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When a person thinks of a video game console of the 90's, they tend to think about such amazing consoles as the Super Nintendo, Sega Genesis, Nintendo 64, Sega Dreamcast, and the Nintendo Play station.

SNES-PlayStation

The Nintendo Playstation

The Nintendo Play station platform was developed in a partnership between Nintendo and Sony. The platform was planned to be launched as an add-on for the standard Super NES, but was later made into a brand new console. The console introduced advanced graphics and sound capabilities compared with other consoles at the time. It also had a cartridge slot to play Super Nintendo cartridge based games. It was also backwards compatible with Nintendo Entertainment System (NES) cartridges and Gameboy cartridges with a add-on called the Super Gameboy. But the most noteworthy feature of the console was the ability to read CDs and having fully 3D games on them.

Super-game-boy

The Super Gameboy which allowed backwards compatibility with Gameboy cartridges.

History

The relationship between Sony and Nintendo started when Sony engineer Ken Kutaragi became interested in working with video games after seeing his daughter play games on Nintendo's Famicom video game console. He took on a contract at Sony for developing hardware that would drive the audio subsystem of Nintendo's next console, the Super NES. Kutaragi secretly developed the chip, known as the Sony SPC 700. As Sony was uninterested in the video game business, most of his superiors did not approve of the project, but Kutaragi found support in Sony executive Norio Ohga and the project was allowed to continue. The success of the project spurred Nintendo to enter into a partnership with Sony to develop both a CD-ROM add-on for the Super NES and a Sony-branded console that would play both SNES games, as well as titles released for the new SNES-CD format. Development of the format started in 1988, when Nintendo signed a contract with Sony to produce a CD-ROM add-on for the SNES. After several years of development, Sony introduced a standalone console at 1991's summer Consumer Electronics Show called the "Play Station." The system was to be compatible with existing SNES titles as well as titles released for the SNES-CD format.  

Launch of the Play Station

The Nintendo Playstation was released in Japan on thursday, November 17th, 1991 for 27,000 yen ($26.23). It was an instant success; Nintendo's initial shipment of 400,000 units sold out within hours. 

With the Nintendo Play Station quickly outselling its chief rivals, Nintendo reasserted itself as the leader of the Japanese console market. Nintendo's success was partially due to its retention of most of its key third-party developers from its earlier system, including Capcom, Konami, Tecmo, Square, Koei, and Enix. Later Nintendo released the Play Station in North America for $199. It began shipping in limited quantities on February 23, 1992, with an official nationwide release date of  August 23,1992.The Play Station was released in the United Kingdom and Ireland in January 1993 for £160, with a German release following a few weeks later. The Nintendo Play Station was released with few games, but these games were well received in the marketplace. In Japan, only two games were initially available: Super Mario Kart and Super Star Wars. In North America, Super Mario Kart  launched as a bundle with the console, and other launch titles include Contra III: The Alien Wars, Mortal Kombat, Wolfenstein 3D, and The Simpsons: Bart's Nightmare.

Console wars

Main article: Console wars

The rivalry between Nintendo and Sega resulted in what has been described as one of the most notable console wars in video game history, in which Sega positioned the Genesis as the "cool" console, with more mature titles aimed at older gamers, and edgy advertisements that occasionally attacked the competition. Nintendo however, scored an early public relations advantage by securing the first console conversion of Capcom's arcade classic Street Fighter II for SNES, which took over a year to make the transition to Genesis. Despite the Genesis's head start, much larger library of games, and lower price point, the Genesis only represented an estimated 60% of the American 16-bit console market in June 1992, and and neither console could maintain a definitive lead for several years. It is said that when Nintendo launched the Play Station, Sega was doomed. According to Nintendo, the company had sold more than 20 million Play Station units in the U.S. According to a 2014 Wedbush Securities report based on NPD sales data, the Play Station ultimately outsold the Genesis in the U.S. market. 

Changes in policy

During the NES era, Nintendo maintained exclusive control over titles released for the system—the company had to approve every game, each third-party developer could only release up to five games per year (but some third parties got around this by using different names, for example Konami's "Ultra Games" brand), those games could not be released on another console within two years, and Nintendo was the exclusive manufacturer and supplier of NES cartridges. However, competition from Sega's console and the partnership with Sony brought an end to this practice; in 1991, Acclaim began releasing games for both platforms, with most of Nintendo's other licensees following suit over the next several years; Capcom (which licensed some games to Sega instead of producing them directly) and Square were the most notable holdouts. The company continued to carefully review submitted titles, giving them scores using a 40-point scale and allocating Nintendo's marketing resources accordingly. Each region performed separate evaluations. Nintendo of America also maintained a policy that, among other things, limited the amount of violence in the games on its systems. One game, Mortal Kombat, would challenge this policy. A surprise hit in arcades in 1992, Mortal Kombat features splashes of blood andfinishing moves that often depict one character dismembering the other. Originally to be altered by removing the blood and censoring the finishing moves called Fatalities, Mortal Kombat was the first Play Station CD game. Because it retained the gore without having to enter a code like it's Genesis counterpart, the Play Station version of Mortal Kombat outsold the Genesis and Super Nintendo versions by a ratio of five or six-to-one.

