The Sega Genesis, known as the Mega Drive (Japanese: メガドライブ Hepburn: Mega Doraibu?) in most regions outside North America, is a 16-bit home video game console which was developed and sold by Sega Enterprises, Ltd. The Genesis was Sega’s third console and the successor to the Master System. Sega first released the console as the Mega Drive in Japan in 1988, followed by a North American debut under the Genesis moniker in 1989. In 1990, the console was distributed as the Mega Drive by Virgin Mastertronic in Europe, by Ozisoft in Australasia, and by Tec Toy in Brazil. In South Korea, the systems were distributed by Samsung and were known as the Super Gam*Boy, and later the Super Aladdin Boy.[b]
Designed by an R&D team supervised by Hideki Sato and Masami Ishikawa, the hardware was adapted from Sega’s System 16 arcade board, centered on a Motorola 68000 processor as a primary CPU and a Zilog Z80 as a secondary processor. The system supports a library of more than 900 games created both by Sega and a wide array of third-party publishers and delivered on ROM-based cartridges. It can play Master System games when the separately sold Power Base Converter is inserted. The Genesis has benefited from several peripherals and network services, as well as multiple first-party and third-party variations of the console that focus on extending its functionality.
In Japan, the Mega Drive did not fare well against its two main competitors, Nintendo’s Super Famicom and NEC’s PC Engine, although it achieved considerable success in North America, Brazil, and Europe. Contributing to its success were its library of arcade game ports, the popularity of the Genesis-exclusive Sonic the Hedgehog series, several popular sports game franchises, and aggressive youth marketing that positioned the system as the cool console for adolescents. The release of the Super Nintendo Entertainment System two years after the Genesis resulted in a fierce battle for market share in the United States and Europe that has often been termed as a “console war” by journalists and historians. As this contest drew increasing attention to the video game industry among the general public, the Genesis and several of its highest-profile games attracted significant legal scrutiny on matters involving reverse engineering and video game violence. Controversy surrounding violent titles such as Night Trap and Mortal Kombat led Sega to create the Videogame Rating Council, a predecessor to the Entertainment Software Rating Board.
Sega sold 30.75 million units worldwide. In addition, Tec Toy sold an estimated 3 million licensed variants in Brazil, Majesco projected it would sell 1.5 million licensed variants of the system in the United States, and much smaller numbers were sold by Samsung in South Korea. The console and its games continue to be popular among game fans, game music fans, collectors, and emulation enthusiasts. As of 2015, licensed third party re-releases of the console are being sold by AtGames in North America and Europe. Many games have been re-released in compilations for newer consoles and offered for download on various online services, such as Virtual Console, Xbox Live Arcade, PlayStation Network, and Steam. The Genesis was succeeded by the Sega Saturn.
In the early 1980s, Sega Enterprises, Inc., then a subsidiary of Gulf & Western, was one of the top five arcade game manufacturers active in the United States, as company revenues rose to $214 million. A downturn in the arcade business starting in 1982 seriously hurt the company, leading Gulf & Western to sell its North American arcade manufacturing organization and the licensing rights for its arcade games to Bally Manufacturing. The company retained Sega’s North American R&D operation, as well as its Japanese subsidiary, Sega Enterprises, Ltd. With its arcade business in decline, Gulf & Western executives turned to Sega Enterprises, Ltd.’s president, Hayao Nakayama, for advice on how to proceed. Nakayama advocated that the company leverage its hardware expertise gained through years working in the arcade industry to move into the home console market in Japan, which was in its infancy at the time.
Nakayama received permission to proceed with this project, leading to the release of Sega’s first home video game system, the SG-1000, in July 1983. The SG-1000 was not successful, and was replaced by the Sega Mark III within two years. In the meantime, Gulf & Western began to divest itself of its non-core businesses after the death of company founder Charles Bluhdorn, so Nakayama and former Sega CEO David Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation, a prominent Japanese software company. Nakayama was then installed as CEO of the new Sega Enterprises, Ltd.
In 1986, Sega redesigned the Mark III for release in North America as the Sega Master System. This was followed by a European release the next year. Although the Master System was a success in Europe, and later also Brazil, it failed to ignite significant interest in the Japanese or North American markets, which, by the mid-to-late 1980s, were both dominated by Nintendo. With Sega continuing to have difficulty penetrating the home market, Sega’s console R&D team, led by Masami Ishikawa and supervised by Hideki Sato, began work on a successor to the Master System almost immediately after that console launched.
