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Thread: Japan execs were upset that Kalinske was allowed to resign w/o taking blame for 32X

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    Quote Originally Posted by gamevet View Post
    It was said that it cost Sega $380 to build a Saturn.
    For the VA0 revision I assume? At launch of $399 that would mean they were actually making money on them wouldn't it? The Japanese launch price was the Yen equivalent of about $425? So wouldn't they be making about $20-$45 in profit on each one sold then if it cost that much to build at those launch prices?

    Quote Originally Posted by gamevet View Post
    Again, removing a small little board, a resistor or 2 and a bridge isn't going to magically cut production costs down to $325. Sega was most certainly taking a loss with that price cut. Don't look at price cuts being there, just because build costs go down. Labor in a place like Malaysia wasn't killing the profits. They pay people pennies on the dollar for labor. Reduction of labor over a missing board wouldn't amount to much, considering that the parts are still being put onto one board. It's the silicon that is expensive, with the Saturn having over 25 ICs on its board, with the cheapest probably being around $5 and the most expensive ones being in excess of $40.
    The VA0s were being built almost exclusively in Japan as zyrobs said, with the few US and PAL ones being made in Taiwan. VA1 is where we see other countries making them such as Indonesia and Malaysia as well as eventually China. So going from mostly Japan to other parts of the world would lower labor costs wouldn't it? Japan is not the same as China when it comes to cost of manufacturing. There's a reason their electronics manufacturing has been shrinking too. So again as zyrobs said VA1 focuses more on streamlining production, and I'd imagine making it easier to assemble, reducing boards, and opening up to other cheaper labor markets would have lowered the cost. Maybe not enough to get it down to only costing $325 to make, but enough that dropping the price wasn't as big of a loss as you may be thinking.

    Quote Originally Posted by gamevet View Post

    NO! NO! NO! NO! NO!

    There aren't enough changes between VA0 and VA6 that would amount to that kind of savings in 1995. Have you actually ever bought resisters, diodes and capacitors? They're fucking cheap!
    VA6 didn't come out until 1996. Same with VA4 and VA5. Those revisions are exclusive to the Model 2 systems according to serial number databases. VA2 and VA3 are pretty much the same as VA4 and VA5 as far as I'm aware, just VA2 and VA3 are in the Model 1 case and still have the Access LEDs and what not. Those did start showing up in 1995 as far as I can tell.

    I'd imagine with VA1-3 the savings you'd see would be from the streamlined production from consolidating the board and expanding production to other cheaper labor markets. Also with production ramping up to handle the other markets I'd imagine some of the chips prices would start to come down as they'd be producing higher yields as time went on. Isn't that generally what happens with other CPUs and ICs over time? For a modern example the Ryzen 2700 launched in 2018 at $329, within a year it was down to only costing $199. Six months later it was down to $135. So within one year it dropped to about 67% of it's original price, and in a year and a half it went down to about 40% of it's original price.

    Now do I think Saturn's costs went down that dramatically? No, most likely not. But they probably did go down over time as the chips manufacturing costs went down over time. By the time they dropped to $299 it would have been in production for over a year. By the time it drops to $199, it would have been in production for over a year and half at least. That combined with the simpler case and board designs of the Model 2 could explain the drop to $199.

    And VA6 is where we see some chips starting to get consolidated like the CD-ROM block. So I'd say that's a significant change. That starts to show up in 1996.

    Quote Originally Posted by gamevet View Post
    They extended it, because Sony had lowered the price. It was easier for them to lose money on software, than hardware.
    They extended it after the Holiday season of 1996 through May of 1997. From NPD sales data it looks like the bulk of the sales from that promotion were in the 1996 Holiday season though. During this time both Saturn and PS1 were being sold at $199 from every thing I'm seeing. Sony didn't drop price until around March of 1997 when they dropped to $149. Sega dropped to $149 at the end of May in 1997 after the ended the 3 Free games deal.