Game players were not the only ones to notice the violence in this game; US Senators Herb Kohl and Joe Lieberman convened a Congressional hearing on December 9, 1993 to investigate the marketing of violent video games to children. The hearings led to the creation of the Interactive Digital Software Association and the Entertainment Software Rating Board, and the inclusion of ratings on all video games. With these ratings in place, Nintendo decided its censorship policies were no longer needed.

32-bit era and beyond

While other companies were moving on to 32-bit systems, Nintendo was already ahead of them all with the Play Station and it's wide library of games, including it's newly released Donkey Kong Country, a platform game featuring 3D models and textures pre-rendered on SGI workstations.

Donkey Kong Country Intro00:48

Donkey Kong Country Intro

The intro to Donkey Kong Country.

With its detailed graphics, fluid animation and high-quality music, Donkey Kong Country rivaled the aesthetic quality of games that were being released on newer 32-bit CD-based consoles. In the last 45 days of 1994, the game sold 6.1 million units, making it the fastest-selling video game in history to that date. This game sent a message that early 32-bit systems had little to offer over the Play Station, and helped make way for the more advanced consoles on the horizon.In October 1997, Nintendo released a  redesigned model of the SNES (the PS-101 model referenced by Nintendo as "New-Style Play Station") in North America for US$99, with some units including the pack-in game Crash Bandicoot 2 Cortex Strikes Back.

Playstation

The PS-101 model of the Play Station.

Like the earlier redesign of the NES (the NES-101 model), the new model was slimmer and lighter than its predecessor, but it removed the cartridge slot making it impossible to play SNES, NES, and Gameboy games. Nintendo ceased production of the Play Station in 1999, about two years after releasing Kirby's Dream Land 3 (its last first-party game for the system) on November 27, 1997, a year after releasing Space Invaders (its last third-party game for the system). In Japan, Nintendo continued production of the Play Station until September 25, 2003, and new games were produced until the year 2000, ending with the release of Metal Slader Glory Director's Cut on November 29, 2000.

Many popular Play Station cartridge based titles have since been ported to the Game Boy Advance, which has similar video capabilities. In 2005, Nintendo announced that those Play Station cartridge titles would be made available for download via the Wii and Wii U's Virtual Console service. On October 31, 2007, Nintendo Co., Ltd. announced that it would no longer repair Family Computer, Super Famicom, and Play station systems due to an increasing shortage of the necessary parts.

Sega attempts to Strike back

Sega CD

After the successful launch of the Play Station, Sega announced the Sega CD add-on to combat the Play Station. The add-on was released on December 12, 1991 in Japan, October 15, 1992 in North America, and 1993 in Europe. The Sega CD lets the user play CD-based games and adds extra hardware functionality, such as a faster central processing unit and graphic enhancements. It can also play audio CDs and CD+G discs.

Sega CD

Sega CD

Seeking to create an add-on device for the Genesis, Sega developed the unit to read compact discs as its storage medium. Seeking to create an add-on device for the Genesis, Sega developed the unit to read compact discs as its storage medium. The main benefit of CD technology was greater storage capacity, which allowed for games to be nearly 320 times larger than their Genesis cartridge counterparts. This benefit manifested in the form of full motion video (FMV) games like the controversial Night Trap, which became a focus of the 1993 Congressional hearings on issues of video game violence and ratings. Sega Enterprises in Japan partnered with JVC to design the add-on and refused to consult with Sega of America until the project was completed. Sega of America assembled parts from various "dummy" units to obtain a working prototype. While the add-on became known for several well-received games such as Sonic the Hedgehog CD and Lunar: Eternal Blue, its game library contained a large number of Genesis ports and FMV titles. The Sega CD was redesigned a number of times, including once by Sega and several times by licensed third-party developers.

2.24 million Sega CD units were sold by March 1996, after which the system was officially discontinued as Sega shifted its focus to the Sega Saturn. Retrospective reception to the add-on is mixed, praising the Sega CD for its individual offerings and additions to the Genesis' functions, but offering criticism to the game library for its depth issues, high price of the unit, and how the add-on was supported by Sega.

32X

Two years after the release of the Nintendo Play station in North America Sega released the 32X, an add-on for the Genesis that was supposed to expand the power of the Genesis and serve as a transitional console into the 32-bit era until the release of the Sega Saturn. Independent of the Genesis, the 32X uses its own ROM cartridges and has its own library of games.

