Saturn development, programming in assembly could offer a two-to-fivefold speed increase over higher-level languages like C. The Saturn hardware is considered extremely difficult to emulate. Sega responded to complaints about the difficulty of programming for the Saturn by writing new graphics libraries which were claimed to make development easier. Sega of America also purchased a United Kingdom-based development firm, Cross Products, to produce the Saturn's official development system. Despite these challenges, Treasure CEO Masato Maegawa stated that the Nintendo 64 was more difficult to develop for than the Saturn. Traveller's Tales' Jon Burton opined that while the PlayStation was easier "to get started on ... you quickly reach [its] limits", whereas the Saturn's "complicated" hardware had the ability to "improve the speed and look of a game when all used together correctly." A major point of criticism was the Saturn's use of 2D sprites to generate polygons and simulate 3D space. The PlayStation functioned in a similar manner, but also featured a dedicated "Geometry Transfer Engine" that rendered additional polygons. As a result, several analysts described the Saturn as an "essentially" 2D system.

Several models of the Saturn were produced in Japan. An updated model in a recolored light gray (officially white) was released in Japan at a price of ¥20,000 in order to reduce the system's cost and raise its appeal among women and younger children. Two models were released by third parties: Hitachi released a model known as the Hi-Saturn (a smaller Saturn model equipped with a car navigation function), while JVC released the V-Saturn. Saturn controllers came in various color schemes to match different models of the console. The system also supports several accessories. A wireless controller powered by AA batteries utilizes infrared signal to connect to the Saturn. Designed to work with "Nights", the Saturn 3D Pad includes both a control pad and an analog stick for directional input. Sega also released several versions of arcade sticks as peripherals, including the Virtua Stick, the Virtua Stick Pro, the Mission Analog Stick, and the Twin Stick. Sega also created a light gun peripheral known as the "Virtua Gun" for use with shooting games such as "Virtua Cop" and "The Guardian", as well as the Arcade Racer, a wheel for racing games. The Play Cable allows for two Saturn consoles to be connected for multiplayer gaming across two screens, while a multitap allows up to six players to play games on the same console. The Saturn was designed to support up to 12 players on a single console, by using two multitaps. RAM cartridges expand the amount of memory in the system. Other accessories include a keyboard, mouse, floppy disk drive, and movie card.

Like the Genesis, the Saturn had an Internet-based gaming service. The Sega NetLink was a 28.8k modem that fit into the cartridge slot in the Saturn for direct dial multiplayer. In Japan, a now defunct pay-to-play service was used. It could also be used for web browsing, sending email, and online chat. Because the NetLink was released before the Saturn keyboard, Sega produced a series of CDs containing hundreds of website addresses so that Saturn owners could browse with the joypad. The NetLink functioned with five games: "Daytona USA", "Duke Nukem 3D", "Saturn Bomberman", "Sega Rally", and "". In 1995 Sega announced it was developing a variant of the Saturn featuring a built-in NetLink modem under the code name "Sega Pluto", but it was never released.

Sega developed an arcade board based on the Saturn's hardware, called the Sega ST-V (or Titan), which was intended as an affordable alternative to Sega's Model 2 arcade board as well as a testing ground for upcoming Saturn software. The Titan was criticized for its comparatively weak performance by Sega AM2's Yu Suzuki and was overproduced by Sega's arcade division. Because Sega already possessed the "Die Hard" license, members of Sega AM1 working at the Sega Technical Institute developed "Die Hard Arcade" for the Titan to clear out excess inventory. "Die Hard" became the most successful Sega arcade game produced in the United States at that point. Other games released for the Titan include "" and "Virtua Fighter Kids".

Much of the Saturn's library comes from Sega's arcade ports, including "Daytona USA", "The House of the Dead", "Last Bronx", "Sega Rally Championship", the "Virtua Cop" series, the "Virtua Fighter" series, and "Virtual-On". Saturn ports of 2D Capcom fighting games including "Darkstalkers 3", "Marvel Super Heroes vs. Street Fighter", and "Street Fighter Alpha 3" were noted for their faithfulness to their arcade counterparts. "Fighters Megamix", developed by Sega AM2 for the Saturn rather than arcades, combined characters from "Fighting Vipers" and "Virtua Fighter" to positive reviews. Highly rated Saturn exclusives include "Panzer Dragoon Saga", "Dragon Force", "Guardian Heroes", "Nights", "Panzer Dragoon II Zwei", and "Shining Force III". PlayStation games such as "", "Resident Evil", and "Wipeout 2097" received Saturn ports with mixed results. Lobotomy Software's "PowerSlave" featured some of the most impressive 3D graphics on the system, leading Sega to contract them to produce Saturn ports of "Duke Nukem 3D" and "Quake". While Electronic Arts' limited support for the Saturn and Sega's failure to develop a football game for the 1996 fall season gave Sony the lead in the sports genre, "Sega Sports" published Saturn sports games including the well-regarded "World Series Baseball" and "Sega Worldwide Soccer" series. With about 600 official releases, the Saturn's library is nearly twice as large as the Nintendo 64's.

Due to the cancellation of "Sonic X-treme", the Saturn lacks an exclusive "Sonic the Hedgehog" platformer; instead it received a graphically enhanced port of the Genesis game "Sonic 3D Blast", the compilation "Sonic Jam", and a racing game, "Sonic R". The platformer "Bug!" received attention for its eponymous main character being a potential mascot for the Saturn, but it failed to catch on as the "Sonic" series had. Considered one of the most important Saturn releases, Sonic Team developed "Nights into Dreams", a score attack game that attempted to simulate both the joy of flying and the fleeting sensation of dreams. The gameplay of "Nights" involves steering the imp-like androgynous protagonist, Nights, as it flies on a mostly 2D plane across surreal stages broken into four segments each. The levels repeat for as long as an in-game time limit allows, while flying over or looping around various objects in rapid succession earns additional points. Although it lacked the fully 3D environments of Nintendo's "Super Mario 64", "Nights"' emphasis on unfettered movement and graceful acrobatic techniques showcased the intuitive potential of analog control. Sonic Team's "Burning Rangers", a fully 3D action-adventure game involving a team of outer-space firefighters, garnered praise for its transparency effects and distinctive art direction, but was released in limited quantities late in the Saturn's lifespan and criticized for its short length.

Some of the games that made the Saturn popular in Japan, such as "Grandia" and the "Sakura Wars" series, never saw a Western release due to Sega of America's policy of not localizing RPGs and other Japanese games that might have damaged the system's reputation in North America. Despite appearing first on the Saturn, games such as "Dead or Alive", "Grandia", and "" only saw a Western release on the PlayStation. Working Designs localized several Japanese Saturn games before a public feud between Sega of America's Bernie Stolar and Working Designs president Victor Ireland resulted in the company switching their support to the PlayStation. "Panzer Dragoon Saga" was praised as perhaps the finest RPG for the system due to its cinematic presentation, evocative plot, and unique battle system—with a tactical emphasis on circling around opponents to identify weak points and the ability to "morph" the physical attributes of the protagonist's dragon companion during combat—but Sega released fewer than 20,000 retail copies of the game in North America in what IGN's Levi Buchanan characterized as one example of the Saturn's "ignominious send-off" in the region. Similarly, only the first of three installments of "Shining Force III" was released outside Japan. The Saturn's library also garnered criticism for its lack of sequels to high-profile Genesis-era Sega franchises, with Sega of Japan's cancellation of a planned third installment in Sega of America's popular "Eternal Champions" series cited as a significant source of controversy.

Later ports of Saturn games including "Guardian Heroes", "Nights", and "" continued to garner positive reviews. Partly due to rarity, Saturn games such as "Panzer Dragoon Saga" and "Radiant Silvergun" have been noted for their cult following. Due to the system's commercial failure and hardware limitations, planned Saturn releases such as "Resident Evil 2", "Shenmue", "Sonic Adventure", and "Virtua Fighter 3" were cancelled and moved to the Dreamcast.

At the time of its release, "Famicom Tsūshin" awarded the Saturn console 24 out of 40 possible points, higher than the PlayStation's 19 out of 40. In June 1995, Dennis Lynch of the "Chicago Tribune" and Albert Kim of "Entertainment Weekly" both praised the Saturn as the most advanced gaming console available, with the former complimenting its double-speed CD-ROM drive and "intense surround-sound capabilities" and the latter citing "Panzer Dragoon" as a "lyrical and exhilarating epic" demonstrating the ability of new technology to "transform" the industry. In December 1995, "Next Generation" evaluated the system with three and a half stars out of a possible five, highlighting Sega's marketing and arcade background as strengths but the system's complexity as a weakness. "Electronic Gaming Monthly"'s December 1996 Buyer's Guide had four reviewers rate the Saturn 8, 6, 7, and 8 out of 10; these ratings were inferior to those of the PlayStation, which was scored 9, 10, 9, and 9 in the same review. By December 1998, "Electronic Gaming Monthly"'s reviews were more mixed, with reviewers citing the lack of games for the system as a major issue. According to "EGM" reviewer Crispin Boyer, "the Saturn is the only system that can thrill me one month and totally disappoint me the next".

Retrospective feedback of the Saturn is mixed, but generally praises its game library. According to Greg Sewart of 1UP.com, "the Saturn will go down in history as one of the most troubled, and greatest, systems of all time". In 2009, IGN named the Saturn as the 18th best video game console of all time, praising its unique game library. According to the reviewers, "While the Saturn ended up losing the popularity contest to both Sony and Nintendo ... "Nights into Dreams", the "Virtua Fighter" and "Panzer Dragoon" series are all examples of exclusive titles that made the console a fan favorite". "Edge" noted "hardened loyalists continue to reminisce about the console that brought forth games like "Burning Rangers", "Guardian Heroes", "Dragon Force" and "Panzer Dragoon Saga"." In 2015, "The Guardian"'s Keith Stuart declared "the Saturn has perhaps the strongest line up of 2D shooters and fighting games in console history".

"Retro Gamer"'s Damien McFerran stated "Even today, despite the widespread availability of sequels and re-releases on other formats, the Sega Saturn is still a worthwhile investment for those who appreciate the unique gameplay styles of the companies that supported it." IGN's Adam Redsell wrote "[Sega's] devil-may-care attitude towards game development in the Saturn and Dreamcast eras is something that we simply do not see outside of the indie scene today." Necrosoft Games director Brandon Sheffield expounded that "The Saturn was a landing point for games that were too 'adult' in content for other systems, as it was the only one that allowed an 18+ rating for content in Japan ... some games, like "Enemy Zero" used it to take body horror to new levels, an important step toward the expansion of games and who they served." Sewart praised the Saturn's first-party games as "Sega's shining moment as a game developer", with Sonic Team demonstrating its creative range and AM2 producing numerous technically impressive arcade ports, but also commented on the many Japan-exclusive Saturn releases, which he connected with a subsequent boom in the game import market. IGN's Travis Fahs was critical of the Saturn library's lack of "fresh ideas" and "precious few high-profile franchises", in contrast to what he described as Sega's more creative Dreamcast output.

Criticism has befallen Sega's management regarding both the creation and handling of the Saturn. McFerran criticizes Sega's management at the time of the Saturn's development, claiming that it had "fallen out of touch with both the demands of the market and the industry". Bernie Stolar has also been criticized for his decision to end support for the Saturn. According to Fahs, "Stolar's decision to abandon the Saturn made him a villain to many Sega fans, but ... it was better to regroup than to enter the next fight battered and bruised. Dreamcast would be Stolar's redemption." Stolar has defended his decision, stating, "I felt Saturn was hurting the company more than helping it. That was a battle that we weren't going to win." Sheffield stated that the Saturn's use of quadrilaterals undermined third-party support for the system, but because "nVidia invested in quads" at the same time there is "a remote possibility" they could have "become the standard instead of triangles"—"if somehow, magically, the Saturn were the most popular console of that era." Speaking more positively of the system, former Working Designs president Victor Ireland described the Saturn as "the start of the future of console gaming" because it "got the better developers thinking and designing with parallel-processing architecture in mind for the first time". Writing for GamesRadar, Justin Towell noted that the Saturn's 3D Pad "set the template for every successful controller that followed, with analog shoulder triggers and left thumbstick ... I don't see any three-pronged controllers around the office these days."

Douglass C. Perry of Gamasutra notes that, from its surprise launch to its ultimate failure, the Saturn "soured many gamers on Sega products." Sewart and IGN's Levi Buchanan cited the failure of the Saturn as the major reason for Sega's downfall as a hardware manufacturer, but USgamer's Jeremy Parish described the Saturn as "more a symptom ... than a cause" of the company's decline, which began with add-ons for the Genesis that fragmented the market and continued with Sega of America's and Sega of Japan's competing designs for the Dreamcast. Sheffield portrayed Sega's mistakes with the Saturn as emblematic of the broader decline of the Japanese gaming industry: "They thought they were invincible, and that structure and hierarchy were necessary for their survival, but more flexibility, and a greater participation with the West could have saved them." According to Stuart, Sega "didn't see ... the roots of a prevailing trend, away from arcade conversions and traditional role-playing adventures and toward a much wider console development community with fresh ideas about gameplay and structure." Pulp365 reviews editor Matt Paprocki concluded "the Saturn is a relic, but an important one, which represents the harshness of progress and what it can leave in its wake".

