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Sega Master System (SMS) - 1986-1989

(Also known as the Game Gear, kinda)

System History
After producing many games for early home videogame consoles, Sega decided to develop a console system of its own. The SG-1000 and Mark III were available in Japan in the mid-1980s, but when Sega witnessed the early success of the Nintendo Entertainment System, the company knew it wanted a share of the American console market. So, Sega redesigned the Mark III, renamed it the Sega Master System (SMS for short), and released it in 1986, not long after the NES first came out. Unfortunately for Sega, the SMS wiped out in the wake of Nintendo´s wave of popularity.
Technically, the Master System was superior to the NES, with better graphics and higher quality sound. The original SMS could play both cartridges and the credit card-sized "Sega Cards," which retailed for cheaper prices than carts but had less code. The SMS also had cooler accessories (like 3D glasses), but this didn´t do much good when there weren´t very many exciting games.
The SMS was touted as an arcade experience at home, but every other system made the same claim. Poor marketing by Tonka toys didn´t help any. Sega originally sold the U.S. SMS rights to Tonka, believing that the toy distributor would allow the SMS to be better circulated, but Tonka´s marketing department passed over popular European titles (such as Psycho Fox) and instead released flops like Cloud Master. After the release of the Genesis in 1989, Sega USA reacquired the SMS rights, and released some popular titles... but it was too little, too late.
The biggest reason for the Master System´s failure, though, was Nintendo. Nintendo owned about 90% of the market, with the Master System, INTV Intellivision, and the Atari 7800 splitting the other 10%. The NES had the head start and all the popular titles, due to Nintendo´s third-party developer policy (see below).
In Europe, the SMS did a little better, and there was enough interest stateside to merit the release of SMS II (a scaled down version of the original, to sell at a cheaper cost) in 1990. The new console did little to boost U.S. sales of SMS games, although the system continued to be popular in Europe. The SMS wasn´t even discontinued in Europe until around 1995. As a result, there are quite a few popular European titles that were hardly heard of in the U.S., including the SMS version of Sonic the Hedgehog. SMS popularity wasn´t just limited to Europe; the SMS was far better supported in other parts of the world than in the USA. Read the Foreign Sega Master System FAQ to learn all about it.
The Master System technology lived on in Sega´s Game Gear, which was basically a portable SMS with some enhancements. There was also a Power Base Converter for the Genesis that allowed you to play SMS games on the latter console.
Games The quality of most SMS games ranged from mediocre to trash. There were a few gems, like the highly acclaimed Phantasy Star, but there just weren´t enough good games to keep the system afloat. It didn´t help that Sega´s conversions of their own arcade games weren´t even that good. The biggest problem, however, was Nintendo´s third-party developer policy.
At the time, if you programmed games for Nintendo… that was it. You programmed for Nintendo and no one else. This seriously hurt Sega, because developers were flocking to the more popular NES (or had signed up before the SMS existed). Later, Nintendo reduced these restrictions because of government pressure, but by that time the SMS was pretty much buried. As a result, the only outside developers for the SMS were Activision and Parker Brothers (though Sega did receive permission to "reprogram" numerous games developed by other companies). Sega did the rest of the games themselves.
The SMS had a heavy bias toward sports and action games, which didn´t help broaden its audience any. It´s ironic that its best game is one of the only RPG´s made for the system. Other SMS games of note include Golvellius, Golden Axe Warrior, and Zillion.
The SMS´s most interesting accessory was the Sega 3D Glasses, which was quite innovative at the time of its release. Gamers raved about them (and still do), because they provided a very immersive experience. Unfortunately, only six 3D games (Blade Eagle 3D, Maze Hunter 3D, Missile Defense 3D, Space Harrier 3D, Poseidon Wars 3D, and Zaxxon 3D) were released, and the glasses only worked with the first version of the SMS (SMS I). It never gained too much of a foothold, mostly because the SMS wasn´t that popular to begin with. VictorMaxx also released a similar "VR" device (although it was more of a helmet) called the StuntMaster.
Light Phaser, and was of higher quality. Modeled after the Zillion gun from the Japanese anime series, the Light Phaser looked so realistic that parents pressured Sega to alter it so that police wouldn´t think their children were running around with a real firearm! (If your Light Phaser has a hand-painted neon orange tip, you´ve got one of the rare "redesigned" ones.) The SMS also had the Power Ball Sports Pad which was compatible with several of the early sports games. Only Sports Pad Football was designed with this controller in mind, a testament to how bad it was.
Sega announced a "Graphics Board" (a drawing pad, with images appearing on your television screen) and a 3.5" disk drive with the SMS´s introduction, but they were never released.

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