Sega 32X box

The box of the Sega 32X

Unveiled by Sega at June 1994's Consumer Electronics Show, the 32X was presented as a low-cost option for consumers looking to play 32-bit games. Developed in response to the Nintendo Play Station and concerns that the Saturn would not make it to market by the end of 1994, the product was first conceived as an entirely new console. At the suggestion of Sega of America executive Joe Miller and his team, the console was converted into an add-on to the existing Genesis and made more powerful. To bring the new add-on to market by its scheduled release date of November 1994, development of the new system and its games were rushed. The console failed to attract third-party video game developers and consumers because of the announcement of the Sega Saturn's simultaneous release in Japan. Sega's efforts to rush the 32X to market cut into available time for game development, resulting in a weak library of forty titles that could not fully use the add-on's hardware, including Genesis ports. By the end of 1994, the 32X had sold 665,000 units. After price reductions in 1995, it was discontinued in 1996 as Sega turned its focus to the Saturn.

Reception after the add-on's unveiling and launch was positive, highlighting the low price of the system and power expansion to the Genesis. Later reviews, both contemporary and retrospective, for the 32X have been mostly negative because of its shallow game library, poor market timing and the resulting market fragmentation for the Genesis.

Sega Saturn

After both the failures of the Sega CD and 32X, Sega announced the Sega Saturn at E3 Tom Kalinske gave a keynote presentation for the upcoming Saturn in which he revealed the release price at US$399 ($449 including a bundled copy of Virtual Fighter), and described the features of the console. Kalinske also revealed that, due to "high consumer demand", Sega had already shipped 30,000 Saturns to Toys "R" Us, Babbage's, Electronics Boutique, and Software Etc. for immediate release.This announcement upset retailers who were not informed of the surprise release, including Best Buy and Walmart;KB Toys responded by dropping Sega from its lineup.

Sega Saturn

The Sega Saturn

Nintendo subsequently unveiled the retail price for the Nintendo 64: Nintendo of America president Todd Lincoln  took the stage, said "$299", and then walked away to applause.

From 1993 to early 1996, although Sega's revenue declined as part of an industry-wide slowdown,the company retained control of 38% of the U.S. video game market (compared to Nintendo's 54%). 800,000 PlayStation units were sold in the U.S. by the end of 1995, compared to 400,000 Saturn units. In part due to an aggressive price war, the PlayStation outsold the Saturn by two-to-one in 1996, while Sega's 16-bit sales declined markedly. By the end of 1996, the Nintendo 64 had sold 2.9 million units in the U.S., more than twice the 1.2 million units sold by the Saturn. After the launch of the Nintendo 64 in 1996, sales of the Saturn and Sega's 32-bit software were sharply reduced. The 1997 release of Final Fantasy VII significantly increased the PlayStation's popularity in Japan. As of August 1997, Nintendo controlled 87% of the console market while Sega controlled only 12%. Neither price cuts nor high-profile game releases were proving helpful to the Saturn's success.

Nintendo 64 and Sony DD

For a list of Nintendo 64 and Sony DD games see List of Nintendo 64 and Sony DD games

Development

Producer and director Shigeru Miyamoto stated that he had conceived of a 3D Mario game concept while developing the SNES game Star Fox. He considered utilizing the Super FX chip in order to develop a proposed Super Nintendo Entertainment System game to be called Super Mario FX, but instead retargeted the idea of developing a brand new 64 bit console. This was not due to the former system's technical limitations, but because the N64 controller has more buttons for gameplay. According to former Argonaut engineer Dylan Cuthbert, a game titled Super Mario FX had never reached development status, and that "Super Mario FX" had been used as the internal code name of the Super FX chip itself.

Nintendo asked their partner Sony to develop the system refused saying "What's the point? We already got a console that plays both cartridges and CDs!" Nintendo eventually negotiated with Sony that if Nintendo themselves developed the console Sony would develop the disc add-on. The console's design was publicly revealed for the first time in late Q2 1994. Images of the console displayed the Nintendo Ultra 64 logo, a ROM cartridge, but no controller. This prototype console's form factor would be retained by the product eventually launched as Nintendo 64 due to a legal issue with Konami. the company now announced a much faster CD-based system, often stating the console was more powerful than the first moon landing computers. Atari had already claimed to have made the first 64-bit game console with their Atari Jaguar, but the Jaguar only uses a general 64-bit architecture in conjunction with two 32-bit RISC processors and a 16/32-bit Motorola 68000.

Later in Q2 1994, Nintendo signed a licensing agreement with Midway's parent company which enabled Midway to develop and market arcade games using the Ultra 64  hardware and formed a joint venture company called Williams/Nintendo to market Nintendo-exclusive home conversions of these games. The result is two arcade games, Killer Instinct and Cruis'n USA, which boasted their upcoming release on the arcade branch of the Nintendo Ultra 64 platform. Compared to the console branch of Ultra 64, the arcade branch uses a different MIPS CPU, has no Reality Coprocessor, and uses onboard ROM chips and a hard drive instead of a CD. Killer Instinct features pre-rendered character artwork, and CG movie backgrounds that are streamed off the hard drive and animated as the characters move horizontally.

