So, your challenge here is to have Nintendo and Sega swap successes. Ideally, Nintendo would leave the console market in the sixth generation and become a third-party developer, with the Mario franchise going downhill, leading to game journalists like IGN viewing Mario in a overly negative light and saying infamous quotes like "Mario was never good". And ideally, Sega would still make consoles to this day and stay as a first-party developer, with the Sonic franchise being viewed in a more positive light than the Mario franchise.
 
So, your challenge here is to have Nintendo and Sega swap successes. Ideally, Nintendo would leave the console market in the sixth generation and become a third-party developer, with the Mario franchise going downhill, leading to game journalists like IGN viewing Mario in a overly negative light and saying infamous quotes like "Mario was never good". And ideally, Sega would still make consoles to this day and stay as a first-party developer, with the Sonic franchise being viewed in a more positive light than the Mario franchise.
Sega introduce the Dreamcast, partnered with Microsoft, built with technology better than both the PS1 & upcoming PS2, and with a whole selection of third & first party titles. Critics call it outstanding, with Sega immediately raking in the profits. Nintendo, left behind as the straggler of the newly created Console Wars between Sega & Sony, stops production of all home & handheld consoles and starts putting new & previously created N64 & handheld games on the Dreamcast & PS1/PS2. Sega thrives, winning awards every year, while Nintendo creates great, good & mediocre games for other consoles.
 
Sega focuses on software and pushes the existing hardware on the Genesis to its potential and crafts a better launch for the Saturn, instead of launching the Sega CD and 32X, while Nintendo follows through with its disc drive partnership with Sony and it flops. Sega, iirc, was leading in the Console war from around 91 until about 94.
 
Sega doesn’t release the Sega CD and 32X, putting all resources into the Saturn. Sega gets on more third party developers for the Saturn, making it a success. Nintendo would struggle getting developers even more than it did IRL and would be out of the console market by 2003.
 
To answer your question as Emperor Max said, SEGA wouldn't release SEGA CD AND SEGA 32X, thus putting all resource and some effort into SEGA Saturn then SEGA Gets more third party Developers for Saturn than Nintendo. meanwhile, Nintendo of America and Nintendo of Japan Argued to make a Nintendo 64 and Nintendo 64 loses third party developer's trust and the final nail in the coffin would be Nintendo's Gamecube; thus putting the end to Nintendo's Exclusives on their own consoles and thus putting their former exclusives into PlayStation and XBOX and SEGA Consoles. meanwhile for SEGA side. SEGA Refuses to put their exclusives on PlayStation and Xbox and PC while believing that their consoles are successful so they shouldn't have put their games on other consoles other than their own Consoles.
 
Ok......

Well, how about Sega get their management straightened out..

That's the first thing.

After that, I admittingly got nothing..
 
Ok......

Well, how about Sega get their management straightened out..

That's the first thing.

After that, I admittingly got nothing..
That was a pretty tall order for the late-80s/early-90s Japanese corporate culture. It would require granting considerable autonomy to their other branches (something they initially did, but then went back on), and creating individual strategies for each regional market. Not least of which trying to avoid Nipponocentric parochialism.

Funny anecdote: when trying to sell the Master System in Europe, they completely messed up their shipping and launch dates, and ended up launching on 26th December. Now, this isn't a problem in Japan, since the main gift holiday is the traditional festival on New Year's Eve. In Japan, Christmas lasts for about a day, and it's mostly about young couples going out on a date, rather than a family gathering with gifts.
However, they completely failed to take into account that, in Europe, nobody buys any sort of large gift after the 24th (kids only get small gifts like candies for Theophania). So the launch was a complete bomb. So much so that some local subsidiaries went bankrupt.
 
That was a pretty tall order for the late-80s/early-90s Japanese corporate culture. It would require granting considerable autonomy to their other branches (something they initially did, but then went back on), and creating individual strategies for each regional market. Not least of which trying to avoid Nipponocentric parochialism.
You mean give their American branch more creative control?
 
You mean give their American branch more creative control?
Not just that. Avoid using US metrics as yardstick for performance in other regions. Famously, SoJ employees became enemies of their US counterparts after getting repeatedly berated by Nakayama, for not managing to reach the performance of their overseas colleagues. There was no understanding in SoJ's headquarters that the conditions for that success (NEC faceplanting while trying to market the TurboGrafx, a desire from the target public for a device that would be seen more "mature" than Nintendo's offerings, several 3rd party developers getting tired of Nintendo's bullshit etc.) couldn't be directly replicated elsewhere.
 
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To do this requires two things: Sega needs to do better, while Nintendo has to do (significantly) worse.

The first shouldn’t be too hard; let Sega keep its focus on the Genesis instead of releasing the Sega CD and 32X, and then release a Saturn that’s less complex and easier to develop for. Also, release a proper 3d Sonic game for the Saturn, to maintain the franchise’s momentum into the 3d era.

But how to screw Nintendo? We need to keep in mind, Nintendo also had a successful handheld business which served as an additional revenue stream. To screw Nintendo enough to leave the hardware market entirely, we’d need to screw both their consoles (especially the N64) and handhelds. Let’s start with the N64. One interesting way to make it less successful is something I’ve mentioned in another thread earlier this year:

Instead of reneging on their deal with Sony and going to Phillips, Nintendo decides to renegotiate the whole thing, so Sony’s work on the SNES CD continues for a while longer. However, just like IOTL, Nintendo eventually scraps the idea of a CD add-on for the SNES. IOTL, as part of dissolving their agreement with Philips, Nintendo gave them the license to use several of their characters, including Link, Zelda, Mario etc. in games for the CDi. In this case however, since they kept working with Sony, it’s Sony who gets the rights instead.

