Posted by: Kai_LeRai | May 2, 2008

Piracy killed the Dreamcast…or did it?

The game scene is pretty quick when it comes to blame the demise of a console or gaming company on piracy. This is especially true for the Dreamcast scene, or more specific – the homebrew part of the Dreamcast scene. Now, apart from the fact that most of these hypocrites use backups themselves, they also have their facts wrong. A good example of a badly researched article that puts the blame on piracy can be read here. Let’s explore why piracy wasn’t the true reason by taking a glance at the Dreamcast’s history.

The Dreamcast was released in Japan in November 1998 and a year later in the western world. In mid 2000 the Dreamcast scene experienced several heavy impacts that would change it forever and also marked a milestone that the once so well protected console had fallen:

- Several hobby programmers were able to run code on the Dreamcast

- The Gameshark CDX was announced to be shipped in June 2000, which would enable consoles to run import games without modchip.

The very first pirate release was the Gameshark CDX by Natural Born Chillers on 19th june 2000, but it was an uncracked CD-ROM copy, so no one really remembers it. Three days later though, the Dreamcast world was struck by a release that is still highly used today – the Boot Disc 1.1 by Utopia. I know that everyone of you has a copy, but most of you most likely have never read the nfo, so here it is:

_ ________
______\\\_ / _ ______ _ ______ _____ _ ______
/ / / /____\\\__ ¬\_\\\__ ¬\_ \\\__ ¬\_
/ / / _____/ / / _/ / / _/ /
/· / /· /____ · / /· \____/· /· \ /
// / // / // / // / // // / /
\________/\________/\________/____/ /____/____/____/cRu/1oo

P R E S E N T S

____ Dreamcast CD Loader V1.1
\ / (c) 2000 Wildlight / Utopia!
___\/_ _ _
\ /\/// Release Information ///_
.-\/—————————————————————– – - :
| |
| Supplier……: premier release Type……….: DC BootCD |
| Format……..: DiscJuggler Release Date..: 22.06.2k |
| Protection….: Filesystem :) Rating……..: You decide! ____ |
| Cracker…….: Wildlight Size……….: 01 X 1.44mb \ / |
| . . ___\/_ |
: – - ———————-) (ø) (ø) (————————–\ /\/–’
\__._/\_.__/ \/
_ _||..||_ _
____ _\\\\/¯||¯\////_
\ / )_||_(
___\/_ _ _
\ /\/// What´s this all about?! ///_
.-\/—————————————————————– – - :
| |
| Finally, |
| |
| though noone really expected it, we made your dreams come true: |
| Dreamcast BootCD V1.1 – boot copies and imports on a NON-chipped (!) |
| standard consumer model. |
| |
| Usage: |
| |
| – switch off, insert BootCD into Dreamcast and switch on again |
| – Wait until the Utopia introscreen comes up, then open door and insert |
| either Import-GD or copied CD. Close door again. |
| – Wait until spinning disc comes up; game will be loaded automatically |
| |
| Important: |
| |
| – do ONLY (!) use DiscJuggler to burn this image (standard blank) |
| – do ONLY (!) use DiscJuggler to copy this CD |
| |
| Sorry for any inconviniences, but standard CDRWIN is not really capable |
| neither creating nor imaging the CD. |
| |
| Don’t get on our nerves asking for copies, we will release a couple of |
| games during the next weeks, so just stay tuned for some more releases |
| from your favourite console group :) |
| |
| Copies so far available: |
| |
| – Dead or Alive II (about to be released within the next few hours) |
| – Soul Calibur |
| – F1 GP |
| – Resident Evil Code Veronica |
| . |
| . ____ |
| . \ / |
| . . ___\/_ |
: – - ———————-) (ø) (ø) (————————–\ /\/–’
\__._/\_.__/ \/
_ _||..||_ _
____ _\\\\/¯||¯\////_
\ / )_||_(
___\/_ _ _
\ /\/// Application ///_
.-\/—————————————————————– – - :
| |
| UTOPiA is looking for: |
| |
| – CRACKERS/KEYGEN MAKERS |
| – SUPPLIERS OF ANY UNRELEASED SOFTWARE ON ANY PLATFORM |
| – BOX OWNERS/SUPPLIERS |
| – EURO/US SITES (T3 minimum) |
| |
| If you like to apply please join #utp on EFNET and talk to an op! |
| ____ |
| Or simply send an e-mail to Lukullus@USA.NET \ / |
| . . ___\/_ |
: – - ———————-) (ø) (ø) (————————–\ /\/–’
\__._/\_.__/ \/
_ _||..||_ _
_\\\\/¯||¯\////_
)_||_(

This release marked the starting point for the active ripping community. By the end of the month the scene had already over 20 releases to choose from. The month after that the scene saw 80 releases, followed by 70 in August. That same month Kalisto released the first self-bootable rip (Dynamite Cop) and a month later Echelon released their first game. It seemed as if the scene was unstoppable… and it was.