The Sega Genesis, known as the in regions outside of North America, is a 16-bit video game console that was developed and sold by Sega. First released in Japan in 1988, in North America in 1989 and in PAL regions in 1990, the Genesis is Sega's third console and the successor to the Master System. The system supports a library of more than 700 games created both by Sega and a wide array of third-party publishers and delivered on ROM cartridges. It can also play the complete library of Master System games when the separately sold Power Base Converter is installed. The Sega Genesis also benefited from numerous peripherals, including the Sega CD and Sega 32X, several network services, and multiple first-party and third-party variations of the console that focused on extending its functionality. The console and its games continue to be popular among fans, collectors, video game music fans, and emulation enthusiasts. Licensed third party re-releases of the console are still being produced, and several indie game developers continue to produce games for it. Many games have also been re-released in compilations for newer consoles and offered for download on various digital distribution services, such as Virtual Console, Xbox Live Arcade, PlayStation Network, and Steam.

List of Sega Genesis games

The Genesis library was initially modest, but eventually grew to contain games to appeal to all types of players. The initial pack-in title was "Altered Beast", which was later replaced with "Sonic the Hedgehog". Top sellers included "Sonic the Hedgehog", its sequel "Sonic the Hedgehog 2", and "Disney's Aladdin". During development for the console, Sega Enterprises in Japan focused on developing action games while Sega of America was tasked with developing sports games. A large part of the appeal of the Genesis library during the console's lifetime was the arcade-based experience of its games, as well as more difficult entries such as "Ecco the Dolphin" and sports games such as "Joe Montana Football". Compared to its competition, Sega advertised to an older audience by hosting more mature games, including the uncensored version of "Mortal Kombat".

This is an alphabetical list of released games for the Sega Genesis. Titles listed do not include releases for the Sega CD and Sega 32X add-ons. Included in this list are titles not licensed by Sega, including releases in Taiwan by several developers such as Gamtec, as well as releases by Accolade before being licensed following the events of "Sega v. Accolade". This list also includes titles developed by unlicensed third-party developers after the discontinuation of the Genesis, such as "Pier Solar and the Great Architects".

A few games were only released exclusively on the Sega Channel subscription service, which was active from 1994 to 1998, in the US. This means that, whilst cartridges were officially released for use on PAL and Japanese consoles, they were unavailable physically in the US. While few games were released this way, some of them are considered to be staples in the Genesis library, such as "Pulseman" and "".

A total of 897 game titles are known to have been released for the console:

Sega Meganet, also known as the Net Work System, was an online service for the Mega Drive in Japan. Utilizing dial-up Internet access, Meganet was Sega's first online multiplayer gaming service, and functioned on a pay to play basis. The system functioned through the use of a peripheral called the Mega Modem and offered several unique titles that could be downloaded, and a few could be played competitively with friends. In addition, it shared technology and equipment with more serious services such as the Mega Anser, used for banking purposes. Though the system was announced for North America under the rebranded name "Tele-Genesis", it was never released for that region.

The Meganet service utilized its own library of titles, independent of the Mega Drive library. Most of these games never received a cartridge release; however, "Columns", "Flicky", "Fatal Labyrinth", and "Teddy Boy Blues" each later saw cartridge versions. Several Meganet games would also later appear in "Game no Kanzume vol. 2", released for the Mega-CD exclusively in Japan. Most games for the service were small, at around 128kB per game, due to the limits of Internet connection speeds at the time. Downloads were estimated to take about five to eight minutes to complete. All of the Meganet games were available through the Sega Game Library, accessed through the Meganet modem. Due to issues with long-distance charges through the use of telephone lines, as well as seconds of lag time between commands, only two games featured competitive play: "Tel-Tel Stadium" and "Tel-Tel Mahjong", with the remainder of the games available for single players via download. Due to Sega's reluctance to commit to releasing the service in North America, third-party developers in that region were unwilling to invest in developing games specifically for Meganet. This resulted in a low number of titles created for the service.

The following list contains all of the titles released for the Meganet service. All titles in this list were released in Japan only.

Games intended for the console but never released include:

Released in 1988, the Sega Genesis (known as the Sega Mega Drive in Japan, Europe and Brazil) was Sega's entry into the fourth generation of video game consoles. Selling 30.75 million units worldwide, the Genesis was the most successful console Sega ever released. The successor to the Genesis, the Sega Saturn, was released in Japan in 1994. The Saturn was a CD-ROM-based console that displayed both 2D and 3D computer graphics, but its complex dual-CPU architecture made it more difficult to program for than its chief competitor, the Sony PlayStation. Although the Saturn debuted before the PlayStation in both Japan and the United States, its surprise U.S. launch—which came four months earlier than originally scheduled—was marred by a lack of distribution, which remained a continuing problem for the system. Moreover, Sega's early release was undermined by Sony's simultaneous announcement that the PlayStation would retail for US$299—compared to the Saturn's initial price of $399. Nintendo's long delay in releasing a competing 3D console and the damage done to Sega's reputation by poorly supported add-ons for the Genesis (particularly the Sega 32X) allowed Sony to establish a foothold in the market. The PlayStation was immediately successful in the U.S., in part due to a massive advertising campaign and strong third-party support engendered by Sony's excellent development tools and liberal $10 licensing fee. Sony's success was further aided by a price war in which Sega lowered the price of the Saturn from $399 to $299 and then from $299 to $199 in order to match the price of the PlayStation–even though Saturn hardware was more expensive to manufacture and the PlayStation enjoyed a larger software library. Losses on the Saturn hardware contributed to Sega's financial problems, which saw the company's revenue decline between 1992 and 1995 as part of an industry-wide slowdown. Furthermore, Sega's focus on the Saturn over the Genesis prevented it from fully capitalizing on the continued strength of the 16-bit market.

Dreamcast

The is a home video game console released by Sega on November 27, 1998 in Japan, September 9, 1999 in North America, and October 14, 1999 in Europe. It was the first in the sixth generation of video game consoles, preceding Sony's PlayStation 2, Nintendo's GameCube and Microsoft's Xbox. The Dreamcast was Sega's final home console, marking the end of the company's 18 years in the console market.

In contrast to the expensive hardware of the unsuccessful Sega Saturn, the Dreamcast was designed to reduce costs with "off-the-shelf" components, including a Hitachi SH-4 CPU and an NEC PowerVR2 GPU. Released in Japan to a subdued reception, the Dreamcast enjoyed a successful U.S. launch backed by a large marketing campaign, but interest in the system steadily declined as Sony built hype for the upcoming PlayStation 2. Sales did not meet Sega's expectations despite several price cuts, and the company continued to incur significant financial losses. After a change in leadership, Sega discontinued the Dreamcast on March 31, 2001, withdrawing from the console business and restructuring itself as a third-party publisher. 9.13 million Dreamcast units were sold worldwide.

Although the Dreamcast had a short lifespan and limited third-party support, reviewers have considered the console ahead of its time. Its library contains many games considered creative and innovative, including "Crazy Taxi", "Jet Set Radio" and "Shenmue", as well as high-quality ports from Sega's NAOMI arcade system board. The Dreamcast was also the first console to include a built-in modem for Internet support and online play.

Due to long-standing disagreements with Sega of Japan, Sega of America CEO Tom Kalinske became less interested in his position. On July 16, 1996, Sega announced that Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America, while Kalinske would be leaving Sega after September 30 of that year. Sega also announced that Sega Enterprises cofounder David Rosen and Sega of Japan CEO Hayao Nakayama had resigned from their positions as chairman and co-chairman of Sega of America, though both men remained with the company. Bernie Stolar, a former executive at Sony Computer Entertainment of America, was named Sega of America's executive vice president in charge of product development and third-party relations. Stolar did not support the Saturn due to his belief that the hardware was poorly designed and publicly announced at E3 1997 that "The Saturn is not our future." After the launch of the Nintendo 64, sales of the Saturn and Sega's 32-bit software were sharply reduced. As of August 1997, Sony controlled 47 percent of the console market, Nintendo controlled 40 percent, and Sega controlled only 12 percent. Neither price cuts nor high-profile games were proving helpful to the Saturn's success. Due to the Saturn's poor performance in North America, Sega of America laid off 60 of its 200 employees in the fall of 1997.
As a result of the company's deteriorating financial situation, Nakayama resigned as president of Sega in January 1998 in favor of Irimajiri. Stolar would subsequently accede to become CEO and president of Sega of America. Following five years of generally declining profits, in the fiscal year ending March 31, 1998, Sega suffered its first parent and consolidated financial losses since its 1988 listing on the Tokyo Stock Exchange. Due to a 54.8% decline in consumer product sales (including a 75.4% decline overseas), the company reported a consolidated net loss of ¥35.6 billion (US$269.8 million). Shortly before announcing its financial losses, Sega revealed that it was discontinuing the Saturn in North America, with the goal of preparing for the launch of its successor. This decision effectively left the Western market without Sega games for over one year. Rumors about the upcoming Dreamcast—spread mainly by Sega itself—leaked to the public before the last Saturn games were released.

As early as 1995, reports surfaced that Sega would collaborate with Lockheed Martin, The 3DO Company, Matsushita, or Alliance Semiconductor to create a new graphics processing unit, which conflicting accounts said would be used for a 64-bit "Saturn 2" or an add-on peripheral. Development of the Dreamcast was wholly unrelated to this rumored project. In light of the Saturn's poor market performance, Irimajiri decided to start looking outside of the company's internal hardware development division to create a new console. In 1997, Irimajiri enlisted the services of IBM's Tatsuo Yamamoto to lead an 11-man team to work on a secret hardware project in the United States, which was referred to as "Blackbelt". Accounts vary on how an internal team led by Hideki Sato also began development on Dreamcast hardware; one account specifies that Sega of Japan tasked both teams, while another suggests that Sato was bothered by Irimajiri's choice to begin development externally and chose to have his hardware team begin development. Sato and his group chose the Hitachi SH-4 processor architecture and the VideoLogic PowerVR2 graphics processor, manufactured by NEC, in the production of their mainboard. Initially known as "Whitebelt", this project was later codenamed "Dural", after the metallic female fighter from Sega's "Virtua Fighter" series.

Yamamoto's group opted to use 3dfx Voodoo 2 and Voodoo Banshee graphics processors alongside a Motorola PowerPC 603e central processing unit (CPU), but Sega management later asked them to also use the SH-4 chip. Both processors have been described as "off the shelf" components. In 1997, 3dfx began its IPO, and as a result of legal obligations unveiled its contracts with Sega, including the development of the new console. This angered Sega of Japan executives, who eventually decided to use the Dural chipset and cut ties with 3dfx. According to former Sega of America vice president of communications and former NEC brand manager Charles Bellfield, presentations of games using the NEC solution showcased the performance and low cost delivered by the SH-4 and PowerVR architecture. He further stated that "Sega's relationship with NEC, a Japanese company, probably made a difference [in Sega's decision to adopt the Japanese team's design] too." Stolar, on the other hand, "felt the US version, the 3Dfx version, should have been used. Japan wanted the Japanese version, and Japan won." As a result, 3dfx filed a lawsuit against both Sega and NEC claiming breach of contract, which would eventually be settled out of court. The choice to use the PowerVR architecture concerned Electronic Arts (EA), a longtime developer for Sega's consoles. EA had invested in 3dfx but was unfamiliar with the selected architecture, which was reportedly less powerful. As recounted by Shiro Hagiwara (a general manager at Sega's hardware division) and Ian Oliver (the managing director of Sega subsidiary Cross Products), the SH-4 was chosen while it was still in development and following a lengthy deliberation process because it was the only available processor that "could adapt to deliver the 3D geometry calculation performance necessary." By February 1998, Sega had renamed the Dural "Katana" (after the Japanese sword), although certain hardware specifications such as random access memory (RAM) were not yet finalized.

Knowing that the Sega Saturn had been set back by its high production costs and complex hardware, Sega took a different approach with the Dreamcast. Like previous Sega consoles, the Dreamcast was designed around intelligent subsystems working in parallel with one another, but the selections of hardware were more in line with what was common in personal computers than video game consoles, reducing the system's cost. According to Damien McFerran, "the motherboard was a masterpiece of clean, uncluttered design and compatibility." Chinese economist and future Sega.com CEO Brad Huang convinced Sega chairman Isao Okawa to include a modem with every Dreamcast despite significant opposition from Okawa's staff over the additional $15 cost per unit. To account for rapid changes in home data delivery, Sega designed the Dreamcast's modem to be modular. Sega selected the GD-ROM media format for the system. The GD-ROM, which was jointly developed by Sega and Yamaha Corporation, could be mass-produced at a similar price to a normal CD-ROM, thus avoiding the greater expense of DVD-ROM technology. As the GD-ROM format can hold about 1 GB of data, illegally copying Dreamcast games onto a 650 MB CD-ROM sometimes required the removal of certain game features, although this did not prevent copying of Dreamcast software. Microsoft developed a custom Dreamcast version of Windows CE with DirectX API and dynamic-link libraries, making it easy to port PC games to the platform, although programmers would ultimately favor Sega's development tools over those from Microsoft.

