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Sega

Sega Corporation[a] is a Japanese multinational video game and entertainment company headquartered in Shinagawa, Tokyo. Its international branches, Sega of America and Sega Europe, are headquartered in Irvine, California and London, respectively. Its division for the development of both arcade games and home video games, Sega Games, has existed in its current state since 2020; from 2015 to that point, the two had made up separate entities known as Sega Games and Sega Interactive Co., Ltd. Sega is a subsidiary of Sega Sammy Holdings. From 1983 until 2001, Sega also developed video game consoles.

Sega Corporation
Logo since 1976
Headquarters in Tokyo, Japan
Native name
株式会社セガ
Kabushiki gaisha Sega
Formerly
  • Nihon Goraku Bussan
  • Sega Enterprises, Ltd.
  • Sega Games Co., Ltd.
TypeSubsidiary
IndustryVideo games
PredecessorService Games of Japan
FoundedJune 3, 1960; 62 years ago (June 3, 1960)
Founders
  • Martin Bromley
  • Richard Stewart
Headquarters
Shinagawa, Tokyo
,
Japan
Area served
Worldwide
Key people
  • Haruki Satomi
    (Chairman and CEO)
  • Shigeru Yamashita
    (Vice Chairman)
  • Yukio Sugino
    (President and COO)
  • Ian Curran
    (President, Sega​ of America)
  • Gary Dale
    (President, Sega​ Europe)
Products
Revenue ¥247.7 billion (2020)
¥14.8 billion (2020)
Number of employees
3,238 (2020) 
ParentSega Sammy Holdings
DivisionsList of development studios
Subsidiaries
Websitesega.com
Footnotes / references
(PDF). Sega Sammy Holdings. May 13, 2020. Archived from the original (PDF) on May 15, 2020. Retrieved May 15, 2020.
"Notice of Changes of Directors and Executive Officers at SEGA SAMMY HOLDINGS INC. and its Major Subsidiaries" (PDF). Sega Sammy Holdings. February 28, 2020. Retrieved May 17, 2020.

Sega was founded by American businessmen Martin Bromley and Richard Stewart as Nihon Goraku Bussan[b] on June 3, 1960; shortly after, the company acquired the assets of its predecessor, Service Games of Japan. Five years later, the company became known as Sega Enterprises, Ltd., after acquiring Rosen Enterprises, an importer of coin-operated games. Sega developed its first coin-operated game, Periscope, in 1966. Sega was sold to Gulf and Western Industries in 1969. Following a downturn in the arcade business in the early 1980s, Sega began to develop video game consoles, starting with the SG-1000 and Master System, but struggled against competitors such as the Nintendo Entertainment System. In 1984, Sega executives David Rosen and Hayao Nakayama led a management buyout, with backing from CSK Corporation.

Sega released its next console, the Sega Genesis (known as the Mega Drive outside North America), in 1988. The Genesis struggled against the competition in Japan, but found success overseas after the release of Sonic the Hedgehog in 1991 and briefly outsold its main competitor, the Super Nintendo Entertainment System, in the U.S. Later in the decade, Sega suffered several commercial failures such as the 32X, Saturn and Dreamcast consoles. In 2001, Sega stopped manufacturing consoles to become a third-party developer and publisher, and was acquired by Sammy Corporation in 2004. In the years since, Sega has been more profitable. Sega Holdings Co. Ltd. was established in 2015; Sega Corporation was renamed Sega Games Co., Ltd., and its arcade, entertainment and toy divisions separated into other companies. In 2020, Sega Games and Sega Interactive merged and were renamed Sega Corporation.

Sega has produced several multi-million-selling game franchises, including Sonic the Hedgehog, Total War and Yakuza. Sonic, Sega's mascot, is internationally recognized. Sega is one of the world's most prolific arcade game producers, with long-running series such as Virtua Fighter and Initial D Arcade Stage. Its name and branding are used for affiliated companies that operate amusement arcades and produce other entertainment products, including Sega Toys; however, these are largely separate ventures. Sega is recognized for its video game consoles, creativity and innovations. In more recent years, it has been criticized for its business decisions and the quality of its creative output.

History

1940–1982: Origins and arcade success

 
The Diamond 3 Star was a coin-operated slot machine produced by Sega in the 1950s.

In May 1940, American businessmen Martin Bromley, Irving Bromberg, and James Humpert formed Standard Games in Honolulu, Hawaii. Their aim was to provide coin-operated amusement machines, including slot machines, to military bases as the increase in personnel with the onset of World War II would create demand for entertainment. After the war, the founders sold Standard Games in 1945, and in 1946 established Service Games, named for the military focus.[3] After the United States government outlawed slot machines in its territories in 1952, Bromley sent employees Richard Stewart and Ray LeMaire to Tokyo to establish Service Games of Japan to provide coin-operated slot machines to U.S. bases in Japan.[4][5][6] A year later, all five men established Service Games Panama to control the entities of Service Games worldwide. The company expanded over the next seven years to include distribution in South Korea, the Philippines, and South Vietnam.[7] The name Sega, an abbreviation of Service Games,[8] was first used in 1954 on a slot machine, the Diamond Star.[7]

Due to notoriety arising from investigations by the US government into criminal business practices, Service Games of Japan was dissolved on May 31, 1960.[7] On June 3,[9] Bromley established two companies to take over its business activities, Nihon Goraku Bussan and Nihon Kikai Seizō.[c] The two new companies purchased all of Service Games of Japan's assets. Kikai Seizō, doing business as Sega, Inc., focused on manufacturing slot machines. Goraku Bussan, doing business under Stewart as Utamatic, Inc., served as a distributor and operator of coin-operated machines, particularly jukeboxes.[7][10][11] The companies merged in 1964, retaining the Nihon Goraku Bussan name.[7]