The completed Nintendo 64 and Sony DD (which was the name of the CD add-on that Sony developed) was fully unveiled to the public in a playable form on November 24, 1995, at the 7th Annual Shoshinkai Software Exhibition in Japan. Photos of the event were disseminated on the web by Game Zero magazine two days later. Official coverage by Nintendo followed later via the Nintendo Power website and print magazine.

In the lead up to the console's release, Nintendo had adopted a new global branding strategy, assigning the console the same name for all markets: Nintendo 64 and Sony DD. The console was originally slated for release by Christmas of 1995. In May 1995, Nintendo pushed back the release to April 1996. The prospect of a release the following year at a lower price than the competition lowered sales of competing Sega consoles during the important Christmas shopping season Electronic Gaming Monthly editor Ed Semrad even suggested that Nintendo may have announced the April 1996 release date with this end in mind, knowing in advance that the system would not be ready by that date. To counter the possibility that gamers would grow impatient with the wait for the Nintendo 64 and Sony DD and purchase one of the several competing consoles already on the market, Nintendo ran ads for the system well in advance of its announced release dates, with slogans like "Wait for it..." and "Is it worth the wait? Only if you want the best!"

Release

Popular Electronics called the launch a "much hyped, long-anticipated moment".

The console was first released in Japan on June 23, 1996. The Nintendo 64 was first sold in North America on September 26, 1996, despite having been advertised for the 29th. It was launched with just two games in the United States, Pilotwings 64 and Super Mario 64. In 1996, prior to the launch, Nintendo of America chairman Howard Lincoln emphasized the quality of first-party games, saying "... we're convinced that a few great games at launch are more important than great games mixed in with a lot of dogs". The PAL version of the console was released in Europe on March 1, 1997.

Originally intended to be priced at US$250, the console was ultimately launched at US$199.99 to make it competitive with Sega offerings ( The Saturn had been lowered to $199.99 earlier that summer).

Nintendo priced the console as an impulse purchase, a strategy from the toy industry. The price of the console in the United States was further reduced in August 1998.

Nintendo 64DD

The Nintendo 64 and Sony DD. (Disc Drive)

Sega's final console and downfall

Development of the Dreamcast

As early as 1995, reports surfaced that Sega would collaborate with Lockheed Martin, The 3DO Company, Matsushita, or Alliance Semiconductor to create a new graphics processing unit, which conflicting accounts said would be used for a 64-bit "Saturn 2" or an add-on peripheral. Development of the Dreamcast was wholly unrelated to this rumored project. In light of the Saturn's poor market performance, Irimajiri decided to start looking outside of the company's internal hardware development division to create a new console. In 1997, Irimajiri enlisted the services of Tatsuo Yamamoto from International Business Machines to lead an 11-man team to work on a secret hardware project in the United States, which was referred to as "Blackbelt". Accounts vary on how an internal team led by Hideki Sato also began development on Dreamcast hardware; one account specifies that Sega of Japan tasked both teams, while another suggests that Sato was bothered by Irimajiri's choice to begin development externally and chose to have his hardware team begin development. Sato and his group chose the Hitachi SH-4 processor architecture and the VideoLogic PowerVR2 graphics processor, manufactured by NEC, in the production of their mainboard. Initially known as "Whitebelt", this project was later codenamed "Dural", after the metallic female fighter from Sega's Virtua Fighter series.

Dreamcast

The Sega Dreamcast

Yamamoto's group opted to use 3dfx Voodoo 2 and Voodoo Banshee graphics processors alongside a Motorola PowerPC 603e central processing unit (CPU), but Sega management later asked them to also use the SH-4 chip. Both processors have been described as "off the shelf" components. In 1997, 3dfx began its IPO, and as a result of legal obligations unveiled its contracts with Sega, including the development of the new console. This angered Sega of Japan executives, who eventually decided to use the Dural chipset and cut ties with 3dfx. According to former Sega of America vice president of communications and former NEC brand manager Charles Bellfield, presentations of games using the NEC solution showcased the performance and low cost delivered by the SH-4 and PowerVR architecture.

Knowing that the Sega Saturn had been set back by its high production costs and complex hardware, Sega took a different approach with the Dreamcast. Like previous Sega consoles, the Dreamcast was designed around intelligent subsystemsworking in parallel with one another, but the selections of hardware were more in line with what was common in personal computers than video game consoles, reducing the system's cost. According to Damien McFerran, "the motherboard was a masterpiece of clean, uncluttered design and compatibility." Chinese economist and future Sega.com CEO Brad Huang convinced Sega chairman Isao Okawa to include a modem with every Dreamcast despite significant opposition from Okawa's staff over the additional $15 cost per unit. To account for rapid changes in home data delivery, Sega designed the Dreamcast's modem to be modular. Sega selected the GD-ROM media format for the system. The GD-ROM, which was jointly developed by Sega and Yamaha Corporation, could be mass-produced at a similar price to a normal CD-ROM, thus avoiding the greater expense of DVD-ROM technology. As the GD-ROM format can hold about 1 GB of data, illegally copying Dreamcast games onto a 650 MB CD-ROM sometimes required the removal of certain game features, although this did not prevent copying of Dreamcast software. Microsoft developed a custom Dreamcast version of Windows CE with DirectX API and dynamic-link libraries, making it easy to port PC games to the platform,[36] although programmers would ultimately favor Sega's development tools over those from Microsoft.