Sega held a public competition to name its new system and considered over 5,000 different entries before choosing "Dreamcast"—a portmanteau of "dream" and "broadcast". According to Katsutoshi Eguchi, Japanese game developer Kenji Eno submitted the name and created the Dreamcast's spiral logo, but this claim has not been verified by Sega. The Dreamcast's start-up sound was composed by the Japanese musician Ryuichi Sakamoto. Because the Saturn had tarnished Sega's reputation, the company planned to remove its name from the console entirely and establish a new gaming brand similar to Sony's PlayStation, but Irimajiri's management team ultimately decided to retain Sega's logo on the Dreamcast's exterior. Sega spent US$50–80 million on hardware development, $150–200 million on software development, and $300 million on worldwide promotion—a sum which Irimajiri, a former Honda executive, humorously compared to the investments required to design new automobiles.

Despite taking massive losses on the Saturn, including a 75 percent drop in half-year profits just before the Japanese launch of the Dreamcast, Sega felt confident about its new system. The Dreamcast attracted significant interest and drew many pre-orders. Sega announced that "Sonic Adventure", the next game starring company mascot Sonic the Hedgehog, would arrive in time for the Dreamcast's launch and promoted the game with a large-scale public demonstration at the Tokyo Kokusai Forum Hall. However, Sega could not achieve its shipping goals for the Dreamcast's Japanese launch due to a shortage of PowerVR chipsets caused by a high failure rate in the manufacturing process. As more than half of its limited stock had been pre-ordered, Sega stopped pre-orders in Japan. On November 27, 1998, the Dreamcast launched in Japan at a price of JP¥29,000, and the entire stock sold out by the end of the day. However, of the four games available at launch, only one—a port of "Virtua Fighter 3", the most successful arcade game Sega ever released in Japan—sold well. Sega estimated that an additional 200,000-300,000 Dreamcast units could have been sold with sufficient supply. Key Dreamcast games "Sonic Adventure" and "Sega Rally Championship 2", which had been delayed, arrived within the following weeks, but sales continued to be slower than expected. Irimajiri hoped to sell over 1 million Dreamcast units in Japan by February 1999, but less than 900,000 were sold, undermining Sega's attempts to build up a sufficient installed base to ensure the Dreamcast's survival after the arrival of competition from other manufacturers. There were reports of disappointed Japanese consumers returning their Dreamcasts and using the refund to purchase additional PlayStation software. "Seaman", released in July 1999, was considered the Dreamcast's first major hit in Japan. Prior to the Western launch, Sega reduced the price of the Dreamcast to JP¥19,900, effectively making the hardware unprofitable but increasing sales. The price reduction and release of Namco's "Soulcalibur" helped Sega to gain 17 percent on its shares.
Working closely with Midway Games (which developed four launch games for the system) and taking advantage of the ten months following the Dreamcast's release in Japan, Sega of America worked to ensure a more successful U.S. launch with a minimum of 15 launch games. Despite lingering bitterness over the Saturn's early release, Stolar successfully managed to repair relations with major US retailers, with whom Sega presold 300,000 Dreamcast units. In addition, a pre-launch promotion enabled consumers to rent the system from Hollywood Video in the months preceding its September launch. Sega of America's senior vice president of marketing Peter Moore, a fan of the attitude previously associated with Sega's brand, worked with Foote, Cone & Belding and Access Communications to develop the "It's Thinking" campaign of 15-second television commercials, which emphasized the Dreamcast's hardware power. According to Moore, "We needed to create something that would really intrigue consumers, somewhat apologize for the past, but invoke all the things we loved about Sega, primarily from the Genesis days." On August 11, Sega of America confirmed that Stolar had been fired, leaving Moore to direct the launch.

Prior to the Dreamcast's release, Sega was dealt a blow when EA—the largest third-party video game publisher—announced it would not develop games for the system. EA executive Bing Gordon claimed "[Sega] couldn't afford to give us [EA] the same kind of license that EA has had over the last five years", but Stolar recounted that EA president Larry Probst wanted "exclusive rights to be the only sports brand on Dreamcast", which Stolar could not accept due to Sega's recent $10 million purchase of sports game developer Visual Concepts. While the Dreamcast would have none of EA's popular sports games, "Sega Sports" games developed mainly by Visual Concepts helped to fill that void.

The Dreamcast launched in North America on September 9, 1999 at a price of $199—which Sega's marketing dubbed "9/9/99 for $199". Eighteen launch games were available for the Dreamcast in the U.S. Sega set a new sales record by selling more than 225,132 Dreamcast units in 24 hours, earning the company $98.4 million in what Moore called "the biggest 24 hours in entertainment retail history". Within two weeks, U.S. Dreamcast sales exceeded 500,000. By Christmas, Sega held 31 percent of the North American video game marketshare. Significant launch games included "Soul Calibur", an arcade fighting game that was graphically enhanced for the system and went on to sell one million units, and Visual Concepts' high-quality football simulation "NFL 2K". On November 4, Sega announced it had sold over one million Dreamcast units. Nevertheless, the launch was marred by a glitch at one of Sega's manufacturing plants, which produced defective GD-ROMs.

Sega released the Dreamcast in Europe on October 14, 1999, at a price of GB₤200. By November 24, 400,000 consoles had been sold in Europe. By Christmas of 1999, Sega of Europe reported selling 500,000 units, placing it six months ahead of schedule. Sales did not continue at this pace, and by October 2000, Sega had sold only about 1 million units in Europe. As part of Sega's promotions of the Dreamcast in Europe, the company sponsored four European football clubs: Arsenal F.C. (England), AS Saint-Étienne (France), U.C. Sampdoria (Italy), and Deportivo de La Coruña (Spain).

Though the Dreamcast launch had been successful, Sony still held 60 percent of the overall video game market share in North America with the PlayStation at the end of 1999. On March 2, 1999, in what one report called a "highly publicized, vaporware-like announcement" Sony revealed the first details of its "next generation PlayStation", which Ken Kutaragi claimed would allow video games to convey unprecedented emotions. The center of Sony's marketing plan and the upcoming PlayStation 2 itself was a new CPU (clocked at 294 MHz) jointly developed by Sony and Toshiba—the "Emotion Engine"—which Kutaragi announced would feature a graphics processor with 1,000 times more bandwidth than contemporary PC graphics processors and a floating-point calculation performance of 6.2 gigaflops, rivaling most supercomputers. Sony, which invested $1.2 billion in two large-scale integration semiconductor fabrication plants to manufacture the PlayStation 2's "Emotion Engine" and "Graphics Synthesizer", designed the machine to push more raw polygons than any video game console in history. Sony claimed the PlayStation 2 could render 75 million raw polygons per second with absolutely no effects, and 38 million without accounting for features such as textures, artificial intelligence, or physics. With such effects, Sony estimated the PlayStation 2 could render 7.5 million to 16 million polygons per second, whereas independent estimates ranged from 3 million to 20 million, compared to Sega's estimates of more than 3 million to 6 million for the Dreamcast. The system would also utilize the DVD-ROM format, which could hold substantially more data than the Dreamcast's GD-ROM format. Because it could connect to the Internet while playing movies, music, and video games, Sony hyped PlayStation 2 as the future of home entertainment. Rumors spread that the PlayStation 2 was a supercomputer capable of guiding missiles and displaying "Toy Story"-quality graphics, while Kutaragi boasted its online capabilities would give consumers the ability to "jack into "‘The Matrix’"!" In addition, Sony emphasized that the PlayStation 2 would be backwards compatible with hundreds of popular PlayStation games. Sony's specifications appeared to render the Dreamcast obsolete months before its U.S. launch, although reports later emerged that the PlayStation 2 was not as powerful as expected and distinctly difficult to program games for. The same year, Nintendo announced that its next generation console would meet or exceed anything on the market, and Microsoft began development of its own console.

Sega's initial momentum proved fleeting as U.S. Dreamcast sales—which exceeded 1.5 million by the end of 1999—began to decline as early as January 2000. Poor Japanese sales contributed to Sega's ¥42.88 billion ($404 million) consolidated net loss in the fiscal year ending March 2000, which followed a similar loss of ¥42.881 billion the previous year and marked Sega's third consecutive annual loss. Although Sega's overall sales for the term increased 27.4%, and Dreamcast sales in North America and Europe greatly exceeded the company's expectations, this increase in sales coincided with a decrease in profitability due to the investments required to launch the Dreamcast in Western markets and poor software sales in Japan. At the same time, increasingly poor market conditions reduced the profitability of Sega's Japanese arcade business, prompting the company to close 246 locations. Knowing that "they have to fish where the fish are biting", Sega of America president Peter Moore (who assumed his position after Stolar had been fired) and Sega of Japan's developers focused on the U.S. market to prepare for the upcoming launch of the PS2. To that end, Sega of America launched its own Internet service provider, Sega.com, led by CEO Brad Huang. On September 7, 2000, Sega.com launched SegaNet, the Dreamcast's Internet gaming service, at a subscription price of $21.95 per month. Although Sega had previously released only one Dreamcast game in the U.S. that featured online multiplayer ("ChuChu Rocket!", a puzzle game developed by Sonic Team), the launch of SegaNet (which allowed users to chat, send email, and surf the web) combined with "NFL 2K1" (a football game including a robust online component) was intended to increase demand for the Dreamcast in the U.S. market. The service would later support games including "Bomberman Online", "Quake III Arena", and "Unreal Tournament". The September 7 launch coincided with a new advertising campaign to promote SegaNet, including via the MTV Video Music Awards of the same day, which Sega sponsored for the second consecutive year. Sega employed aggressive pricing strategies with relation to online gaming. In Japan, every Dreamcast sold included a free year of Internet access, which Okawa personally paid for. Prior to the launch of SegaNet, Sega had already offered a $200 rebate to any Dreamcast owner who purchased two years of Internet access from Sega.com. To increase SegaNet's appeal in the U.S., Sega dropped the price of the Dreamcast to $149 (compared to the PS2's U.S. launch price of $299) and offered a rebate for the full $149 price of a Dreamcast (and a free Dreamcast keyboard) with every 18-month SegaNet subscription.

Moore stated that the Dreamcast would need to sell 5 million units in the U.S. by the end of 2000 in order to remain a viable platform, but Sega ultimately fell short of this goal with some 3 million units sold. Moreover, Sega's attempts to spur increased Dreamcast sales through lower prices and cash rebates caused escalating financial losses. Instead of an expected profit, for the six months ending September 2000, Sega posted a ¥17.98 billion ($163.11 million) loss, with the company projecting a year-end loss of ¥23.6 billion. This estimate was more than doubled to ¥58.3 billion, and in March 2001, Sega posted a consolidated net loss of ¥51.7 billion ($417.5 million). While the PS2's October 26 U.S. launch was marred by shortages—with only 500,000 of a planned 1 million units shipped due to a manufacturing glitch—this did not benefit the Dreamcast as much as expected, as many disappointed consumers continued to wait for a PS2—while the PSone, a remodeled version of the original PlayStation, was the best-selling console in the U.S. at the start of the 2000 holiday season. According to Moore, "the PlayStation 2 effect that we were relying upon did not work for us ... people will hang on for as long as possible ... What effectively happened is the PlayStation 2 lack of availability froze the marketplace". Eventually, Sony and Nintendo held 50 and 35 percent of the US video game market, respectively, while Sega held only 15 percent. According to Bellfield, Dreamcast software sold at an 8-to-1 ratio with the hardware, but this ratio "on a small install base didn't give us the revenue ... to keep this platform viable in the medium to long term."

On May 22, 2000, Okawa replaced Irimajiri as president of Sega. Okawa had long advocated that Sega abandon the console business. His sentiments were not unique; Sega co-founder David Rosen had "always felt it was a bit of a folly for them to be limiting their potential to Sega hardware", and Stolar had previously suggested that Sega should have sold their company to Microsoft. In September 2000, in a meeting with Sega's Japanese executives and the heads of the company's major Japanese game development studios, Moore and Bellfield recommended that Sega abandon its console business and focus on software—prompting the studio heads to walk out.

Nevertheless, on January 31, 2001, Sega announced the discontinuation of the Dreamcast after March 31 and the restructuring of the company as a "platform-agnostic" third-party developer. The decision was Moore's. Sega also announced a Dreamcast price reduction to $99 to eliminate its unsold inventory, which was estimated at 930,000 units as of April 2001. After a further reduction to $79, the Dreamcast was cleared out of stores at $49.95. The final Dreamcast unit manufactured was autographed by the heads of all nine of Sega's internal game development studios as well as the heads of Visual Concepts and Wave Master and given away with 55 first-party Dreamcast games through a competition organized by "GamePro" magazine. Okawa, who had previously loaned Sega $500 million in the summer of 1999, died on March 16, 2001; shortly before his death, he forgave Sega's debts to him and returned his $695 million worth of Sega and CSK stock, helping the company survive the third-party transition. As part of this restructuring, nearly one-third of Sega's Tokyo workforce was laid off in 2001.

9.13 million Dreamcast units were sold worldwide. After the Dreamcast's discontinuation, commercial games were still developed and released for the system, particularly in Japan. In the United States, game releases continued until the end of the first half of 2002. Sega of Japan continued to repair Dreamcast units until 2007. As of 2014, the console is still supported through various MIL-CD independent releases. After five consecutive years of financial losses, Sega finally posted a profit for the fiscal year ending March 2003.

