Just earlier today, MD Shock reported on the translation of a 2022 lecture by former SEGA president, Shoichiro Irimajiri.
This lecture lays everything bare in terms of SEGA of America’s ultimate failings and it also helps to dispel certain long-running rumors about what did and didn’t happen in regard to the Saturn in America. Some of these already sound a bit familiar, but nonetheless, they really help solidify the issues. Here are the biggest points he’s made:
SEGA was indecisive and internally divided on 3D for Saturn
It was generally thought that our next-generation console had to bring something new and different to the market, such as 3D graphics. However, there was also the opinion that we could make even greater games with 2D graphics, with more color and smoother animation. Such a game console could specialize in upgraded 2D graphics. Opinions were split on the matter. Without a clear decision being made, the next-generation console design featured both the ability to do a limited amount of 3D graphics and the ability to do the highest level of 2D graphics.
Shoichiro Irimajiri
SEGA used a second SH-2 CPU (NOT GPU) to aid in 3D rendering
We soon learned that many third-party developers had made the decision to abandon 2D game development in favor of 3D graphics. It was a very bad situation for us. Just as I entered Sega, there was a huge debate about whether it was okay to release the Saturn as it was with its limited 3D capabilities. It was decided we had no choice but to increase the 3D capabilities. At the absolute minimum, the Saturn had to be able to handle the 3D graphics of Sega’s fighting game Virtua Fighter. That was impossible on the Saturn as it then was. To put it in simple terms, the Saturn’s CPU could not handle the heavy processing required to create the 3D graphics. A possible solution was to add a GPU, a graphics chip, that could specialize in handling the heavy graphics calculations. However, it was far too late to begin development on something like that, so it was decided to use a second Hitachi SH-2 CPU in place of a GPU. The architecture of the Saturn was revised to include two SH-2s, and that’s how the Saturn was released. So, in Japan, the 3D capabilities of the Saturn were boosted.
Shoichiro Irimajiri
Saturn could have launched in US alongside Japan, but SoA insisted on 32X
However, in America, they didn’t want to go in that direction. The Genesis had been so successful, and third-parties were still in the middle of developing games for it. Therefore, before releasing a next-generation 3D-capable console, they wanted to release an enhancer for the Genesis that would boost its capabilities. This is where things got messy. Since we wouldn’t be able to release the Saturn in America, I was told to go there and help resolve the situation. I had just joined Sega at the beginning of July 1993, and by the middle of July, I flew out to Sega of America. I still didn’t have a good understanding of the game industry, so I was just going to listen to what they had to say. I met with Sega of America president Tom Kalinske and head of software development Joe Miller. They told me that there was no way they could abandon the incredible success of the Genesis. They made this clear to me in a very passionate manner. After that, I returned to Japan. We would release the Saturn in Japan at the end of 1994. Meanwhile, we would develop an enhancer for the Genesis, the 32X, that Sega of America would release at the end of 1994. We would split the markets that way. The Saturn’s American release would be postponed for a year. That’s the plan that was eventually agreed upon.
Shoichiro Irimajiri
SoA was forced to keep massive inventory in warehouses and lost a fortune on unsold returns…
In the American market, it was typically large retailers such as Toys “R” Us and Wal-Mart that stocked game hardware and software. Those kinds of retailers would buy a huge quantity of stock at first. However, if they didn’t sell the stock within a certain period, they’d send it all back. We’d have to buy it all back. SOA’s posted profits in 1993, for example, were all washed away because it had to take extraordinary losses on returned stock later on. Those extraordinary losses came to $100 million or $200 million at a time. Furthermore, retailers in America held a lot of power, and they required manufacturers to have a certain amount of inventory on hand to replenish stocks when items sold out. For example, retailers required SOA to have at least 500,000 Genesis hardware units on hand to replenish sold stock, or they wouldn’t do business with us. SOA had an excess of inventory that would all be sold at once, bringing in a huge amount of revenue. Then, all that inventory would come back from retailers later on and SOA would take a huge loss. With the Genesis, all of those losses started to appear in 1994, 1995, and 1996. If you added up all the losses, the number would be astronomical. When we looked at the numbers carefully, even though SOA had a reputation for earning so much money, it turned out they weren’t earning much at all. We decided we had to change things, and that necessitated reducing the size of the company.
Shoichiro Irimajiri
Tom Kalinske did not just resign… He was asked to leave.
We told Tom Kalinske that we’d give him one year to restructure the company like so. This was a quite a strong request. After one year, in 1996, the restructuring hadn’t progressed at all. We decided we had no choice, and I was ordered to go to SOA and take over as president. Tom Kalinske was asked to step down. I initiated the restructuring and worked to make the company healthy.
Shoichiro Irimajiri
What’s the ultimate takeaway?
Well, SEGA of America didn’t believe that US gamers could (or would) afford the Saturn, when SEGA of Japan wanted to bring it over here, and they were so adamant about this that they managed to convince SOJ to hold off on bringing Saturn over for a year. (We could have had the Saturn alongside of Japan).
Meanwhile, SOA brought the 32X to market, and nobody bought it, yet they were forced to keep massive stock in warehouses based on the rules of American retail, and then when those units remained unsold, retailers were allowed to send them back to SEGA, would have to pay to take them back.
Almost all of SOA’s profits from 1992 & 1993 with Genesis & Sonic went up in smoke due to the massive overstocking, underselling and merchandise returns that took place in 1994, 1995 & 1996…
A massive Saturn fan since Christmas ’96, Dave is enthusiastic about growing the community and spreading Saturn love and knowledge to fans old and new. Co-founding the SEGA SATURN, SHIRO! podcast back in 2017 and creating the SHIRO! SHOW in 2020, he seeks to create interesting and engaging Saturn-related content for the community. Dave’s interests circle around game preservation, and he is a huge fan of game magazines and developer interviews.
thanks for this article, i recently discovered your youtube channel and website. I’ve been a Saturn fan since the beginning. I didn’t realize how much power big North American retailers had over Sega! That’s crazy how SOA was forced to buy back unsold product. No wonder they lost a fortune! So sad!
Thank you. Very interesting 🙂