Microsoft logo

Microsoft logo

Sega held a public competition to name its new system and considered over 5,000 different entries before choosing "Dreamcast"—a combination of "dream" and "broadcast".  According to Katsutoshi Eguchi, Japanese game developerKenji Eno submitted the name and created the Dreamcast's spiral logo, but this claim has not been verified by Sega. The Dreamcast's start-up sound was composed by the Japanese musician Ryuichi Sakamoto.  Because the Saturn had tarnished Sega's reputation, the company planned to remove its name from the console entirely and establish a new gaming brand similar to Nintendo's Play Station, but Irimajiri's management team ultimately decided to retain Sega's logo on the Dreamcast's exterior.  Sega spent US$50–80 million on hardware development, $150–200 million on software development, and $300 million on worldwide promotion—a sum which Irimajiri, a former Honda executive, humorously compared to the investments required to design new automobiles.

Launch

Despite taking massive losses on the Saturn, including a 75 percent drop in half-year profits just before the Japanese launch of the Dreamcast, Sega felt confident about its new system. The Dreamcast attracted significant interest and drew many pre-orders. Sega announced that Sonic Adventure, the next game starring company mascot Sonic the Hedgehog, would arrive in time for the Dreamcast's launch and promoted the game with a large-scale public demonstration at the Tokyo Kokusai Forum Hall. However, Sega could not achieve its shipping goals for the Dreamcast's Japanese launch due to a shortage of PowerVR chipsets caused by a high failure rate in the manufacturing process. As more than half of its limited stock had been pre-ordered, Sega stopped pre-orders in Japan. On November 27, 1998, the Dreamcast launched in Japan at a price of JP¥29,000, and the entire stock sold out by the end of the day. However, of the four games available at launch, only one—a port of Virtua Fighter 3, the most successful arcade game Sega ever released in Japan—sold well.

Virtua Fighter 3tb

The cover of Virtua Fighter 3tb. The only Dreamcast launch title to sell well.

Sega estimated that an additional 200,000-300,000 Dreamcast units could have been sold with sufficient supply. Key Dreamcast software titles Sonic Adventure and Sega Rally Championship 2, which had been delayed, arrived within the following weeks, but sales continued to be slower than expected. Irimajiri hoped to sell over 1 million Dreamcast units in Japan by February 1999, but less than 900,000 were sold, undermining Sega's attempts to build up a sufficient installed base to ensure the Dreamcast's survival after the arrival of competition from other manufacturers. There were reports of disappointed Japanese consumers returning their Dreamcasts and using the refund to purchase additional Play Station software. Seaman, released in July 1999, was considered the Dreamcast's first major hit in Japan.

Seaman Coverart

The cover of Seaman which, features Leonard Nimoy as the narrator for the game.

Prior to the Western launch, Sega reduced the price of the Dreamcast to JP¥19,900, effectively making the hardware unprofitable but increasing sales. Working closely with Midway Games (which developed four launch titles for the system) and taking advantage of the ten months following the Dreamcast's release in Japan, Sega of America worked to ensure a more successful U.S. launch with a minimum of 15 launch games. Despite lingering bitterness over the Saturn's early release, Stolar successfully managed to repair relations with major US retailers, with whom Sega presold 300,000 Dreamcast units. In addition, a pre-launch promotion enabled consumers to rent the system from Hollywood Video in the months preceding its September launch. Sega of America's senior vice president of marketing Peter Moore, a fan of the attitude previously associated with Sega's brand, worked with Foote, Cone & Belding and Access Communications to develop the "It's Thinking" campaign of 15-second television commercials, which emphasized the Dreamcast's hardware power. According to Moore, "We needed to create something that would really intrigue

Dreamcast "it's thinking" Commercial01:01

Dreamcast "it's thinking" Commercial

consumers, somewhat apologize for the past, but invoke all the things we loved about Sega, primarily from the Genesis days." On August 11, Sega of America confirmed that Stolar had been fired, leaving Moore to direct the launch.
GW240H160

EA logo.

Prior to the Dreamcast's release, Sega was dealt a blow when EA—the largest third-party video game publisher—announced it would not develop games for the system. EA executive Bing Gordon claimed "[Sega] couldn't afford to give us [EA] the same kind of license that EA has had over the last five years", but Stolar recounted that EA president Larry Probst wanted "exclusive rights to be the only sports brand on Dreamcast", which Stolar could not accept due to Sega's recent $10 million purchase of sports game developer Visual Concepts. While the Dreamcast would have none of EA's popular sports games, "Sega Sports" titles developed mainly by Visual Concepts helped to fill that void.