Reasons cited for the failure of the Dreamcast include hype for the PS2; a lack of support from EA and Squaresoft, considered the most popular third-parties in the U.S. and Japan respectively; disagreement among Sega executives over the company's future, and Okawa's lack of commitment to the product; Sega's lack of advertising money, with Bellfield doubting that Sega spent even "half" the $100 million it had pledged to promote the Dreamcast in the U.S.; that the market was not yet ready for online gaming; Sega's focus on "hardcore" gamers over the mainstream consumer; and poor timing. Perhaps the most frequently cited reason is the damage to Sega's reputation caused by several previous poorly supported Sega platforms. Writing for "GamePro", Blake Snow stated that "the much beloved console launched years ahead of the competition but ultimately struggled to shed the negative reputation [Sega] had gained during the Saturn, Sega 32X, and Sega CD days. As a result, casual gamers and jaded third-party developers doubted Sega's ability to deliver." Eurogamer's Dan Whitehead noted that the "wait and see" approach of consumers and the lack of support from EA were symptoms rather the cause of Sega's decline, concluding "Sega's misadventures during the 1990s had left both gamers and publishers wary of any new platform bearing its name." According to 1UP.com's Jeremy Parish, "While it would be easy to point an accusatory finger at Sony and blame them for killing the Dreamcast by overselling the PS2 ... there's a certain level of intellectual dishonesty in such a stance ... [Sega]'s poor U.S. support for hardware like the Sega CD, the 32X, and the Saturn made gamers gun shy. Many consumers felt burned after investing in expensive Sega machines and finding the resulting libraries comparatively lacking".

The announcement of Sega's third-party transition was met with widespread enthusiasm. According to IGN's Travis Fahs, "Sega was a creatively fertile company with a rapidly expanding stable of properties to draw from. It seemed like they were in a perfect position to start a new life as a developer/publisher." Former Working Designs president Victor Ireland wrote that "It's actually a good thing ... because now Sega will survive, doing what they do best: software." The staff of "Newsweek" remarked "From "Sonic" to "Shenmue", Sega's programmers have produced some of the most engaging experiences in the history of interactive media ... Unshackled by a struggling console platform, this platoon of world-class software developers can do what they do best for any machine on the market". Rosen predicted "they have the potential to catch Electronic Arts". "Game Informer", commenting on Sega's tendency to produce under-appreciated cult classics, stated: "Let us rejoice in the fact that Sega is making games equally among the current console crop, so that history will not repeat itself."

Physically, the Dreamcast measures and weighs. The Dreamcast's main CPU is a two-way 360 MIPS superscalar Hitachi SH-4 32-bit RISC clocked at 200 MHz with an 8 Kbyte instruction cache and 16 Kbyte data cache and a 128-bit graphics-oriented floating-point unit delivering 1.4 GFLOPS. Its 100 MHz NEC PowerVR2 rendering engine, integrated with the system's ASIC, is capable of drawing more than 3 million polygons per second and of deferred shading. Sega estimated that the Dreamcast was theoretically capable of rendering 7 million raw polygons per second, or 6 million with textures and lighting, but noted that "game logic and physics reduce peak graphic performance." Graphics hardware effects include trilinear filtering, gouraud shading, z-buffering, spatial anti-aliasing, per-pixel translucency sorting and bump mapping. The system can output approximately 16.77 million colors simultaneously and displays interlaced or progressive scan video at 640 × 480 video resolution. Its 67 MHz Yamaha AICA sound processor, with a 32-bit ARM7 RISC CPU core, can generate 64 voices with PCM or ADPCM, providing ten times the performance of the Saturn's sound system. The Dreamcast has 16 MB main RAM, along with an additional 8 MB of RAM for graphic textures and 2 MB of RAM for sound. The system reads media using a 12x speed Yamaha GD-ROM Drive. In addition to Windows CE, the Dreamcast supports several Sega and middleware application programming interfaces. In most regions, the Dreamcast included a removable modem for online connectivity, which was modular for future upgrades. The original Japanese model and all PAL models had a transfer rate of 33.6 kbit/s, while consoles sold in the US and in Japan after September 9, 1999 featured a 56 kbit/s dial-up modem.

Sega constructed numerous Dreamcast models, most of which were exclusive to Japan. A refurbished Dreamcast known as the R7 was originally used as a network console in Japanese pachinko parlors. Another model, the Divers 2000 CX-1, possesses a shape similar to Sonic's head and includes a television and software for teleconferencing. A "Hello Kitty" version, limited to 2000 units produced, was targeted at Japanese female gamers. Special editions were created for "Seaman" and "". Color variations were sold through a service called "Dreamcast Direct" in Japan. Toyota also offered special edition Dreamcast units at 160 of its dealers in Japan. In North America, a limited edition black Dreamcast was released with a Sega Sports logo on the lid, which included matching Sega Sports-branded black controllers and two games.

The Dreamcast controller includes both an analog stick and a digital pad, four action buttons, and two analog triggers. The system has four ports for controller inputs, although it was bundled with only one controller. The design of the Dreamcast's controller, described by the staff of "Edge" as "an ugly evolution of Saturn's 3D controller," was called "[not] that great" by 1UP.com's Sam Kennedy and "lame" by "Game Informer"'s Andy McNamara. The staff of IGN wrote that "unlike most controllers, Sega's pad forces the user's hands into an uncomfortable parallel position." In contrast to the Sega CD and Sega Saturn, which included internal backup memory, the Dreamcast uses a 128 kbyte memory card called the VMU (or "Visual Memory Unit") for data storage. The VMU features a small LCD screen, audio output from a one-channel PWM sound source, non-volatile memory, a directional pad, and four buttons. The VMU can present game information, be used as a minimal handheld gaming device, and connect to certain Sega arcade machines. For example, players use the VMU to call plays in "NFL 2K" or raise virtual pets in "Sonic Adventure". Sega officials noted that the VMU could be used "as a private viewing area, the absence of which has prevented effective implementation of many types of games in the past." After a VMU slot was incorporated into the controller's design, Sega's engineers found many additional uses for it, so a second slot was added. This slot was generally used for vibration packs providing force feedback like Sega's "Jump Pack" and Performance's "Tremor Pack", although it could also be used for other peripherals including a microphone enabling voice control and player communication. Various third-party cards provide storage, and some contain the LCD screen addition. Iomega announced a Dreamcast-compatible zip drive that could store up to 100 MB of data on removable discs, but it was never released.

Various third-party controllers from companies like Mad Catz include additional buttons and other extra features; third-parties also manufactured arcade-style joysticks for fighting games, such as Agetech's Arcade Stick and Interact's Alloy Arcade Stick. Mad Catz and Agetec created racing wheels for racing games. Sega decided against releasing its official light gun in the U.S., but some third party light guns were available. The Dreamcast supports a Sega fishing "reel and rod" motion controller and a keyboard for text entry. Although it was designed for fishing games such as "Sega Bass Fishing", "Soul Calibur" was playable with the fishing controller, which translated vertical and horizontal movements into on-screen swordplay in a manner that was retroactively cited as a predecessor to the Wii Remote. The Japanese Dreamcast port of Sega's "Cyber Troopers Virtual-On Oratorio Tangram" supported a "Twin Sticks" peripheral, but the game's American publisher, Activision, opted not to release it in the U.S. The Dreamcast could connect to SNK's Neo Geo Pocket Color, predating Nintendo's GameCube–Game Boy Advance link cable. Sega also produced the Dreameye, a digital camera that could be connected to the Dreamcast and used to exchange pictures and participate in video chat over the system's Internet connection. Sega hoped developers would use the Dreameye for future software, as some later did with Sony's similar EyeToy peripheral. In addition, Sega investigated systems that would have allowed users to make telephone calls with the Dreamcast, and discussed with Motorola the development of an Internet-enabled cell phone that would have used technology from the console to enable quick downloads of games and other data.

The console can supply video through several different accessories. The console came with A/V cables, considered at the time to be the standard for video and audio connectivity. Sega and various third parties also manufactured RF modulator connectors and S-Video cables. A VGA adapter allows Dreamcast games to be played on computer displays or Enhanced-definition television sets in 480p.

Before the launch of the Dreamcast in Japan, Sega announced the release of its New Arcade Operation Machine Idea (NAOMI) arcade board, which served as a cheaper alternative to the Sega Model 3. NAOMI shared the same technology as the Dreamcast—albeit with twice as much system, video, and audio memory and a 160 Mbyte flash ROM board in place of a GD-ROM drive—allowing nearly identical home conversions of arcade games. Games were ported from NAOMI to the Dreamcast by several leading Japanese arcade companies, including Capcom ("Marvel vs. Capcom 2" and "Project Justice"), Tecmo ("Dead or Alive 2"), Treasure ("Ikaruga"), and Sega itself ("F355 Challenge" and "Crazy Taxi").

In what has been called "a brief moment of remarkable creativity", in 2000, Sega restructured its arcade and console development teams into nine semi-autonomous studios headed by the company's top designers. Studios included United Game Artists (UGA) (headed by former "Sega Rally Championship" producer Tetsuya Mizuguchi), Hitmaker (headed by "Crazy Taxi" creator and future Sega president Hisao Oguchi), Smilebit (headed by Shun Arai and including many former "Panzer Dragoon" and future "Yakuza" developers from Team Andromeda), Overworks (headed by Noriyoshi Oba and composed of developers from Sega franchises including "Sakura Wars", "Shinobi" and "Streets of Rage"), Sega AM2 (Sega's most famous arcade studio and the developer of Sega's "Virtua Fighter" fighting game series, headed by the company's top developer, Yu Suzuki), and Sonic Team (the developer of Sega's flagship series, "Sonic the Hedgehog", headed by Yuji Naka). Sega's design houses were encouraged to experiment and benefited from a relatively lax approval process, resulting in games such as "Rez" (an attempt to simulate synaesthesia in the form of a rail shooter), "The Typing of the Dead" (a version of "The House of the Dead 2" remade into a touch typing trainer), "Seaman" (a pet simulator in which players use a microphone to interact with a grotesque humanoid fish whose growth is narrated by Leonard Nimoy), and "Segagaga" (a Japan-exclusive role-playing-game employing commentary on the perceived over-abundance of sequels produced by the video game industry, in which players are tasked with preventing Sega from going out of business). Sega also revived franchises from the Genesis era, such as "". Sega's internal studios were consolidated starting in 2003, with Mizuguchi leaving the company following the merger of UGA with Sonic Team.

UGA created the music game "Space Channel 5", in which players help a female outer space news reporter named Ulala fight aliens with "groove energy" by dancing. Intended for a "female casual" audience, "Space Channel 5" is considered one of Sega's "most daring and beloved" original properties, combining a "defiantly retro" and "uplifting" soundtrack with "dazzling" and "colorful" visual presentation—despite "a lack of real gameplay substance." Neither "Space Channel 5" nor UGA's "Rez" were commercially successful, and "Rez" was only available in the U.S. market through a PS2 port released in limited quantities. Hitmaker's arcade ports included "Crazy Taxi"—an open-world arcade racing game known for its addictive gameplay, which sold over one million copies and has been frequently cited as one of the best Dreamcast games—and "Virtua Tennis"—which revitalized the tennis game genre with a simple two-button control scheme and use of minigames to test the player's technique. Smilebit's "Jet Set Radio"—in which players control a Tokyo-based gang of youthful, rebellious inline skaters called the "GGs", who use graffiti to claim territory from rival gangs while evading an oppressive police force—has been cited as a major example of Sega's commitment to original game concepts during the Dreamcast's lifespan. Lauded for composer Hideki Naganuma's "punchy, psychedelic" soundtrack incorporating elements of "J-pop and electro-funk" as well as its message of "self-expression and non-violent dissent", the game also popularized cel shaded graphics. Despite wide praise for its style, some criticized "Jet Set Radio"'s gameplay as mediocre, and it failed to meet Sega's sales expectations. Produced by Rieko Kodama, the Overworks-developed traditional role-playing game "Skies of Arcadia" was acclaimed for its surreal Jules Verne-inspired fantasy world of floating islands and sky pirates, charming protagonists, unique emphasis on the environmental properties of weapons, exciting airship battles, and memorable plot (including a sequence viewed from multiple perspectives).

