Sega

Sega Corporation is a Japanese multinational video game development and distribution company based in Shinagawa, Tokyo. Its two international subsidiaries, Sega America and Sega Europe, are headquartered in Irvine, California, and London, respectively. Sega's arcade division was named Sega Interactive Co., Ltd. from 2015 to 2020, later merging with Sega Games to create Sega Corporation. Sega is a subsidiary of Sega Group Corporation, which in turn is part of Sega Sammy Holdings. Between 1983 and 2002 Sega was also a developer of game consoles.

Sega was founded by American businessmen Martin Bromley and Richard Stewart as Nihon Goraku Bussan on June 3, 1960; soon after, the company acquired the assets of its predecessor, Service Games of Japan. Five years later it was renamed Sega Enterprises, Ltd., after acquiring Rosen Enterprises, an importer of arcade games, coin-operated gaming machines. Sega developed its first arcade game, Periscope, in the late 1960s. The company was sold to Gulf and Western Industries in 1969. Following a downturn in the arcade business in the early 1980s, Sega Sega began developing video game consoles, starting with the SG-1000 and the Master System, but had to face competitors like Nintendo's NES. In 1984 Sega executives David Rosen and Hayao Nakayama undertook a management takeover of the company with the backing of CSK Corporation.

It released its next console, the Mega Drive (known as the Genesis in North America), in 1988. The Mega Drive was not very successful against its competitors in Japan, but it was widely accepted in North America and Europe after the release of Sonic the Hedgehog in 1991 and briefly surpassed its main competitor, the Super Nintendo, in the United States. In that decade the company suffered several commercial failures, such as the 32X, Saturn and Dreamcast consoles. In 2002 it stopped manufacturing consoles to become a developer and distributor for third parties and was acquired by Sammy Corporation in 2004. Since the acquisition, Sega has been more profitable. Sega Holdings Co. Ltd. was founded in 2015, Sega Corporation, which was renamed Sega Games Co., Ltd. and its arcade, entertainment, and toy divisions were split up among other companies. Sega Games and Sega Interactive merged in 2020 and were renamed Sega Corporation.

Sega developed several multi-million-selling game franchises, including Sonic the Hedgehog, Total War, and Yakuza, and is the producer of games The world's most prolific arcade game. It also manages game rooms and develops other entertainment products, such as toys. He received wide recognition during the stage in which he was developing his own video game consoles, for his creativity and innovations. However, in recent years it has been criticized for aspects related to its business decisions and the quality of its creative output.

History

1940-1982: Beginnings; arcade hit

The "Diamond 3 Star" was a slot machine manufactured by Sega in the 1950s.

In 1940 American businessmen Martin Bromley, Irving Bromberg, and James Humpert founded Standard Games in Honolulu, Hawaii. Their goal was to provide coin-operated arcade machines, including slot machines, to military bases considering that the increase in personnel with the onset of World War II would lead to a demand for entertainment. After the war the founders sold Standard Games in 1945 and in 1946 created Service Games, named for its military focus. When the United States government banned slot machines in its territories in 1952, Bromley sent its employees Richard Stewart and Ray LeMaire to Tokyo to form Service Games of Japan, which would supply slot machines to US bases in Japan. A year later the five men established Service Games Panama to oversee Service entities. Games all over the world. The company expanded over the next seven years to include distribution in South Korea, the Philippines, and South Vietnam. The name "Sega", an abbreviation for Service Games, was first used in 1954 on a machine. slot machine, the Diamond Star.

Due to a poor reputation caused by investigations into illegal business practices by the United States government, Service Games of Japan was dissolved on May 31, 1960. On June 3, Bromley established two companies to take over the its business activities, Nihon Goraku Bussan and Nihon Kikai Seizō. The new companies acquired all of the assets of Service Games of Japan; Kikai Seizō, doing business as Sega, Inc., focused on manufacturing slot machines. Goraku Bussan, doing business under Stewart's direction as Utamatic, Inc., was a distributor and operator of coin-operated machines, primarily jukeboxes. The two companies merged in 1964, keeping the name Nihon Goraku Bussan.

At the same time David Rosen, an American officer in the United States Air Force stationed in Japan, started a photo booth business in Tokyo in 1954. This company became Rosen Enterprises and in 1957 began importing coin-operated games to Japan. In 1965 Nihon Goraku Bussan acquired Rosen Enterprises to form Sega Enterprises, Ltd., with Rosen as CEO and general manager, while Stewart was named president and LeMaire as planning director. Soon after, Sega stopped leasing its products to military bases and switched from slot machines to coin-operated arcade machines. Among its imports were the Rock-Ola jukebox, the pinball i> from Williams and gun sets from Midway Manufacturing.

Old logo Sega Enterprises, Ltd.

By importing second-hand machines, which required frequent maintenance, they began to make replacement guns and flippers for their imported equipment. According to former Sega head Akira Nagai, this led the company to develop its own games. The first electromechanical game they made was the submarine simulator Periscope, released worldwide in the late 1990s. 1960s; it featured sound and light effects considered innovative and was a hit in Japan. It was exported to malls and department stores in Europe and the United States and helped standardize the 25-cent-a-game arcade price in the United States. The company was surprised by the success and for the next two years they developed and exported eight to ten games per year, although increasing piracy in the industry would lead Sega to stop shipping their games around 1970.