NFL 2K cover

The Dreamcast launched in North America on September 9, 1999 at a price of $199—which Sega's marketing dubbed "9/9/99 for $199". Eighteen launch titles were available for the Dreamcast in the U.S. Sega set a new sales record by selling more than 225,132 Dreamcast units in 24 hours, earning the company $98.4 million in what Moore called "the biggest 24 hours in entertainment retail history". Within two weeks, U.S. Dreamcast sales exceeded 500,000. By Christmas, Sega held 31 percent of the North American video game marketshare. Significant launch titles included Visual Concepts' high-quality football simulation NFL 2K. On November 4, Sega announced it had sold over one million Dreamcast units. Nevertheless, the launch was marred by a glitch at one of Sega's manufacturing plants, which produced defective GD-ROMs.

Sega released the Dreamcast in Europe on October 14, 1999, at a price of GB₤200. By November 24, 400,000 consoles had been sold in Europe. By Christmas of 1999, Sega of Europe reported selling 500,000 units, placing it six months ahead of schedule. Sales did not continue at this pace, and by October 2000, Sega had sold only about 1 million units in Europe. As part of Sega's promotions of the Dreamcast in Europe, the company sponsored four Europeanfootball clubs: Arsenal F.C. (England), AS Saint-Étienne (France), U.C. Sampdoria (Italy), and Deportivo de La Coruña (Spain).

Nintendo announces a new console

Nintendo Playstation 2

The PS2 provided stiff competition to the Dreamcast.

Though the Dreamcast launch had been successful, Nintendo still held 60 percent of the overall video game market share in North America with the PlayStation at the end of 1999.On March 2, 1999, in what one report called a "highly publicized, vaporware-like announcement" Nintendo  revealed the first details of its "next generation PlayStation"(now just one word instead of two), which Ken Kutaragi claimed would allow video games to convey unprecedented emotions. The center of Nintendo's and Sony's marketing plan and the upcoming PlayStation 2 itself was a new CPU (clocked at 294 MHz) jointly developed by Sony and Toshiba—the "Emotion Engine"—which Kutaragi announced would feature a graphics processor with 1,000 times more bandwidth than contemporary PC graphics processors and a floating-point calculation performance of 6.2 gigaflops, rivaling most supercomputers. Nintendo, which invested $1.2 billion in two large-scale integration semiconductor fabrication plants to manufacture the PlayStation 2's "Emotion Engine" and "Graphics Synthesizer", designed the machine to push more raw polygons than any video game console in history. Nintendo claimed the PlayStation 2 could render 75 million raw polygons per second with absolutely no effects, and 38 million without accounting for features such as textures, artificial intelligence, or physics. With such effects, Nintendo estimated the PlayStation 2 could render 7.5 million to 16 million polygons per second, whereas independent estimates ranged from 3 million to 20 million, compared to Sega's estimates of more than 3 million to 6 million for the Dreamcast. The system would also utilize the DVD-ROM format, which could hold substantially more data than the Dreamcast's GD-ROM format. Because it could connect to the Internet while playing movies, music, and video games, Nintendo hyped PlayStation 2 as the future of home entertainment. Rumors spread that the PlayStation 2 was a supercomputer capable of guiding missiles and displaying Toy Story-quality graphics, while Kutaragi boasted its online capabilities would give consumers the ability to "jack into The Matrix’!"  In addition, Nintendo emphasized that the PlayStation 2 would be backwards compatible with hundreds of popular CD-based Play Station games. Nintendo's specifications appeared to render the Dreamcast obsolete months before its U.S. launch, although reports later emerged that the PlayStation 2 was not as powerful as expected and distinctly difficult to program games for. The same year, Microsoft announced that it was getting into the console market with the Xbox.

XBOX Unveiling 200103:23

XBOX Unveiling 2001

Xbox reveal at e3 featuring WWF wrestler The Rock

Sega's initial momentum proved fleeting as U.S. Dreamcast sales—which exceeded 1.5 million by the end of 1999—began to decline as early as January 2000.  Poor Japanese sales contributed to Sega's ¥42.88 billion ($404 million) consolidated net loss in the fiscal year ending March 2000, which followed a similar loss of ¥42.881 billion the previous year and marked Sega's third consecutive annual loss. Although Sega's overall sales for the term increased 27.4%, and Dreamcast sales in North America and Europe greatly exceeded the company's expectations, this increase in sales coincided with a decrease in profitability due to the investments required to launch the Dreamcast in Western markets and poor software sales in Japan. At the same time, increasingly poor market conditions reduced the profitability of Sega's Japanese arcade business, prompting the company to close 246 locations.  Knowing that "they have to fish where the fish are biting", Sega of America president Peter Moore (who assumed his position after Stolar had been fired) and Sega of Japan's developers focused on the U.S. market to prepare for the upcoming launch of the PS2. To that end, Sega of America launched its own Internet service provider, Sega.com, led by CEO Brad Huang. On September 7, 2000 Sega.com launched SegaNet, the Dreamcast's Internet gaming service, at a subscription price of $21.95 per month. Although Sega had previously released only one Dreamcast title in the U.S. that featured online multiplayer (ChuChu Rocket!, a puzzle game developed by Sonic Team), the launch of SegaNet (which allowed users to chat, send email, and surf the web) combined with NFL 2K1 (a football game including a robust online component) was intended to increase demand for the Dreamcast in the U.S. market. The service would later support games including Bomberman Online, Phantasy Star Online, Quake III Arena, and Unreal Tournament. The September 7 launch coincided with a new 