During the same time frame, David Rosen, an American officer in the United States Air Force stationed in Japan, launched a photo booth business in Tokyo in 1954.[4] This company became Rosen Enterprises, and in 1957 began importing coin-operated games into Japan. In 1965, Nihon Goraku Bussan acquired Rosen Enterprises to form Sega Enterprises, Ltd.[d] Rosen was installed as the CEO and managing director, while Stewart was named president and LeMaire was the director of planning. Shortly afterward, Sega stopped leasing to military bases and moved its focus from slot machines to coin-operated amusement machines.[12] Its imports included Rock-Ola jukeboxes, pinball games by Williams, and gun games by Midway Manufacturing.[13]

 
Former logo

Because Sega imported second-hand machines, which required frequent maintenance, it began constructing replacement guns and flippers for its imported games. According to former Sega director Akira Nagai, this led to the company developing its own games.[13] The first arcade electro-mechanical game (EM game) Sega manufactured was the submarine simulator Periscope, released worldwide in the late 1960s. It featured light and sound effects considered innovative and was successful in Japan. It was then exported to malls and department stores in Europe and the United States and helped standardize the 25-cent-per-play cost for arcade games in the U.S. Sega was surprised by the success, and for the next two years, the company produced and exported between eight and ten games per year.[14] The worldwide success of Periscope led to a "technological renaissance" in the arcade industry, which was reinvigorated by a wave of "audio-visual" EM novelty games that followed in the wake of Periscope during the late 1960s to early 1970s.[15] However, rampant piracy led Sega to cease exporting its games around 1970.[16]

In 1969, Sega was sold to the American conglomerate Gulf and Western Industries, although Rosen remained CEO. In 1974, Gulf and Western made Sega Enterprises, Ltd., a subsidiary of an American company renamed Sega Enterprises, Inc. Sega released Pong-Tron, its first video-based game, in 1973.[16] Despite late competition from Taito's hit arcade game Space Invaders in 1978,[13] Sega prospered from the arcade video game boom of the late 1970s, with revenues climbing to over US$100 million by 1979. During this period, Sega acquired Gremlin Industries, which manufactured microprocessor-based arcade games,[17] and Esco Boueki, a coin-op distributor founded and owned by Hayao Nakayama. Nakayama was placed in a management role of Sega's Japanese operations.[18] In the early 1980s, Sega was one of the top five arcade game manufacturers active in the United States, as company revenues rose to $214 million.[19] 1979 saw the release of Head On, which introduced the "eat-the-dots" gameplay Namco later used in Pac-Man.[20] In 1981, Sega licensed Frogger, its most successful game until then.[21] In 1982, Sega introduced the first game with isometric graphics, Zaxxon.[22]

1982–1989: Entry into the game console market and arcade resurgence

 
Sega's first video game console, the SG-1000

Following a downturn in the arcade business starting in 1982, Gulf and Western sold its North American arcade game manufacturing organization and the licensing rights for its arcade games to Bally Manufacturing in September 1983.[23][24][25] Gulf and Western retained Sega's North American R&D operation and its Japanese subsidiary, Sega Enterprises, Ltd. With its arcade business in decline, Sega Enterprises, Ltd. president Nakayama advocated for the company to use its hardware expertise to move into the home consumer market in Japan.[26] This led to Sega's development of a computer, the SC-3000. Learning that Nintendo was developing a games-only console, the Famicom, Sega developed its first home video game system, the SG-1000, alongside the SC-3000.[27] Rebranded versions of the SG-1000 were released in several other markets worldwide.[27][28][29][30] The SG-1000 sold 160,000 units in 1983, which far exceeded Sega's projection of 50,000 in the first year but was outpaced by the Famicom.[27] This was in part because Nintendo expanded its game library by courting third-party developers, whereas Sega was hesitant to collaborate with companies with which it was competing in the arcades.[27]

In November 1983, Rosen announced his intention to step down as president of Sega Enterprises, Inc. on January 1, 1984. Jeffrey Rochlis was announced as the new president and COO of Sega.[31] Shortly after the launch of the SG-1000, and the death of company founder Charles Bluhdorn, Gulf and Western began to sell off its secondary businesses.[32] Nakayama and Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation, a prominent Japanese software company.[33] Sega's Japanese assets were purchased for $38 million by a group of investors led by Rosen and Nakayama. Isao Okawa, head of CSK, became chairman,[18] while Nakayama was installed as CEO of Sega Enterprises, Ltd.[34]

 
The Master System, released in North America in 1986 and Europe in 1987

In 1985, Sega began working on the Mark III,[35] a redesigned SG-1000.[36] For North America, Sega rebranded the Mark III as the Master System,[37] with a futuristic design intended to appeal to Western tastes.[38] The Mark III was released in Japan in October 1985.[39] Despite featuring more powerful hardware than the Famicom in some ways, it was unsuccessful at launch. As Nintendo required third-party developers not to publish their Famicom games on other consoles, Sega developed its own games and obtained the rights to port games from other developers.[35] To help market the console in North America, Sega planned to sell the Master System as a toy, similar to how Nintendo had done with the Nintendo Entertainment System. Sega partnered with Tonka, an American toy company, to make use of Tonka's expertise in the toy industry.[40] Ineffective marketing by Tonka handicapped sales of the Master System.[41] By early 1992, production had ceased in North America. The Master System sold between 1.5 million and 2 million units in the region.[42] This was less market share in North America than both Nintendo and Atari, which controlled 80 percent and 12 percent of the market respectively.[43] The Master System was eventually a success in Europe, where its sales were comparable to the NES.[44] As late as 1993, the Master System's active installed user base in Europe was 6.25 million units.[44] The Master System has had continued success in Brazil. New versions continue to be released by Sega's partner in the region, Tectoy.[45] By 2016, the Master System had sold 8 million units in Brazil.[46]

During 1984, Sega opened its European division of arcade distribution, Sega Europe.[47] It re-entered the North American arcade market in 1985 with the establishment of Sega Enterprises USA at the end of a deal with Bally. The release of Hang-On in 1985 would prove successful in the region, becoming so popular that Sega struggled to keep up with demand for the game.[48] UFO Catcher was introduced in 1985 and as of 2005 was Japan's most commonly installed claw crane game.[49] In 1986, Sega of America was established to manage the company's consumer products in North America, beginning with marketing the Master System.[50] During Sega's partnership with Tonka, Sega of America relinquished marketing and distribution of the console and focused on customer support and some localization of games.[40] Out Run, released in 1986, became Sega's best selling arcade cabinet of the 1980s.[51] Former Sega director Akira Nagai said Hang-On and Out Run helped to pull the arcade game market out of the 1982 downturn and created new genres of video games.[13]

1989–1994: Genesis, Sonic the Hedgehog, and mainstream success

 
The Sega Genesis (second North American version pictured), Sega's successor to the Master System, took control of the 16-bit console market in much of the world during the fourth generation of video game consoles.