By December 2000 the Dreamcast was practically dead. Not officially though, but behind the curtains the dice had been rolled and the Dreamcast was already on its demise. By the end of the year over 420 releases had hit the scene, but only 330 of them were unique game titles. This seems to be a lot, but was it enough to kill a whole gaming console?

Piracy and its impact on consoles

Sega’s Dreamcast was confronted with a unique scenario. It was the first console system based on optical discs that was released at a time when cheap CD burners hit the home market at a massive scale. In 1998, most burners were cheap enough so that the videogame target group – teenagers – could afford them, which posed a serious threat to the gaming industry, especially the console gaming industry….or did it?

A system that experienced extreme piracy was the Playstation. It had been around since 1994 when burners were still so unbelievable expensive that producing a coaster was enough to lose the advantage of copying a game and it was still cheaper to buy multi-disc games than to burn them. In 1998 the system was old enough to be left behind in favor of a new console like the Dreamcast, but what happened? Sony experienced record sales. By that time Sony had sold 10 million units in the United States and was still going strong. In 1998 it expected sales to drop, but with the massive spreading of CD burners the easy to mod Playstation became attractive to the ones that didn’t have one so far. So a year later Sony surprised the market with still strong going sales. The games were easy to copy and the console had a lot of them including some highly anticipated game series. This fact alone was reason enough to get a Playstation. The trend went on and despite the PS2 already being on the market, Sony introduced the new and last Playstation model, the PSOne in 2001.

If piracy had killed the Dreamcast, why didn’t it kill the Playstation? Three years after the big pirating craze started the console was still going strong, or else Sony wouldn’t have had invested money into releasing some piece of console in 2001 that was equipped with hardware from 1994 for a market, where only the newest and technically superior products survive.

Sega’s Battlefield

Sega’s Dreamcast had to take on a hard fight right from the beginning. That was clear to everyone who looked at the sales stats. Sega’s consoles were never really successful sales-wise. The Super Nintendo ruled over the Genesis, the GameBoy smashed the GameGear and the Playstation beat the Saturn into the ground. The console market is based on fanbases and fanboys… and Sega had far too few of those. In 2000 – before piracy hit the Dreamcast – the Playstation had been sold over 70 million times worldwide and could be found in one out of four american households. This was a fanbase Sony could count on and it worked. Who would want to invest into a Dreamcast at this point when the PS2 was lurking just around the corner?

Sega had a hard time selling their consoles in that year. They had a marketshare of only 15% in early 2000, followed by Nintendo with 30%. Over half of the market was dominated by Sony. When the first pirated Dreamcast games turned up….sales went up by 150%. But apparently they were still behind Sega’s expectations. Just before the PS2 was introduced to the market, Sega cut the price for the Dreamcast by 25%. If the console would have been so much seeked after then this wouldn’t have been necessary. As a matter of fact, Sega’s console had only two choices to survive when it was released: It had to convince old Sega users to trust in the company’s product one more time and it had to activate a totally new field of gamers, that hadn’t been biased by the Playstation. Sega was already limited right from the start and it limited itself even more by mainly targeting the dying breed of arcade gamers. While Sega’s approach was everything else but successful, Sony targeted the gaming masses and especially those that might turn to Dreamcast. Sony didn’t need to care that much for its PSX userbase. It had done that already: The PS2 was downward compatible, giving 70 million PSX owners a reason to get the console. While the DC experienced rising sales the PS2 was already sold out before even one unit had been shipped. In October 2000 when Sony’s console was released, its sales skyrocketed and even exceeded those of the Dreamcast. The Dreamcast profited from the resulting PS2 shortage, but not enough to actually gain more market share. Sega’s only hope to get some much needed profit was linked to the upcoming christmas, but instead of buying Sega’s console as a replacement for the almost impossible to get PS2, people just resorted to buying the PSOne, which was also US$50 cheaper by only costing US$ 99. By the end of the Year and after a span of being over two years into the market, Sega had only sold 2 Million units worldwide. In November and December 2000 the PSOne alone sold 3 Million units. Eleven Months after its release the PS2 had already sold 12 Million consoles. In February 2001 Sega finally announced what had been rumored behind the curtains already: the production stop of the Dreamcast.