In 1969 Sega was sold to the American consortium Gulf and Western Industries, although Rosen remained CEO. In 1974 Gulf and Western incorporated Sega Enterprises, Ltd., a subsidiary of an American company that was renamed Sega Enterprises, Inc. Sega released Pong-Tron, its first video game, in 1973. Despite After stiff competition from Taito's hit arcade game Space Invaders in 1978, Sega grew through the arcade boom of the late 1970s, with revenues exceeding $100 million. in 1979. During this period, Sega acquired Gremlin Industries, which made microprocessor-based arcade games, and Esco Boueki, a coin-operated game distributor founded and owned by Hayao Nakayama, who became involved in managing operations at Sega in Japan. In the early 1980s they were one of the top five active manufacturers of arcade games in the United States, with revenues of $214 million. In 1979 they released Head On, first game of the "eat the dots" type which Namco later used in its smash hit Pac-Man. In 1981 Sega licensed and released Frogger, its most successful game to date. In 1982 it released the first game in using axonometric perspective, Zaxxon.

1982-1989: Entering the game console market

SG-1000, Sega's first video console.

Following a decline in the arcade game market beginning in 1982, Gulf and Western sold its North American arcade production subsidiary and the licensing rights to its arcade games to Bally Manufacturing in September 1983. Gulf and Western retained Sega's R&D division in North America and its Japanese subsidiary, Sega Enterprises, Ltd. With its arcade business in decline, Sega Enterprises, Ltd. president Nakayama proposed that the company use its experience in hardware to enter the domestic consumer market in Japan. This decision led Sega to develop a computer, the SC-3000. Learning that Nintendo was developing a console dedicated exclusively to games, the Famicom, Sega developed its first video game system for home use, the SG-1000, which was released in conjunction with the SC-3000, a version in personal computer format.. Adapted versions of the SG-1000 were released in various markets around the world. 160,000 units of the SG-1000 sold in 1983, far exceeding Sega's forecast of 50,000 units in its first year, although it was surpassed by the Famicom, due in part to Nintendo expanding its game catalog by hiring outside developers, while Sega was reluctant to collaborate with companies it competed with in the arcade market.

In November 1983, Rosen announced his intention to step down as president of Sega Enterprises, Inc. on January 1, 1984. Jeffrey Rochlis introduced himself as Sega's new president and chief operating officer. the SG-1000 and the death of company founder Charles Bluhdorn, Gulf and Western began selling off its side businesses. Nakayama and Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation, a major Japanese software development company. Sega's assets in Japan were purchased for $38 million by a group of investors led by Rosen and Nakayama. Isao Okawa, the chairman of CSK's board of directors, became president, while Nakayama was established as CEO of Sega Enterprises, Ltd.

The Master System was launched in 1986 in North America and in 1987 in Europe.

In 1985 he began work on the Mark III, an improved version of the SG-1000 that retained full compatibility with its predecessor's cartridges and cards. The Mark III was released in Japan in October 1985, being marketed in the United States and Europe as the Master System, with a futuristic design that was intended to appeal to Western tastes. Despite having more powerful hardware than the Famicom in some respects, it was not initially it was a success. Because Nintendo required third-party developers not to port their Famicom games for other consoles, Sega developed its own games and acquired the rights to port games from other developers. To facilitate the marketing of the console in North America, they decided to sell the Master System as a toy, as Nintendo had done with the NES. Sega partnered with Tonka, an American toy company, to take advantage of Tonka's industry experience, although inadequate marketing by Tonka hurt sales of the Master System. In early 1992, production in South America was discontinued. North. The Master System sold between 1.5 and 2 million units in the region, a smaller market share than that of Nintendo and Atari, which controlled 80 and 12% of the market respectively. Instead the console turned out to be a success in Europe, where it surpassed the NES by a considerable margin; in 1993 the active user base of the Master System in Europe was 6.25 million units. In Brazil the success of this console has been continuous and has been they continue to release new versions by Sega's partner in the region, Tectoy; in 2016 the Master System had sold 8 million units in the country.

In 1984 it opened its European arcade distribution division, Sega Europe. It re-entered the North American arcade market in 1985 with the establishment of Sega Enterprises USA after a deal with Bally, where it was successful with the release of Hang-On that same year, becoming so popular that they had difficulty meeting demand for the game. UFO Catcher was introduced in 1985 and by 2005 was the most installed hang-on crane game in Japan. In 1986 Sega America was established to manage the company's consumer products in North America, beginning with the marketing of the Master System. During its association with Tonka, Sega America relinquished marketing and distribution of the console and focused on the console. customer support and certain localization of the titles. Out Run, a racing video game released in 1986, became the company's best-selling arcade game in the 1980s. Sega, Aki ra Nagai, said that Hang-On and Out Run helped save the arcade game market from the 1982 crash and created new genres of video games.

1989-1994: Mega Drive; Sonic the Hedgehog; commercial success

Second American version design of the Mega Drive.

With the arcade game market expanding again, Sega was one of the most recognizable gaming brands in the late 1980s. The company focused on offering arcade games that catered to different tastes, such as racing or side-scrolling, among others. The successor to the Master System, the Mega Drive, was presented in Japan on October 29, 1988. Its launch was overshadowed by that of Super Mario Bros. 3 from Nintendo a week before. Positive reviews from Famitsū and Beep! magazines helped win customers, but Sega only shipped 400,000 units in its first year. The Mega Drive suffered from competition from the Mega Drive. Nintendo's 8-bit Famicom and lagged behind the Super Famicom and NEC's 16-bit PC Engine in the Japanese fourth-generation console market. For its North American release, where it was marketed as the Genesis, the company did not had a sales and marketing organization; when Atari turned down its offer to market the console in the region, the company did so through its own subsidiary Sega America. The Genesis was introduced in New York and Los Angeles on August 14, 1989, and later in the rest of North America that same year. The European version was released in September 1990.

