Sega Corporation (株式会社セガ Kabushiki gaisha Sega), usually styled as SEGA, is a multinational video game software developer and an arcade software and hardware development company headquartered in Ōta, Tokyo, Japan, with various offices around the world. Sega previously developed and manufactured its own brand of home video game consoles from 1983 to 2001, but a restructure was announced on January 31, 2001 that ceased continued production of its existing home console, effectively exiting the company from the home console business.[3] While arcade development would continue unchanged, the restructure shifted the focus of the company's home video game software development to consoles developed by various third-party manufacturers. They are responsible for famous video game franchises such as Sonic the Hedgehog.
Sega's head offices, as well as the main office of its domestic division, Sega Corporation (Japan), are located in Ōta, Tokyo, Japan. Sega's European division, Sega Europe Ltd., is headquartered in the Brentford area of London in the United Kingdom. Sega's North American division, Sega of America Inc., is headquartered in San Francisco; having moved there from Redwood City, California in 1999.[4][5] Sega Australia is headquartered in Sydney, and Sega Publishing Korea is headquartered in Jongno, Seoul, Korea. The company also has smaller offices in France, Germany, the Netherlands, Spain, and Italy.
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Sega's roots can be traced back to a small company based in Honolulu, Hawaii named Standard Games, which began operations in 1940. In 1951, Raymond Lemaire and Richard Stewart moved the company to Tokyo, Japan to develop and distribute coin-operated amusement-type games such as jukeboxes and slot machines, and renamed it Service Games. Within a few years Service Games began importing these machines to American military bases throughout Japan.
In 1954, David Rosen, an American officer in the Air Force, launched a two-minute photo booth business in Tokyo. This company eventually became Rosen Enterprises, and in 1957 began importing coin-operated games to Japan. By 1965, Rosen Enterprises grew to a chain of over 200 arcades, with Service Games its only competitor. Rosen then orchestrated a merger between Rosen Enterprises and Service Games, who by then had their own factory facilities, becoming chief executive of the new company, Sega Enterprises, which derived its name from the first two letters of SErvice GAmes.[6]
Within a year, Sega began the transition from importer to manufacturer, with the release of the Rosen designed submarine simulator game Periscope. The game at that time sported innovative light and sound effects, eventually becoming quite successful in Japan. It was soon exported to both Europe and the United States, becoming the world's first 25 cent arcade game.[6]
In 1969, Rosen sold Sega to Gulf & Western Industries, remaining on however as CEO of the Sega division. Under Rosen's leadership, Sega continued to grow and prosper, and in 1972 G&W made Sega Enterprises a subsidiary, and took the company public. Sega prospered heavily from the arcade gaming boom of the late 1970s, with revenues climbing to over $100 million by 1979.[6]
In 1982, Sega's revenues would eclipse $214 million, and they introduced the industry's first three-dimensional game, SubRoc 3D. The following year, an overabundance of arcade games led to the video game crash, causing Sega's revenues to drop to $136 million. Sega then pioneered the use of laser disks in the video game Astronbelt, and designed and released its first home video game console, the SG-1000. Despite this, G&W sold the U.S. assets of Sega Enterprises that same year to pinball manufacturer Bally Manufacturing Corporation, and in January 1984 Rosen resigned his post with the company. He was replaced by Hayao Nakayama, who had been serving as the head of Sega's Japanese operations after his own company, Esco Boueki (Esco Trading) was acquired by Sega in 1979.[7]
The Japanese assets of Sega were purchased for $38 million by a group of investors led by Rosen and Hayao Nakayama, a Japanese businessman who owned Esco Boueki (Esco Trading) an arcade game distribution company[7] that had been acquired by Rosen in 1979. Nakayama became the new CEO of Sega, and Rosen became head of its subsidiary in the United States.
In 1984, the multibillion dollar Japanese conglomerate CSK bought Sega, renamed it to Sega Enterprises Ltd., headquartered it in Japan, and two years later, shares of its stock were being traded on the Tokyo Stock Exchange. David Rosen's friend, Isao Okawa, the chairman of CSK, became chairman of Sega.
In 1986, Sega of America was poised to take advantage of the resurgent video game market in the United States.