AM2 developed what Sega hoped would be the Dreamcast's killer app, "Shenmue", a "revenge epic in the tradition of Chinese cinema." The action-adventure game involved the quest of protagonist Ryo Hazuki to avenge his father's murder, but its main selling point was its rendition of the Japanese city of Yokosuka, which included a level of detail considered unprecedented for a video game. Incorporating a simulated day/night cycle with variable weather, non-player characters with regular schedules, and the ability to pick up and examine detailed objects (also introducing the Quick-time event in its modern form), "Shenmue" went over budget and was rumored to have cost Sega over $50 million. Originally planned as the first installment in an 11-part saga, "Shenmue" was eventually downsized to a trilogy—and only one sequel was ever released. While "Shenmue" was lauded for its innovation, visuals and music, its critical reception was mixed; points of criticism included "invisible walls" which limited the player's sense of freedom, boredom caused by the inability to progress without waiting for events scheduled to occur at specific times, excessive in-game cutscenes and a lack of challenge. According to Moore, "Shenmue" sold "extremely well", but the game had no chance of making a profit due to the Dreamcast's limited installed base. "Shenmue II" "was completed for a much more reasonable sum", while Sato defended "Shenmue" as an "investment [which] will someday be recouped" because "the development advances we learned ... can be applied to other games". In addition to the mixed reception for "Shenmue", IGN's Travis Fahs stated that "the [Dreamcast] era wasn't as kind to [AM2] as earlier years"—citing (among others) "F355 Challenge" as an "acclaimed" arcade game that "didn't do much at home", and Genki's port of "Virtua Fighter 3" as inferior to the arcade version, "which was already a couple years old and never as popular as its predecessors." The "Virtua Fighter" series would experience a "tremendous comeback" with the universally acclaimed "Virtua Fighter 4"—which saw a console release exclusively on PS2.

As the first fully 3D platforming game starring Sega's mascot, Sonic the Hedgehog, Sonic Team's "Sonic Adventure" was considered "the centerpiece of the [Dreamcast] launch". "Adventure" garnered criticism for technical problems including erratic camera angles and glitches, but was praised for its "luscious" visuals, "vast, twisting environments" and iconic set pieces —including a segment in which Sonic runs down the side of a skyscraper —and has been described as the "Sonic" series' creative apex. However, it failed "to catch on with players in nearly the way that [Nintendo's] "Mario 64" had done", perhaps due to a perceived lack of gameplay depth. Distinguished by its innovative use of multiple storylines with varied forms of play, "Adventure" sold 2.5 million copies, making it the Dreamcast's best-selling game. Sonic Team also developed the Dreamcast's first online game—"ChuChu Rocket!"—which was widely complimented for its addictive puzzle gameplay and "frantic" multiplayer matches, and the critically successful music game "Samba de Amigo", which was noted for its expensive maracas peripheral and colorful aesthetic. Perhaps the most influential of Sonic Team's Dreamcast releases was "Phantasy Star Online", the first online console RPG. Developed after Okawa requested an online game from Sonic Team, "PSO" was heavily influenced by the PC action RPG "Diablo", but refined and simplified its style of gameplay to appeal to console audiences.

In sports, Visual Concepts' "NFL 2K" football series and its "NBA 2K" basketball series were critically acclaimed. "NFL 2K" was considered an outstanding launch game for its high-quality visuals and "insightful, context-friendly, and, yes, even funny commentary", while "NFL 2K1" featured groundbreaking online multiplayer earlier than its chief competitor, EA's "Madden NFL" series. "Madden" and "2K" continued to compete on other platforms through 2004—with the "2K" series introducing innovations such as a first person perspective new to the genre, and eventually launching "ESPN NFL 2K5" at the aggressively low price point of $19.95—until EA signed an exclusive agreement with the National Football League, "effectively putting every other pro-football game out of business." After Sega sold Visual Concepts for $24 million in 2005, the "NBA 2K" series continued with publisher Take-Two Interactive. During the Dreamcast's lifespan, Visual Concepts also collaborated with "Sonic the Hedgehog" level designer Hirokazu Yasuhara on the action-adventure game "Floigan Bros." and developed the critically successful action game "Ooga Booga".

To appeal to the European market, Sega formed a French affiliate called No Cliché, which developed games such as "Toy Commander". Sega Europe also approached Bizarre Creations to develop the critically successful racing game "Metropolis Street Racer", which featured detailed recreations of London, Tokyo, and San Francisco—complete with consistent time zones and fictional radio stations—and 262 individual race tracks.

Although Acclaim, SNK, Ubisoft, Midway, Activision, Infogrames, and Capcom supported the system during its first year, third-party developer support proved difficult to obtain due to the failure of the Sega Saturn and the profitability of publishing for the PlayStation. Namco's "Soul Calibur", for example, was released for the Dreamcast because of the relative unpopularity of the "Soul" series at the time; Namco's more successful "Tekken" franchise was associated with the PlayStation console and PlayStation-based arcade boards. Nevertheless, "Soul Calibur" received overwhelming critical acclaim and has been frequently described as one of the best games for the system. Capcom produced a number of fighting games for the system, including the "Power Stone" series, in addition to a temporary exclusive in the popular "Resident Evil" series called "Resident Evil Code: Veronica". The Dreamcast is also known for several shoot 'em ups, most notably Treasure's "Bangai-O" and "Ikaruga".

In January 2000, three months after the system's North American launch, "Electronic Gaming Monthly" offered praise for the game library, stating, "...with triple-A stuff like "Soul Calibur", "NBA 2K", and soon "Crazy Taxi" to kick around, we figure you're happy you took the 128-bit plunge." In a retrospective, "PC Magazine"'s Jeffrey L. Wilson referred to Dreamcast's "killer library" and emphasized Sega's creative influence and visual innovation as being at its peak during the lifetime of the system. The staff of "Edge" agreed with this assessment on Dreamcast's original games, as well as Sega's arcade conversions, stating that the system "delivered the first games that could meaningfully be described as arcade perfect." "GamePro" writer Blake Snow referred to the library as being "much celebrated". Damien McFerran of "Retro Gamer" praised Dreamcast's NAOMI arcade ports, opining "The thrill of playing "Crazy Taxi" in the arcade knowing full well that a pixel-perfect conversion (and not some cut-down port) was set to arrive on the Dreamcast is an experience gamers are unlikely to witness again." Nick Montfort and Mia Consalvo, writing in "Loading... The Journal of the Canadian Game Studies Association", argued that "the Dreamcast hosted a remarkable amount of videogame development that went beyond the odd and unusual and is interesting when considered as avant-garde ... it is hard to imagine a commercial console game expressing strong resistance to the commodity perspective and to the view that game production is commerce. But even when it comes to resisting commercialization, it is arguable that Dreamcast games came closer to expressing this attitude than any other console games have." 1UP.com's Jeremy Parish favorably compared Sega's Dreamcast output, which included some of "the most varied, creative, and fun [games] the company had ever produced", with its "enervated" status as a third-party. Fahs noted "The Dreamcast's life was fleeting, but it was saturated with memorable titles, most of which were completely new properties." According to author Steven L. Kent, "From "Sonic Adventure" and "Shenmue" to "Space Channel 5" and "Seaman", Dreamcast delivered and delivered and delivered."

In December 1999, "Next Generation" rated the Dreamcast 4 out of 5 stars and stated, "If you want the most powerful system available now, showcasing the best graphics at a reasonable price, this system is for you." However, "Next Generation" rated the Dreamcast's future prognosis as 3 stars out of 5 in the same article, noting that Sony would ship a superior hardware product in the PlayStation 2 in the next year, and that Nintendo had said it would do the same with the GameCube. At the beginning of 2000, "Electronic Gaming Monthly" had five reviewers score the Dreamcast 8.5, 8.5, 8.5, 8.0, and 9.0 out of 10 points. By 2001, the reviewers for "Electronic Gaming Monthly" gave the Dreamcast scores of 9.0, 9.0, 9.0, 9.0, and 9.5 out of 10. "BusinessWeek" recognized the Dreamcast as one of the best products of 1999.

In 2009, IGN named the Dreamcast the 8th greatest video game console of all time, giving credit to the innovations and software for the system. According to IGN, "The Dreamcast was the first console to incorporate a built-in modem for online play, and while the networking lacked the polish and refinement of its successors, it was the first time users could seamlessly power on and play with users around the globe." In 2010, "PC Magazine"'s Jeffrey L. Wilson named the Dreamcast the greatest video game console, emphasizing that the system was "gone too soon". In 2013, "Edge" named the Dreamcast the 10th best console of the last 20 years, highlighting innovations that it added to console video gaming, including in-game voice chat, downloadable content, and second screen technology through the use of VMUs. "Edge" explained the system's poor performance by stating, "Sega's console was undoubtedly ahead of its time, and it suffered at retail for that reason... [b]ut its influence can still be felt today." Writing in "1001 Video Games You Must Play Before You Die", Duncan Harris noted "One of the reasons that older gamers mourned the loss of the Dreamcast was that it signaled the demise of arcade gaming culture ... Sega's console gave hope that things were not about to change for the worse and that the tenets of fast fun and bright, attractive graphics were not about to sink into a brown and green bog of realistic war games." Parish, writing for USgamer, contrasted the Dreamcast's diverse library with the "suffocating sense of conservatism" that pervaded the gaming industry in the following decade. Dan Whitehead of Eurogamer, discussing the Dreamcast's portrayal "as a small, square, white plastic JFK", commented that the system's short lifespan "may have sealed its reputation as one of the greatest consoles ever": "Nothing builds a cult like a tragic demise". According to IGN's Travis Fahs, "Many hardware manufacturers have come and gone, but it's unlikely any will go out with half as much class as Sega."

The Sega Genesis, known as the in regions outside of North America, is a 16-bit home video game console developed and sold by Sega. The Genesis was Sega's third console and the successor to the Master System. Sega released the console as the Mega Drive in Japan in 1988, followed by North America as the Genesis in 1989. In 1990, the console was distributed as the Mega Drive by Virgin Mastertronic in Europe, Ozisoft in Australasia, and Tec Toy in Brazil. In South Korea, the systems were distributed by Samsung as the Super Gam*Boy and later the Super Aladdin Boy.

Sega Genesis

Designed by an R&D team supervised by Hideki Sato and Masami Ishikawa, the hardware was adapted from Sega's System 16 arcade board, centered on a Motorola 68000 processor as the CPU, a Zilog Z80 as a sound controller, and a video system supporting hardware sprites, tiles, and scrolling. The system plays a library of more than 900 games created by Sega and a wide array of third-party publishers and delivered on ROM-based cartridges. The Genesis has benefited from several add-ons, including a Power Base Converter to play Master System games, as well as multiple first and third party licensed variations of the console. Sega created two network services to support the Genesis: Sega Meganet and Sega Channel.

In Japan, the Mega Drive did not fare well against its two main competitors, Nintendo's Super Famicom and NEC's PC Engine, but it achieved considerable success in North America, Brazil, and Europe. Contributing to its success were its library of arcade game ports, the popularity of Sega's "Sonic the Hedgehog" series, several popular sports franchises, and aggressive youth marketing that positioned the system as the cool console for adolescents. The release of the Super Nintendo Entertainment System two years after the Genesis resulted in a fierce battle for market share in the United States and Europe that has often been termed as a "console war" by journalists and historians. As this contest drew increasing attention to the video game industry among the general public, the Genesis and several of its highest-profile games attracted significant legal scrutiny on matters involving reverse engineering and video game violence. Controversy surrounding violent games such as "Night Trap" and "Mortal Kombat" led Sega to create the Videogame Rating Council, a predecessor to the Entertainment Software Rating Board.

30.75 million first-party Genesis units were sold worldwide. In addition, Tec Toy sold an estimated three million licensed variants in Brazil, Majesco projected it would sell 1.5 million licensed variants of the system in the United States, and much smaller numbers were sold by Samsung in South Korea. By the mid-2010s, licensed third-party Genesis rereleases were still being sold by AtGames in North America and Europe. Many games have been rereleased in compilations or on online services such as the Nintendo Virtual Console, Xbox Live Arcade, PlayStation Network, and Steam. The Genesis was succeeded in 1994 by the Sega Saturn.

In the early 1980s, Sega Enterprises, Inc., then a subsidiary of Gulf & Western, was one of the top five arcade game manufacturers active in the United States, as company revenues surpassed $200 million between July 1981 and June 1982. A downturn in the arcade business starting in 1982 seriously hurt the company, leading Gulf & Western to sell its North American arcade manufacturing organization and the licensing rights for its arcade games to Bally Manufacturing. The company retained Sega's North American R&D operation, as well as its Japanese subsidiary, Sega Enterprises, Ltd. With its arcade business in decline, Gulf & Western executives turned to Sega Enterprises, Ltd.'s president, Hayao Nakayama, for advice on how to proceed. Nakayama advocated that the company leverage its hardware expertise gained through years working in the arcade industry to move into the home console market in Japan, which was in its infancy at the time.

Nakayama received permission to proceed with this project, leading to the release of Sega's first home video game system, the SG-1000, in July 1983. The SG-1000 was not successful; while it had sold 160,000 units in Japan, far greater than any of Sega's arcade platforms, sales at stores were dominated by Nintendo's Famicom which had been released the same day. Sega estimated that the Family Computer outsold the SG-1000 by a 10-to-1 margin. The SG-1000 was replaced by the Sega Mark III within two years. In the meantime, Gulf & Western began to divest itself of its non-core businesses after the death of company founder Charles Bluhdorn, so Nakayama and former Sega CEO David Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation, a prominent Japanese software company. Nakayama was then installed as CEO of the new Sega Enterprises, Ltd.

In 1986, Sega redesigned the Mark III for release in North America as the Sega Master System. This was followed by a European release the next year. Although the Master System was a success in Europe, and later in Brazil, it failed to ignite significant interest in the Japanese or North American markets, which, by the mid-to-late 1980s, were both dominated by Nintendo. With Sega continuing to have difficulty penetrating the home market, Sega's console R&D team, led by Masami Ishikawa and supervised by Hideki Sato, began work on a successor to the Master System almost immediately after that console launched.

