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Thread: Sega President Hayao Nakayama’s New Year Speech 1994 (for the Sega history nerds)

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    Mega Driver Hedgehog-in-TrainingMaster of Shinobi Gryson's Avatar
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    Genesis Sega President Hayao Nakayama’s New Year Speech 1994 (for the Sega history nerds)

    Here's a new translation for the history nerds out there:

    https://mdshock.com/2020/06/16/sega-...r-speech-1994/

    Highlights:

    • Explanation for Sega’s unexpected decline in revenue that began in the second half of 1993.
    • Praise for Sega’s success in overcoming Nintendo in America.
    • Discussion of Sega’s new 32-bit machine and why it is polygon-based.
    • Brief mention of the 3DO and why it is irrelevant.
    • Discussion of Sega’s focus on multimedia.
    • Discussion of Sega’s amusement operations.


    There are some interesting pieces of information here.

    It provides a good illustration of the fact that Sega's revenue began to decline in the 2nd half of 1993, which was a big cause for concern. They weren't able to sustain their rapid growth for long, and that must have been troubling for shareholders. This was likely at the forefront of a lot of the decisions that came in 1994.

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    Hero of Algol
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    I'm a bit surprised to see that this thread had 0 replies so far.
    So let's fix this huge mistake.

    We’ll soon be making the transition to the next generation of home consoles. Our upcoming 32-bit console will have a much different architecture than anything we’ve seen yet. Up until now, the focus has been on sprite-based graphics, but now we’re moving on to polygon-based graphics. The foundation of next-generation hardware will be support for CG-like graphics. Specifically, we’re using chips such as the VDP and DSP that are capable of very fast instruction processing. An important concept that has appeared recently is MIPS. This refers to how many millions of instructions can be processed in one second. The CPU in our 32-bit console is about 50 MIPS. However, we’re also including the VDP and DSP to increase the speed of calculations, which brings it up to about 800 MIPS. What that means is the console will be capable of performing 800 million instructions per second. Without a doubt, it’s going to be a very powerful console, and essentially a high-grade computer.

    You might wonder why it’s necessary to build such a high-performance console. The reason is that the current types of games have reached their limit. The market did not grow very much from the 8-bit console generation to the 16-bit console generation. Why? 16-bit consoles were basically straightforward extensions of 8-bit consoles, and because of that, games did not evolve significantly. What, then, is necessary to create such new styles of games? The answer is polygon-based computer graphics.

    Moving forward, we will be focusing on questions such as how far we can take polygon-based graphics, to what extent we can incorporate digitized video into creating new genres of games, and what age ranges, beyond the typical 8-20 year olds, we can reach with such new forms of entertainment.
    These quotes show some kind of disdain or even ignorance towards the 4th gen games and how some genres evolved significantly since the previous one.
    I'd love to see Nakayama's face when Nintendo was outselling them 4:1 or 5:1 with DKC against Sonic & Knuckles in the end of that same year.

    The 1993 slump seem to have scared SOJ and they simply didn't know what to do about that.
    They seem to have thought the answer to all issues was polygon-based graphics, but I'd argue that people also got tired of Sonic-esque games and the whoring of Sonic's image to products like Sonic Spinball may have had a negative effect in the long run too.

    The "funny" thing is that at the end of 1994 SOJ would have the nerve to release the 32X also in Japan, close to both Saturn's and PS1's release and with the 32X hardware having not really being designed for polygon-based graphics.
    I guess they just didn't know what they were doing at that point.
    Last edited by Barone; 08-24-2020 at 11:11 PM.

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    To be fair though, at least from a visual point of view, games like Virtua Fighter, Resident Evil or Tomb Raider stand for a paradigm shift in video game genres; to a certain degree this also goes for FPS games, especially when Quake hit the scene, as the Mega Drive, SNES and co were struggling even with the bitmap style of Doom and similar titles. Yes, Genesis and SNES greatly increased the scope, the size and individual features within the games; but how many new genres or completely new perspectives on established genres can be found when compared to the previous generation?

    That being said, it is still weird the way he stresses the "polygon-based" future of games, when you consider that he Saturn was still very much optimized towards "classic", sprite-based 2D-games, and thus geared more towards being an "extension" to classic genres, and not as much towards the polygon-based graphics - at least when you compare its capabilities to the Sony Playstation and - to a degree - even the N64. Seems like he was aiming his speech more towards what the industry at the time was buzzing about, and not regarding (maybe even not exactly knowing) the hardware capabilities Sega's own home consoles were optimized for.