    The deal started around Fall of 1996 from what I can tell. By this point both systems were still $199 from everything I'm seeing. So no, I don't see the offer or the extension being a reaction to Sony dropping prices. It seems more that they did it to try and push sales into the Holiday season to meet their sales goals and extended it afterwards to try and maintain momentum as it did give a big spike in the Holidays.


    Quote Originally Posted by gamevet View Post
    This is like a $5 savings. Labor is dirt cheap in that part of the world. Why do you think it is that the US no longer manufactures their own products, outside of automobiles?
    Again, the VA0s weren't being manufactured in those cheap labor markets. They were being made almost exclusively in Japan, which isn't really at the same level of cheapness as China. Why do you think Japan's Manufacturing is also on the downturn?


    Quote Originally Posted by gamevet View Post
    VA15 didn't appear in the Sega Saturn until 1998.

    Then why are there Saturns with that revision that were manufactured in 1997?


    You can't believe everything Sega Retro says. They make a lot of shit up from time to time.

    Quote Originally Posted by gamevet View Post
    No, I'm saying that legit good games were hitting the clearance bins at Best Buy, because they weren't selling. I was picking up games like Marvel Super Heroes, Street Fighter Collection, AMOK, Scorcher, Bomberman, Tempest 2000, Megaman X4, Decathlete and Soviet Strike. Those are the ones I remember off of the top of my head. I do also remember passing up on Legend of Oasis for a stupid Madden title, that really sucked!
    And I'm saying those clearance bins are not enough to account for 80 million games sold considering the absolute disaster of the US Saturn market. I highly doubt even 20 million games were even printed for the Saturn in the region, expecially when you consider the very low print runs some games had.

    Quote Originally Posted by gamevet View Post
    I think it goes beyond that though. EA didn't show up with a Madden game that year and when Sega finally did bring out their own NFL game, it sucked!
    You don't think that has nothing to do with the fact EA was busy making 32X and 3DO games instead? It wasn't just Sega wasting time and resources on the 32X, they were encouraging western devs to do so as well. If this wasn't happening, we probably would have seen more western focused games being made for the Saturn's western launch. So we may have seen a Madden from EA, or a better NFL game from Sega. That's the point you're missing here. The reason there's no good US sports games or good US focused titles for the Saturn's launch is because Sega of America was dicking around with the 32X and encouraging third parties to do so as well, when they should have been focused on the Saturn.

    Quote Originally Posted by gamevet View Post

    Boards are cheap. You're talking about $10 for the larger boards and $3-$5 for the smaller ones. Labor is also cheap, when it is all outsourced to the cheapest labor forces they can find.
    As stated previously, VA0s weren't being outsourced to the cheapest labor forces they could find.

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    I want to emphasize that manufacturing costs are much more complicated than the hardware cost itself. Efficiency optimization is huge.

    You can think of it in three stages:

    -Stage 1: Get the hardware to market as fast as possible, even if costs are high.
    -Stage 2: Develop more efficient manufacturing methods; focus on optimization.
    -Stage 3: Implement low cost hardware redesigns.

    The same process is going on at the chip manufacturers (and all manufacturers in general). Basically, you don't wait to release the hardware until after you've developed more efficient methods, because then you risk being out-competed. Sega probably had dozens of employees devoted just to studying ways to lower manufacturing costs.

    On top of that, scaling up manufacturing is an important element to cost. Initially, Sega was targeting production in terms of 100,000s of units. Once they had a strong foothold, production really started to ramp up and they began manufacturing in the millions. They would be renegotiating chip costs at that larger scale.

    So, yeah, the Saturn was selling at a loss the entire time, but Sega wasn't necessarily losing more by lowering the sale price (although that is entirely possible).

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    Quote Originally Posted by Gryson View Post
    I want to emphasize that manufacturing costs are much more complicated than the hardware cost itself. Efficiency optimization is huge.

    You can think of it in three stages:

    -Stage 1: Get the hardware to market as fast as possible, even if costs are high.
    -Stage 2: Develop more efficient manufacturing methods; focus on optimization.
    -Stage 3: Implement low cost hardware redesigns.