In 1987, Sega faced another threat to its console business when Japanese computer giant NEC released the PC Engine amid great publicity. To remain competitive against the two more established consumer electronics companies, Ishikawa and his team decided they needed to incorporate a 16-bit microprocessor into their new system to make an impact in the marketplace and once again turned to Sega's strengths in the arcade industry to adapt the successful Sega System 16 arcade board into architecture for a home console. The decision to use a Motorola 68000 as the system's main CPU was made late in development, while a Zilog Z80 was used as a secondary CPU to handle the sound due to fears that the load to the main CPU would be too great if it handled both the visuals and the audio. The 68000 chip was expensive and would have driven the retail price of the console up greatly, but Sega was able to negotiate a sale with a distributor for obtaining the chips for a tenth of their price on an up-front volume sale with the promise of potentially more if the console was successful.

First announced in June 1988 in "Beep!", a Japanese gaming magazine, the developing console was referred to as the "Mark V", but Sega management felt the need for a stronger name. After reviewing more than 300 proposals, the company settled on "Mega Drive". In North America, the name of the console was changed to "Genesis". The reason for this change is not known, but it may have been due to a trademark dispute.

Sega released the Mega Drive in Japan on October 29, 1988, though the launch was overshadowed by Nintendo's release of "Super Mario Bros. 3" a week earlier. Positive coverage from magazines "Famitsu" and "Beep!" helped to establish a following, but Sega only managed to ship 400,000 units in the first year. In order to increase sales, Sega released various peripherals and games, including an online banking system and answering machine called the Sega Mega Anser. Nevertheless, the Mega Drive was unable to overtake the venerable Famicom and remained a distant third in Japan behind Nintendo's Super Famicom and NEC's PC Engine throughout the 16-bit era.

Sega announced a North American release date for the system on January 9, 1989. At the time, Sega did not possess a North American sales and marketing organization and was distributing its Master System through Tonka. Dissatisfied with Tonka's performance, Sega looked for a new partner to market the Genesis in North America and offered the rights to Atari Corporation, which did not yet have a 16-bit system. David Rosen made the proposal to Atari CEO Jack Tramiel and the president of Atari's Entertainment Electronics Division, Michael Katz. Tramiel declined to acquire the new console, deeming it too expensive, and instead opted to focus on the Atari ST. Sega decided to launch the console through its own Sega of America subsidiary, which executed a limited launch on August 14, 1989, in New York City and Los Angeles. The Sega Genesis was released in the rest of North America later that year.

The European version was released in September 1990, at a price of GB₤189.99. The release was handled by Virgin Mastertronic, which was later purchased by Sega in 1991 and became Sega of Europe. Games like "Space Harrier II", "Ghouls 'n Ghosts", "Golden Axe", "Super Thunder Blade", and "The Revenge of Shinobi" were available in stores at launch. The console was also bundled with "Altered Beast". The Mega Drive and its first batch of games were shown at the 1990 European Computer Entertainment Show (ECES) in Earl's Court. Between July and August 1990, Virgin initially placed their order for 20,000 Mega Drive units. However, the company increased the order by 10,000 units when advanced orders had exceeded expectations, and another 10,000 units was later added following the console's success at the ECES event. The projected number of units to be sold between September and December 1990 had eventually increased to 40,000 units in the United Kingdom alone.

Other companies assisted in distributing the console to various countries worldwide. Ozisoft handled the Mega Drive's launch and marketing in Australia, as it had done before with the Master System. In Brazil, the Mega Drive was released by Tectoy in 1990, only a year after the Brazilian release of the Master System. Tec Toy produced games exclusively for the Brazilian market and began a network service for the system called Sega Meganet in 1995. In India, Sega entered a distribution deal with Shaw Wallace in the spring of 1995 in order to circumvent an 80% import tariff, with each unit selling for INR₹18,000. Samsung handled sales and distribution in Korea, where it was renamed the "Super Gam*Boy" and retained the Mega Drive logo alongside the Samsung name. It was later renamed "Super Aladdin Boy".

For the North American market, former Atari Corporation Entertainment Electronics Division president and new Sega of America CEO Michael Katz instituted a two-part approach to build sales in the region. The first part involved a marketing campaign to challenge Nintendo head-on and emphasize the more arcade-like experience available on the Genesis, summarized by slogans including "Genesis does what Nintendon't". Since Nintendo owned the console rights to most arcade games of the time, the second part involved creating a library of instantly recognizable games which used the names and likenesses of celebrities and athletes such as "Pat Riley Basketball", "Arnold Palmer Tournament Golf", "James 'Buster' Douglas Knockout Boxing", "Joe Montana Football", "Tommy Lasorda Baseball", "Mario Lemieux Hockey", and "Michael Jackson's Moonwalker". Nonetheless, it had a hard time overcoming Nintendo's ubiquitous presence in consumers' homes. Tasked by Nakayama to sell one million units within the first year, Katz and Sega of America managed to sell only 500,000 units.

In mid-1990, Nakayama hired Tom Kalinske to replace Katz as CEO of Sega of America. Although Kalinske initially knew little about the video game market, he surrounded himself with industry-savvy advisors. A believer in the razor and blades business model, he developed a four-point plan: cut the price of the console, create a U.S.-based team to develop games targeted at the American market, continue and expand the aggressive advertising campaigns, and replace the bundled game "Altered Beast" with a new game, "Sonic the Hedgehog". The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." Magazines praised "Sonic" as one of the greatest games yet made, and Sega's console finally took off as customers who had been waiting for the release of the international version of Nintendo's Super Famicom—the Super Nintendo Entertainment System or SNES—decided to purchase a Genesis instead. Nintendo's console debuted against an established competitor, while NEC's TurboGrafx-16 failed to gain traction, and NEC soon pulled out of the market. In large part due to the popularity of "Sonic the Hedgehog", the Sega Genesis outsold the SNES in the United States nearly two to one during the 1991 holiday season. This success led to Sega having control of 65% of the 16-bit console market in January 1992, making it the first time Nintendo was not the console leader since December 1985.

To compete with Nintendo, Sega was more open to new types of games than its rival, but still tightly controlled the approval process for third-party games and charged high prices for cartridge manufacturing. Technicians from American third-party video game publisher Electronic Arts (EA) reverse engineered the Genesis in 1989, following nearly one year of negotiations with Sega in which EA requested a more liberal licensing agreement than was standard in the industry before releasing its games for the system. The clean room reverse engineering was led by Steve Hayes and Jim Nitchals, lasting several months before EA secretly began game development. EA founder Trip Hawkins confronted Nakayama with this information one day prior to the 1990 Consumer Electronics Show (CES), noting that EA had the ability to run its own licensing program if Sega refused to meet its demands. Sega relented, and the next day EA's upcoming Genesis games were showcased at CES. EA signed what Hawkins described as "a very unusual and much more enlightened license agreement" with Sega in June 1990: "Among other things, we had the right to make as many titles as we wanted. We could approve our own titles ... the royalty rates were a lot more reasonable. We also had more direct control over manufacturing." After the deal was in place, EA chief creative officer Bing Gordon learned that "we hadn't figured out all the workarounds" and "Sega still had the ability to lock us out," noting "It just would have been a public relations fiasco." EA released its first two Genesis games, "Populous" and "", within the month. The first Genesis version of EA's "John Madden Football" arrived before the end of 1990, and became what Gordon called a "killer app" for the system. Taking advantage of the licensing agreement, Gordon and EA's vice president of marketing services Nancy Fong created a visual identifier for EA's Genesis cartridges: A yellow stripe on their left side added during manufacturing.

Sega was able to outsell Nintendo four Christmas seasons in a row due to the Genesis' head start, a lower price point, and a larger library of games when compared to the Super Nintendo at its release. Sega had ten games for every game on SNES, and while the SNES had an exclusive version of "Final Fight", one of Sega's internal development teams created "Streets of Rage", which had bigger levels, tougher enemies, and a well-regarded soundtrack. ASCII Entertainment reported in the spring of 1993 that Genesis had 250 games versus 75 for Super Nintendo, but limited shelf space meant that stores typically offered 100 Genesis and 50 Super Nintendo games. The NES was still the leader, with 300 games and 100 on shelves.

Sega's advertising positioned the Genesis as the cooler console, and as its advertising evolved, the company coined the term "blast processing" (the origin of which is an obscure programming trick on the graphics hardware) to suggest that its processing capabilities were far greater than those of the SNES. A Sony focus group found that teenage boys would not admit to owning a SNES rather than a Genesis. With the Genesis often outselling the SNES at a ratio of 2:1, Nintendo and Sega both focused heavily on impression management of the market, even going to the point of deception, with Nintendo claiming it had sold more consoles in 1991 than it actually had, and forecasting it would sell 6 million consoles by the end of 1992, while its actual U.S. install base at the end of 1992 was only just more than 4 million units. Due to these tactics, it was difficult to ascertain a clear leader in market share for several years at a time, with Nintendo's dollar share of the U.S. 16-bit market dipping down from 60% at the end of 1992 to 37% at the end of 1993, Sega claiming 55% of all 16-bit hardware sales during 1994, and "Donkey Kong Country" helping the SNES to outsell the Genesis from 1995 through 1997. According to a 2004 study of NPD sales data, the Sega Genesis was able to maintain its lead over the Super NES in the American 16-bit console market. However, according to a 2014 Wedbush Securities report based on revised NPD sales data, the SNES outsold the Genesis in the U.S. market.

While Sega was seeking a flagship series to compete with Nintendo's Mario series along with a character to serve as a company mascot, several character designs were submitted as part of a company-wide contest, including "an anime-inspired egg and a teal hedgehog with red shoes created by Naoto Ohshima that he called Mr. Needlemouse." This character won the contest and was renamed Sonic the Hedgehog, spawning one of the best-selling video game franchises in history. The gameplay of "Sonic the Hedgehog" originated with a tech demo created by Yuji Naka, who had developed an algorithm that allowed a sprite to move smoothly on a curve by determining its position with a dot matrix. Naka's original prototype was a platform game that involved a fast-moving character rolling in a ball through a long winding tube, and this concept was subsequently fleshed out with Ohshima's character design and levels conceived by designer Hirokazu Yasuhara. Sonic's blue pigmentation was chosen to match Sega's cobalt blue logo, and his shoes were a concept evolved from a design inspired by Michael Jackson's boots with the addition of the color red, which was inspired by both Santa Claus and the contrast of those colors on Jackson's 1987 album "Bad"; his personality was based on Bill Clinton's "can do" attitude.

Although Katz and Sega of America's marketing experts disliked the idea of "Sonic", certain that it would not catch on with most American kids, Kalinske's strategy to place "Sonic the Hedgehog" as the pack-in game paid off. Featuring speedy gameplay, "Sonic the Hedgehog" greatly increased the popularity of the Sega Genesis in North America. Bundling "Sonic the Hedgehog" with the Sega Genesis is credited with helping Sega gain 65% of the market share against Nintendo.

After the release of the Sega Genesis in 1989, video game publisher Accolade began exploring options to release some of their PC games on the console. At the time, Sega had a licensing deal in place for third-party developers that increased the costs to the developer. According to Accolade co-founder Alan Miller, "One pays them between $10 and $15 per cartridge on top of the real hardware manufacturing costs, so it about doubles the cost of goods to the independent publisher." To get around licensing, Accolade chose to seek an alternative way to bring their games to the Genesis. It did so by purchasing one in order to decompile the executable code of three Genesis games. Such information was used to program their new Genesis cartridges in a way that would allow them to disable the security lockouts on the Genesis that prevented unlicensed games from being able to be played. This strategy was used successfully to bring "" to the Genesis in 1990. To do so, Accolade had copied Sega's copyrighted game code multiple times in order to reverse engineer the software of Sega's licensed Genesis games.

As a result of piracy in some countries and unlicensed development issues, Sega incorporated a technical protection mechanism into a new edition of the Genesis released in 1990, referred to as the Genesis III. This new variation of the Genesis included a code known as the Trademark Security System (TMSS), which, when a game cartridge was inserted, would check for the presence of the string "SEGA" at a particular point in the memory contained in the cartridge. If the string was present, the console would run the game, and would briefly display the message: "" This system had a twofold effect: it added extra protection against unlicensed developers and software piracy, and forced the Sega trademark to display when the game was powered up, making a lawsuit for trademark infringement possible if unlicensed software were to be developed. Accolade learned of this development at the Winter Consumer Electronics Show in January 1991, where Sega showed the new Genesis III and demonstrated it screening and rejecting an "Ishido" game cartridge. With more games planned for the following year, Accolade successfully identified the TMSS file. It later added this file to the games "HardBall!", "Star Control", "Mike Ditka Power Football", and "Turrican".

In response to the creation of these unlicensed games, Sega filed suit against Accolade in the United States District Court for the Northern District of California, on charges of trademark infringement, unfair competition, and copyright infringement. In response, Accolade filed a counterclaim for falsifying the source of its games by displaying the Sega trademark when the game was powered up. Although the district court initially ruled for Sega and issued an injunction preventing Accolade from continuing to reverse engineer the Genesis, Accolade appealed the verdict to the United States Court of Appeals for the Ninth Circuit.