With the arcade game market once again growing, Sega was one of the most recognized game brands at the end of the 1980s. In the arcades, the company focused on releasing games to appeal to diverse tastes, including racing games and side-scrollers.[52] Sega released the Master System's successor, the Mega Drive, in Japan on October 29, 1988. The launch was overshadowed by Nintendo's release of Super Mario Bros. 3 a week earlier. Positive coverage from magazines Famitsu and Beep! helped establish a following, with the latter launching a new publication dedicated to the console, but Sega shipped only 400,000 units in the first year.[53]

The Mega Drive struggled to compete against the Famicom[54] and lagged behind Nintendo's Super Famicom and NEC's PC Engine in Japanese sales throughout the 16-bit era.[55] For the North American launch, where the console was renamed Genesis, Sega had no sales and marketing organization. After Atari declined an offer to market the console in the region, Sega launched it through its own Sega of America subsidiary. The Genesis was launched in New York City and Los Angeles on August 14, 1989, and in the rest of North America later that year.[56] The European version of the Mega Drive was released in September 1990.[57]

Former Atari executive and new Sega of America president Michael Katz developed a two-part strategy to build sales in North America. The first part involved a marketing campaign to challenge Nintendo and emphasize the more arcade-like experience available on the Genesis,[56][58] with slogans including "Genesis does what Nintendon't".[53] Since Nintendo owned the console rights to most arcade games of the time, the second part involved creating a library of games which used the names and likenesses of celebrities, such as Michael Jackson's Moonwalker and Joe Montana Football.[4][59] Nonetheless, Sega had difficulty overcoming Nintendo's ubiquity in homes.[60] Despite being tasked by Nakayama to sell a million units in the first year, Katz and Sega of America sold only 500,000.[53]

 
Characterized by the matching blue color of its long-standing logo, Sonic the Hedgehog has been Sega's mascot since 1991.[61]

After the launch of the Genesis, Sega sought a new flagship line of releases to compete with Nintendo's Mario series.[62] Its new character, Sonic the Hedgehog, went on to feature in one of the best-selling video game franchises in history.[63][64] Sonic the Hedgehog began with a tech demo created by Yuji Naka involving a fast-moving character rolling in a ball through a winding tube; this was fleshed out with Naoto Ohshima's character design and levels conceived by designer Hirokazu Yasuhara.[65] Sonic's color was chosen to match Sega's cobalt blue logo; his shoes were inspired by Michael Jackson's boots, and his personality by Bill Clinton's "can-do" attitude.[66][67][68]

Nakayama hired Tom Kalinske as CEO of Sega of America in mid-1990, and Katz departed soon after. Kalinske knew little about the video game market, but surrounded himself with industry-savvy advisors. A believer in the razor-and-blades business model, he developed a four-point plan: cut the price of the Genesis, create a U.S. team to develop games targeted at the American market, expand the aggressive advertising campaigns, and replace the bundled game Altered Beast with Sonic the Hedgehog. The Japanese board of directors disapproved,[60] but it was approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it."[53]

In large part due to the popularity of Sonic the Hedgehog,[60] the Genesis outsold its main competitor, the Super Nintendo Entertainment System (SNES), in the United States nearly two to one during the 1991 holiday season. By January 1992, Sega controlled 65 percent of the 16-bit console market.[69] Sega outsold Nintendo for four consecutive Christmas seasons[70] due to the Genesis' head start, lower price, and a larger library compared to the SNES at release.[71] Nintendo's dollar share of the U.S. 16-bit market dropped from 60% at the end of 1992 to 37% at the end of 1993,[72] Sega claimed 55% of all 16-bit hardware sales during 1994,[73] and the SNES outsold the Genesis from 1995 through 1997.[74][75][76]

In 1990, Sega launched the Game Gear, a handheld console, to compete against Nintendo's Game Boy. The Game Gear was designed as a portable version of the Master System and featured a full-color screen, in contrast to the monochrome Game Boy screen.[77] Due to its short battery life, lack of original games, and weak support from Sega, the Game Gear did not surpass the Game Boy, having sold approximately 11 million units.[78] Sega launched the Mega-CD in Japan on December 1, 1991, initially retailing at JP¥49,800.[79] The add-on uses CD-ROM technology. Further features include a second, faster processor, vastly expanded system memory, a graphics chip that performed scaling and rotation similar to Sega's arcade games, and another sound chip.[80][81] In North America, it was renamed the Sega CD and launched on October 15, 1992, with a retail price of US$299.[80] It was released in Europe as the Mega-CD in 1993.[79] The Mega-CD sold only 100,000 units during its first year in Japan, falling well below expectations.[79]

 
Larger Virtua Formula installation of Virtua Racing at the Sega VirtuaLand arcade in Luxor Las Vegas, circa late 1993

Throughout the early 1990s, Sega largely continued its success in arcades around the world. In 1992 and 1993, the new Sega Model 1 arcade system board showcased in-house development studio Sega AM2's Virtua Racing and Virtua Fighter (the first 3D fighting game), which, though expensive, played a crucial role in popularizing 3D polygonal graphics.[82][83][84][85] In addition, complex simulator equipment like the rotational R360 kept Sega competing with machines by rival arcade companies, including Taito.[86] New official region-specific distributors and manufacturers, including the UK's Deith Leisure, allowed Sega to sell its machines outside of Japan with ease.[87] Sega's domestic operations division also opened hundreds of family-oriented suburban Sega World amusement arcades in Japan during this period,[88] as well as large over-18s "GiGO" facilities in the high-profile urban areas of Roppongi and Ikebukuro.[89] In 1993, this success was mirrored in overseas territories with the openings of several large branded entertainment centers, such as Sega VirtuaLand in Luxor Las Vegas.[90][91] In 1994, Sega generated a revenue of ¥354.032 billion or $3,464,000,000 (equivalent to $6,333,000,000 in 2021).[92]