    The same process is going on at the chip manufacturers (and all manufacturers in general). Basically, you don't wait to release the hardware until after you've developed more efficient methods, because then you risk being out-competed. Sega probably had dozens of employees devoted just to studying ways to lower manufacturing costs.

    On top of that, scaling up manufacturing is an important element to cost. Initially, Sega was targeting production in terms of 100,000s of units. Once they had a strong foothold, production really started to ramp up and they began manufacturing in the millions. They would be renegotiating chip costs at that larger scale.

    So, yeah, the Saturn was selling at a loss the entire time, but Sega wasn't necessarily losing more by lowering the sale price (although that is entirely possible).
    Right, and really the thing I'm trying to get at here is that I think if they prepped for a Fall of 1995 launch in the US and not done the 32X, they probably could have launched at $299 and not had it be as big of an issue as people think. They may still have been selling at a loss, but possibly not any worse of a loss than they were already selling at in Japan in 1994. And I think that may have done better for them in the long run than what actually played out.

    Also I think it was mentioned in an interview that towards 1997 that Saturn did start to become profitable in Japan? Which that would make sense as that's when you start to see the VA15 revision. Also the Saturn's price in Japan stayed at 20,000 Yen from when the Model 2 released to when it was discontinued as far as I can tell. So in Japan at least they'd be reducing costs but still selling at the same price.

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    Quote Originally Posted by Gryson View Post
    Kalinske swears he wasn't forced out
    And on another day and in another interview, Tom will say the reason he left was that he was forced to launch the Saturn early, which I don't buy at all
    Tom only left because Nakayama-san stood down, with Okawa-san looking to sort out the cash flow and no doubt getting plans ready to merge SEGA with Bandia

    Like Okawa-san said

    The bottom line is that SEGA was too lose with its money, No matter what I told Nakayama-san he just brushed me off, saying Okawa-san, you don't know the game business. What I do know is business [Nakayamas-san] may have known games, but he did not know business
    I still think that even with the 32X, If SEGA had gotten Daytona USA right and had the Sonic Team make the Saturn Sonic. The Saturn would have done very well. To me the Saturn really lacked that 'must have' title no matter how good it's line up was and how knows how Japan would have gone for the Saturn if SEGA had done what SONY did to get Square FF7 on its system.


    In the end, I don't think any of it would have mattered. When you have both SONY and Microsoft coming into console hardware, I doubt SEGA would have been able to still make its own consoles, given the amount of money MS and SONY were prepared to spend just on the Hardware alone and the sheer cost of supporting those consoles. All that might have been left is SEGA to have gone the gimmick route like Nintendo, sod that.

    I'm just happy that SEGA is still around making decent games and now with Nagoshi-san gone, good times will be ahead.
    Last edited by Team Andromeda; 05-07-2022 at 04:13 AM.
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    Quote Originally Posted by gamevet View Post
    VA15 didn't appear in the Sega Saturn until 1998.
    They made at least 80k VA15 consoles in 1997 already, based on the serials. By 1998 it was the only model in production, but they only made something like 300k units that year (including the skeleton units), and many ICs inside had 1997 time stamps - so at that point they were probably just clearing inventory.

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    Quote Originally Posted by TrekkiesUnite118 View Post
    For the VA0 revision I assume? At launch of $399 that would mean they were actually making money on them wouldn't it? The Japanese launch price was the Yen equivalent of about $425? So wouldn't they be making about $20-$45 in profit on each one sold then if it cost that much to build at those launch prices?
    No, because we don't know if that price is the console alone or with packaging, and also because there are other things like logistics to consider, the units have to be moved to the shops - which is a much bigger deal for USA and Europe than the relatively small and densely populated Japan.