As a result of the appeal, the Ninth Circuit overturned the district court's verdict and ruled that Accolade's decompilation of the Sega software constituted fair use. The court's written opinion followed on October 20, 1992, and noted that the use of the software was non-exploitative, although commercial. Further, the court found that the trademark infringement, being required by the TMSS for a Genesis game to run on the system, had been inadvertently triggered by a fair use act and was the fault of Sega for having caused false labeling. Ultimately, Sega and Accolade settled the case on April 30, 1993. As a part of this settlement, Accolade became an official licensee of Sega, and later developed and released "Barkley Shut Up and Jam!" while under license. The terms of the licensing, including whether or not any special arrangements or discounts were made to Accolade, were not released to the public. The financial terms of the settlement were also not disclosed, although both companies agreed to pay their own legal costs.

In 1993, the American media began to focus on the mature content of certain video games. Games such as "Night Trap" for the Sega CD, an add-on, received unprecedented scrutiny. Issues about "Night Trap" were brought up in the United Kingdom, with former Sega of Europe development director Mike Brogan noting that ""Night Trap" got Sega an awful lot of publicity ... it was also cited in UK Parliament for being classified as "15" due to its use of real actors." This came at a time when Sega was capitalizing on its image as an edgy company with attitude, and this only reinforced that image. By far the year's most controversial game was Midway's "Mortal Kombat", ported to the Genesis and SNES by Acclaim Entertainment. In response to public outcry over the game's graphic violence, Nintendo decided to replace the blood in the game with "sweat" and the arcade's gruesome "fatalities" with less violent finishing moves. Sega took a different approach, instituting America's first video game ratings system, the Videogame Rating Council (VRC), for all its current systems. Ratings ranged from the family friendly GA rating to the more mature rating of MA-13, and the adults-only rating of MA-17. With the rating system in place, Sega released its version of "Mortal Kombat", appearing to have removed all the blood and sweat effects and toning down the finishing moves even more than in the SNES version. However, all the arcade's blood and uncensored finishing moves could be enabled by entering a "Blood Code". This technicality allowed Sega to release the game with a relatively low MA-13 rating. Meanwhile, the tamer SNES version shipped without a rating.

The Genesis version of "Mortal Kombat" was well-received by gaming press, as well as fans, outselling the SNES version three- or four-to-one, while Nintendo was criticized for censoring the SNES version of the game. Executive vice president of Nintendo of America Howard Lincoln was quick to point out at the hearings that "Night Trap" had no such rating, saying to Senator Joe Lieberman:

In response, Sega of America vice president Bill White showed a videotape of violent video games on the SNES and stressed the importance of rating video games. At the end of the hearing, Lieberman called for another hearing in February 1994 to check on progress toward a rating system for video game violence.

As a result of the Congressional hearings, "Night Trap" started to generate more sales and released ports to the PC, Sega 32X, and 3DO. According to Digital Pictures founder Tom Zito, "You know, I sold 50,000 units of "Night Trap" a week after those hearings." Although experiencing increased sales, Sega decided to recall "Night Trap" and re-release it with revisions in 1994 due to the Congressional hearings. After the close of these hearings, video game manufacturers came together to establish the rating system that Lieberman had called for. Initially, Sega proposed the universal adoption of its system, but after objections by Nintendo and others, Sega took a role in forming a new one. This became the Entertainment Software Rating Board, an independent organization that received praise from Lieberman. With this new rating system in place, Nintendo decided its censorship policies were no longer needed, and the SNES port of "Mortal Kombat II" was released uncensored.

In order to extend the life of the Genesis, Sega released two add-ons to increase its capabilities: a CD-based peripheral known as the Sega CD (Mega-CD outside North America), and a 32-bit peripheral known as the Sega 32X. 2.24 million Sega CD units were sold worldwide, and an estimated 665,000 32X units were sold by the end of 1994.

Following the launch of the next-generation 32-bit Sony PlayStation and Sega Saturn, sales of 16-bit hardware and software continued to account for 64% of the video game market in 1995. Sega underestimated the continued popularity of the Genesis and did not have the inventory to meet demand for the product. Sega was able to capture 43% of the dollar share of the U.S. video game market and claimed to have sold more than 2 million Genesis units in 1995, while Genesis software such as "Vectorman" remained highly successful, but Kalinske estimated that "we could have sold another 300,000 Genesis systems in the November/December timeframe." Nakayama's decision to focus on the Saturn over the Genesis, based on the systems' relative performance in Japan, has been cited as the major contributing factor in this miscalculation. By contrast, Nintendo concentrated on the 16-bit home console market, as well as its successful handheld, the Game Boy. As a result, Nintendo took in 42% of the video game market dollar share, without launching a 32-bit console to compete directly with the PlayStation or the Saturn. Following tensions with Sega Enterprises, Ltd. over its focus on the Saturn, Kalinske, who oversaw the rise of the Genesis in 1991, grew uninterested in the business and resigned in mid-1996.

Sega sold 30.75 million Genesis units worldwide. Of these, 3.58 million were sold in Japan, and sales in Europe and the U.S. are roughly estimated at 8 million and 18–18.5 million as of June 1997 (at which time Sega was no longer manufacturing the system) respectively. In 1998, Sega licensed the Genesis to Majesco Entertainment in North America so it could re-release the console. Majesco began reselling millions of formerly unsold cartridges at a budget price, together with 150,000 units of the second model of the Genesis. It released the Sega Genesis 3, projecting to sell 1.5 million units of the console by the end of 1998. An estimated 3 million Genesis units were sold by Tec Toy in Brazil.

The main microprocessor is a 16/32-bit Motorola 68000 CPU clocked at 7.6 MHz. The console uses a Zilog Z80 sub-processor, mainly used to control the sound hardware and provide backward compatibility with the Master System. The system has 72 kB of RAM, 64 kB of video RAM, and can display up to 61 colors at once from a palette of 512. The games are in ROM cartridge format and inserted in the top.

The system produces sound using a Yamaha YM2612 FM synthesizer and a Texas Instruments SN76489 PSG; the latter is integrated with the Video Display Processor (VDP). The Z80 processor is primarily used to control both sound chips to produce stereo music and sound effects. Most revisions of the original system contain a discrete YM2612 and a separate YM7101 VDP; the functionality of these two chips was later integrated into a single custom ASIC (FC1004) for the model 2 and later revisions.

The back of the model 1 console provides a radio frequency output port (designed for use with antenna and cable systems) and a specialized 8-pin DIN port, both of which provide video and audio output. Both outputs produce monophonic sound; a headphone jack on the front of the console produces stereo sound. On the model 2, the DIN port, radio frequency output port, and headphone jack are replaced by a 9-pin mini-DIN port on the back for composite video, RGB and stereo sound, and the standard RF switch. Earlier model 1 consoles have a 9-pin extension port, although this was removed in later production runs and is absent in the model 2. An edge connector on the bottom-right of the console allows it to be connected to a peripheral.

The standard controller features a rounded shape, a directional pad, three main buttons, and a "start" button. Sega later released a six-button version in 1993. This pad is slightly smaller and features three additional face buttons, similar to the design of buttons on some popular arcade fighting games such as "Street Fighter II". The third model of the controller, MK-1470 was released with the Sega Genesis Model 3, with a switch between Normal, Turbo, and Slow while also having the Mode button. Sega released a wireless revision of the six-button controller, the Remote Arcade Pad.

The system is backward compatible with the Master System. The first peripheral released, the Power Base Converter (Master System Converter in Europe), allows Master System games to be played. A second model, the Master System Converter 2, was released only in Europe for use with the Mega Drive II.

Other peripherals were released to add functionality. The Menacer is a wireless, infrared light gun peripheral used with compatible games. Other third parties created light gun peripherals for the Genesis, such as the American Laser Games Pistol and the Konami Justifier. Released for art creation software, the Sega Mega Mouse features three buttons and is only compatible with a few games, such as "Eye of the Beholder". A foam-covered bat called the BatterUP and the TeeVGolf golf club were released for both the Genesis and SNES.

In November 1993, Sega released the Sega Activator, an octagonal device that lies flat on the floor and was designed to translate the player's physical movements into game inputs. Several high-profile games, including "Mortal Kombat" and "", were adapted to support the peripheral. The device was a commercial failure, due mainly to its inaccuracy and its high price point. IGN editor Craig Harris ranked the Sega Activator the third worst video game controller ever made.

Both EA and Sega released multitaps to allow more than the standard two players to play at once. Initially, EA's version, the 4 Way Play, and Sega's adapter, the Team Player, only supported each publisher's games. In response to complaints about this, Sega publicly stated, "We have been working hard to resolve this problem since we learned of it", and that a new Team Player which would work with all multitap games for the console would be released shortly. Later games were created to work on both the 4 Way Play and Team Player. Codemasters also developed the J-Cart system, providing two extra ports on the cartridge itself, although the technology came late in the console's life and is only featured on a few games. Sega planned to release a steering wheel peripheral in 1994, and the Genesis version of "Virtua Racing" was advertised as being "steering wheel compatible," but the peripheral was cancelled.

In its first foray into online gaming, Sega created Sega Meganet, which debuted in Japan on November 3, 1990. Operating through a cartridge and a peripheral called the "Mega Modem," this allowed Mega Drive players to play a total of seventeen games online. A North American version, dubbed "Tele-Genesis," was announced but never released. Another phone-based system, the Mega Anser, turned the Japanese Mega Drive into an online banking terminal.

In 1994, Sega started the Sega Channel, a game distribution system using cable television services Time Warner Cable and TCI. Using a special peripheral, Genesis players could download a game from a library of fifty each month and demos for upcoming releases. Games were downloaded to internal memory and deleted when the console was powered off. The Sega Channel reached 250,000 subscribers at its peak and ran until July 31, 1998, well past the release of the Sega Saturn.

In an effort to compete with Sega, third-party developer Catapult Entertainment created the XBAND, a peripheral which allowed Genesis players to engage in online competitive gaming. Using telephone services to share data, XBAND was initially offered in five U.S. cities in November 1994. The following year, the service was extended to the SNES, and Catapult teamed up with Blockbuster Video to market the service, but as interest in the service waned, it was discontinued in April 1997.

The Genesis library was initially modest, but eventually grew to contain games to appeal to all types of players. The initial pack-in game was "Altered Beast", which was later replaced with "Sonic the Hedgehog" in 1991. Top sellers included "Sonic the Hedgehog", its sequel "Sonic the Hedgehog 2", and "Disney's Aladdin". During development for the console, Sega Enterprises focused on developing action games, while Sega of America was tasked with developing sports games. A large part of the appeal of the Genesis library during the console's lifetime was the arcade-based experience of its games, as well as more difficult entries such as "Ecco the Dolphin", and sports games such as "Joe Montana Football". Compared to its competition, Sega advertised to an older audience by hosting more mature games, including the uncensored version of "Mortal Kombat".

Initially, the Genesis suffered from limited third-party support due to its low market share and Nintendo's monopolizing practices. Notably, the arcade hit "Street Fighter II" by Capcom initially skipped the Genesis, instead only being released on the SNES. However, as the Genesis continued to grow in popularity, Capcom eventually ported a version of "Street Fighter II" to the system known as "", that would go on to sell over a million copies. One of the biggest third-party companies to support the Genesis early on was Electronic Arts. Trip Hawkins, founder and then president of EA, believed the Genesis faster drawing speed made it more suitable for sport games than the SNES, and credits EA's success on the Genesis for helping catapult the EA Sports brand. Another third-party blockbuster for the system was the port of the original "Mortal Kombat". Although the arcade game was released on the SNES and Genesis simultaneously, the two ports were not identical. The SNES version looked closer to the arcade game, but the Genesis version allowed players to bypass censorship, helping make it more popular. In 1997, Sega of America claimed the Genesis had a software attach rate of 16 games sold per console, double that of the SNES.

On the Super NES, companies could add enhancement chips to cartridges to increase the console's capabilities and produce more advanced graphics; for example, the launch game "Pilotwings" contained a digital signal processor. Later, the Super FX chip was designed to offload complex rendering tasks from the main CPU. It was first used in "Star Fox", which renders 3D polygons in real time, and "" demonstrates rotation, scaling, and stretching of individual sprites and manipulates large areas of the screen.

Sega began work on an enhancement chip to compete with the Super FX, resulting in the Sega Virtua Processor. This chip enables the Genesis to render polygons in real time and provides an "Axis Transformation" unit that handles scaling and rotation. "Virtua Racing", the only game released with this chip, runs at a significantly higher and more stable frame rate than similar games on the SNES. The chip was expensive to produce, and increased the cost of the games that used it. At, "Virtua Racing" was the most expensive Genesis cartridge ever produced. Two other games, "Virtua Fighter" and "Daytona USA", were planned for the SVP chip, but were instead moved into the Saturn's launch line-up. There were plans to sell the SVP chip as a separate upgrade module for the Genesis, but this module was never released.

In addition to accessories such as the Power Base Converter, the Sega Genesis supports two add-ons that each support their own game libraries. The first is the Sega CD (known as the Mega-CD in all regions except for North America), a compact disc-based peripheral that can play its library of games in CD-ROM format. The second is the Sega 32X, a 32-bit peripheral which uses ROM cartridges and serves as a pass-through for Genesis games. Sega produced a custom power strip to fit the peripherals' large AC adapters. Both add-ons were officially discontinued in 1996.