Michael Katz, former Atari executive and new president of Sega America, developed a two-phase strategy to increase sales in North America. The first included a marketing campaign to take on Nintendo by emphasizing the more arcade-like experience the Genesis offered, with slogans such as "Genesis Does What Nintendon' t (Genesis does what Nintendo doesn't)". Since Nintendo owned the rights to most of the console arcade games of the time, the second phase consisted of creating a series of games that it used the names of celebrities, such as Michael Jackson's Moonwalker or Joe Montana Football. However, Sega could not overcome Nintendo's enormous presence in homes; despite being commissioned by Nakayama to sell one million units in the first year, Sega America only sold 500,000.

After the release of the Mega Drive, Sega searched for a new flagship franchise to compete with Nintendo's Mario series. Its new character, Sonic the Hedgehog, eventually became one of the franchises of best-selling video games in history. The origins of the first Sonic game date back to a tech demo created by Yūji Naka that featured a fast-moving character rolling into a ball through a winding tube, which later became a reality. with character design by Naoto Ōshima and levels conceived by Hirokazu Yasuhara.

Nakayama hired Tom Kalinske as CEO of Sega America in the mid-1990s, and Katz left the company shortly thereafter. Kalinske was not very knowledgeable about the video game market, but he surrounded himself with expert industry advisers. A supporter of freebie marketing, he developed a plan with four goals: reduce the price of the Genesis, create a team of American personnel to develop games aimed at the American market, expand aggressive advertising campaigns, and replace the game Altered Beast with Sonic the Hedgehog. The Japanese managers disapproved of his plan, but Nakayama gave him the go-ahead, telling him, "I hired you to make the decisions for Europe and America, so go ahead and do it." Largely due to the popularity of Sonic> the Hedgehog, the Genesis outperformed its main competitor, Nintendo's SNES, in the United States by nearly two to one during the 1991 holiday season. In January 1992 Sega controlled 65% of the gaming market. 16-bit consoles. They outperformed Nintendo for four consecutive Christmas seasons thanks to the advantage of the Genesis' earlier release, its lower price, and a larger catalog of games compared to the SNES at the time of its release. Nintendo's penetration of the US 16-bit market fell from 60% in late 1992 to 37% in late 1993, Sega accounted for 55% of all 16-bit hardware sales during 1994, although the SNES outperformed the Genesis from 1995 to 1997.

Sonic the Hedgehog, Sega's pet.

In 1990 Sega released a handheld console, the Game Gear, to compete with Nintendo's Game Boy. The Game Gear was designed as a portable version of the Master System and featured a full-color screen, as opposed to the Game Boy's monochrome screen. Due to short battery life, lack of original games, and poor support Sega's Game Gear, with sales of about 11 million units, did not surpass the Game Boy. Sega released the Mega-CD in Japan on December 1, 1991, with a starting price of 49,800 yen. peripheral device used CD-ROM technology and had features such as a second faster processor, a large expansion of system memory, a graphics chip that performs scaling and rotation similar to Sega arcade games, and other sound chip. In North America it was released on October 15, 1992 as a Sega CD with a retail price of $299. In Europe it kept its original name and was released in 1993. In Japan they were only sold 100,000 units in the first year, well underdeveloped below Sega's expectations. Instead the company found success with arcade games; in 1992 and 1993 the games Virtua Racing and Virtua Fighter (the first 3D fighting video game), created for the new Sega Model 1 motherboard for arcade systems developed by his team internal Sega-AM2, played a crucial role in popularizing 3D polygonal graphics.

In 1993 the US media began to draw attention to the violent and adult content of certain video games, such as the Night Trap for the Sega CD and the Genesis version of the Mortal Kombat by Midway Games, precisely at a time when Sega was capitalizing on its image as an "edgy" company with "character", which accentuated that image. To manage this situation, Sega instituted the America's first video game rating system, the Videogame Rating Council (VRC), for all of its systems. Ratings ranged from the GA family category to the older MA-13 category, as well as the MA-17 adult-only category. Nintendo of America Executive Vice President Howard Lincoln was quick to point out in Congressional hearings on video games the United States of 1993 that Night Trap had not yet been classified. Senator Joe Lieberman called another hearing in February 1994 to review progress toward a rating system for video game violence. Following the hearings, Sega proposed that its VRC system be adopted as the general rating system; following objections from Nintendo and other manufacturers, Sega participated in the formation of the Entertainment Software Rating Board.

1994-1999: 32X; Saturn; decline in sales

Sega had begun design work on the Saturn more than two years before the system was unveiled at the Tokyo Toy Fair in June 1994. According to former Sega America producer Scot Bayless, Nakayama was concerned about the release of the Atari Jaguar in 1994 and that the Saturn would not be available until the following year, they decided to release a second console in late 1994. The company began developing the 32X, a peripheral for the Mega Drive that would serve as a less expensive introduction to the 32-bit era. The 32X would not be compatible with the Saturn, but would work with games on the Mega Drive. It was released on November 21, 1994 in North America, on November 3 December 1994 in Japan and January 1995 in PAL areas, with a launch price of less than half of what was to be the launch price of the Saturn. After the holiday season, interest in the 32X declined rapidly.

Saturn was not as successful as its predecessor, the Mega Drive.