    Quote Originally Posted by TrekkiesUnite118 View Post
    So going from mostly Japan to other parts of the world would lower labor costs wouldn't it? Japan is not the same as China when it comes to cost of manufacturing. There's a reason their electronics manufacturing has been shrinking too.
    It would not necessarily lower costs (logistics alone would increase costs). They may have used more plants simply to push production numbers up, and those other plants may not have used super cheap work-for-food labor like Apple does in China.
    Also, many manufacturers in other countries have been historically SEGA partners, which is another reason why they'd specifically use a Chinese or Taiwanese company. EFA Corporation (Taiwan) and Wong's Kong King International Holdings (China) have been production partners for Sega since the late 80s - we have internal Sega memos found on ancient Teradrive HDDs with them mentioned. Seiyo Denshi, one of Segas primary Japanese manufacturer (from Megadrive to Game Gear to Saturn), had a related company in Philippines (Seiyo Electronics Philippines) where they also produced some Saturns.

    Electronics manufacturing is shrinking because it gets progressively more complex and expensive due to hitting the physical limits of silicon. In the 1980s you could have an in-house fab and go from having photolithographic masks to having produced silicon in a week (according to Bil Herd formerly of Commodore).

    Quote Originally Posted by TrekkiesUnite118 View Post
    VA2 and VA3 are pretty much the same as VA4 and VA5 as far as I'm aware, just VA2 and VA3 are in the Model 1 case and still have the Access LEDs and what not.
    No. The difference between VA2/3 and VA4/5 is that the latter used a different DCC chip (see IC6).
    VA2/3 was also used in model 2s, with just the access led / memory reset button removed, see:
    http://evilboris.sonic-cult.net/satu...s3=2&sega_id=-
    http://evilboris.sonic-cult.net/satu...s3=3&sega_id=-

    They always had multiple revisions in production, either to get rid of excess stock or to pump out as many units as possible. Or maybe some plants did not get the retooling needed for a new board until much later - this is possibly also why some type of boards were only made in certain plants. All VA0 PAL units were made by EFA Corp in Taiwan for example, and all VA1 and later PAL boards were exclusively made by WKK in China or GS in Indonesia (not sure exactly which company was this latter one).

    Quote Originally Posted by TrekkiesUnite118 View Post
    For a modern example the Ryzen 2700 launched in 2018 at $329, within a year it was down to only costing $199. Six months later it was down to $135. So within one year it dropped to about 67% of it's original price, and in a year and a half it went down to about 40% of it's original price.
    Those were still made them at the original high cost, but they did so in the previous financial quarter / year. So the production costs only show up in the previous financial report. It will then show up as income on the next year/quarter since they already had them sitting in the warehouse and just had to sell them. This is always how they get rid of units which are not made anymore, case in point the $50 Dreamcast in 2001.

    Quote Originally Posted by TrekkiesUnite118 View Post
    Now do I think Saturn's costs went down that dramatically? No, most likely not. But they probably did go down over time as the chips manufacturing costs went down over time. By the time they dropped to $299 it would have been in production for over a year. By the time it drops to $199, it would have been in production for over a year and half at least. That combined with the simpler case and board designs of the Model 2 could explain the drop to $199.
    There's absolutely no way they saved $200 worth of costs, especially since some board versions had almost the exact amount of ICs in them (VA8, VA9) as the earliest models.

    Quote Originally Posted by TrekkiesUnite118 View Post
    And VA6 is where we see some chips starting to get consolidated like the CD-ROM block. So I'd say that's a significant change. That starts to show up in 1996.
    That won't save up that much either when you have 30+ ICs, 10 of them being very large with hundreds of pins, plus they still have the same amount of memory.

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    Quote Originally Posted by zyrobs View Post
    No, because we don't know if that price is the console alone or with packaging, and also because there are other things like logistics to consider, the units have to be moved to the shops - which is a much bigger deal for USA and Europe than the relatively small and densely populated Japan.
    I was more trying to point out that saying that was the cost to produce doesn't really align with the statement they were selling it at a massive loss. We know from Sato's interviews that it was being sold at a ~$100 loss when it launched in 1994. Which that would put the total cost of production around ~$500 when it launched in November of 1994. The $380 cost to produce comes from an Edge Magazine article from Summer of 1995 I think? It's just an estimate with no breakdown as far as I'm aware.