In 1987, Sega faced another threat to its console business when Japanese computer giant NEC released the PC Engine amid great publicity. To remain competitive against the two more established consumer electronics companies, Ishikawa and his team decided they needed to incorporate a 16-bit microprocessor into their new system to make an impact in the marketplace and once again turned to Sega’s strengths in the arcade industry to adapt the successful Sega System 16 arcade board into a home console architecture. The decision to use a Motorola 68000 as the system’s main CPU was made late in development, while a Zilog Z80 was used as a secondary CPU to handle the sound due to fears that the load to the main CPU would be too great if it handled both the visuals and the audio.
First announced in June 1988 in Beep!, a Japanese gaming magazine, the developing console was referred to as the “Mark V,” but Sega management felt the need for a stronger name. After reviewing more than 300 proposals, the company settled on “Mega Drive.” In North America, the name of the console was changed to “Genesis.” The reason for this change is not known, but it may have been due to a trademark dispute.
Sega released the Mega Drive in Japan on October 29, 1988, though the launch was overshadowed by Nintendo’s release of Super Mario Bros. 3 a week earlier. Positive coverage from magazines Famitsu and Beep! helped to establish a following, but Sega only managed to ship 400,000 units in the first year. In order to increase sales, Sega released various peripherals and games, including an online banking system and answering machine called the Sega Mega Anser. Nevertheless, the Mega Drive was unable to overtake the venerable Famicom and remained a distant third in Japan behind Nintendo’s Super Famicom and NEC’s PC Engine throughout the 16-bit era.
Sega announced a North American release date for the system on January 9, 1989. At the time, Sega did not possess a North American sales and marketing organization and was distributing its Master System through Tonka. Dissatisfied with Tonka’s performance, Sega looked for a new partner to market the Genesis in North America and offered the rights to Atari Corporation, which did not yet have a 16-bit system. David Rosen made the proposal to Atari CEO Jack Tramiel and the president of Atari’s Entertainment Electronics Division, Michael Katz. Tramiel declined to acquire the new console, deeming it too expensive, and instead opted to focus on the Atari ST. Sega decided to launch the console through its own Sega of America subsidiary, which executed a limited launch on August 14, 1989, in New York City and Los Angeles. The Sega Genesis was released in the rest of North America later that year.
The European version was released on November 30, 1990. Building on the success of the Master System, the Mega Drive became the most popular console in Europe. Since the Mega Drive was two years old at the time of its release in the region, more games were available at launch compared to the launches in other regions. The ports of arcade titles like Altered Beast, Golden Axe and Ghouls ‘n Ghosts, available in stores at launch, provided a strong image of the console’s power to deliver an arcade-like experience. The release of the Mega Drive in Europe was handled by Virgin Mastertronic, which was later purchased by Sega in 1991 and became Sega of Europe.
Other companies assisted in distributing the console to various countries worldwide. Ozisoft handled the Mega Drive’s launch and marketing in Australia, as it had done before with the Master System. In Brazil, the Mega Drive was released by Tec Toy in 1990, only a year after the Brazilian release of the Master System. Tec Toy produced games exclusively for the Brazilian market and began a network service for the system called Sega Meganet in 1995. In India, Sega entered a distribution deal with Shaw Wallace in Spring 1995 in order to circumvent an 80% import tariff, with each unit selling for INR₹18,000. Samsung handled sales and distribution in Korea, where it was renamed the “Super Gam*Boy” and retained the Mega Drive logo alongside the Samsung name. It was later renamed “Super Aladdin Boy.”
North American sales and marketing
For the North American market, former Atari Corporation Entertainment Electronics Division president and new Sega of America CEO Michael Katz instituted a two-part approach to build sales in the region. The first part involved a marketing campaign to challenge Nintendo head-on and emphasize the more arcade-like experience available on the Genesis, summarized by slogans including “Genesis does what Nintendon’t”. Since Nintendo owned the console rights to most arcade games of the time, the second part involved creating a library of instantly-recognizable titles which used the names and likenesses of celebrities and athletes such as Pat Riley Basketball, Arnold Palmer Tournament Golf, James ‘Buster’ Douglas Knockout Boxing, Joe Montana Football, Tommy Lasorda Baseball, Mario Lemieux Hockey, and Michael Jackson’s Moonwalker. Nonetheless, it had a hard time overcoming Nintendo’s ubiquitous presence in consumers’ homes. Tasked by Nakayama to sell one million units within the first year, Katz and Sega of America managed to sell only 500,000 units.