Sega would also release the Sega Master System and the first Alex Kidd game, who would be Sega's unofficial mascot until 1991, when Sonic the Hedgehog took over. While the Master System was technically superior to the NES,[8] it failed to capture market share in North America and Japan due to highly aggressive strategies by Nintendo and ineffective marketing by Tonka in the United States. It performed somewhat better, however, in the UK, Australia, New Zealand, and Brazil.
With the introduction of the Mega Drive/Genesis, Sega of America launched an anti-Nintendo campaign to carry the momentum to the new generation of games, with its slogan "Genesis does what Nintendon't." This was initially implemented by Sega of America President Michael Katz.[9] When Nintendo launched its Super Nintendo Entertainment System in 1991, Sega changed its slogan to "Welcome to the next level."
The same year, Sega of America's leadership passed from Michael Katz to Tom Kalinske, who further escalated the "console war" that was developing.[10] As a preemptive strike against the release of the Super Nintendo, Sega re-branded itself with a new game and mascot, Sonic the Hedgehog. With his hip attitude and style, he was marketed to seem "cooler" than Mario, Nintendo's mascot.[11] This shift led to a wider success for the Genesis and would eventually propel Sega to 65% of the market in North America for a brief time.[12] Simultaneously, after much previous delay, Sega released the moderately successful Mega-CD as an add-on feature, allowing for extra storage in games due to their CD-ROM format, giving developers the ability to make longer, more sophisticated games, the most popular of which was Sega’s own Sonic CD.[13] Sonic the Hedgehog 2 was also released at this time, and became the most successful game Sega ever made,[14] selling six million copies as of June 2006.[14]
In 1994, Sega released the Sega 32X in an attempt to upgrade the Mega Drive/Genesis to the standards of more advanced systems. It sold well initially, but had problems with lack of software and hype about the upcoming Sega Saturn and Sony's PlayStation.[15] Within a year, it was in the bargain bins of many stores.[16] Also in 1994, Sega launched the Sega Channel, a subscription gaming service delivered by local cable companies affiliated with Time-Warner Cable, or TCI, through which subscribers received a special cartridge adapter that connected to the cable connection. At its peak, the Sega Channel had approximately 250,000 subscribers.[17]
In 1992, Sega lost the Sega v. Accolade case, which involved independently produced software for the Sega Mega Drive/Genesis console. Accolade had copied a small amount of Sega's code to achieve compatibility with the Sega Genesis platform. The verdict set a precedent that copyrights do not extend to non-expressive content in software that a system requires to be present to run the software.[18] The case in question stems from the nature of the console video game market. Hardware companies often sell their systems at or below cost, and rely on other revenue streams such as in this case, game licensing. Sega was attempting to "lock out" game companies from making Mega Drive/Genesis games unless they paid Sega a fee (something its competition has done in the past). Their strategy was to make the hardware reject any cartridge that did not include a Sega trademark. If an unlicensed company included this trademark in their game, Sega could sue the company for trademark infringement. Though Sega lost this lawsuit, all later Sega systems seemed to incorporate similar hardware requirements.
On May 11, 1995, Sega released the Sega Saturn (with Virtua Fighter) in the American market, which utilized two 32-bit processors and preceded both the Sony PlayStation and the Nintendo 64. However, poor sales in the West (including the traditional stronghold markets in Europe) led to the console being abandoned.[11] The lack of a strong Sonic title (and titles based on other Genesis franchises) and its high price point in comparison to the PlayStation were among the reasons for the failure of the console.[19] Notable titles include several titles exclusive to the Japanese market, like Radiant Silvergun and Sakura Taisen, involving fighting games like Last Bronx, rail shooters, such as Panzer Dragoon and The House of the Dead and a few well regarded RPGs; Panzer Dragoon Saga, Grandia, Albert Odyssey: Legend of Eldean, Shining Force 3, Dragon Force, Shining Wisdom, Shining the Holy Ark and Magic Knight Rayearth
In 1997, Sega entered into a short-lived merger with Bandai. However it was later called off, citing "cultural differences" between the two companies.[20] Entertainment fun center GameWorks was founded in 1997 as well as the now defunct Sega World theme parks.
On November 27, 1998, Sega launched the Dreamcast game console, its final one, in Japan. The Dreamcast was competitively priced, partly due to the use of off-the-shelf components, but it also featured technology that allowed for more technically impressive games than its direct competitors, the Nintendo 64 and PlayStation. An analog 56k modem was also included, allowing gamers to play multi-player games online on a home console for the first time, featuring titles such as the action-puzzle title Chu Chu Rocket, Phantasy Star Online, the first console-based MMORPG, and the innovative Alien Front Online, the first console game with online voice chat.
