Not all that long ago, the three powerhouses that were at each others throats as it pertained to video game dominance were not Nintendo, Sony, and Microsoft, but Nintendo, Sony, and Sega.
Right as Microsoft was about to step into the ring was when Sega was showing signs of serious weakness. For a while it was rumored that MS was going to purchase Sega, as their means to enter the console business in a quick and easy manner.
And it made a lot of sense on a number of levels. At the very least, it would have been given them instant access to a plethora of IPs that has proven name and money value, and an immediate inside track into the Japanese marketplace, which at the time, still reigned supreme.
And for Sega, it gave them the edge as it pertained to hardware, which was always their Achilles' heel, with the Sega CD, 32X, and Sega Saturn being the prime examples.
Though in the end, according to Joachim Kempin, a Microsoft employee from 1983 to 2003, and speaking to IGN, it was a deal that was ultimately nixed by the man who founded MS himself, Bill Gates. Why? He just didn't have any faith in the Sega brand at that point:
"There were three companies at that point in time, I think this was [Sony,] SEGA and Nintendo. There was always talk maybe we buy SEGA or something like that; that never materialised, but we were actually able to license them what they call Windows CE, the younger brother of Windows, to run on their system and make that their platform.
But for Bill [Gates] this wasn’t enough, he didn’t think that SEGA had enough muscle to eventually stop Sony so we did our own Xbox thing.
There were some talks but it never materialised because SEGA was a very different bird. It was always Sony and Nintendo, right? And Nintendo had some financial trouble at that point in time, so Sony came out with the PlayStation and bang! They took off, and everyone else was left behind."
The funny thing is that Sega’s next system, the Dreamcast, corrected every wrong that every previous piece of Sega hardware was guilty of. Except it came loaded with a second operating system, the aforementioned Windows CE, that cause more trouble than it helped. Yet by that point, the writing was on the wall for Sega.
Meanwhile, MS developed their own console, the Xbox 1, which was the beacon that helped to invigorate west game development that is clearly thriving today.
Though it helps that they were luck enough to steal a key developer and their promising IP… that being Bungie and Halo 1… from Apple, who had hoped to turn their G4 Macintosh into a gaming powerhouse (but were clearly not very serious about it). And Microsoft was never able to get a foothold in Japan, not that it really matters at this point perhaps.