In 1993, the American media began to focus on the mature content of certain video games, such as Night Trap for the Sega CD and the Genesis version of Midway's Mortal Kombat.[93][94] This came at a time when Sega was capitalizing on its image as an "edgy" company with "attitude", and this reinforced that image.[54] To handle this, Sega instituted the United States' first video game ratings system, the Videogame Rating Council (VRC), for all its systems. Ratings ranged from the family-friendly GA rating to the more mature rating of MA-13, and the adults-only rating of MA-17.[94] Executive vice president of Nintendo of America Howard Lincoln was quick to point out in the United States congressional hearings in 1993 that Night Trap was not rated at all. Senator Joe Lieberman called for another hearing in February 1994 to check progress toward a rating system for video game violence.[94] After the hearings, Sega proposed the universal adoption of the VRC; after objections by Nintendo and others, Sega took a role in forming the Entertainment Software Rating Board.[94]

1994–1998: 32X, Saturn, falling console sales, and continued arcade success

Sega began work on the Genesis' successor, the Sega Saturn, more than two years before showcasing it at the Tokyo Toy Show in June 1994.[95] According to former Sega of America producer Scot Bayless, Nakayama became concerned about the 1994 release of the Atari Jaguar, and that the Saturn would not be available until the next year. As a result, Nakayama decided to have a second console release to market by the end of 1994. Sega began to develop the 32X, a Genesis add-on which would serve as a less expensive entry into the 32-bit era.[96] The 32X would not be compatible with the Saturn, but would play Genesis games.[34] Sega released the 32X on November 21, 1994, in North America, December 3, 1994, in Japan, and January 1995 in PAL territories, and was sold at less than half of the Saturn's launch price.[97][98] After the holiday season, interest in the 32X rapidly declined.[96][99]

 
The Sega Saturn failed to repeat the western success of the Genesis.

Sega released the Saturn in Japan on November 22, 1994.[100] Virtua Fighter, a port of the popular arcade game, sold at a nearly one-to-one ratio with the Saturn at launch and was crucial to the system's early success in Japan.[101][102][103] Sega's initial shipment of 200,000 Saturn units sold out on the first day,[4][103][104] and it was more popular than the new competitor Sony's PlayStation in Japan.[103][105] In March 1995, Sega of America CEO Tom Kalinske announced that the Saturn would be released in the U.S. on "Saturnday" (Saturday) September 2, 1995.[106][107] Sega of Japan mandated an early launch to give the Saturn an advantage over the PlayStation.[104] At the first Electronic Entertainment Expo (E3) in Los Angeles on May 11, 1995, Kalinske revealed the release price and that Sega had shipped 30,000 Saturns to Toys "R" Us, Babbage's, Electronics Boutique, and Software Etc. for immediate release.[106] A by-product of the surprise launch was the provocation of retailers not included in Sega's rollout; KB Toys in particular decided to no longer stock its products in response.[106]

The Saturn's release in Europe also came before the previously announced North American date, on July 8, 1995.[108] Within two days of the PlayStation's American launch on September 9, 1995, the PlayStation sold more units than the Saturn.[109][110] Within its first year, the PlayStation secured over twenty percent of the U.S. video game market.[111] The console's high price point, surprise launch, and difficulty handling polygonal graphics were factors in its lack of success.[112] Sega also underestimated the continued popularity of the Genesis; 16-bit sales accounted for 64 percent of the market in 1995.[113][114] Despite capturing 43 percent of the U.S. market dollar share and selling more than 2 million Genesis units in 1995, Kalinske estimated that, if prepared for demand, another 300,000 could have been sold.[115]

Sega announced that Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America in July 1996, while Kalinske left Sega after September 30 of that year.[116][117] A former Honda executive,[118][119] Irimajiri had been involved with Sega of America since joining Sega in 1993.[116][120] The company also announced that Rosen and Nakayama had resigned from their positions at Sega of America, though both remained with Sega.[116][121] Bernie Stolar, a former executive at Sony Computer Entertainment of America,[122][123] became Sega of America's executive vice president in charge of product development and third-party relations.[116][117] Stolar was not supportive of the Saturn, believing its hardware was poorly designed.[4]

While Stolar had said "the Saturn is not our future" at E3 1997, he continued to emphasize the quality of its games,[4] and later reflected that "we tried to wind it down as cleanly as we could for the consumer."[123] At Sony, Stolar had opposed the localization of certain Japanese PlayStation games that he felt would not represent the system well in North America. He advocated a similar policy for the Saturn, generally blocking 2D arcade games and role-playing games from release, although he later sought to distance himself from this stance.[4][124][125] Other changes included a softer image in Sega's advertising, including removing the "Sega!" scream, and holding press events for the education industry.[126]

 
Tokyo Joypolis, the flagship Sega indoor theme park, in 1999

Sega partnered with GE to develop the Sega Model 2 arcade system board, building on 3D technology in the arcade industry at the time. This led to several successful arcade games, including Daytona USA, launched in a limited capacity in late 1993 and worldwide in 1994. Other popular games included Virtua Cop, Sega Rally Championship, and Virtua Fighter 2.[127] Virtua Fighter and Virtua Fighter 2 became Sega's best-selling arcade games of all time, surpassing their previous record holder Out Run.[128] There was also a technological arms race between Sega and Namco during this period, driving the growth of 3D gaming.[129]

