Sonic & All-Stars Racing Transformed is the kind of sequel I like: one that shows improvement.

The second installment in the franchise, developed by Sumo Digital and published by SEGA, liven things up by adding water and air racing to the mix. When released, it will be available on Xbox 360, PlayStation 3, Wii U, 3DS and PS Vita. The kiosks at E3 had the PlayStation 3 version running.

I played through the demo as Knuckles on a Super Monkey Ball-themed course that blends sea and land “tracks,” and then as Amy Rose on a Panzer Dragoon-inspired level that added a sky portion.

The vehicular transformations occur automatically, so the only thing you have to worry about is getting used to the new environment. That means being prepared to move from flat lands to water rapids or over bridges in the air.

Despite Sonic’s top billing, Transformed’s character selection is a smorgasbord of SEGA characters. Besides Sonic regulars such as Tails, Knuckles, Amy Rose, Dr. Eggman, and Shadow, characters from other beloved SEGA franchises join the cast. They include AiAi from Super Monkey Ball and Golden Axe’s Gilius. Those nostalgic for the gone-too-soon Dreamcast can play as Vyse from Skies of Arcadia, BD Joe of  Crazy Taxi, or Jet Set Radio’s Beat.

There are some great power ups on the tracks. For example, Sonic and friends can pelt snowballs at each other or position a giant baseball glove behind their vehicles to catch and deflect oncoming projectiles. You also have to love letting a swarm of bees loose on your opponents.

Those are nice, but the tight controls (better than the game’s predecessor) is also noteworthy. Transformed‘s racers are easy to steer, which makes it a fine pick-up-and-play game. In contrast to the original game’s looser steering, the demo showed serious progress.

Other controls will be familiar to kart racing fans. The PS3 version of the game uses R2 to accelerate, X to deploy power ups and L2 to drift. It you fly off of a jump in a land or sea portions, players can use the right analog stick to do spins. Completed spins give players speed boosts as rewards.

Sonic & All-Stars Racing Transformed probably won’t end up being the best franchise-based racing game ever, but the demo showed it’s shaping up to be a decent one, and a better one than its predecessor, at that. SEGA fans and kart racers should keep their eyes open.