In mid-1990, Nakayama hired Tom Kalinske to replace Katz as CEO of Sega of America. Although Kalinske initially knew little about the video game market, he surrounded himself with industry-savvy advisors. A believer in the razor and blades business model, he developed a four-point plan: cut the price of the console, create a U.S.-based team to develop games targeted at the American market, continue and expand the aggressive advertising campaigns, and replace the bundled game Altered Beast with a new title, Sonic the Hedgehog. The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, “I hired you to make the decisions for Europe and the Americas, so go ahead and do it.” Magazines praised Sonic as one of the greatest games yet made, and Sega’s console finally took off as customers who had been waiting for the release of the international version of Nintendo’s Super Famicom—dubbed the Super Nintendo Entertainment System or SNES—decided to purchase a Genesis instead. Nintendo’s console debuted against an established competitor, while NEC’s TurboGrafx-16 failed to gain traction, and NEC soon pulled out of the market. In large part due to the popularity of this game, the Sega Genesis outsold the SNES in the United States nearly two to one during the 1991 holiday season. This success led to Sega having control of 65% of the 16-bit console market in January 1992, making it the first time Nintendo was not the console leader since December 1985.
To compete with Nintendo, Sega was more open to new types of games than its rival, but still tightly controlled the approval process for third-party games and charged high prices for cartridge manufacturing. Technicians from American third-party video game publisher Electronic Arts (EA) reverse engineered the Genesis in 1989, following nearly one year of negotiations with Sega in which EA requested a more liberal licensing agreement than was standard in the industry before releasing its games for the system. The clean room reverse engineering was led by Steve Hayes and Jim Nitchals, lasting several months before EA secretly began game development. EA founder Trip Hawkins confronted Nakayama with this information one day prior to the 1990 Consumer Electronics Show (CES), noting that EA had the ability to run its own licensing program if Sega refused to meet its demands. Sega relented, and the next day EA’s upcoming Genesis games were showcased at CES. EA signed what Hawkins described as “a very unusual and much more enlightened license agreement” with Sega in June 1990: “Among other things, we had the right to make as many titles as we wanted. We could approve our own titles … the royalty rates were a lot more reasonable. We also had more direct control over manufacturing.” After the deal was in place, EA chief creative officer Bing Gordon learned that “we hadn’t figured out all the workarounds” and “Sega still had the ability to lock us out,” noting “It just would have been a public relations fiasco.” EA released its first two Genesis games, Populous and Budokan: The Martial Spirit, within the month. The first Genesis version of EA’s John Madden Football arrived before the end of 1990, and became what Gordon called a “killer app” for the system. Taking advantage of the licensing agreement, Gordon and EA’s vice president of marketing services Nancy Fong created a visual identifier for EA’s Genesis cartridges: A yellow stripe on their left side added during manufacturing.
Sega was able to outsell Nintendo four Christmas seasons in a row due to the Genesis’ head start, a lower price point, and a larger library of games when compared to the Super Nintendo Entertainment System (SNES) at its release. Sega had ten games for every game on SNES, and while the SNES had an exclusive version of Final Fight, one of Sega’s internal development teams created Streets of Rage, which had bigger levels, tougher enemies, and a well-regarded soundtrack. ASCII Entertainment reported in spring 1993 that Genesis had 250 titles versus 75 for Super Nintendo, but limited shelf space meant that stores typically offered 100 Genesis and 50 Super Nintendo titles. The NES was still the leader, with 300 titles and 100 on shelves.
Sega’s advertising positioned the Genesis as the cooler console, and as its advertising evolved, the company coined the term “blast processing” (the origin of which is an obscure programming trick on the graphics hardware) to suggest that its processing capabilities were far greater than those of the SNES. A Sony focus group found that teenage boys would not admit to owning a SNES rather than a Genesis. With the Genesis often outselling the SNES at a ratio of 2:1, Nintendo and Sega both focused heavily on impression management of the market, even going to the point of deception, with Nintendo claiming they had sold more consoles in 1991 than they actually had, and forecasting they would sell 6 million consoles by the end of 1992, while their actual U.S. install base at the end of 1992 was only just more than 4 million units. Due to these tactics, it was difficult to ascertain a clear leader in market share for several years at a time, with Nintendo’s dollar share of the U.S. 16-bit market dipping down from 60% at the end of 1992 to 37% at the end of 1993, Sega claiming 55% of all 16-bit hardware sales during 1994, and Donkey Kong Country helping the SNES to outsell the Genesis from 1995 through 1997. According to a 2004 study of NPD sales data that presents year by year charts through 2001, the Sega Genesis was able to maintain its lead over the Super NES in the American 16-bit console market. According to a 2014 Wedbush Securities report based on revised NPD sales data, the SNES outsold the Genesis in the U.S. market.