The Dreamcast's launch in Japan was a failure. Launching with a small library of software and in the shadow of the upcoming PS2, the system would not gain great success, despite several successful games in the region. The Western launch a year later was accompanied by a large amount of both first-party and third-party software and an aggressive marketing campaign. It was extremely successful and earned the distinction of "most successful hardware launch in history," selling a then-unprecedented 500,000 consoles in its first week in North America.[21] On November 1, 2000, Sega changed its company name from Sega Enterprises, Ltd to Sega Corporation.[22] Sega was able to hold onto this momentum in the US almost until the launch of Sony's PlayStation 2. The Dreamcast is home to several innovative and critically acclaimed games of the time, including one of the first cel-shaded titles, Jet Set Radio (Jet Grind Radio in North America); Seaman, a game involving communication with a fish-type creature via microphone; a rhythm game involving the use of maracas, Samba de Amigo; and Shenmue, an adventure game of vast scope with freeform gameplay and a striking attempt at creating a detailed in-game city. Despite receiving critical acclaim, these titles failed to garner much public attention in the face of the upcoming PlayStation 2 launch.
Faced with debt and competition from Sony, Nintendo, and Microsoft, Sega discontinued the Dreamcast hardware in 2001. The final game Sega released for it was Puyo Puyo Fever in 2004.
In late 1999, Sega Enterprises Chairman Isao Okawa spoke at an Okawa Foundation meeting, saying that Sega's focus in the future will shift from hardware to software, but adding that they were still fully behind the Dreamcast. On January 23, 2001 a story ran in Nihon Keizai Shimbun that said Sega was going to cease production of the Dreamcast and develop software for other platforms.[23] After the initial denial, Sega Japan then put out a press release confirming they were considering producing software for PlayStation 2 and Game Boy Advance as part of their "New Management Policy".[24][25] Then on January 31, 2001, Sega of America officially announced they were becoming a third-party software publisher.[3]
The company has since developed primarily into a platform-neutral software company, known as a "third-party publisher", that creates games that will launch on a variety of game consoles produced by other companies, many of their former rivals, the first of which was a port of ChuChu Rocket! to Nintendo's Game Boy Advance.
Arcade units are still being produced, first under the Sega NAOMI name, and then with subsequent releases of the Sega NAOMI 2, Sega Hikaru, Sega Chihiro, Triforce (in collaboration with Nintendo and Namco), Sega Lindbergh, and more recently, RingEdge.
By March 31, 2002, Sega had five consecutive fiscal years of net losses.[30] To help with Sega's debt, CSK founder Isao Okawa, before his death in 2001, gave the company a $695.7 million private donation,[31] and also talked to Microsoft about a sale or a merger with their Xbox division, but those talks failed.[32] On February 13, 2003, Sega announced plans to merge with Sammy, but plans fell through. Discussions also took place with Namco, Bandai, Electronic Arts and again with Microsoft.
The shift to software development affected Sega's Australian operations. Sega Ozisoft ceased to operate in its current form with Sega Enterprises selling its share in Sega Ozisoft and was bought over by Infogrames in 2002. This led to Infogrames having an Australian presence for the first time but decided to change the company name for its Australian operations to GameNation. Sega then went to find an Australian distributor, and made a deal with THQ Asia Pacific, who at the time until 2006 had deals with Capcom. In 2003 GameNation was changed to Atari Australia and then challenged THQ Asia Pacific to the distribution rights to Sega's IP's in Australia but failed. In early 2008 Sega Corporation announced that Sega would re-establish an Australian presence, effectively ending THQ's distribution of Sega's products in Australia and would be a subsidiary of Sega of Europe, rather than being a separate local subsidiary like Atari Australia, Nintendo Australia and THQ Asia Pacific.
In August 2003, Sammy bought the outstanding 22% of shares that CSK had,[33] and Sammy chairman Hajime Satomi became CEO of Sega. With the Sammy chairman at the helm of Sega, it has been stated that Sega's activity will focus on its profit-making arcade business rather than its loss-making home software development. In late December, Sega released Sonic Heroes selling over 2 million copies. It was the first multi-platform Sonic game, with identical versions on the Xbox, the PlayStation 2, and the GameCube.