Beginning in 1994, Sega launched a series of indoor theme parks in Japan under a concept dubbed "Amusement Theme Park",[130] including Joypolis parks sited in urban Tokyo locations such as Yokohama and Odaiba.[131] A rapid overseas rollout was planned, with at least 100 locations across the world proposed to be opened by 2000,[18] however only two, SegaWorld London and Sega World Sydney, would ultimately materialise in September 1996 and Match 1997, respectively.[132][133] Following on from difficulties faced in setting up theme parks in the United States, Sega established the GameWorks chain of urban entertainment centers in a joint venture with DreamWorks SKG and Universal Studios during March 1997.[134]

In 1995, Sega partnered with Atlus to launch Print Club (purikura),[135] an arcade photo sticker machine that produces selfie photos.[136][137] Atlus and Sega introduced Purikura in February 1995, initially at game arcades, before expanding to other popular culture locations such as fast food shops, train stations, karaoke establishments and bowling alleys.[138] Purikura became a popular form of entertainment among youths across East Asia, laying the foundations for modern selfie culture.[136][137] By 1997, about 47,000 Purikura machines had been sold, earning Sega an estimated ¥25 billion (£173 million) or $283,000,000 (equivalent to $478,000,000 in 2021) from Purikura sales that year. Various other similar purikira machines appeared from other manufacturers, with Sega controlling about half of the market in 1997.[139]

Sega also made forays in the PC market with the 1995 establishment of SegaSoft, which was tasked with creating original Saturn and PC games.[140][141] From 1994 to 1999, Sega also participated in the arcade pinball market when it took over Data East's pinball division, renaming it Sega Pinball.[142]

In January 1997, Sega announced its intentions to merge with the Japanese toymaker Bandai. The merger, planned as a $1 billion stock swap whereby Sega would wholly acquire Bandai, was set to form a company known as Sega Bandai, Ltd.[143][144] Though it was to be finalized in October of that year, it was called off in May after growing opposition from Bandai's midlevel executives. Bandai instead agreed to a business alliance with Sega.[145] As a result of Sega's deteriorating financial situation, Nakayama resigned as Sega president in January 1998 in favor of Irimajiri.[118] Nakayama's resignation may have in part been due to the failure of the merger, as well as Sega's 1997 performance.[146] Stolar became CEO and president of Sega of America.[123][147]

After the launch of the Nintendo 64 in the U.S. during 1996, sales of the Saturn and its games fell sharply in much of the west.[123] The PlayStation outsold the Saturn three-to-one in the U.S. in 1997, and the latter failed to gain a foothold in Europe and Australia, where the Nintendo 64 would not release until March 1997.[111] After several years of declining profits,[92] Sega had a slight increase in the fiscal year ended March 1997, partly driven by increasing arcade revenue,[92] while outperforming Nintendo during the mid-term period.[148] However, in the fiscal year ending March 1998, Sega suffered its first financial loss since its 1988 listing on the Tokyo Stock Exchange as both a parent company and a corporation as a whole.[149] Shortly before the announcement of the losses, Sega discontinued the Saturn in North America to prepare for the launch of its successor, the Dreamcast, releasing remaining games in low quantities.[118][123]

The decision to discontinue the Saturn effectively left the North American home console market without Sega games for over a year, with most of its activity in the country coming from arcade divisions.[150] The Saturn lasted longer in some Europe territories and particularly Japan, with it notably outperforming the Nintendo 64 in the latter.[119] Nonetheless, Irimajiri confirmed in an interview with Japanese newspaper Daily Yomiuri that Saturn development would stop at the end of 1998 and games would continue to be produced until mid-1999.[151] With lifetime sales of 9.26 million units,[152] the Saturn is retrospectively considered a commercial failure in much of the world.[153] While Sega had success with the Model 3 arcade board and titles like Virtua Fighter 3, Sega's arcade divisions struggled in the West during the late 1990s.[154] On the other hand, Sega's arcade divisions were more successful in Asia, with Sega's overall arcade revenues increasing year-on-year throughout the late 1990s, but it was not enough to offset the significant declining revenues of Sega's home consumer divisions.[92]

1998–2001: Dreamcast and continuing struggles

 
The Dreamcast, discontinued in 2001, was Sega's last video game console.

Despite a 75 percent drop in half-year profits just before the Japanese launch of the Dreamcast, Sega felt confident about its new system. The Dreamcast attracted significant interest and drew many pre-orders.[155] Sega announced that Sonic Adventure, the next game starring company mascot Sonic the Hedgehog, would be a Dreamcast launch game. It was promoted with a large-scale public demonstration at the Tokyo Kokusai Forum Hall.[156][157][158] Due to a high failure rate in the manufacturing process, Sega could not ship enough consoles for the Dreamcast's Japanese launch.[155][159] As more than half of its limited stock had been pre-ordered, Sega stopped pre-orders in Japan.[160] Before the launch, Sega announced the release of its New Arcade Operation Machine Idea (NAOMI) arcade system board, which served as a cheaper alternative to the Sega Model 3.[161] NAOMI shared technology with the Dreamcast, allowing nearly identical ports of arcade games.[150][162]

The Dreamcast launched in Japan on November 27, 1998. The entire stock of 150,000 consoles sold out by the end of the day.[160] Irimajiri estimated that another 200,000 to 300,000 Dreamcast units could have been sold with sufficient supply.[160] He hoped to sell more than a million Dreamcast units in Japan by February 1999, but less than 900,000 were sold. The low sales undermined Sega's attempts to build up a sufficient installed base to ensure the Dreamcast's survival after the arrival of competition from other manufacturers.[163] Sega suffered a further ¥42.881 billion consolidated net loss in the fiscal year ending March 1999, and announced plans to eliminate 1,000 jobs, nearly a quarter of its workforce.[164][165] Before the Western launch, Sega reduced the price of the Dreamcast in Japan by JP¥9,100, effectively making it unprofitable but increasing sales.[155]