    It's also interesting to see that he identifies 1993 as a difficult year where Sega suffered hardships. Theoretically you could take that statement and pinpoint the moment when things started to "go wrong" for Sega's console business, at least in the west.
    The funny thing about an oxymoron is, even if you remove the ox, there'll always be a moron. The Question Remains: Y?

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    Quote Originally Posted by Phantar View Post
    To be fair though, at least from a visual point of view, games like Virtua Fighter, Resident Evil or Tomb Raider stand for a paradigm shift in video game genres; to a certain degree this also goes for FPS games, especially when Quake hit the scene, as the Mega Drive, SNES and co were struggling even with the bitmap style of Doom and similar titles. Yes, Genesis and SNES greatly increased the scope, the size and individual features within the games; but how many new genres or completely new perspectives on established genres can be found when compared to the previous generation?

    That being said, it is still weird the way he stresses the "polygon-based" future of games, when you consider that he Saturn was still very much optimized towards "classic", sprite-based 2D-games, and thus geared more towards being an "extension" to classic genres, and not as much towards the polygon-based graphics - at least when you compare its capabilities to the Sony Playstation and - to a degree - even the N64. Seems like he was aiming his speech more towards what the industry at the time was buzzing about, and not regarding (maybe even not exactly knowing) the hardware capabilities Sega's own home consoles were optimized for.

    It's also interesting to see that he identifies 1993 as a difficult year where Sega suffered hardships. Theoretically you could take that statement and pinpoint the moment when things started to "go wrong" for Sega's console business, at least in the west.
    Yeah, that part surprised me -- for a gamer, 1993 looked like Sega was having their best year ever. I've also never understood how a company that knew 3D was the future and had already developed several successful 3D titles for the arcades could have been so unprepared for the 5th gen.

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    16-bit era evolved gaming in many ways that now indie devs try and replicate. One thing I liked that gen is sprites were so big they became expressive. Games like Final Fantasy VI or Chrono Trigger you got to see the emotions on the character sprite. NES they had two squares alternate back and forth for a walking animation. Fighting games, in general, took a massive leap forward. Oh sure Karate Champion NES is such a masterpiece! Fuck, we didn't need SFII or Mortal Kombat. OK yeah, Double Dragon was fun but Streets of Rage really did take it to the next level.

    Music was rich enough to help tell the story. I'm sucked at the beginning of Gaiares. And yes again FFVI (sorry it's just so good and a pinnacle game to me that gen) It helped elevate the story. How is Starfox any extension of 8 bit? Sonic proved to not really work on SMS. Maybe just me but I feel like NES/SMS games struggled to create an atmosphere. Phantasy Star IV sure did for me. Games again. Castlevania IV esp the opening with the fog rolling in. SOR with that Yuzo Koshiro music beat dropping. Ys 1 opening cinematic for Turbo CD still gives me chills! From the CD-quality sound to VA to the image of Dahm tower at night in a storm. Chills I tell you! On older consoles, Ys is a fun little game. Turbo CD it becomes a grand adventure with that music. Elevates it to a new level!


    Sorry about the rambling but I always felt the music upgrade was just as big if not bigger than the visual upgrade from 8-16-bit systems.

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    Raging in the Streets Sik's Avatar
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    Nobody is gonna comment on the 800 MIPS bullshit? We had some fun poking at that on Twitter when this went up.

    Quote Originally Posted by axel View Post
    Yeah, that part surprised me -- for a gamer, 1993 looked like Sega was having their best year ever. I've also never understood how a company that knew 3D was the future and had already developed several successful 3D titles for the arcades could have been so unprepared for the 5th gen.
    1993 was also one of the greatest years for SNES, just saying. If I recall correctly part of what had happened is that Nintendo was eating Sega's lunch.

    And yeah, it's ironic that Sega out of all companies screwed up hard with 3D… but the problem is precisely in how they made the Saturn: they asked their own developers what they wanted. Outside of AM2 just about everybody was too comfortable with 2D sprites to look towards doing anything else. This also probably explains why there's the VDP2 with all the fancy layers: that was how they did things, even though ditching it and focusing on making a more powerful blitter would have made also more sense from a 2D viewpoint.