If you think about it, it was quite risky of Nintendo to not only allow another company to make Mario or Zelda games, but also to release them on a non-Nintendo console. IOTL, Phillips’ CDi games (most famously Zelda) were total garbage of course, but Nintendo couldn’t have known that beforehand. So what if a more competent company had gotten their hands on the rights for Nintendo characters? I think we can all agree that Sony was infinitely more competent than Phillips when it came to gaming, even though they were a newcomer in the market too.

So what if Sony, after getting the rights for Nintendo characters (and having decided to make their own console after the agreement with Nintendo is dissolved), had given the task of making Zelda or Mario games to developers that were actually competent? Imagine if instead of Crash Bandicoot, Naughty Dog was contracted to make a 3d Mario game for the PS1. Or Insomniac doing a Zelda game. Or Sony gave the job to their own internal teams, many of which IOTL made lots of original high-quality PS1 games. Not only would the PS1 have gotten its own ‘Nintendo games’ (which would’ve been crazy enough on its own), but it’s even possible that those games would’ve been released before Nintendo released their own Mario and Zelda games for the N64! In other words, Zelda and Mario could’ve made the jump to 3d on a non-Nintendo system first! By the time the N64 would’ve come out, the PS1 would’ve probably had an even greater head start in terms of sales, while the N64 would’ve seen quite a bit less hype since Nintendo’s biggest IPs would also have entries on the Playstation.

So, the PS1 comes out like OTL, except this time Sony has the rights to Nintendo’s biggest franchises, and releases 3d Zelda and Mario games on their system before Nintendo can do so for the N64. With their biggest IPs already having made their 3d debut on a different console, the launch of the N64 generates much less enthusiasm. Considering that IOTL Nintendo’s IPs are the main reason why most people bought the N64 in the first place, and in this ATL people can now get good Zelda and Mario games on the PS1, I could see the N64 being a flop similar to the OTL Saturn. Sega’s ATL Saturn meanwhile takes the place of OTL’s N64, being a system that, while not being as successful as the PS1, still sells a decent amount and has a great library of games (and, more importantly, is profitable).

So that takes care of the N64, but what about the Gameboy? The thing about the Gameboy is that it was actually in decline in the mid 90s, which isn’t surprising considering the system was more than 6 years old at that time. Nintendo was already working on a successor system, but then Pokémon came out and breathed new life into the Gameboy (almost half the Gameboy’s lifetime sales occurred after the release of Pokémon). So what if Sega decides to release a new handheld system of their own in the mid 90s (a proper handheld system, not the Nomad which was just a portable Genesis with terrible battery life)? And let’s also say that Sega makes a deal with Gamefreak, and Pokémon is one of the early titles released for this new Sega handheld. This means the Gameboy doesn’t get a second life, and keeps declining until Nintendo releases a successor.

This double blow of Mario and Zelda releasing on the PS1, and Pokémon being exclusive to Sega’s handheld, might be enough force Nintendo out of the hardware market by the 6th gen (maybe Sony even buys them to keep the rights to Nintendo IPs permanently). Sony is still the market leader, but Sega is doing well too, even though they’re second place.
 
Not just that. Avoid using US metrics as yardstick for performance in other regions. Famously, SoJ employees became enemies of their US counterparts after getting repeatedly berated by Nakayama, for not managing to reach the performance of their overseas colleagues. There was no understanding in SoJ's headquarters that the conditions for that success (NEC faceplanting while trying to market the TurboGrafx, a desire from the target public for a device that would be seen more "mature" than Nintendo's offerings, several 3rd party developers getting tired of Nintendo's bullshit etc.) couldn't be directly replicated elsewhere.
Is a 1991 PoD good enough for SoJ to have a better relationship with SoA?
 
Well maybe we could have Sega, Nintendo/PlayStation and Xbox together...

But I fear Sony would drain out the creative innovation that Nintendo is famous for.
 
You could just take inspiration from EternalMadness1997's timeline, SEGA Generation.
Sega clears up its leadership issues, scraps the SegaCD & 32x, and partners with Sony for a Sega-Sony PlayStation/Saturn. Then the two companies split in the late 90's out of corporate politics, copyright issues, or just plain greed. They would be neck-and-neck coming into the 6th console generation.
The N64 would have taken a worse shellacking than it did OTL, and the GameCube would have to deal with not just Sony and Microsoft, but Sega as well. Nintendo made plenty of costly mistakes during this period (e.g. Virtual Boy, N64 Cartridges, GameCube miniDVD). However, even if their mainline consoles are eating dust, Nintendo can make a comeback. Like Rufus said, to truly take Nintendo out of the console business you have to kill the GameBoy. I can't really think of any way to do that outside of their suggestion.

There are also other opportunities for Sega, like the 1997 merger with Bandai that fell through, though from what I know that fell apart because of a middle-management revolt in Bandai over differences in corporate culture. So it might not happen unless things get real desperate for Bandai.
 
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