On August 11, 1999, Sega of America confirmed that Stolar had been fired.[166] Peter Moore, whom Stolar had hired as a Sega of America executive only six months before,[167] was placed in charge of the North American launch.[166][168][169][170] The Dreamcast launched in North America on September 9, 1999,[150][163][171] with 18 games.[171][172][173] Sega set a record by selling more than 225,132 Dreamcast units in 24 hours, earning $98.4 million in what Moore called "the biggest 24 hours in entertainment retail history".[167] Within two weeks, U.S. Dreamcast sales exceeded 500,000.[167] By Christmas, Sega held 31 percent of the U.S. video game market by revenue.[174] On November 4, Sega announced it had sold more than a million Dreamcast units.[175] Nevertheless, the launch was marred by a glitch at one of Sega's manufacturing plants, which produced defective GD-ROMs where data was not properly recorded onto the disc.[176] Sega released the Dreamcast in Europe on October 14, 1999.[175] While Sega sold 500,000 units in Europe by Christmas 1999,[155] sales there slowed, and by October 2000 Sega had sold only about a million units.[177]

Though the Dreamcast's launch was successful, Sony's PlayStation still held 60 percent of the overall market share in North America at the end of 1999.[175] On March 2, 1999, in what one report called a "highly publicized, vaporware-like announcement",[178] Sony revealed the first details of the PlayStation 2.[179][180] The same year, Nintendo announced that its next console would meet or exceed anything on the market, and Microsoft began development of its own console, the Xbox.[181][182][183] Sega's initial momentum proved fleeting as U.S. Dreamcast sales—which exceeded 1.5 million by the end of 1999[184]—began to decline as early as January 2000.[185] Poor Japanese sales contributed to Sega's ¥42.88 billion ($404 million) consolidated net loss in the fiscal year ending March 2000. This followed a similar loss of ¥42.881 billion the previous year and marked Sega's third consecutive annual loss.[164][186] Sega's overall sales for the term increased 27.4 percent, and Dreamcast sales in North America and Europe greatly exceeded its expectations. However, this coincided with a decrease in profitability due to the investments required to launch the Dreamcast in Western markets and poor software sales in Japan.[164] At the same time, worsening conditions reduced the profitability of Sega's Japanese arcade business, prompting the closure of 246 locations.[164][187]

Moore became the president and chief operating officer of Sega of America on 8 May, 2000.[188] He said the Dreamcast would need to sell 5 million units in the U.S. by the end of 2000 to remain viable, but Sega fell short of this goal with some 3 million units sold.[174][189] Moreover, Sega's attempts to spur Dreamcast sales through lower prices and cash rebates caused escalating financial losses.[190] In March 2001, Sega posted a consolidated net loss of ¥51.7 billion ($417.5 million).[191] While the PlayStation 2's October 26 U.S. launch was marred by shortages, this did not benefit the Dreamcast as much as expected, as many disappointed consumers continued to wait or purchased a PSone.[174][192][193] Eventually, Sony and Nintendo held 50 and 35 percent of the U.S. video game market respectively, while Sega held only 15 percent.[155]

The Puyo Puyo IP was acquired by Sega in 1998.[194]

2001–2003: Shift to third-party software development

CSK chairman Isao Okawa replaced Irimajiri as president of Sega on May 22, 2000.[197] Okawa had long advocated that Sega abandon the console business.[198] Others shared this view; Sega co-founder David Rosen had "always felt it was a bit of a folly for them to be limiting their potential to Sega hardware", and Stolar had suggested Sega should have sold the company to Microsoft.[4][199] In a September 2000 meeting with Sega's Japanese executives and heads of its first-party game studios, Moore and Sega of America executive Charles Bellfield recommended that Sega abandon its console business. In response, the studio heads walked out.[167] Sega announced an official company name change from Sega Enterprises, Ltd. to Sega Corporation effective November 1, 2000. Sega stated in a release that this was to display its commitment to its "network entertainment business".[200]

On January 23, 2001, Japanese newspaper Nihon Keizai Shinbun reported that Sega would cease production of the Dreamcast and develop software for other platforms.[201] After an initial denial, Sega released a press release confirming it was considering producing software for the PlayStation 2 and Game Boy Advance as part of its "new management policy".[202] On January 31, 2001, Sega announced the discontinuation of the Dreamcast after March 31 and the restructuring of the company as a "platform-agnostic" third-party developer.[203][204] Sega also announced a Dreamcast price reduction to eliminate its unsold inventory, estimated at 930,000 units as of April 2001.[205][206] This was followed by further reductions to clear the remaining inventory.[207][208] The final manufactured Dreamcast was autographed by the heads of all nine of Sega's first-party game studios, plus the heads of sports game developer Visual Concepts and audio studio Wave Master, and given away with 55 first-party Dreamcast games through a competition organized by GamePro.[209]

Okawa, who had loaned Sega $500 million in 1999, died on March 16, 2001. Shortly before his death, he forgave Sega's debts to him and returned his $695 million worth of Sega and CSK stock, helping the company survive the third-party transition.[210][211][212] He held failed talks with Microsoft about a sale or merger with their Xbox division.[213] According to former Microsoft executive Joachim Kempin, Microsoft founder Bill Gates decided against acquiring Sega because "he didn't think that Sega had enough muscle to eventually stop Sony."[214] A business alliance with Microsoft was announced where Sega develops 11 games for the new Xbox console.[215] As part of the restructuring, nearly one third of Sega's Tokyo workforce was laid off in 2001.[216] 2002 was Sega's fifth consecutive fiscal year of net losses.[217] After Okawa's death, Hideki Sato, a 30-year Sega veteran who had worked on Sega's consoles, became company president. Following poor sales in 2002, Sega cut its profit forecast for 2003 by 90 percent, and explored opportunities for mergers. In 2003, Sega began talks with Sammy Corporation–a pachinko and pachislot manufacturing company–and video game company Namco. The president of Sammy, Hajime Satomi, had a history with Sega, as he was mentored by Isao Okawa and was previously asked to be CEO of Sega.[218] On February 13, Sega announced that it would merge with Sammy; however, as late as April 17, Sega was still in talks with Namco, which was attempting to overturn the merger. Sega's consideration of Namco's offer upset Sammy executives. The day after Sega announced it was no longer planning to merge with Sammy, Namco withdrew its offer.[219] In 2003, Sato and COO Tetsu Kamaya stepped down; Sato was replaced by Hisao Oguchi, the head of the Sega studio Hitmaker.[220] Moore left Sega in January 2003 following a meeting in which he was frustrated by Japanese executives refusing to adapt to industry changes, such as the demand for mature games such as Grand Theft Auto III.[221] Hideaki Irie, who had worked at Agetec and ASCII, became the new president and COO of Sega of America in October 2003.[222]

2003–2015: Sammy takeover and business expansion

 
Sega Sammy Holdings (current logo pictured) was founded in 2004 with pachinko and pachislot manufacturer Sammy Corporation's purchase of Sega.