During mid-2004, Sammy bought a controlling share in Sega Corporation at a cost of $1.1 billion, creating the new company Sega Sammy Holdings, one of the biggest game manufacturing companies in the world. With the merger, Sega reabsorbed its second party studios and began to reorganize them. Tetsuya Mizuguchi, father of Sega Rally and Space Channel 5, cited the changes in the corporate culture after the Sega-Sammy merger.[34]
On January 25, 2005, Sega's Visual Concepts, a studio Sega dubbed a "1.5" developer, was sold to Take-Two Interactive. Sega used the parlance "1.5" as a mid-point of sorts between first-party and second-party developer status: that is, a wholly owned studio that would otherwise be known as a first-party developer, but was outside of internal development teams. Visual Concepts was known for many Sega Sports games including the ESPN NFL Football series, formerly NFL2K. The sale also came with Visual Concept's wholly owned subsidiary Kush Games. Take Two subsequently announced the start of the publishing label 2K Games because of this purchase.
By the end of 2005, Sega experienced strong earnings growth across multiple divisions. Contributing to the company's success were strong pachinko sales,[35] and sales of software titles Ryu Ga Gotoku (known as Yakuza outside of Asia) and Mushiking.
In an effort to appeal to western tastes, they partnered with Obsidian Entertainment to develop a new RPG for the PlayStation 3, Xbox 360, and PC based on the Aliens franchise, which was subsequently cancelled.[36] The partnership was the latest in a series of collaborations with western video game studios, including Monolith Productions (Condemned: Criminal Origins), Bizarre Creations (The Club), and Silicon Knights (who have yet to announce their project with Sega).
That desire to have a more Western appeal for Sega was shortly followed up by Sega acquiring British developer Sports Interactive after a successful run of publishing Football Manager 2005 and 2006, in which they managed to sell 1.5 million copies,[37] the deal was said to be worth in the region of £30 million ($52 million) by Miles Jacobson, Sports Interactive’s Managing Director.[38] This was, however, not the only developer Sega acquired, as they also purchased American developer Secret Level. Although the terms of the deal were not disclosed,[39] Secret Level had begun work before being bought by Sega to “recreate a classic Sega franchise" for the PS3 and Xbox 360 in July 2005, which was revealed to be Golden Axe: Beast Rider later that year.
While Sega continued its expansion in the West, on May 8, 2006, it was announced that Sega of Japan had begun helping famed Sega developer and Sonic Team head Yuji Naka (known for being the main programmer for the original Sonic the Hedgehog games and Nights into Dreams...) to start up his own company titled "Prope" (Latin for "beside" and "near future")[40] in which Sega helped provide 10% startup capital[41] and have the option to publish games produced from the studio if they wished to.
Due to the continued success of Sega’s software sales, the company reported on May 17, 2006 a 31% rise in net profits from that of the previous year of the period ending March 31, 2006, being posted at ¥66.2 billion ($577 million), as well as an increase in operating profit growing by 13% from the previous year, being posted at ¥553.2 billion ($4.82 billion).[42] Notable titles to have helped Sega increase profits in the West, such as Shadow the Hedgehog (which sold over a million copies)[43] and Sonic Riders, while in Japan, games such as Yakuza, Mushiking, and Brain Trainer Portable continued to have strong sales.
Although Sega seemed poised to continue increasing profits, the company reported a massive drop of 93% profits for the period ending June 30, 2006 compared to the same period the previous year. Net income for the company dropped from $98.3 million (a year earlier) to $7.12 million for this period as well as total sales dropping from $926.5 million to $809.1 million,[44] Sega reported that the decrease in profits was due to no significant big releases by its slot machine division.
Despite this, Sega reported in November a massive 52% rise in profits for the periods between April and September 2006, compared to the same period last year.[45] Software sales for the company had also increased with 5.75 million. Of those units, 1.76 million were sold in Japan, 1.59 million in Europe, 2.36 million in the US, and 30,000 in other regions.[46] a number of titles were said to have performed well, in particular Super Monkey Ball: Touch & Roll for the Nintendo DS and Football Manager 2006 for the Xbox 360 having sold well. While Sega performed better in 2006, they had slashed their forecasts for the year ending March 2007 by 20% with an anticipated profit of $536.7 million, down from the initial profits of $656.7 million.
