Sonic the Hedgehog
No other character or series symbolizes Sega. Their mascot in the olden days of gaming, the "blue blur", "dude with a 'tude", or whatever other moniker the marketing guys gave him, the little blue guy has seen a lot of action over the years and has become one of the most recognizable characters in the industry.
The original game, Sonic the Hedgehog, was released on the Genesis and followed with three sequels on that system (plus downloadable versions have appeared on 360 and Wii). Each game added upon its predecessors in gameplay and graphics, and each game was excellent. Sonic CD, on the Sega CD, was the pinnacle of the 2D games, but from there the series took a dip. Unlike Mario's diversions into other genres (sports, racing, puzzles), Sonic's were generally poor. His attempts at racing, Sonic R for the Saturn and Sonic Riders for the Xbox, PS2, and Cube were both disappointing, even more so for a character whose entire existence is based around speed. There was a bit of an upswing when Sonic made the transition to 3D with the Dreamcast's Sonic Adventure, a solid game across the board.

Sonic and the Secret Rings, the hedgehog's Wii outing, had a lot of promise but was hampered by a shoddy control scheme. Then we have the next-gen game for the 360 and PS3, simply titled Sonic the Hedgehog. I'm not even going to go into detail as to how bad this game is. Suffice to say that if this is the direction Sega's mascot is going, then it's best to just let him go gracefully into that dark cold night. Continue to recycle his golden years with downloads and re-releases, let the kiddies know what gaming was like back when the mascots ruled, but stop trying to keep the series alive if this is the care he's getting. It just seems like they're trying so hard to make a game that's going to be "cool" that they forgot what made the originals cool in the first place.
There are glimmers of hope, though. The DS game, Sonic Rush, put the little guy back into 2D and was actually a good game. Bioware has been put onto an RPG project, also for the DS, and when you have one of the premier role-playing companies on the job there's definitely some promise.
So what does Sonic need? Sega needs to stop trying to update and revolutionize the series, trying to force the games into some form of next-gen relevance. Putting the game back into 2D would be a huge step in the right direction, using the power of the new systems to make everything look absolutely gorgeous.
Maybe online play, where one controls Sonic and another Tails/ Knuckles/ Sally or whoever, or maybe some simple sort of competitive racing, but that's hardly necessary. Perhaps the series should stick with the handhelds for a bit, the last real bastion of 2D gaming, or even just a new game in download form on the consoles. The original games were fun for their simplicity, and that's what needs to come back. No complex storylines, exploration stages, or whatever else they've been trying to force on the fans.
In short, before trying to make a new Sonic game, go back and play the old ones for a bit.
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