So the PS2 is to be blamed, right?

It’s not that easy. The Year 2000 was the fourth year in a row, where Sega was in the red, despite the fact that the Dreamcast was free from piracy for almost two years. In that very year Sega missed its own sales expectations by almost 2 million units. As a result Kmart – one of the USA’s biggest retailers – took the Dreamcast off its shelves in August 2000. It takes no genius to see why the Dreamcast sales suffered. The small rise of 150% during the summer can most likely be blamed on piracy, because this event was hyped up all over the internet like never before – and never again. Days before the first rip was released rumors of it popped up all over the web. Every rip was frantically named and counted. Sega struck back by closing iso sites and having Utopia arrested. Journalists claimed to have made interviews with the ripping groups, who later denied it in their nfos. Kalisto was offered stock by Sega to stop releasing rips. May be it was the wide media coverage that helped establish the urban myth that piracy was responsible for killing the Dreamcast. At one point one ripping group even directly responded to an article to defend themselves against these claims:

| All you leeches that just suck from sega/associated developers and the|
| groups who are trying to make a positive impact on this ‘scene’ can go right |
| to hell, espically ones that call yourself legitimate writers and bash on |
| piracy in a poorly written article, but then turn around and ask for/leech |
| ‘iSOz’. You people are worse then the average EFNet leech, you are the CANCER|
| of our scene. Instead of playing a ‘bootleg’ Dead or Alive 2, maybe you ought|
| to take a class on journalism or re-think your career. (ahem-CNET-cough) |

From the Natural Born Chillers nfo for Advanced Daisenryaku regarding this CNET article.

Everybody in the gaming world knew about it and now that the console was able to play backups, it’s highly likely that a good portion of that summer sales are thanks to these events. Still, those didn’t create such a boom like the Playstation had experienced. The reasons as to why Sega had to give up in the end were many-fold and they started way back in the early 90s.

Sega’s crumbling foundation

Sega’s battle tactics to establish themselves in the market always started out simple and they never changed. For them the better hardware was bound to win the battle:

- The GameBoy with its slowly reacting monochrome display couldn’t hold a candle to Sega’s GameGear, which boasted a 256 color display and a TV/Radio extension.

- Sega’s Genesis was downwards compatible to the Master System thanks to an adaptor.

- It also saw a CD-ROM extension, contrary to the SNES thanks to Nintendo’s quarrels with Sony.

- The Sega Saturn featured multiple processors making it the strongest console at that time

This tactic didn’t work out and yet Sega never learned. It was lacking the most essential things: good games. Sure it had some good franchises, but this was nothing compared to what Nintendo and Sony had to offer. They raked in huge profits enabling them to hold out bad times much longer than Sega ever could. Additionally to that, Sega was in the bad position to create its own franchises. Nintendo did so too, but it limited itself to only a few, but very successful ones. Sony was in an even luckier position. Most of its top titles came from independent software houses, so Sony hardly had to spend as much money as Nintendo and Sega had to.

Sega’s history is marked by constant mismanagement. The Genesis’ hardware extensions cost the company money, but didn’t make any, thanks to them being released far too late into the consoles life cycle. Also gamers could only choose between a few bad games for them. Sega of America announced a new console in 1993, which would have been nothing more than a standalone 32X – a hardware extension for the Genesis that had already miserably failed. Before they finally got it out, they received word that their mothercompany in Japan was already working on the Saturn, so they shelved it immediately.

The Saturn wasn’t much better off than the Genesis though. Thanks to its architecture of 8 processors it was not just powerful, but also hard to program for. As a result, many developers turned away from the console. Those who did develop for the Saturn sometimes only used half its processing power, because they weren’t able to master the full potential, which resulted in sub-standard games in terms of graphical quality.

As for the Dreamcast there were also plenty of management mistakes. The first was to target a small group of gamers by concentrating mostly on arcade games. This eliminated one of the biggest expanding markets of that time: the roleplaying games market. Even worse: the back then president of Sega of America, Bernie Stolar, actively refused to offer RPGs for the american market, because he thought the american gamers weren’t ready for them. This came at a time when Sony’s Playstation was doing excellent with the millions-producing Final Fantasy franchise. Seeing that Sega of Japan had invested between US$ 20 and 70 Million into the upcoming Shenmue, this decision was just short-sighted. This is also a perfect example for how Sega just dictated its own ideas to the gaming masses without taking note of any feedback from its target audience. Stolar was terminated on Dreamcast’s launch day in the USA. This decision was badly timed, since his successor had to start at the most critical time for the console’s establishment into the market.

