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

[Gryson]

I'm trawling old Japanese newspapers for Sega info from the 90s. What a gold mine of untapped info this is.

I came across this article from the March 16, 1998 issue of the Nikkei Shinbun titled "Sega plunges into the red without anyone taking blame". It features quotes from then-Sega president Shoichiro Irimajiri, as well as other unnamed Sega executives, and I trust the info given. This comes after Nakayama was ousted from power.

Here is a juicy excerpt:

During the first half of the 1990s, Sega was victorious in capturing 50% of the North American market with its 16-bit game console the Genesis. If Sega had fully committed to the Saturn with that kind of force, the outcome probably would have been different. However, just before the release of the Saturn, Sega released the 32X, an add-on that just increased the capabilities of the Genesis. The intention was to boost profits from the Genesis install base, but the result was a disaster. Among software developers, “there was a rapid spread of distrust for Sega” (Irimajiri). The Saturn was released under these negative conditions.

The 32X was handled by Sega’s North American subsidiary [SOA], whose president had managed to persuade Nakayama to let him sell the add-on. However, soon after, that president was allowed to resign at his own convenience without being called on to take blame for the failure. Nakayama is famous for his management style of “sure punishment or reward,” but his sharp intuition for the arcade industry failed him when it came to the home console industry, where he lacked experience. Because of that, he allowed some executives to run solo.

Based on other articles, Irimajiri heavily implies that Sega of America was mismanaged under Kalinske and Nakayama (Irimajiri, I should point out, took over as president of SOA in 1996 after Kalinske and Nakayama resigned). Although SOA claimed 50% of the market by 1994, it apparently came at a great cost via excessive promotions with little focus on profits. Furthermore, SOA completely failed to manage inventory well and ended up with millions upon millions of unsold consoles and games filling warehouses. Essentially, although the Sega parent company was posting profits through 1997, SOA had been tying up / bleeding money like crazy, something that didn't easily show up in annual reports. When Irimajiri took over the company, he was forced to write off all of this unsold inventory and heavily write down the value of SOA, which is what finally caused Sega to post a loss in 1998.

Irimajiri didn't exactly seem to get along with Nakayama. Irimajiri was vocally critical of Nakayama's continued push to sell the Saturn, and they really butted heads over the design of the Dreamcast.

People tend to assume the conflict at Sega was between Nakayama and Kalinske. I've never seen any indication of that. This and other things I'm reading, however, do indicate Nakayama received a lot of internal criticism for how he handled SOA. Everything I've read has shown that Nakayama was a strong supporter of Kalinske and Joe Miller, but the freedom he gave them with the 32X was seen as a deadly mistake for the company.

There is so much more to the narrative of the 32X and the Saturn that has yet to be told.

[Iced Snowman]

Fascinating history. Could the 32X have been the cancer that spread and prevented Sega from continuing to put out consoles past the Dreamcast? It's definitely a possibility.

[Blades]

Fascinating indeed.

Irimajiri didn't exactly seem to get along with Nakayama. Irimajiri was vocally critical of Nakayama's continued push to sell the Saturn, and they really butted heads over the design of the Dreamcast.

This would be very interesting to learn more about. It might fill in a lot of the gaps of why the Saturn and Dreamcast ended up like they did. After all, the Saturn did fine in Japan.

[Gryson]

Fascinating indeed.

This would be very interesting to learn more about. It might fill in a lot of the gaps of why the Saturn and Dreamcast ended up like they did. After all, the Saturn did fine in Japan.

By that comment about the Saturn, I mean in North America. When Irimajiri took over as president of SOA after Kalinske in 1996, he wanted to cut losses. Nakayama, however, still thought the Saturn had a chance there and pushed through promotions like the 'three free games' promotion. Irimajiri said those promotions just pushed them deeper into the hole and were a waste of money. People mistakenly think Bernie Stolar was the one calling the shots against the Saturn, but he was just VP under Irimajiri. Irimajiri was guiding the policy there.

The Dreamcast info comes from that long Hideki Sato interview a few years back. I never got around to translating it, but it's fascinating...

Long story short, for the successor to the Saturn, there were two competing projects: Black Belt and Katana (Dural). That's nothing new. Irimajiri led development at SOA of the Black Belt project, while Hideki Sato led development of the Katana project in Japan. Black Belt was based on 3dfx technology, and Irimajiri had even gone as far as having SOA buy a 16% stake in 3dfx.

When it came time to decide which project would become the Dreamcast, Irimajiri and Sato both presented their final proposals to Nakayama. Of course, both had a lot on the line and were very passionate about why they should be chosen. It got to the point where Sato said that if Katana was not chosen, he was going to quit the company. He also said he didn't trust Irimajiri's intentions, since he suspected Irimajiri had personally bought stock in 3dfx and was just trying to profit off of it. Things got dirty. In the end, Nakayama went with Katana, because he felt Sato had a better grasp on developing a console through his many years of experience. Irimajiri was irate and said "This company is crazy." 3dfx ended up suing Sega over the whole ordeal.

Irimajiri didn't seem too upset when Nakayama was forced out not long after that. He was quoted in the Wall Street Journal as saying Nakayama was "the tyrant of Sega". Definitely some bad blood there.

[Melf]

Where do you find Japanese newspapers? I'd love to see them!

[Pyron]

Very good makes it clear that the idea of 32x and who forced it to be launched was SOA, they certainly knew that the arrival of the Saturn was close and that this attempt to profit even more on top of MD could be disastrous.