The Saturn was released in Japan on November 22, 1994. The ported version of the popular arcade game Virtua Fighter sold almost one to one with the Saturn. upon its release and was crucial to the system's initial success in Japan. The initial supply of 200,000 units of the Saturn sold out on the first day, and in Japan it was more popular than its new competitor, Sony's PlayStation In March 1995, Sega America CEO Tom Kalinske announced that the console would be released in the United States on "Sarturnday" September 2, 1995. Sega Japan decided to make an early release of the Saturn for ahead of that of the PlayStation. At the first Electronic Entertainment Expo (E3) held in Los Angeles on May 11, 1995, Kalinske revealed the launch price and that Sega had shipped 30,000 Saturns to Toys "R" Us, Babbage's, Electronics Boutique and Software Etc. for immediate release. The European release occurred ahead of the previously announced North American date of July 8, 1995. The PlayStation was released in North America on September 9, 1995 and two days later, it already outsold the Saturn in the five months since its early release; in its first year, the PlayStation captured more than twenty percent of the US video game market The Saturn's high price, surprise release that caused problems with distributors and third-party developers, and its problems handling polygonal graphics were the main factors behind its failure. Sega also underestimated the Mega's long-standing popularity. Drive; sales of 16-bit games and consoles accounted for 64% of the market in 1995. Despite taking 43% of the United States market share and selling over two million units of the Genesis in 1995, Kalinske estimated that Sega could have sold another 300,000 consoles if they had prepared to meet their demand.

In July 1996 Shōichirō Irimajiri was appointed Chairman of the Board of Directors and CEO of Sega America, while Kalinske left the company on September 30 of that year. Previously a Honda executive, Irimajiri had been linked with Sega America since joining the company in 1993. The company also announced that Rosen and Nakayama had resigned from Sega America, although both remained with Sega. Bernie Stolar, former executive of Sony Computer Entertainment of America, he became executive vice president of Sega America in charge of product development and third-party relations. Stolar was not a fan of the Saturn, considering its hardware to be poorly designed, going so far as to declare that "the Saturn is not our future" at E3 in 1997, although he continued to highlight the quality of its games. At Sony, Stolar had opposed the localization of certain Japanese games for the PlayStation which, in his opi tion, would not represent the system well in North America, and advocated a similar policy for the Saturn, although he later tried to disengage from this stance. Other changes included a more toned-down image in Sega's advertising, including the removal of its logo. sound with the cry "Sega!", and the holding of meetings with the press for the education sector.

Sega partnered with General Electric to develop the Sega Model 2 arcade system board, using the 3D technology of the arcade industry at the time, leading to the creation of several highly successful arcade games such as Daytona USA, which was released in limited capacity in late 1993 and worldwide in 1994, Virtua Cop and Virtua Fighter 2. In addition to the Saturn, the company made forays into the personal computer market with the creation in 1995 of the video game development company SegaSoft, which was tasked with creating original games for the Saturn and PC. In 1996 Sega operated centers commercial not only in Japan, with Joypolis, but also abroad, with arcades called Sega World in the UK and Australia. From 1994 to 1999 Sega was involved in the pinball market. > when he took over Data East's division of these games.

In January 1997 they announced their intention to merge with the Japanese toy company Bandai; The intention was to formalize a merger through a stock exchange (stock swap) worth one billion dollars through which Sega would acquire all of Bandai, to form the company Sega Bandai, Ltd. but, although the merger was due to take place in October of that year, it was called off in May after mounting opposition from Bandai's mid-level executives, instead formalizing a business alliance between Sega and Bandai. Sega's financial situation, Nakayama resigned as president in January 1998 in favor of Irimajiri; this resignation may have been partly due to the failure of the merger, as well as Sega's poor performance in 1997. Stolar became CEO and president of Sega. Sega America.

Nakayama's resignation may have been partly due to the failure of the merger, as well as Sega's results in 1997. Stolar was named CEO and president of Sega America.

The Saturn failed to gain market leadership. After the launch of the Nintendo 64 in 1996, sales of the Saturn and its games fell drastically, while the PlayStation surpassed it three to one in the United States in 1997. After five years of declining profits, in the fiscal year Ending on March 31, 1998, Sega suffered its first financial losses since its listing on the Tokyo Stock Exchange in 1988, both from the parent company and the corporation as a whole. Shortly before the announcement of the losses, they dropped distribution of the Saturn in North America to prepare for the release of its successor, the Dreamcast. The decision left the western market without Sega games for over a year. The Saturn lasted longer in Japan and Europe; Irimajiri stated in the Japanese newspaper Daily Yomiuri that production of the console would stop at the end of 1998 and that games would continue to be released until mid-1999. The company suffered a new net loss with nconsolidated company of 42,881 million yen in the fiscal year ending March 1999 and announced plans to cut 1,000 jobs, nearly a quarter of its workforce. With total sales of 9.26 million units, the Saturn is considered a commercial failure. Sega's arcade divisions also struggled in the late 1990s, partly due to the market decline from competition from home consoles.

1998-2001: Dreamcast; continued negative economic results

The Dreamcast, which stopped commercializing in 2002, was the last video game console of Sega.

Despite a 75% drop in half-year profit just before the console's Japanese launch, the company was confident in its new system. The Dreamcast aroused great interest and generated many pre-orders. Sega announced that Sonic Adventure, the new game starring the company's mascot Sonic the Hedgehog, would be released in conjunction with the console; it was promoted with a large-scale public demonstration at the Tokyo International Forum. Due to the high failure rate in the manufacturing process, they were unable to produce enough consoles for the Dreamcast's Japanese release. After half of their limited stock had been pre-ordered, Sega stopped accepting pre-orders in Japan. Before launch, they announced the release of their new arcade board New Arcade Operation Machine Idea (NAOMI), a more cheap to the Sega Model 3. NAOMI shared technology with the Dreamcast, allowing arcade games to be ported to the Dreamcast almost identical to the original.