Speaking of Shenmue. Pumping a never seen amount of money into the development of a single video game was more than just a high stakes poker game, especially since Sega had lost hundreds of Millions in the past years. What Sega would have needed instead would have been highly addicting, but cheaply to produce games. The console saw some of them thanks to the many arcade ports that filled the Dreamcast library. Too bad that they didn’t appeal to the masses as Tetris or Guitar Hero.

When the Dreamcast sales plummeted in 2000, Sega announced such a massive rebate that they virtually gave the console away for free. All interested users had to join SegaNet though, which set the customers back by $US22 per month. Unimpressed by that announcement the Dreamcast sales went down even more.

Thanks to its unique design the Dreamcast was free of piracy for an amazing amount of time. Yet, this was not enough for it to be successful. Sega had missed its chance in 1993 with the Saturn. Nintendo’s 64 marked a change in the company’s success and rang in its weak era. The Playstation was a newcomer that no one knew. Seven years later the newcomer had risen up to the rank of market leader. Sony just understood how to build up anticipation for its console and its games and didn’t disappoint the gaming community by delivering both in never before seen quality. This directly affected the PS2 sales. After only 11 months the PS2 had sold 40 million units worldwide. Sega’s sales of only 1.5 million units in the first 14 months were nothing short but laughable compared to Sony’s success. Goliath had defeated David.

I hope all this background information proves once and for all to the few who still believe in that urban myth that piracy actually killed Sega’s console. Piracy is a side effect every game and console developer has to reckon with and they all do, even if they show full confidence in their product and claim that it can’t be compromised. Piracy in the Dreamcast scene had a bigger time out than in any other scene of optical media based consoles. If piracy had an impact on the Dreamcast, then a rather positive one, by pumping up the sales in the month, where the console’s security features had been breached.

A good documentary about the Dreamcast’s rise and demise is available on Youtube:

Funny fact: While researching information for this article I found an article, where someone actually believed that the XBOX was the Dreamcast’s true gravedigger. The explanation of this theory borders on conspiracy theories. Since you know better now, you’re invited to read it.

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Responses

  1. Happy to share.
    Didn’t read your entire article, but one hole in your thesis is that piracy was as easy (or easier) on the original Xbox by the end of its life too… and that console did just fine.
    I suspect, however, that the actual reason the DC died was a combination of the majory theories out there, and no one factor alone caused Sega to fold its hardware division.

    Glad you enjoyed my conspiracy theory, tho ;-)

  2. thanks for commenting :) i can’t see the hole that you mentioned though, as i never compared xbox piracy with dreamcast piracy in terms of easiness.

    also i don’t think that my article is just another theory, as i use proven facts to tell sega’s story, which is quite understandable that their mismanagement cost them their hardware section thanks to the hundreds of millions of debt sega had built up with its latest hardware misses. of course the fact that sega had only a small segment to market the console in did the rest to ensure that the money they made was nowhere nearly enough to make ends meet.

    what makes you think that the xbox did well? the fact that it sold 24 million units, of which each cost microsoft over 100 dollars than it earned? microsoft lost about 400 million each year the console was sold. sure you get the profits from software titles, but that didn’t work out too well for the xbox. even the 360 has such tremendous losses that it was estimated back in 2005 that it would take at least 2 years of constant sales to even break even ….solely through the help of software sales, because the hardware is still a huge minus and can be seen as a gift to gamers price-wise. same goes for ps3. nintendo is the only company right now that sells hardware with a profit.

    so from an economical point of view the xbox was a disaster, which didn’t really show as one thanks to the endless funds of microsoft. the company did profit from the console in the long run though by creating a new rival in the market and gaining a fanbase to market the successor to. that works out well so far, but is a concept which require a lot of time and insane funds, or in other words: if you’re persistent enough you can make it work, given of course that your console concept is accepted by gamers. in the end the xbox is not much different than the dreamcast. if sega have had billions back then, then it surely would still be in the hardware business… theory? of course not, because this actually happened: with the saturn. sega had huge funds thanks to the profits it made from its successful coin-op and master system/genesis sales, but it blew it all to market still births as the nomad, the saturn, the 32x, the cd-rom extension for the genesis, the game gear and shenmue.