    In short: don't get too comfortable with doing things the way you're used to do or you're gonna be screwed hard if anything needs to change.

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    Master of Shinobi Mega Drive Bowlsey's Avatar
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    Hang on I'm confused. I thought it was around early 1995 that Sega started struggling and that's what made them panic and fumble the early release of the Saturn. Sega's sales were very strong throughout '93 and for most of '94, especially around the Christmas periods, so I don't understand why Nakayama and SOJ would have been starting to panic as early as late '93.

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    Quote Originally Posted by Mega Drive Bowlsey View Post
    Hang on I'm confused. I thought it was around early 1995 that Sega started struggling and that's what made them panic and fumble the early release of the Saturn. Sega's sales were very strong throughout '93 and for most of '94, especially around the Christmas periods, so I don't understand why Nakayama and SOJ would have been starting to panic as early as late '93.
    In retrospect, if the panic began in 1993 then it would explain some of Sega's odd choices in 1994/1995. If they thought the 16-bit era was ending soon and they were falling behind that would explain why they were in such a hurry to get the 32X and Saturn onto shelves.

    Of course hindsight is always 20/20, I've had the same thing in business where a problem I'm worried about today turns out to be nothing in two years time. With the way the gaming industry was changing in the early to mid 90s it was tough to know what to do next.

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    Quote Originally Posted by Sik View Post
    Nobody is gonna comment on the 800 MIPS bullshit? We had some fun poking at that on Twitter when this went up.
    He is a company man putting a positive spin on things, so what if he is off by an order of magnitude

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    Master of Shinobi Mega Drive Bowlsey's Avatar
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    Quote Originally Posted by axel View Post
    In retrospect, if the panic began in 1993 then it would explain some of Sega's odd choices in 1994/1995. If they thought the 16-bit era was ending soon and they were falling behind that would explain why they were in such a hurry to get the 32X and Saturn onto shelves.

    Of course hindsight is always 20/20, I've had the same thing in business where a problem I'm worried about today turns out to be nothing in two years time. With the way the gaming industry was changing in the early to mid 90s it was tough to know what to do next.
    I agree that there must have been something that spooked Sega that led to them pretty much losing interest in the 16-bit market and starting to push next gen hardware, I'm just suprised that whatever that something was happened as early as 1993. That was another successful year for Sega in terms of software sales and, in Europe and America at least, saw them beat Nintendo during that Christmas period for something like the third year running. I know SOJ were struggling in their own country, but then they always had so Japanese sales figures should have been neither here nor there to them by that point.

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    Raging in the Streets Sik's Avatar
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    Quote Originally Posted by axel View Post
    In retrospect, if the panic began in 1993 then it would explain some of Sega's odd choices in 1994/1995. If they thought the 16-bit era was ending soon and they were falling behind that would explain why they were in such a hurry to get the 32X and Saturn onto shelves.
    To be fair, the PS1 launched the same day as the 32X, and they weren't the only ones pushing for polygonal 3D in arcades (Namco in particular was also starting to push big there), so they probably were not wrong about that.

    EDIT: and before I forget, also the 3DO :​P (which was comically overpriced but everybody knew how quickly technology was advancing so it was not to be ignored)

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    WCPO Agent Greg2600's Avatar
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    That was a very interesting speech, thanks for finding it Gryson!

    One obvious takeaway that Nakayama himself did not sidestep was the Japanese recession that was well under weigh and lasted nearly a dozen years! They call it the "Lost Decade," and it certainly hit a company like SEGA far harder than the cash-heavy, established Nintendo. He mentions theme parks and arcades, which did poorly for them. In fact, around this time the arcade resurgence (with fighting games) was largely waning as well. Another point he hit on was Disney, who announced they were not moving into multimedia. I think that was an area that SEGA (particularly Kalinske) were hoping to see larger Hollywood involvement with. Instead, Laser Disc was dead, and they remained on VHS, eventually moving to DVD but not for at least 5 years or more, completely skipping home consoles.

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    Mega Driver Hedgehog-in-TrainingMaster of Shinobi Gryson's Avatar
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    Quote Originally Posted by Barone View Post
    I'm a bit surprised to see that this thread had 0 replies so far.
    So let's fix this huge mistake.


    These quotes show some kind of disdain or even ignorance towards the 4th gen games and how some genres evolved significantly since the previous one.
    I'd love to see Nakayama's face when Nintendo was outselling them 4:1 or 5:1 with DKC against Sonic & Knuckles in the end of that same year.