It was released in Japan on November 27, 1998; by the end of the day the entire initial production run of 150,000 units had been sold out. Irimajiri estimated that an additional 200,000 to 300,000 units could have been sold had sufficient supply been available. They expected to sell more than a million of Dreamcast units in Japan by February 1999, but fewer than 900,000 were sold. This decline in sales thwarted Sega's attempts to build a sufficient base of equipment in use to ensure the Dreamcast's survival in the face of the arrival of the Internet. competition from other manufacturers. Before its release in the Western market, they lowered the price of the console in Japan to 9,100 yen, making it unprofitable but increasing sales.

On August 11, 1999, Sega America confirmed Stolar's dismissal. Peter Moore, whom Stolar himself had hired as a Sega America executive just six months earlier, was responsible for the console's North American launch, which was released on September 9, 1999, with 18 games. Sega set a record by selling 225,132 Dreamcast units in 24 hours, earning $98.4 million in revenue in what Moore called "the biggest 24 hours in the history of entertainment retail". Within two weeks, console sales in the United States surpassed 500,000 units; by Christmas, Sega had 31 percent of the sales. video game market in the United States by revenue. On November 4, the company announced that it had sold more than one million units of the Dreamcast in North America. However, the launch was marred by a failure at one of the manufacturing plants. Sega manufacturing, which produced faulty GD-ROM s where the data was not being written correctly to the disc. The Dreamcast was released in Europe on October 14, 1999; while 500,000 units had been shipped in Europe by Christmas 1999, sales on that continent they decreased and by October 2000 only around one million units had been sold.

Although the launch of the Dreamcast was a success, Sony's PlayStation still held 60% of the total market share in North America at the end of 1999. On March 2, 1999, in what one article called "a much-hyped vaporware", Sony revealed the first details of its "next-generation PlayStation". That same year, Nintendo announced that its next console would meet or exceed everything on the market, and Microsoft began development of its console itself, the Xbox. Sega's initial success was short-lived; Sales of the Dreamcast in the United States, which exceeded 1.5 million units in late 1999, began to decline in January 2000. Poor sales in Japan contributed to Sega's consolidated net loss of nearly forty-three. billion yen in the fiscal year ending March 2000, which also followed a loss of a similar amount the previous year and marked the company's third consecutive negative fiscal year. Although Sega's total sales during this increased by 27.4% in the period and Dreamcast sales in North America and Europe far exceeded their expectations, this increase coincided with a decline in profitability due to the investments they had to make to launch the Dreamcast in Western markets and the poor software sales in Japan. At the same time, the worsening general situation reduced the profitability of Sega's Japanese arcade business, leading to the closure of 246 stores.

Moore claimed that the Dreamcast would need to sell five million units in the United States by the end of 2000 to remain viable, but this goal could not be reached as sales only reached three million units. Sega's attempts to stimulate sales of the console through lower prices and cash refunds caused financial losses to escalate. As of March 2001 the company's consolidated net loss was 51.7 billion yen. Although the release of While the PlayStation 2 in North America on October 26 was marred by a lack of availability, this fact did not benefit the Dreamcast as much as expected, as many consumers decided to hold on or bought a PSOne. Sony and Nintendo ended up getting with 50 and 35% respectively of the US video game market, while Sega was only able to grab 15%.

2001-2003: Change in business line

CSK Chairman Isao Okawa replaced Irimajiri as Sega's president on May 22, 2000. Okawa had long advocated that Sega should exit the console business, a view he shared Sega co-founder David Rosen, who said he had "always considered it crazy of them to be limiting Sega's potential to hardware", and Stolar had suggested they should have sold the company to Microsoft In a September 2000 meeting with Sega executives in Japan and those responsible for its original game designs, Peter Moore and Sega America executive Charles Bellfield recommended that Sega exit the console business; at the proposal, the game designers walked out of the meeting. An official company name change from Sega Enterprises, Ltd. to Sega Corporation was announced effective November 1, 2000. Sega stated in a statement that it was to show its commitment to the "entertainment business through the network".

On January 23, 2001, the Japanese newspaper Nihon Keizai Shimbun reported that Sega would abandon production of the Dreamcast and work on developing software for other platforms. After an initial denial of the news, Sega Japan eventually issued a press release confirming that it was considering developing software for the PlayStation 2 and Game Boy Advance as part of its "new management policy". On January 31, 2001, they announced the cessation of production of the Dreamcast as of March 31 and the restructuring of the company as a developer of cross-platform software for third parties. They also announced a price reduction for the Dreamcast to clear their backlog of stock, estimated at 930,000 units, beginning in April 2001, followed by further reductions to clear remaining inventory. The last Dreamcast manufactured was signed by the heads of the nu eve Sega original game development studios, together with the heads of sports game developer Visual Concepts and audio studio Wave Master and given away along with 55 original games for the Dreamcast through a contest organized by the specialized video game publication GamePro.