In August 2003, Sammy bought 22.4 percent of Sega's shares from CSK, making Sammy into Sega's largest shareholder.[223][224] In the same year, Hajime Satomi said Sega's activity would focus on its profitable arcade business as opposed to loss-incurring home software development.[225] In 2004, Sega Sammy Holdings, an entertainment conglomerate, was created; Sega and Sammy became subsidiaries of the new holding company, both companies operating independently while the executive departments merged. According to the first Sega Sammy Annual Report, the merger went ahead as both companies were facing difficulties. Satomi said Sega had been operating at a loss for nearly ten years,[226] while Sammy feared stagnation and overreliance of its highly profitable pachislot and pachinko machine business and wanted to diversify.[49] Sammy acquired the remaining percentages of Sega, completing a takeover.[227] The stock swap deal valued Sega between $1.45 billion and $1.8 billion.[226][228] Sega Sammy Holdings was structured into four parts: Consumer Business (video games), Amusement Machine Business (arcade games), Amusement Center Business (Sega's theme parks and arcades) and Pachislot and Pachinko Business (Sammy's pachinko and pachislot business).[229]

In response to the decline of the global arcade industry in the late 1990s, Sega created several novel concepts tailored to the Japanese market.[230] Derby Owners Club was an arcade machine with memory cards for data storage, designed to take over half an hour to complete and costing JP¥500 to play. Testing of Derby Owners Club in a Chicago arcade showed that it had become the most popular machine at the location, with a 92% replay rate. While the eight-player Japanese version of the game was released in 1999, the game was reduced to a smaller four-player version due to size issues and released in North America in 2003.[231] The machine considered was too expensive for the western market, and it did not perform consistently well at all locations.[232] Similar issues were faced with trading card game machines such as World Club Champion Football and Mushiking: The King of Beetles or bringing internet functionality to arcades with ALL.Net, a network system for arcade games.[233][234] While the Japanese market retained core players, western arcades had become more focused on casual footfall, and Sega Amusements Europe, the entity created to officially distribute and manufacture Sega's machines on the continent after the consolidation of its regional divisions, subsequently decided to develop more games locally that were better suited to western tastes.[235] The GameWorks chain of arcades came under the sole ownership of Sega, which previously was shared with Vivendi Universal.[236] The chain was sold in 2011.[237] In 2009, Sega Republic, an indoor theme park, opened in Dubai.[238] Sega gradually reduced its arcade centers from 450[239] in 2005 to around 200 in 2015.[240] However arcade machine sales incurred higher profits than the company's console, mobile and PC games on a year-to-year basis until the fiscal year of 2014.[241]

In order to drive growth in western markets, Sega announced new leadership for Sega of America and Sega Europe in 2005. Simon Jeffery became president and COO of Sega of America, and Mike Hayes president and COO for Sega Europe.[242] In 2009, Mike Hayes became president of the combined outfit of Sega West which includes both Sega of America and Sega Europe, due to Simon Jeffery leaving.[243] Mike Hayes is credited for re-inventing Sega's software strategy taking it from failing to 500 Million in revenue, focusing on PC with franchises like Total War and Football Manager, selling Mario & Sonic at the Olympic games and at one point being one of the top 3 costumers on Steam.[244] In the console and handheld business, Sega found success in the Japanese market with the Yakuza, Phantasy Star Portable and Hatsune Miku: Project DIVA series.[245][246][247] Related to Hatsune Miku, in 2010, Sega began providing the 3D imaging for her holographic concerts.[248] Sega also distributes games from smaller Japanese game developers and sells localizations of Western games in Japan.[249][250] In 2013, Index Corporation was purchased by Sega Sammy after going bankrupt.[251] The year before, Sega signed a deal to distribute Atlus titles in Japan.[252] After the buyout, Sega implemented a corporate spin-off with Index. The latter's game assets were rebranded as Atlus, a wholly owned subsidiary of Sega.[253]

In the mobile market, Sega released its first app on the iTunes Store with a version of Super Monkey Ball in 2008.[254] Due in part to the decline of packaged game sales worldwide in the 2010s,[255] Sega began layoffs and closed five offices based in Europe and Australia on July 1, 2012.[256] This was to focus on the digital game market, such as PC and mobile devices.[257][258] Strong performers for Sega on these platforms include Sonic Dash in Western markets and Phantasy Star Online 2 and Chain Chronicle in Asian markets. In 2012, Sega also began acquiring studios for mobile development, studios such as Hardlight, Three Rings Design, and Demiurge Studios becoming fully owned subsidiaries.[259][260][261] 19 older mobile games were pulled due to quality concerns in May 2015.[262][263]

To streamline operations, Sega established operational firms for each of its businesses in the 2010s. In 2012, Sega established Sega Networks as a subsidiary company for its mobile games.[264] The same year, Sega Entertainment was established for Sega's amusement facility business.[265] In January 2015, Sega of America announced its relocation from San Francisco to Atlus USA's headquarters in Irvine, California, which was completed later that year.[266] From 2005 to 2015, Sega's operating income generally saw improvements compared to Sega's past financial problems, but was not profitable every year.[267]