    Quote Originally Posted by zyrobs View Post
    No. The difference between VA2/3 and VA4/5 is that the latter used a different DCC chip (see IC6).
    VA2/3 was also used in model 2s, with just the access led / memory reset button removed, see:
    http://evilboris.sonic-cult.net/satu...s3=2&sega_id=-
    http://evilboris.sonic-cult.net/satu...s3=3&sega_id=-
    My bad, I didn't see any HST-3220 models when I was looking through it last night.

    Quote Originally Posted by zyrobs View Post
    Those were still made them at the original high cost, but they did so in the previous financial quarter / year. So the production costs only show up in the previous financial report. It will then show up as income on the next year/quarter since they already had them sitting in the warehouse and just had to sell them. This is always how they get rid of units which are not made anymore, case in point the $50 Dreamcast in 2001.
    Why wouldn't a CPU in production for years go down in price over time? We know the SH-2 went into production in Summer of 1994 and by March of 1997 they had produced 15 Million of them for Sega to put in Saturns. So wouldn't the price per unit come down over time as production ramps up?

    Quote Originally Posted by zyrobs View Post
    There's absolutely no way they saved $200 worth of costs, especially since some board versions had almost the exact amount of ICs in them (VA8, VA9) as the earliest models.
    I'd imagine the Model 2 case being cheaper to produce and assemble would have lowered costs. Also in 1996 we see Memory prices pretty much nosedive. In January of 1996 RAM prices were about $30/1MB, by the end of 1996 they go to about $5/1MB. For what it's worth we see a drop of about $10/1MB from end of 1994 to the end of 1995. Granted this is going off of PC RAM prices, I'd imagine it would have applied to other markets and types of RAM and helped reduce costs. You have about 4.5MB of RAM in the Saturn, so going off of PC RAM prices of the time that would account for over $100 in cost. So if similar price drops happened with the RAM Sega was buying I'd imagine it would have made a significant dent in the cost.

    So with falling RAM prices and the other cost reductions that happened with the Model 2, I don't think the drop to $200 was as big of a hit as some people think. Sure it may have still been being sold at a loss at that price when it first launched at $200, it may not have been as big of a loss people think. At the very least I'd imagine it was no worse than the $100 loss it was at when it launched in 1994.

    Quote Originally Posted by zyrobs View Post
    That won't save up that much either when you have 30+ ICs, 10 of them being very large with hundreds of pins, plus they still have the same amount of memory.
    I'd say it still probably helped reduce costs. Combined with falling RAM prices I could again see it all starting to add up.

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    Zyrobs - repped, that is way more than I ever expected to learn about Saturn manufacturing and version differences.

    Trekkies - even if cost to build is $380 they definitely aren't turning a profit at $399. For one thing they have to include packaging and documentation, which costs money to design and has to be localized for each region. Then it goes to the wholesaler, they take their cut and pass along the shipping charges of getting the consoles to North America. Then it goes to the retailer, who adds their own markup. Then there's the marketing and promotional push. There's more steps than that but you get the idea.

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    Quote Originally Posted by axel View Post
    Trekkies - even if cost to build is $380 they definitely aren't turning a profit at $399. For one thing they have to include packaging and documentation, which costs money to design and has to be localized for each region. Then it goes to the wholesaler, they take their cut and pass along the shipping charges of getting the consoles to North America. Then it goes to the retailer, who adds their own markup. Then there's the marketing and promotional push. There's more steps than that but you get the idea.
    Which is why I questioned if $380 was actually the total cost to produce the Saturn, because if that was the total cost they would technically be making money at that price. The reality is that figure is just an estimate Edge pulled out of their butt in 1995.

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    Quote Originally Posted by TrekkiesUnite118 View Post
    Which is why I questioned if $380 was actually the total cost to produce the Saturn, because if that was the total cost they would technically be making money at that price. The reality is that figure is just an estimate Edge pulled out of their butt in 1995.
    Oh right, I get you. Yeah the relevant number though is Sega saying they lost $100 per unit at $399. So whatever it cost them to build it they had a big problem when Sony forced them to slash prices early on.