On the other hand, maybe if JP's SEGA had waited a little longer to see how the market reacted and what the PSX would be like, it might have developed the Saturn better and launched a more competitive product.

In the end it turns out that both were responsible for the beginning of the end of SEGA, the USA tries to profit by launching a product to take advantage of a small window of time until the new console comes out,
and Japan running and making decisions in a hurry to try to get ahead of the future competitor and making last minute design choices to suit the product.

More time and patience would have been beneficial to both sides.

[Fozzy]

I wonder what happened to the millions and millions of unsold consoles and games?

Mostly last years EA Sports?

[Gryson]

Where do you find Japanese newspapers? I'd love to see them!

I recently realized I have access through the university I work at in Japan. Not sure how to get access from outside Japan, though.

The Nikkei Shinbun, which seems to be the best for business information, has articles online going back to ~1982. A search for "Sega Enterprises" returns over 12,000 unique articles.

Very good makes it clear that the idea of 32x and who forced it to be launched was SOA, they certainly knew that the arrival of the Saturn was close and that this attempt to profit even more on top of MD could be disastrous.

On the other hand, maybe if JP's SEGA had waited a little longer to see how the market reacted and what the PSX would be like, it might have developed the Saturn better and launched a more competitive product.

In the end it turns out that both were responsible for the beginning of the end of SEGA, the USA tries to profit by launching a product to take advantage of a small window of time until the new console comes out,
and Japan running and making decisions in a hurry to try to get ahead of the future competitor and making last minute design choices to suit the product.

More time and patience would have been beneficial to both sides.

Keep in mind Sega wasn't really in a position to wait. They had to cater to stockholder expectations in the face of unexpected declining revenues. In other words, business is hard and you can't always control contextual variables. Besides, waiting just wasn't Sega's thing.

I wonder what happened to the millions and millions of unsold consoles and games?

Mostly last years EA Sports?

Those would have been published by EA, not Sega

Sega would have probably auctioned off the excess inventory, and it ended up at discount retailers or shipped to other countries. Or they would have destroyed it if they couldn't sell it.

[gamevet]

Fascinating history. Could the 32X have been the cancer that spread and prevented Sega from continuing to put out consoles past the Dreamcast? It's definitely a possibility.

They only sold about 650,000 units. Hardly what I'd call the cancer that led to Sega's downfall.

[Gryson]

I found out what happened to the Neptune (the 32X - Genesis all-in-one budget system):

Nakayama personally cancelled it in a meeting with SOA management in mid-Jan 1995. It had been scheduled for release in the fall of 1995. According to the Nikkei, Nakayama said it was important to be flexible and adjust to the situation.

I've long said this, but everything related to the surprise early release of the Saturn in North America was directly a result of the failure of the 32X. Nakayama was desperate to draw attention away from the 32X, which was just pulling Sega's reputation down the longer it stayed on the market.

[Zeus]

Link to these articles?

[gamevet]

I found out what happened to the Neptune (the 32X - Genesis all-in-one budget system):

Nakayama personally cancelled it in a meeting with SOA management in mid-Jan 1995. It had been scheduled for release in the fall of 1995. According to the Nikkei, Nakayama said it was important to be flexible and adjust to the situation.

I've long said this, but everything related to the surprise early release of the Saturn in North America was directly a result of the failure of the 32X. Nakayama was desperate to draw attention away from the 32X, which was just pulling Sega's reputation down the longer it stayed on the market.

You don't think that maybe the threat of the PlayStation had more to do with that early launch?

[Gryson]

Link to these articles?

No link - I'm reading them through a library database.

You don't think that maybe the threat of the PlayStation had more to do with that early launch?

Maybe? But everything indicates Sega was well aware of the threat from Sony way before the launch in Japan. The biggest indicator was that Sony was attracting many more of the top third parties, and they knew Sony's hardware was good. It wasn't the case that they ignored Sony until both consoles were launched and then panicked when the PlayStation was matching them in sales. I've never seen indication that Sega underestimated Sony into 1994.

[axel]

By that comment about the Saturn, I mean in North America. When Irimajiri took over as president of SOA after Kalinske in 1996, he wanted to cut losses. Nakayama, however, still thought the Saturn had a chance there and pushed through promotions like the 'three free games' promotion. Irimajiri said those promotions just pushed them deeper into the hole and were a waste of money. People mistakenly think Bernie Stolar was the one calling the shots against the Saturn, but he was just VP under Irimajiri. Irimajiri was guiding the policy there.

Thanks for posting these. I agree with Irimajiri that these promotions were likely just digging them deeper, but I also see Nakayama's point, if you cut support that soon in a console's lifecycle it's like a big "fuck you" to your fanbase. They had to just ride it out until the Dreamcast was ready. I look it at like the situation with Nintendo and Wii U, it was clear early on this console was not going to do well but they continued to release AAA games until the Switch came out. Then they ported the games to the new hardware and made back all the money they'd invested.

As I've mentioned before the biggest issue I see with having both the 32X and Saturn is that there was no consideration to have cross compatibility between them. If 32X games could have run on the Saturn it would have eased the transition for both consumers and developers. Look at the success of the Xbox Series S as a lower cost next gen console, Sega needed to create something similar if they wanted to have two 5th gen systems out at the same time.

[Lycanphoenix]

I agree with Axel. The lack of Genesis and 32X backwards compatibility severely hindered the Saturn, in my opinion.
The lack of Saturn backwards compatibility on the Dreamcast? Eh, not so much, though backwards compatibility would have been nice.