  3. Good Read:

    I have a question:

    Where’s the source for that “Sega sold 1.5 million worldwide in 2 years.” comment.

  4. Also sorry for the doublepost but do you have information that sums up the dreamcast first two years?

    I have heard arguments that it did well, but I think that’s not the case.

  5. Where’s the source for that “Sega sold 1.5 million worldwide in 2 years.” comment.

    kinda got me here :D i totally forgot to back this up. of course the number is wrong, as you can see from the included graphics that the console had already hit that number in january 2000. so i checked again to find some sources, but wasn’t really lucky. the only source i could use was vgchartz.com and cumulative sales settle at 2 million at that point. this seems to be a reasonable number considering that sega had only sold 1.5 million just 12 earlier and after being 14-15 months into the market. other sources i found state that the dc had been sold 6 million units at that time, but that doesn’t really make sense, since it would have meant that the dc would have sold almost 3 times as much in 2000 than in the year before. at those kinda rates, sega wouldn’t have pulled the plug on it.

    thanks for pointing out this flaw :)

    Also sorry for the doublepost but do you have information that sums up the dreamcast first two years?

    I have heard arguments that it did well, but I think that’s not the case.

    how about my article??? it’s whole purpose is to show that the dreamcast didn’t do well and also its reasons…but i shouldn’t need to tell you that if you actually read and understood it…guess why i constantly used comparisons between sega and sony based on sales numbers. guess why i analyzed it this way…because there is no article that actually does that, at least i didn’t find any

  6. Thank you for your response.

    I guess didn’t make myself clear on my last point. I read your article: I did say it was good read.

    I really love a lot of your points and thanks for clarifying that a good portion of them are analysis. The thing is imo they would be even more persuasive if you had more sources. Don’t get me wrong- A lot your points were backed up well. I just felt that at some points in your article, if you had backed up it up, it would have been reallyhard to dispute your overall arguement.

    Lastly, what I was trying to say was if you had information between the japanese launch and the us launch (hence my two year comment)? I know it did bad but I can’t find proof.

  7. well, name the points that you think weren’t backed up well and i’ll try to remedy that.

    as for the dreamcast launch, the proof as to why it did bad are the sales numbers. no one can argue those. selling a few hundred thousand consoles in the first few days doesn’t mean anything if the sales tend to go near a few thousand afterwards. the dc had 300,000 preorders and 200,000 in sales on day 1 in the states, the PS2 had twice as many sales after 1 day in japan. after 1 year, playstation 2 had been sold 6 times more than the dreamcast. as i wrote, even sega admitted that it missed its own projection on unit sales by 2 million which is immense considering that by that time they hadn’t even sold 2 million meaning that they had sold less than even half of what they had expected. so, it’s kind of an official statement by sega telling the public: “we expected more…at least twice as many sales”. and this fact is even more revealing: sega expected to sell 4mio consoles in 1 year, sony sold 3 times as many as sega even had wished for. sega had already settled with a smaller marketshare right from the beginning, because they didn’t even see the market’s full potential.

    i don’t know what more you wanna hear to finally feel that it has been proven that the dreamcast did bad throughout its history. imo the proof is in my article already

    but lemme take an additional approach to prove it once more with the same numbers you can read in the article. you said that you heard arguments that it did well and you can hear that too in the documentary that i linked to, so lets take these statements and prove them wrong:

    in the documentary they say that the dreamcast had a tremendous success because it had 300,000 preorders while the psx had only 100,000 and sales on launch day were also higher. too bad that this comparison fails to take one important aspect into account: they compared the success of a back then current console with launches from 3-5 year old consoles. the market those older consoles had to deal with was very different. it was much smaller. it was really only blown open by the psx, but not on launch day, but in the long run. the dc profited from that on its launch day, but not as much as it could have. it just underperformed compared to the market’s potential and that’s what those people who usually say that it did well don’t take into account. today, 10 years later, a launch day like the dreamcast’s wouldn’t be called a tremendous success but a failure. each new console’s launch day had been more successful than the one of earlier released rivals/predecessors. the game cube sold 700,000 units in the first 3 days ( http://www.dfcint.com/game_article/nov01gmsysreview.html ), the xbox sold 600,000 in the first week, while the dc needed 2 weeks to even reach 500,000… a number that the ps2 cracked on its very first day. so comparing the dc sales numbers to its actual technological rivals reveal that it sold worst than all the other consoles. i hope this is proof enough for you to shut the doubters up :D

    if you still feel that this is not enough then please feel free to elaborate on that :)


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