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    Quote Originally Posted by axel View Post
    Oh right, I get you. Yeah the relevant number though is Sega saying they lost $100 per unit at $399. So whatever it cost them to build it they had a big problem when Sony forced them to slash prices early on.
    Sure, but we also see attempts at getting the cost down. To be clear, the $100 loss is in reference to the Japanese launch. In Japan it launched at 44,800 Yen, which was about $415 give or take. PS1 was 39,800 Yen, which was about $370 give or take. So both systems had to cut quite a bit to get down to $299 by September of 1995. Sure Sony's hardware made this easier, but I don't think it was impossible for Sega to make changes to get the cost down to make it so they could sell at $299 in September of 1995 and not have the loss be much worse.

    People point to the Sato interview about holding back production due to the losses, but this really seems to be more in reference to the early launch period in Japan. VA0 Saturns were only made in Japan and a few in Taiwan for US and PAL launches. When the VA1 comes along suddenly we see them being made in more countries and production starts ramping up. So clearly the changes to the VA1 with reducing the amount of boards and making it easier to assemble made it so they could start producing more of them.

    Next we know the SH-2 went into mass production in the early summer of 1994, so assuming Saturn production started maybe a month or two later, we'd be looking at around July or August of 1994 for when systems started being produced. PC RAM prices at that time were almost $40/1MB. So if that's roughly equivalent to what it costs for the RAM Sega was using, with 4.5MB of RAM in the system that would account for about $180 of the cost. By Summer of 1995, RAM prices were down to about $30/1MB. While still not great, that would account for saving about $45 in RAM costs. So that combined with what little savings came from the VA1 revision could explain the first price cut the system had in June of 1995 to 34,800 Yen (about $325) and how it could be possible for them to sell at $299 come September/October and not have the loss be too much worse.

    Really the point I'm trying to get at here is I don't think the cost would have been as big of an issue had they not just nuked their brand outside of Japan with the mess that was the 32X. Had they not done that, they probably could have afforded to launch at $299 in September of 1995 and could have had the focus to really sell it with a solid launch line up to help drive sales and give a better first impression.

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    Quote Originally Posted by TrekkiesUnite118 View Post
    Really the point I'm trying to get at here is I don't think the cost would have been as big of an issue had they not just nuked their brand outside of Japan with the mess that was the 32X. Had they not done that, they probably could have afforded to launch at $299 in September of 1995 and could have had the focus to really sell it with a solid launch line up to help drive sales and give a better first impression.
    I get that. All the resources diverted to develop the 32X hardware and games should have gone into the Saturn. Even if they couldn't hit a $299 price point at least it could have had a much better launch.

    Or, alternatively, stick with the 32X/Neptune/Nomad and let the Genesis platform have the spotlight for a couple more years, then launch a better 5th gen console in 1996. I think either approach could have been justified, anything is better than trying to juggle two home platforms at once. As you pointed out this didn't make life easy for 3rd party devs either.

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    I'm actually translating an article now regarding the 16-bit market in the US in 1995. Spoiler: it was dead.

    Apparently console sales don't reflect what was going on with software sales. It turns out that people who buy budget previous-gen consoles don't exactly buy a lot of new games too (ok, this is not at all surprising).

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    Quote Originally Posted by Gryson View Post
    I'm actually translating an article now regarding the 16-bit market in the US in 1995. Spoiler: it was dead.

    Apparently console sales don't reflect what was going on with software sales. It turns out that people who buy budget previous-gen consoles don't exactly buy a lot of new games too (ok, this is not at all surprising).
    Didn't realize that. I always thought 1995 was a great year for the SNES. Just looking at the list here https://en.wikipedia.org/wiki/1995_i...me_video_games it appears the SNES/SFC outsold everything else. But I look forward to seeing what you found.

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    Nintendo was definitely not OK in North America in 1995. In September 1995 they took an extraordinary loss of around $100 million (!!!) writing down the value of Nintendo of America. Of course they still turned a profit overall, but it was the company's lowest profit since 1990. They were as desperate as Sega and they had their own 32X moment - the Virtual Boy.

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