Okawa, who had lent Sega $500 million in 1999, died on March 16, 2001; shortly before his death, he paid off Sega's debts to him and handed over his $695 million worth of Sega and CSK shares, helping the company survive the transition to its new form of software development business. for third parties. He had unsuccessful talks with Microsoft about a possible sale or merger with its Xbox division. According to former Microsoft executive Joachim Kempin, Microsoft founder Bill Gates decided not to acquire Sega because " I didn't think Sega was strong enough to stop Sony." A business alliance with Microsoft was announced in which Sega would develop 11 games for the new Xbox console. As part of the restructuring, almost a third of Sega's staff in Tokyo was laid off in 2001. Fiscal year 2002 was Sega's fifth consecutive year of net losses. Following Okawa's death, Hideki Sato, a 30-year veteran of the company who had worked in the division of conso las, he became president of Sega.

In view of poor sales results in 2002, they cut their 2003 profit forecast by 90% and considered mergers. In 2003 they began talks with the Sammy Corporation, a manufacturer of pachinko and pachislot (a variant of slot machines) and with the video game company Namco. Sammy's president, Hajime Satomi, had a history with Sega, as Isao Okawa had been his advisor and had been asked to be Sega's CEO. On February 13 the company announced that it would merge with Sammy but, until February 17, As of April they were still in talks with Namco, which was trying to stop the merger. The fact that Sega considered Namco's offer upset Sammy's executives. The day after Sega's announcement that it was no longer merging with Sammy, Namco withdrew its offer. In 2003 Sato and COO Tetsu Kamaya resigned; Sato was replaced by Hisao Oguchi, the head of Sega AM3's in-house game development team. Peter Moore left Sega America in January 2003 after a frustrating encounter with Sega Japan which refused to adapt to the changing landscape of the video game market due to to adult games such as Grand Theft Auto III; in October 2003 he was replaced by Hideaki Irie, who had previously worked at Agetec and ASCII Media Works.

2003-2015: The acquisition by Sammy; expansion of markets

Sega Sammy Holdings was founded in 2004.

In August 2003, Sammy bought 22.4% of the company's shares from CSK, thus becoming Sega's largest shareholder. That same year, Hajime Satomi stated that Sega's activity would focus on its profitable arcade business, rather than the loss-making home software development market. In 2004, Sega Sammy Holdings, an entertainment industry holding, was created; Sega and Sammy became subsidiaries of the new management company, both operating independently although the executive departments were merged. According to Sega Sammy's first annual report, the merger was made because both companies were going through difficult times. Satomi noted that Sega had been operating at a loss for almost ten years, while in Sammy's case he feared stagnation and an over-reliance on his highly profitable pachislot and pachinko machine business, and wanted to gamble on diversification. took over the rest of Sega's shares through a takeover bid. In the share exchange agreement, he valued Sega at between $1.45 billion and $1.8 billion. Sega Sammy Holdings was structured into four business segments: Consumer Sector (video games), Arcade Sector, Amusement Center Sector (Sega Arcade and Theme Parks) and Pachislot and Pachinko Sector (Sammy's pachinko and pachislot business).

Following the worldwide decline of the arcade industry in the 21st century, Sega introduced several novel approaches tailored to the Japanese market. Derby Owners Club was an arcade horse racing simulation with memory cards for data storage, designed to take over half an hour to complete and costing 500 yen per game; Testing of this game at a Chicago arcade showed that it had become the most popular machine in the venue, with a 92% repeat rate. The eight-player Japanese version was released in 1999, and a smaller four-player version was released in North America in 2003. Sega introduced collectible card game arcade machines, with games such as World Club Champion Football for the general public and Mushiking: The King of Beetles for children. It also introduced the use of the Internet in arcades with Virtua Fighter 4 in 2001 and enhanced it in 2014 with ALL.Net, a network communication system for arcade games. network gaming options in arcades, as the existing infrastructure was deemed insufficient.

In 2005 Sega acquired the GameWorks arcade chain, until it was sold in 2011. Sales of arcade machines earned the company more annual revenue than console, mobile, and PC games until fiscal year 2014.

In order to fuel growth in Western markets, in 2005 changes were made to the company's leadership; Simon Jeffery became president and COO of Sega America and Mike Hayes became president and COO of Sega Europe. In 2009, due to Jeffrey's departure, Mike Hayes became president of Sega West which includes both Sega America as Sega Europe.

In the console and handheld market, Sega found success with games aimed at the Japanese market such as Hatsune Miku: Project DIVA and the Yakuza series. It also distributes games from small Japanese developers and sells western game localizations in Japan. In 2013 Sega Sammy acquired Index Corporation, which had entered bankruptcy proceedings; following the purchase, Sega implemented a corporate spin-off with Index. The latter's assets passed to Atlus, a Sega subsidiary.

In the mobile market, Sega launched its first app on the iTunes Store in 2008 with a version of Super Monkey Ball. of physical-distributed game sales worldwide in the 2010s, the company began a layoff process and closed five offices based in Europe and Australia on July 1, 2012, and decided to focus its line of business in the digital games market for PC and mobile devices. In 2012 they acquired some mobile development companies, such as Hardlight, Three Rings Design and Demiurge Studios, which became part of their subsidiaries.

To streamline their operations, Sega established operating companies for each of their business lines in the 2010s. In 2012 they created Sega Networks as a subsidiary for their mobile games. entertainment facilities. In January 2015 Sega America announced its move from San Francisco to the Atlus headquarters in Irvine, California, a move that was completed by the end of that year. From 2005 to 2015 the company's operating income improved compared to financial problems in the past, although they were not profitable every year.

