Sumo Digital said that for courses it wanted specific themes that could cater for three vehicle types - car, boat and plane - which Sega's various properties had to fit into.
"We took a different route on this one [than the original]," design director Gareth Wilson told Digital Spy.
"What we wanted was the game experience and the visuals to dictate what IPs were in the game. So we did the George Lucas approach of scene setting, so we said, 'We want a desert, we want a water section, an ice level, some lava, we want space'.
"[For peaceful scenery] we wanted forest, so we went with Shinobi. For Billy Hatcher, we picked an ice level. For a lava level, we had Golden Axe."
Wilson continued: "If you go about it the other way - which is, 'Which games are cool?' - you just get a mish-mash of stuff. It's just stepping on each other's toes. I could pick my favourite Sega levels; Daytona, After Burner, Sega Rally, Sega GT and suddenly I've got a lot of cars racing around, but in the mix [they don't work].
"Daytona is probably my favourite game of Sega's roster, but it didn't really fit with this because, what do we do for flying or boating? For Outrun there's beach, there's water, so you know what, maybe we could that?
"So that's why we ended up doing Outrun and not Daytona. And we wanted a beach level, because we wanted a coastal environment which we didn't have anywhere else."
Wilson also explained why one particular franchise that appeared in the original Sonic & All-Stars Racing - Shenmue - couldn't be included.
"We didn't want a dock - if we wanted a dock then Shenmue could have gone on the list! We did want an urban area, but we decided to go for Jet Set Radio because it was a lot more stylised and it fit better with our game, to be honest."
When it came to characters, Wilson said that demographics for a mass-market game were a big factor in creating the list.
"If we had all the time in the world, we'd have 120 characters in the game, from Nack the Weasel to some other obscure character that someone's going on about on forums. We have to accept that although we love making games for the Sega fans, it's a mass market title that has to sell two or three million units," he explained.
"We have to put in characters that appeal to certain demographics. We need to have a few female characters, that's why Amy Rose is in the game. Amy Rose probably isn't the most famous Sonic character, but [it appeals] to my 5-year-old daughter, and she drives a pink Beetle, which is great because there's a portion of 5-year-old girls that are going to play the game.
"Equally, we know there's a load of teenagers who are going to play the game and will like Shinobi. Not because he's a classic arcade character from the '80s, but because he's a ninja driving a Batman-inspired car, so he'll fit that particular demographic.
"We have to go across the whole thing and make sure we tick all the boxes. Anyone who plays it hopefully will find a character they would like.
"It's a shame, really, because there's loads of characters I'd love to put in, but we have to be realistic unfortunately!"
Wilson continued by saying that the added cost of designing multiple vehicles, as well as animations for transformations and All-Star moves, meant adding characters was a much costlier process than the last game.
"You're talking about five models and animations, so each one is an incredibly expensive thing to do," he explained. "Adding more and more [detail] gets very expensive - like, three times more expensive than it was for the previous game."
Announced in April, the follow-up to 2010 racing title Sonic & Sega All-Stars Racing will feature nearly 30 characters and lets players drive transforming vehicles.
Sonic & All-Stars Racing Transformed will be released on November 16 in Europe and November 20 in North America for Xbox 360 and PS3, while a Wii U version will be available on November 30.
> Read our hands-on preview of Sonic & All-Stars Racing Transformed
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