By 1991, compact discs had gained in popularity as a data storage device for music and software. PCs and video game companies had started to make use of this technology. NEC had been the first to include CD technology in a game console with the release of the TurboGrafx-CD add-on, and Nintendo was making plans to develop its own CD peripheral as well. Seeing the opportunity to gain an advantage over its rivals, Sega partnered with JVC to develop a CD-ROM add-on for the Genesis. Sega launched the Mega-CD in Japan on December 1, 1991, initially retailing at JP¥49,800. The CD add-on was launched in North America on October 15, 1992, as the Sega CD, with a retail price of US$299; it was released in Europe as the Mega-CD in 1993. In addition to greatly expanding the potential size of its games, this add-on unit upgraded the graphics and sound capabilities by adding a second, more powerful processor, more system memory, and hardware-based scaling and rotation similar to that found in Sega's arcade games. It provided battery-backed storage RAM to allow games to save high scores, configuration data, and game progress.

Shortly after its launch in North America, Sega began shipping the Sega CD with the pack-in game "Sewer Shark", a full motion video (FMV) game developed by Digital Pictures, a company that became an important partner for Sega. Touting the benefits of the CD's comparatively vast storage space, Sega and its third-party developers produced a number of games for the add-on that include digital video in their gameplay or as bonus content, as well as re-releasing several cartridge-based games with high-fidelity audio tracks. In 1993, Sega released the Sega CD 2, a smaller and lighter version of the add-on designed for the Genesis II, at a reduced price compared to the original. A limited number of games were later developed that use both the Sega CD and the Sega 32X add-ons.

The Mega-CD sold only 100,000 units during its first year in Japan, falling well below expectations. Although many consumers blamed the add-on's high launch price, it also suffered from a tiny software library; only two games were available at launch. This was due in part to the long delay before Sega made its software development kit available to third-party developers. Sales were more successful in North America and Europe, although the novelty of FMV and CD-enhanced games quickly wore off as many of the system's later games were met with lukewarm or negative reviews. In 1995, Sega announced a shift in focus to its new console, the Saturn, and discontinued all advertising for Genesis hardware, including the Sega CD. The add-on sold 2.24 million units worldwide.

With the release of the Sega Saturn slated for 1995, Sega began to develop a stop-gap solution that would bridge the gap between the Genesis and the Saturn, and would serve as a less expensive entry into the 32-bit era. At the Winter Consumer Electronics Show in January 1994, Sega of America research and development head Joe Miller took a phone call from Nakayama, in which Nakayama stressed the importance of coming up with a quick response to the Atari Jaguar. One potential idea for this came from a concept from Sega Enterprises, later known as "Project Jupiter," an entirely new independent console. Project Jupiter was initially slated to be a new version of the Genesis, with an upgraded color palette and a lower cost than the upcoming Saturn, as well as with some limited 3D capabilities thanks to integration of ideas from the development of the Sega Virtua Processor chip. Miller suggested an alternative strategy, citing concerns with releasing a new console with no previous design specifications within six to nine months. At the suggestion from Miller and his team, Sega designed the 32X as a peripheral for the existing Genesis, expanding its power with two 32-bit SuperH-2 processors. The SH-2 had been developed in 1993 as a joint venture between Sega and Japanese electronics company Hitachi. At the end of the Consumer Electronics show, with the basic design of the 32X in place, Sega Enterprises invited Sega of America to assist in development of the new add-on.

Although the new unit was a stronger console than originally proposed, it was not compatible with Saturn games. Before the 32X could be launched, the release date of the Saturn was announced for November 1994 in Japan, coinciding with the 32X's target launch date in North America. Sega of America now was faced with trying to market the 32X with the Saturn's Japan release occurring simultaneously. Their answer was to call the 32X a "transitional device" between the Genesis and the Saturn. This was justified by Sega's statement that both platforms would run at the same time, and that the 32X would be aimed at players who could not afford the more expensive Saturn.

The 32X was released in November 1994, in time for the holiday season. Demand among retailers was high, and Sega could not keep up orders for the system. More than 1,000,000 orders had been placed for 32X units, but Sega had only managed to ship 600,000 units by January 1995. Launching at about the same price as a Genesis console, the price of the 32X was less than half of what the Saturn's price would be at launch. Despite the console's positioning as an inexpensive entry into 32-bit gaming, Sega had a difficult time convincing third-party developers to create games for the new system. After an early run on the peripheral, news soon spread to the public of the upcoming release of the Sega Saturn, which would not support the 32X's games. The Saturn was released on May 11, 1995, four months earlier than its originally intended release date of September 2, 1995. The Saturn, in turn, caused developers to further shy away from the console and created doubt about the library for the 32X, even with Sega's assurances that there would be a large number of games developed for the system. In early 1996, Sega conceded that it had promised too much out of the 32X and decided to stop producing the system in order to focus on the Saturn. Prices for the 32X dropped to $99 and cleared out of stores at $19.95.

More than a dozen licensed variations of the Sega Genesis/Mega Drive have been released. In addition to models made by Sega, alternate models were made by other companies, such as Majesco Entertainment, AtGames, JVC, Pioneer Corporation, Amstrad, and Aiwa. A number of bootleg clones were created during its lifespan.

In 1993, Sega introduced a smaller, lighter version of the console, known as the Mega Drive 2 in Japan, Europe, and Australia and simply sold as Genesis (without the Sega prefix) in North America. This version omits the headphone jack in the front, replaces the A/V-Out connector with a smaller version that supports stereo sound, and provides a simpler, less expensive mainboard that requires less power.

Sega released a combined, semi-portable Genesis/Sega CD unit called the Genesis CDX (marketed as the Multi-Mega in Europe). This unit retailed at $399.95 in the U.S. (roughly $100 more than the individual Genesis and Sega CD units put together, since the Sega CD dropped its price to $229 half a year before), and was bundled with "Sonic CD", "Sega Classics Arcade Collection", and the Sega CD version of "Ecco the Dolphin". The CDX features a small LCD screen that, when the unit is used to play audio CDs, displays the current track being played. With this feature and the system's lightweight build (weighing two pounds), Sega marketed it in part as a portable CD player.

Late in the 16-bit era, Sega released a handheld version of the Genesis called the Genesis Nomad. Its design was based on the Mega Jet, a Mega Drive portable unit featured on airplane flights in Japan. As the only successor to the Game Gear, the Nomad operates on 6 AA batteries, displaying its graphics on a 3.25-inch (8.25-mm) LCD screen. The Nomad supports the entire Genesis library, but cannot be used with the Sega 32X, the Sega CD, or the Power Base Converter.

Exclusive to the Japanese market was the TeraDrive, a Mega Drive combined with an IBM PC compatible computer. Sega also produced three arcade system boards based on the Mega Drive: the System C-2, the MegaTech, and the MegaPlay, which support approximately 80 games combined.

Working with Sega Enterprises, JVC released the Wondermega on April 1, 1992, in Japan. The system was later redesigned by JVC and released as the X'Eye in North America in September 1994. Designed by JVC to be a Genesis and Sega CD combination with high quality audio, the Wondermega's high price ($500 at launch) kept it out of the hands of average consumers. The same was true of the Pioneer LaserActive, which requires an add-on known as the Mega-LD pack, developed by Sega, in order to play Genesis and Sega CD games. Although the LaserActive was lined up to compete with the 3DO Interactive Multiplayer, the combined price of the system and the Mega-LD pack made it a prohibitively expensive option for Sega players. Aiwa released the CSD-GM1, a combination Genesis/Sega CD unit built into a boombox. Several companies added the Mega Drive to personal computers, mimicking the design of Sega's TeraDrive; these include the MSX models AX-330 and AX-990, distributed in Kuwait and Yemen, and the Amstrad Mega PC, distributed in Europe and Australia.

After the Genesis was discontinued, Majesco Entertainment released the Genesis 3 as a budget version in 1998. In 2009, AtGames began producing two new variations: the Firecore, which can play original Genesis cartridges as well as preloaded games, and a handheld console preloaded with 20 Genesis games. Companies such as Radica Games have released various compilations of Genesis and Mega Drive games in "plug-and-play" packages resembling the system's controller.

A number of Genesis and Mega Drive emulators have been produced, including GenEM, KGen, Genecyst, VGen, St0rm, and Gens. The GameTap subscription gaming service included a Sega Genesis emulator and had several dozen licensed Genesis games in its catalog. The Console Classix subscription gaming service includes an emulator and has several hundred Sega Genesis games in its catalog.

Compilations of Sega Genesis games have been released for other consoles. These include "Sonic Mega Collection" and "Sonic Gems Collection" for PS2, Xbox, and Nintendo GameCube; "Sega Genesis Collection" for PS2 and PSP, and "Sonic's Ultimate Genesis Collection" (known as the "Sega Mega Drive Ultimate Collection" in PAL territories) for PlayStation 3 and Xbox 360.

During his keynote speech at the 2006 Game Developers Conference, Nintendo president Satoru Iwata announced that Sega would make a number of Genesis/Mega Drive games available to download on the Wii's Virtual Console. There are select Sega Genesis games available on the Xbox 360 through Xbox Live Arcade, such as "Sonic the Hedgehog" and "Sonic 2", as well as games available via the PlayStation Network and Steam.

On May 22, 2006, North American company Super Fighter Team released "Beggar Prince", a game translated from a 1996 Chinese original. It was released worldwide and was the first commercial Genesis game release in North America since 1998. Super Fighter Team would later go on to release two more games for the system, "Legend of Wukong" and "Star Odyssey". In December 2010, WaterMelon, an American company, released "Pier Solar and the Great Architects", the first commercial role-playing video game specifically developed for the console since 1996, and the biggest 16-bit game ever produced at 64 Mb. "Pier Solar" is the only cartridge-based game which can optionally use the Sega CD to play an enhanced soundtrack and sound effects disc. In 2013, independent programmer Future Driver, inspired by the Disney film "Wreck-It Ralph", developed "Fix-It Felix Jr." for the Genesis.

On December 5, 2007, Tec Toy released a portable version of the Sega Genesis/Mega Drive with twenty built-in games. Another version called "Mega Drive Guitar Idol" comes with two six-button joypads and a guitar controller with five fret buttons. The "Guitar Idol" game contains a mix of Brazilian and international songs. The console has 87 built-in games, including some from Electronic Arts based on the mobile phone versions.

In 2009, Chinese company AtGames produced a Sega Genesis/Mega Drive-compatible console, the Firecore. It features a top-loading cartridge slot and includes two controllers similar to the six-button controller for the original Genesis. The console has 15 games built-in and is region-free, allowing cartridge games to run regardless of their region. AtGames produced a handheld version of the console. Both machines have been released in Europe by distributing company Blaze Europe.

It was announced that TecToy has developed a new Genesis console that not only looks almost identical to the original model of the Sega Genesis known as the Genesis III, but also has a traditional cartridge slot and SD card reader which will be released in June 2017.

In 2018, Sega announced a miniature dedicated console version of the Genesis, the Mega Drive Mini. Similar to the NES and SNES Classic Editions, it will allow users to play a number of built-in Genesis games.

The Sega Genesis has often ranked among the best video game consoles. In 2009, IGN named it the fifth best video game console, citing its edge in sports games and better home version of "Mortal Kombat", and lauding "what some consider to be the greatest controller ever created: the six button." In 2007, GameTrailers named the Sega Genesis as the sixth best console of all time in their list of top ten consoles that "left their mark on the history of gaming," noting its great games and solid controller, and writing of the "glory days" of "Sonic the Hedgehog". In January 2008, technology columnist Don Reisinger proclaimed that the Sega Genesis "created the industry's best console war to date," citing Sonic the Hedgehog, superior sports games, and backward compatibility with the Sega Master System. GamingExcellence also gave the Sega Genesis sixth place in 2008, declaring, "one can truly see the Genesis for the gaming milestone it was." At the same time, GameDaily rated it ninth of ten for its memorable games.

In 2014, USgamer's Jeremy Parish wrote, "If the Atari generation introduced video games as a short-lived '70s fad ... and the NES generation established it into an enduring obsession for the young, Sega's Genesis began pushing the medium toward something resembling its contemporary form," expounding that the system served as "the key incubator for modern sports franchises," made "consoles truly international" by providing Western third-parties previously put at a disadvantage by Nintendo's restrictive licensing policies with a more profitable alternative, created "an online subscription service" that foreshadowed "PlayStation Plus more than 15 years early" with the Sega Channel, and "played a key role in ensuring the vitality and future of the games industry by breaking Nintendo's near-monopolistic hold on the U.S. and awakening the U.K. to the merits of television gaming."

For his part, Kalinske highlighted Sega's role in developing games for an older demographic and pioneering "the concept of the'street date'" with the simultaneous North American and European release of "Sonic the Hedgehog 2". John Sczepaniak of "Retro Gamer" noted, "It was a system where the allure was born not only of the hardware and games, but the magazines, playground arguments, climate, and politics of the time." Sega of America's marketing campaign for the Genesis was widely emulated, influencing marketing in the subsequent generation of consoles.