2015-present: Restructuring

In April 2015, the Sega Corporation became the Sega Group, one of three groups comprising Sega Sammy Holdings. Sega Holdings Co., Ltd. was established, with four business areas under its charge. Haruki Satomi, the son of Hajime Satomi, became the company's president and CEO in April 2015. Sega Games Co., Ltd. became the legal name of Sega Corporation and continued to manage the games. while Sega Interactive Co., Ltd. was founded to take over the arcade division. Also in 2015, Sega Networks merged with Sega Games Co., Ltd. At the Tokyo Game Show in September In 2016, Sega announced that it had acquired the intellectual property and development rights to all games developed and published by Technosoft.

In April 2017, Sega Sammy Holdings announced that it would relocate its headquarters offices and national subsidiaries located in the Greater Tokyo Area to Shinagawa-ku in January 2018, in order to consolidate the various units of the headquarters headquarters, including Sega Sammy Holdings, Sammy Corporation, Sega Holdings, Sega Games, Atlus, Sammy Network, and Dartslive. Sega's previous headquarters, located in Ōta, was sold in 2019.

In June 2017 Chris Bergstresser replaced Jurgen Post as President and COO of Sega Europe, followed in June 2018 by Gary Dale, formerly of Rockstar Games and Take-Two Interactive. A few months later Ian Curran, former executive of THQ and Acclaim Entertainment, he replaced John Cheng as president and COO of Sega America. In October 2018 Sega announced good sales results in the western market for games such as Yakuza 6: The Song of Life and Persona 5, thanks to localization work by Atlus.

Despite a 35% increase in console game sales and success in its PC games line of business, profits fell 70% year-over-year in fiscal 2018, mainly due to to the mobile game market or cross-platform online games like Phantasy Star Online 2. In response, Sega announced that for its digital games it would focus on versions of games that were already part of its intellectual property and also expanding areas such as physical format games in the foreign market. The company attributed the loss to market research errors and having too many games in development. Among Sega's projects in development were a new game in the Yakuza series, Persona 5 Scramble: The Phantom Strikers, the film Sonic the Hedgehog > and the dedicated Mega Drive Mini console, which was released in September 2019. In May 2019 Sega acquired Two Point Studios, a company best known for its simulation video game Two Point Hospital.

On April 1, 2020, Sega Interactive merged with Sega Games Co., Ltd. The company was renamed Sega Corporation, while Sega Holdings Co., Ltd. was renamed Sega Group Corporation. company itself, the change was made to allow more flexibility in research and development. In April 2020 Sega sold Demiurge Studios to Demiurge co-founder Albert Reed. Demiurge stated that he would continue to support the mobile games he developed under Sega's direction. In June, as part of its 60th anniversary celebration, Sega announced the retrogaming Game Gear Micro microconsole., scheduled for release on October 6, 2020 in Japan. They also announced their Fog Gaming platform, which will harness unused processing power from overnight arcade machines in Japanese arcades to power cloud gaming applications..

Corporate structure

Sega headquarters in Tokyo, Japan.

Sega's headquarters are located in Shinagawa-ku, Tokyo, Japan. The company also has offices in Irvine, California (as Sega America), in London (as Sega Europe), in Seoul, South Korea (as Sega Publishing Korea), and in Singapore, Hong Kong, Shanghai, and Taipei. In other regions, Sega has turned to distributors for its games and consoles, such as Tectoy in Brazil. In 2012 they closed their offices in France, Germany, Spain, Australia, and the Netherlands and instead entered into distribution contracts with other companies for those markets.

Relations between regional offices have not always been smooth. Some conflicts in the 1990s may have been caused by the president of Sega Nakayama and his favoritism towards Sega America; According to Kalinske, "There were some guys in the executive offices who really didn't like that Nakayama in particular seemed to favor the US executives. It's possible that a lot of the Japanese executives were a little bit jealous and I think that played a role." the decisions that were made." In contrast, Steven L. Kent, an American writer and journalist specializing in the video game industry, stated that Nakayama intimidated American executives and that Nakayama believed that Japanese executives made the best decisions; Kent also believes that Sega America CEOs Kalinske, Stolar, and Moore feared meeting with Sega Japan executives.

Affiliates of Sega Group Corporation

Sega Club in Akihabara, Tokyo.

Following the formation of the Sega Group in 2015 and the founding of Sega Holdings (later Sega Group Corporation), the former Sega Corporation was renamed Sega Games Co., Ltd.< Under this corporate structure, Sega Games was the responsible for the market and development of home video games, while Sega Interactive Co., Ltd., was in charge of Sega's arcade game business. The two merged in 2020, becoming Sega Corporation. The company includes Sega Networks, which is responsible for the development of games for smartphones. Sega Corporation develops and publishes games for major video game consoles and arcade machines, and has not expressed any intention to redevelop consoles. According to former Sega Europe CEO Mike Brogan, “There is no future in selling hardware. In any market, through competition, hardware ends up becoming a commodity... If a company has to sell hardware, it should only promote software , even if it means damaging the hardware".

Sega Toys Co., Ltd. has created toys for children's franchises such as Oshare Majo: Love and Berry, Mushiking: King of the Beetles, Lilpri, Bakugan Battle Brawlers, Jewelpet, Rilu Rilu Fairilu, Dino Rey, and Hero Bank ; products launched in the Western market include the iDog robot dog and the Homestar home planetarium, launched in 2005 with design by renowned professional planetarium specialist Takayuki Ohira. Sega Toys also inherited the Sega Pico portable edutainment mini console and developed the Pico software. Sega operates bowling alleys and arcade arcades through its subsidiary Sega Entertainment Co., Ltd. Since opening its The first arcade in Japan in 1970, Sega has always been present in Japanese arcades, but in other territories it has not had sustained success. Its subsidiary DartsLive makes electronic dart games, while the Logistics Service of Sega distributes and repairs arcade games. In 2015 Sega and Japanese advertising agency Hakuhodo formed a joint venture, Stories LLC, to create entertainment for film and television; Stories LLC has exclusive licensing rights to adapt Sega products for film and television and has partnered with producers to develop series based on such series as Shinobi, Golden Ax, Virtua Fighter, The House of the Dead and Crazy Taxi.