Quake III Arena front cover

The front cover of Quake III Arena

advertising campaign to promote SegaNet, including via the MTV Video Music Awards of the same day, which Sega sponsored for the second consecutive year.  Sega employed aggressive pricing strategies with relation to online gaming. In Japan, every Dreamcast sold included a free year of Internet access, which Okawa personally paid for. Prior to the launch of SegaNet, Sega had already offered a $200 rebate to any Dreamcast owner who purchased two years of Internet access from Sega.com. To increase SegaNet's appeal in the U.S., Sega dropped the price of the Dreamcast to $149 (compared to the PS2's U.S. launch price of $299) and offered a rebate for the full $149 price of a Dreamcast (and a free Dreamcast keyboard) with every 18-month SegaNet subscription.

Moore stated that the Dreamcast would need to sell 5 million units in the U.S. by the end of 2000 in order to remain a viable platform, but Sega ultimately fell short of this goal with some 3 million units sold. Moreover, Sega's attempts to spur increased Dreamcast sales through lower prices and cash rebates caused escalating financial losses. Instead of an expected profit, for the six months ending September 2000 Sega posted a ¥17.98 billion ($163.11 million) loss, with the company projecting a year-end loss of ¥23.6 billion. This estimate was more than doubled to ¥58.3 billion, and in March 2001 Sega posted a consolidated net loss of ¥51.7 billion ($417.5 million). While the PS2's October 26 U.S. launch was marred by shortages—with only 500,000 of a planned 1 million units shipped due to a manufacturing glitch—this did not benefit the Dreamcast as much as expected, as many disappointed consumers continued to wait for a PS2—while the PS-101, a remodeled version of the original Play Station, was the best-selling console in the U.S. at the start of the 2000 holiday season. According to Moore, "the PlayStation 2 effect that we were relying upon did not work for us ... people will hang on for as long as possible ... What effectively happened is the PlayStation 2 lack of availability froze the marketplace". Eventually, Sony and Nintendo held 50 and 35 percent of the US video game market, respectively, while Sega held only 15 percent. According to Bellfield, Dreamcast software sold at an 8-to-1 ratio with the hardware, but this ratio "on a small install base didn't give us the revenue ... to keep this platform viable in the medium to long term."

The Dreamcast's decline and Sonic Adventure 2

Sonic Adventure 2

The cover to the abysmal Sonic Adventure 2.

On May 22, 2000 Okawa replaced Iramajiri as president of Sega. Okawa had long openly advocated that Sega abandon the console business. His sentiments were not unique; Sega co-founder David Rosen had "always felt it was a bit of a folly for them to be limiting their potential to Sega hardware", and Stolar had previously suggested that Sega should have sold their company to Microsoft.  In September 2000, in a meeting with Sega's Japanese executives and the heads of the company's major Japanese game development studios, Moore and Bellfield recommended that Sega abandon its console business and focus solely on software—prompting the studio heads to walk out. But on  June 23, 2001 the final nail in not only the Dreamcast's coffin but the Sonic franchise's and Sega's too, was released and to a critical pan. One critic said "The game seems like it's still in pre-alpha faze." Another said "Sonic Adventure 2 is the worst game ever made. It gives E.T. for the  Atari 2600 a run for it's money." "This is the most glichiest game ever made."

Etvideogamecover

The cover to E.T. for the Atari 2600. Once considered to be the worst video game ever.

The game caused many people to return their Dreamcasts to department store all over the world and demand refunds. Thus causing Sega too announce the discontinuation of the Dreamcast after March 31 and the restructuring of the company as a "platform-agnostic" third-party developer. But the damage was done, Sega was forced to layoff thousands of employees and close Sega of America headquarters, officially bankrupting Sega. And unintentionally on April 1st, 2001 Nintendo announced it bought out their long time rival. After the Nintendo buyout of Sega, Atari announced that they were back in the console market and were developing a brand new console, the Atari Phoenix.