    The 1993 slump seem to have scared SOJ and they simply didn't know what to do about that.
    They seem to have thought the answer to all issues was polygon-based graphics, but I'd argue that people also got tired of Sonic-esque games and the whoring of Sonic's image to products like Sonic Spinball may have had a negative effect in the long run too.

    The "funny" thing is that at the end of 1994 SOJ would have the nerve to release the 32X also in Japan, close to both Saturn's and PS1's release and with the 32X hardware having not really being designed for polygon-based graphics.
    I guess they just didn't know what they were doing at that point.
    Keep in mind the context of this speech - it was a networking event intended to build partnerships with other companies in the industry. Nakayama's goal was to promote Sega as a successful technological innovator. Such a speech is always going to be forward-looking. He also spent significant time in the speech praising the success of Sega in the overseas 16-bit markets. In other contexts up through 1995, Nakayama sometimes mentioned the continuing importance of the 16-bit market in North America, but this speech would not be the place for that.

    As for the focus on polygon-based graphics, this speech was delivered just as Virtua Fighter was reaching enormous levels of popularity in Japan, so it was almost a given that Nakayama would tout Sega's success there and their desire to pursue such graphics more.

    Quote Originally Posted by Mega Drive Bowlsey View Post
    I agree that there must have been something that spooked Sega that led to them pretty much losing interest in the 16-bit market and starting to push next gen hardware, I'm just suprised that whatever that something was happened as early as 1993. That was another successful year for Sega in terms of software sales and, in Europe and America at least, saw them beat Nintendo during that Christmas period for something like the third year running. I know SOJ were struggling in their own country, but then they always had so Japanese sales figures should have been neither here nor there to them by that point.
    Sega hitting a roadblock in 1993 is not new info, though. They posted negative growth for the first time ever in the 2nd half of 1993 (for the stated reasons), and that only got worse in 1994. To make matters even worse, the value of their stock in Japan had skyrocketed (I think the value was higher that Nintendo's at the time), so they had shareholder pressure to maintain strong growth (hence the risky investments). It also didn't help that just a year earlier, Nakayama had predicted that Sega's annual revenue would double within 5 years (as I remember). Negative growth was seen as a very dire situation.

    Software sales were strong, especially in NA, but they were still in an expensive price war with Nintendo. Furthermore, Sega had fierce competition on its own platform from 3rd parties (such as EA, who were reportedly paying very little in royalties). So we don't know how much Sega was actually profiting from NA software sales.

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    Hedgehog-in-Training Hedgehog-in-TrainingNameless One Centrale's Avatar
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    Quote Originally Posted by axel View Post
    I've also never understood how a company that knew 3D was the future and had already developed several successful 3D titles for the arcades could have been so unprepared for the 5th gen.
    We usually speak of Sega as a single entity. But the truth is that Sega (and all companies) are comprised of different teams and individuals who are negotiating, persuading, and fighting each other to determine the best path forward. It's only in retrospect that it becomes obvious to everyone. As enthusiasts we have the luxury of expertise borne of 27 years of hindsight and absolutely nothing to risk.

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    Quote Originally Posted by Centrale View Post
    We usually speak of Sega as a single entity. But the truth is that Sega (and all companies) are comprised of different teams and individuals who are negotiating, persuading, and fighting each other to determine the best path forward. It's only in retrospect that it becomes obvious to everyone. As enthusiasts we have the luxury of expertise borne of 27 years of hindsight and absolutely nothing to risk.
    Exactly. Whenever I see someone coming out with "Sega (or whichever company) should have done things differently", I can't help but wonder where any of these people work. Every company I've ever worked for has done nothing but engage in arguments, disputes and politics at every level, and yet everyone seems to think that their favourite company is supposed to be different and should have made the right decision with the small amount of information available to them at the time (and yes, by small amount of information I mean in comparison to 30 years of hindsight available to you in the present day).

    Come on people, think about what its like at your own workplace, and then imagine what it must have been like working for Sega 30 years ago. You would still have to work with the dickhead who wants to throw his weight around, most of the staff would be nice to those above them and nasty to those below them. People would still be terrified of reporting problems, professional jealousy would still exist. Incompetent people would still be in positions of responsibility and somehow all these morons are supposed to keep the company on track.

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