The Scoop:
In the early 1990's, Sega was looking for just about anything that would boot Nintendo off of their high horse. Be it mascots, celebrities, you name it, Sega tried it. Using the same math that NEC did a few years earlier, Sega decided to release a Compact Disc ROM reading device, one that was just as big and just as heavy as the Genesis. Using a pop-out tray, the sleek looking Sega CD offered gamers some of the special effects the Nintendo was boasting in their Super NES.
Problem is, Sega released the Sega CD with a few major problems, at least for us gamers in North America. Though the Sega CD had been finalized long before its launch, Sega had no interest in allowing the third party companies easy access to the tools that would allow the system's special graphic abilities, such as sprite scaling and rotating.
Sega followed this move with a somewhat puzzling embargo on Japanese Mega CD titles. American gamers hoping that the added memory could improve the length and quality of adventure titles and role playing games were about to be all but cut off. Instead Sega opted for licensed action games like Batman Returns and Jurassic Park, or full motion video. Sega even spent millions of dollars creating a studio where they could shoot, make, and develop Sega CD games.
Magazines even embraced the use of full motion video, Electronic Gaming Monthly proclaimed that "the most impressive titles contained moving video. Night Trap, Sewer Shark, Citizen X as well as three 'Make Your Own Music Videos' were the best of the bunch". Even though Sega might have considered Full Motion Video a selling point early on, without the imported games with substance, American gamers were left wondering why they bought this $300 system.
A number of high profile arcade ports were announced, including an enhanced version of Strider and Street Fighter II, but none saw the light of day. Final Fight and
Mortal Kombat would find a home, but by the time they were released they were old news. Without the current arcade games and high profile products, the Sega CD was doomed to fail from the get-go.
The Other Side:
A lot of the early Mega CD (Japanese Sega CD) games weren't instantly accessible to the American audiences. And truthfully, many would have taken months to translate. It would have been a gamble to release unproven adventure games like Woodstock: Funky Horror Band, Tenkafubu 3, Nostalgia: 1907, and 3 x 3 Eyes.
To Sega's credit, one first generation Mega CD RPG was ported to the Sega CD, however years late. Lunar: the Silver Star was not only one of the best Sega CD games, but also made quite a stir in the land of the rising sun.
The Impact:
The studio that Sega built would find its way into most of the first party Sega CD software, sometimes for better, but generally for worse. Sonic CD, for example, offered one the the best soundtracks of all time when released in Japan, but when ported to for the U.S., the music was completely changed, and not in a productive way. (You can read all about this in the On Running Feud: Die Hard Game Fan vs. Sonic CD.)
In the other camp, Nintendo was planning their own CD upgrade, however, scrapped plans after the Sega CD performed poorly. This "Nintendo CD" would go on to become the PlayStation, and the rest is, as they say, history.
Where Are They Now?:
Believe it or not, the Sega CD is still a house for new games, if you use the word "new" loosely. Citizen X (yeah, the same one that was mentioned above) is FINALLY getting a release by Good Deal Games and Older Games. Available on their website, Citizen X retails for $25, and is in limited quantity.
Since the system didn't sell especially well, these days certain games are going for quite a lot on the auction block. Snatcher and even Night Trap are going for way more than anyone would have thought eleven years ago, and a number of Working Design RPGs are finding a new market on other platforms. So maybe everything worked out in the end.