On August 26, 2007, IGN Australia announced that Sega would re-establish itself in Australia, ending THQ Asia Pacific's distribution of Sega products in Australia. Sega Australia has a very close relationship with Nintendo Australia, despite Sega Ozisoft and NAL previously being rivals in the Australian gaming market. Sega Australia currently do not distribute in New Zealand, instead like most other Australian publishers, they opt to let retailers take care of the distribution e.g. EB Games Australia and Kmart.
Continuing to prepare more games for the Western market, Sega was able to bridge a partnership with New Line Cinema in September to develop a game for the movie tie-in game The Golden Compass[47] and also partnered themselves with Fox to develop two new games based on the Alien franchise.[48] Sega then assigned critically acclaimed developers Gearbox software to develop a first person shooter (Aliens: Colonial Marines) and Obsidian Entertainment to develop an RPG based on the popular film franchise for the PlayStation 3, Xbox 360, and PC. The latter was cancelled for undisclosed reasons by Sega. However, as of January 2011, Aliens: Colonial Marines is still in production by Gearbox. Sega has also been publishing games from independent studios (such as Platinum Games), and is currently considering turning them into franchises.
Sega has also designed an online flash game site dubbed "PlaySEGA," which includes both original games and ports of classic games, with retro Sonic games being promised in the long run.[49] Users of this site earn various amounts of "PlaySEGA Rings", which they can use to customize and house their avatar or enter weekly cash drawings.
In September 2009, evidence was uncovered[50] that suggests Sega is expanding into the online gambling sector with the launch of an online casino and poker room in October 2009. In 2010, Sega published a sequel to the original Sonic series with Sonic The Hedgehog 4: Episode I.
Currently, the Consumer R&D Division focuses on development of game software for consoles, handhelds and mobiles. The division is headed by Toshihiro Nagoshi[51] The Amusement R&D Division focuses on the development of game software for arcade and slot machines. The division is headed by Hiroshi Yagi.[51]
The Sega Seal of Quality was an icon placed on the packaging of all video games that had Sega's official approval to be played on a Sega console system. As was the case with the Nintendo Seal of Quality, the intention behind the "seal" was to avoid the mistakes that led to the Video Game Crash of 1983 by ensuring that games were compatible with the intended Sega console system, and to censor content that Sega felt was inappropriate for their image.
The Sega Seal of Quality was an icon that Sega put on its own video games along with certain video games published by a third party software developer. As was the case with the Nintendo Seal of Quality, the Sega seal appeared on a video game's box and marketing as a means of informing the consumer that Sega had previewed the game before its release to ensure that the game was fully compatible for its intended home console system, and had met a certain level of Sega's standard of quality (in terms of graphics, sound, challenge, and possible offensive content). However, the Sega Seal of Quality was otherwise very different than the Nintendo Seal of Quality.
Sega never required a third-party software developer to earn the official Sega Seal of Quality as a precondition for publication, although most developers chose to do so. Furthermore, a game could earn the seal even if it contained certain themes that its bigger competitor, Nintendo, would have prohibited: blood, scantily-clad female villains, and graphic violence. Hence, the Sega Seal of Quality was given out to Sega Genesis games that depicted blood (Splatterhouse 2, Techno Cop), and scantily clad females (Streets of Rage, Final Fight CD).
Video games released on a Sega home console system were still censored for other taboo or controversial depictions; i.e. profanity, nudity, prostitution, homosexuality. However, this was done by the software developer and not as a requirement issued by Sega to the developer.
In 1993, Sega of America permitted Acclaim to keep the graphic violence and gore in its port of Midway's popular arcade game titled Mortal Kombat. As this game and other games sparked a national controversy over the violent content in video games, Sega created the Videogame Rating Council to give a descriptive rating to every game sold on a Sega home console system in the United States. This rating, along with the seal, would appear on the game's box and marketing. The Videogame Rating Council was phased out in 1994 with the adoption of the industry wide Entertainment Software Ratings Board.
Sega gradually shifted the scope of their seal of quality to focus less on content and more on assuring consumers that a game was fully compatible with its intended home console system. The Sega Seal is no longer seen on any games as Sega stopped producing games consoles, home or handheld, after the discontinual of the Dreamcast in March 2001.
Sega has had a long history of different slogans and ad campaigns.
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