The mid-1990s was indeed a challenging period for Sega. The company had launched the Saturn in 1995, but the console struggled significantly against Sony’s PlayStation. When Sony announced a price reduction of the PlayStation to $199 in May 1996, Sega was forced to match this price despite the Saturn being more expensive to manufacture. By 1997, Sony controlled 47% of the console market, Nintendo 40%, and Sega only 12%. Thanks to Reddit user SonOfTron for sharing this information.
Game Players magazine predicts Sega's exit from hardware business in 1996.
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Sega’s financial situation deteriorated rapidly. The company reported its first financial loss since its 1988 listing on the Tokyo Stock Exchange in the fiscal year ending March 1998, with a net loss of ¥43.3 billion (US$327.8 million). Shortly after, Sega announced it was discontinuing the Saturn in North America to prepare for its successor, the Dreamcast.
While Sega didn’t immediately exit the hardware business following the 1996 Game Players article—they would go on to release the Dreamcast in 1998—the company’s trajectory was certainly heading in that direction. The Saturn is considered a commercial failure with lifetime sales of 9.26 million units worldwide. Multiple factors contributed to this failure, including a surprise early launch that damaged relationships with retailers, competition from the PlayStation and Nintendo 64, and poor management decisions.
The Game Players magazine prediction was ultimately fulfilled when Sega eventually did exit the hardware business after the Dreamcast, transitioning to a third-party game developer and publisher. According to one Reddit commenter, there may have been internal consideration of cutting the hardware division as early as 1996, with preliminary work being done to port Sega games to other platforms.