Atari Phoenix

The Atari Phoenix

A new era for Nintendo

Launch of the Playstation 2

Nintendo announced announced the PlayStation 2 (PS2) on March 1, 1999. The video game console was positioned as a competitor to Sega's Dreamcast, the first sixth-generation console to be released, although the main rivals of the PS2 ended up being Atari's Phoenix and Microsoft's Xbox. Despite Sony's announcement, the Dreamcast went on to a very successful North American launch later that year selling over 500,000 units within two weeks.

Super Mario 128 Tech Demo -HD-06:07

Super Mario 128 Tech Demo -HD-

Super Mario 128 a tech demo of the PS2. It later was made into the sequel to Super Mario 64, Super Mario 64 2.

Soon after the Dreamcast's North American launch, Nintendo unveiled the PlayStation 2 at the Tokyo Game Show on September 20, 1999. Nintendo showed fully playable demos of upcoming PlayStation 2 games including Gran Turismo 2000 (later released as Gran Turismo 3: A-Spec), Tekken Tag Tournament, and Super Mario 128 – which showed the console's graphic abilities and power.

The PS2 was launched in March 2000 in Japan, October in North America and November in Europe. Sales of the console, games and accessories pulled in $250 million on the first day, beating the $97 million made on the first day of the Dreamcast. Directly after its release, it was difficult to find PS2 units on retailer shelves due to manufacturing delays. Another option was purchasing the console online through auction websites such as eBay, where people paid over a thousand dollars for the console.The PS2 initially sold well partly on the basis of the strength of the PlayStation brand and the console's backward compatibility, selling over 980,000 units in Japan by March 5, 2000, one day after launch. This allowed the PS2 to tap the large install base established by the Play Station – another major selling point over the competition. Later, Nintendo and Sony added new development kits for game developers and more PS2 units for consumers. The PS2's built-in functionality also expanded its audience beyond the gamer, as its debut pricing was the same or less than a standalone DVD player. This made the console a low cost entry into the home theater market.

The success of the PS2 at the end of 2000 caused Sega problems both financially and competitively, and Sega announced the discontinuation of the Dreamcast in March 2001, just 18 months after its successful launch, and was bought out by Nintendo on April 2001. The PS2 remained as the only active sixth generation console for over 6 months, before it would face competition from newer rivals; Atari's Phoenix and Microsoft's Xbox, which were then released. Many analysts predicted a close three-way matchup among the three consoles; the Xbox having the most powerful hardware, while the Phoenix was least expensive console, and while the PlayStation 2 theoretically had the weakest specs of the three, it had a head start due to its installed base plus strong developer commitment, as well as a built-in DVD player (the Xbox required an adapter, while the Phoenix lacked support entirely). The PlayStation 2's initial game lineup was considered impressive consisting of Super Mario 64 2, Luigi's Mansion, Madden NFL 2001, Street Fighter EX3, TimeSplitters, and much more. During the 2001 holiday season with the release of several blockbuster games that maintained the PS2's sales momentum and held off its newer rivals. Sony also countered the Xbox by temporarily securing PlayStation 2 exclusives for highly anticipated games such as the Grand Theft Auto series and Metal Gear Solid 2: Sons of Liberty.

MGS 2 cover

The cover to Metal Gear Solid 2: Sons of Liberty

Nintendo cut the price of the console in May 2002 from US$299 to $199 in North America, making it the same price as the GameCube and $100 less than the Xbox. It also planned to cut the price in Japan around that time. It cut the price twice in Japan in 2003. In 2006, Nintendo cut the cost of the console in anticipation of the release of the PlayStation 3.

Nintendo, unlike Sega with its Dreamcast, originally placed little emphasis on online gaming during its first few years, although that changed upon the launch of the online-capable Xbox. Coinciding with the release of Xbox Live, Nintendo  released the PlayStation Network Adapter in late 2002, with several online first–party titles released alongside it, such as SOCOM: U.S. Navy SEALs to demonstrate its active support for Internet play. Nintendo also advertised heavily, and its online model had the support of Electronic Arts (EA); EA did not offer online Xbox titles until 2004. Although Nintendo and Sony both started out late, and although both followed a decentralized model of online gaming where the responsibility is up to the developer to provide the servers, Nintendo's moves made online gaming a major selling point of the PS2.

In September 2004, in time for the launch of Grand Theft Auto: San Andreas, Nintendo revealed a newer, slimmer PS2. In preparation for the launch of the new models (SCPH-700xx-9000x), Sony stopped making the older models (SCPH-3000x-500xx) to let the distribution channel empty its stock of the units. After an apparent manufacturing issue – Nintendo and Sony reportedly underestimated demand – caused some initial slowdown in producing the new unit caused in part by shortages between the time the old units were cleared out and the new units were ready. The issue was compounded in Britain when a Russian oil tanker became stuck in the Suez Canal, blocking a ship from China carrying PS2s bound for the UK. During one week in November, British sales totalled 6,000 units – compared to 70,000 units a few weeks prior. There were shortages in more than 1,700 stores in North America on the day before Christmas.

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