Software research and development

Sega develops games through its own research and development teams. The Sonic the Hedgehog franchise, developed by its Sonic Team division, is one of the best-selling in history. Sega has also acquired development studios that are now owned by the company, such as Amplitude Studios, Atlus, Creative Assembly, Hardlight, Relic Entertainment, Sports Interactive and Two Point Studios.

Sega's software research and development teams began with a development division that operated under the company's experienced director of R&D, Hisashi Suzuki. As the market for home video game consoles grew, Sega created three Consumer Development (CS) divisions. Starting in October 1983, the development of arcade systems was extended to three teams: Sega DD No. 1, 2 and 3. Shortly after the release of the arcade car racing Power Drift, the company again restructured its teams as Sega Amusement Machine Research (Research in Recreational Machines) and Development Teams (Development Teams), or AM teams. Each arcade division was unbundled, and there was some rivalry between the arcade development divisions and the consumer products divisions. In 2000 the company restructured its arcade and console development teams into nine semi-autonomous studios led by top game designers. company. The studios were United Game Artists, Smilebit, Hitmaker, Sega Rosso, Sega Wow, Overworks, Amusement Vision, Sega AM2, and Sonic Team. Their design companies were encouraged to experiment and benefited from a relatively lax approval process. Upon assuming the company's presidency in 2003, Hisao Oguchi announced his intention to consolidate Sega's development studios. Prior to Sammy's acquisition, Sega began the process of reintegrating its subsidiaries at the parent company. Toshihiro Nagoshi, former head of Amusement Vision, remembers this period as one in which "in many ways a work of affection" of Sega teaching creatives It's the experience of running a business.

Sega still has its own development studios structured as departments of its research and development division. Sonic Team remains the research and development department of Sega CS2; the CS3 department has developed games like Phantasy Star Online 2 and Sega Interactive's AM2 department has worked on projects like the game for Soul Reverse Zero smartphones. Toshihiro Nagoshi continues to be involved in research and development as Sega's creative director while working on the Yakuza series.

Legacy

Sega is the largest developer of arcade games in the world, with more than 500 games, 76 franchises and 23 arcade system boards since 1981, and registered in 2010 in the Guinness Book of Records for this fact. Martin Robinson, a writer for Eurogamer said of Sega's arcade division: "It's bustling, expansive and very showmanship to its fullest extent. Plus, it has something that its console development cousin has often eschewed: success."

The Mega Drive (Genesis in America) is often ranked among the best consoles ever. In 2014 Jeremy Parish of USgamer credited it with energizing the market by breaking the Nintendo's virtual monopoly, helping to create modern sports video game franchises and popularizing television games in the United Kingdom. Former Sega America CEO Tom Kalinske considers Sega to have been innovative in developing games for an older demographic and by pioneering the concept of a "street date" with the simultaneous release in North America and Europe of Sonic the Hedgehog 2. The marketing campaign Sega America's i> for the release of the Genesis influenced the marketing of later consoles.

Sega officials were criticized for their management of the Saturn, though despite its commercial failure the console is highly regarded for its catalog of games, though it has been criticized for its lack of releases of notable franchises. Edge published in 2008 that "its stalwart devotees continue to remember the console that gave rise to games such as Burning Rangers, Guardian Heroes, Dragon Force and Panzer Dragoon Saga." According to Greg Sewart of 1UP.com, "the Saturn will go down in history as one of the one of the best and most problematic systems of all time".

The Dreamcast has a reputation for being ahead of its time, with some elements that became standard on consoles, such as motion controls and online functionality. Its demise has been linked to transformations in the video game industry. In his work 1001 Video Games You Must Play Before You Die, Duncan Harris wrote that the end of the Dreamcast "signaled the end of arcade game culture... Sega's console offered the hope that things weren't going to change for the worse and that the principles of fast-paced fun and bright, engaging graphics weren't going to sink into a brown-and-green swamp of realistic war games." Parish contrasted their diverse catalog with the "suffocating sense of conservatism" that permeated the industry in the following decade.

In Eurogamer, Damien McFerran called Sega's decisions in the late 1990s "a tragic spectacle of overconfidence and woefully flawed business practice." Travis Fahs of IGN, noted that since the Sammy acquisition, Sega had developed fewer games and outsourced them to more Western studios and that its arcade operations had been reduced significantly, though he wrote: "Sega was one of the biggest developers around." active, creative and productive that the industry has known and nothing that can happen to their reputation since then will change that". i> that, in the previous ten years, Sega had "betrayed" the trust of longtime fans and that he hoped to restore the image of the Sega brand. During the promotion of the Sega Genesis Mini, the company's CEO, Hiroyuki Miyazaki, refl he elaborated on Sega's history, saying, "I feel like Sega has never been the champion, at the top of all video game companies, but I feel like a lot of people love Sega for its underdog image." In his 2018 book The Sega Arcade Revolution, Horowitz related Sega's decline in the arcade industry after 1995 to major changes in the industry; he argued that its most serious problems stemmed from the loss of its creative talent, particularly Yūji Naka and Yū Suzuki, following Sammy's takeover, but concluded that "Sega is now in its best financial situation of the two last decades. The company has resisted."