Sega operating income 2005–2015, Japanese yen in millions
Business year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Amusement Machine Sales[267] 7,423 12,176 11,682 7,152 6,890 7,094 7,317 7,415 1,902 −1,264 −2,356
Amusement Center Operations[267] 5,472 9,244 132 −9,807 −7,520 −1,338 342 355 1,194 60 −946
Consumer Business[267] −8,809 9,244 1,748 −5,989 −941 6,332 1,969 −15,182 −732 2,089 4,033

2015–present: Restructuring

In April 2015, Sega Corporation was reorganized into Sega Group, one of three groups of Sega Sammy Holdings. Sega Holdings Co., Ltd. was established, with four business sectors under its control. Haruki Satomi, son of Hajime Satomi, took office as president and CEO of the company in April 2015.[268][269] Sega Games Co., Ltd. became the legal name of Sega Corporation and continued to manage home video games, while Sega Interactive Co., Ltd. was founded to take control of the arcade division.[270][271] Sega Networks merged with Sega Games Co., Ltd. in 2015.[264] At the Tokyo Game Show in September 2016, Sega announced that it had acquired the intellectual property and development rights to all games developed and published by Technosoft.[272] Effective from January 2017, 85.1% of the shares in Sega's theme park business became owned by China Animations Character Co., renaming the former Sega Live Creation to CA Sega Joypolis.[273]

 
Sega's headquarters in Shinagawa-ku, Tokyo, Japan

Sega Sammy Holdings announced in April 2017 that it would relocate its head office functions and domestic subsidiaries located in the Tokyo metropolitan area to Shinagawa-ku by January 2018. This was to consolidate scattered head office functions including Sega Sammy Holdings, Sammy Corporation, Sega Holdings, Sega Games, Atlus, Sammy Network, and Dartslive.[274] Sega's previous headquarters in Ōta was sold in 2019 and will likely be torn down.[275]

In June 2017, Chris Bergstresser replaced Jurgen Post as president and COO of Sega Europe.[276] In June 2018, Gary Dale, formerly of Rockstar Games and Take-Two Interactive, replaced Chris Bergstresser as president and COO of Sega Europe.[277] A few months later, Ian Curran, a former executive at THQ and Acclaim Entertainment, replaced John Cheng as president and COO of Sega of America in August 2018.[278] In October 2018, Sega reported favorable western sales results from games such as Yakuza 6 and Persona 5, due to the localization work of Atlus USA.[279]

Despite a 35-percent increase in the sale of console games and success in its PC game business, profits fell 70 percent for the 2018 fiscal year in comparison to the previous year, mainly due to the digital games market which includes mobile games as well as Phantasy Star Online 2. In response, Sega announced that for its digital games it would focus on releases for its existing intellectual property and also focus on growth areas such as packaged games in the overseas market. Sega blamed the loss on market miscalculations and having too many games under development. Projects in development at Sega included a new game in the Yakuza series, the Sonic the Hedgehog film, and the Sega Genesis Mini,[280][281] which was released in September 2019.[282] In May 2019, Sega acquired Two Point Studios, known for Two Point Hospital.[283][284]

On April 1, 2020, Sega Interactive merged with Sega Games Co., Ltd. The company was again renamed Sega Corporation, while Sega Holdings Co., Ltd. was renamed Sega Group Corporation.[285] According to a company statement, the move was made to allow greater research and development flexibility.[286] In April 2020, Sega sold Demiurge Studios to Demiurge co-founder Albert Reed. Demiurge said it would continue to support the mobile games it developed under Sega.[287]

As part of the company's 60th anniversary of the brand name, Sega announced the Game Gear Micro microconsole, scheduled for October 6, 2020 in Japan.[288] In announcement that was dubbed "revolutionary", Sega also announced its Fog Gaming platform, which will use the unused processing power of arcade machines in Japanese arcades overnight to help power cloud gaming applications.[288]

During the latter half of 2020, much of the financial gains Sega made in the earlier part of the year were wiped out due to the impact of the COVID-19 pandemic on its Sega Entertainment division, which ran its arcades.[289] In November, Sega Sammy sold 85.1% of its shares in the division to Genda Inc., though the Sega branding and coin-operated machines produced by the company continue to be found in the arcades. Arcade game development was unaffected by the move.[290] By January 2022, Sega sold the remaining portion of this division to Genda.[291]

Contrasting its losses brought forth by amusement operations in 2020, sales and critical reception of Sega's home console games improved; Metacritic named Sega the best publisher of the year in 2020.[292] Of its 28 releases that year, 95% had "good" Metacritic scores (above 75%), including two with "great" scores (above 90% for Persona 5 Royal and Yakuza 0), with an average Metacritic score of 81.6% for all 2020 Sega releases.[293][294]

Corporate structure

Sega's global headquarters are in Shinagawa, Tokyo, Japan. The company was scheduled to move there in August 2018.[295] Sega also has offices in Irvine, California (as Sega of America), in London (as Sega Europe),[296] in Seoul, South Korea (as Sega Publishing Korea),[297] and in Singapore, Hong Kong, Shanghai, and Taipei.[298] In other regions, Sega has contracted distributors for its games and consoles, such as Tectoy in Brazil.[35] Sega has had offices in France, Germany, Spain, and Australia;[256] those markets have since contracted distributors.[299]

Relations between the regional offices have not always been smooth.[300] Some conflict in the 1990s may have been caused by Sega president Nakayama and his admiration for Sega of America; according to Kalinske, "There were some guys in the executive suites who really didn't like that Nakayama in particular appeared to favor the U.S. executives. A lot of the Japanese executives were maybe a little jealous, and I think some of that played into the decisions that were made."[4] By contrast, author Steven L. Kent said Nakayama bullied American executives and that Nakayama believed the Japanese executives made the best decisions. Kent also said Sega of America CEOs Kalinske, Stolar, and Moore dreaded meeting with Sega of Japan executives.[301]

In 2021, Sega Group Corporation was absorbed into Sega Corporation.[302]

Subsidiaries of Sega Corporation

 
Club Sega game center in Akihabara, Tokyo

After the formation of Sega Group in 2015 and the founding of Sega Holdings, the former Sega Corporation was renamed Sega Games Co., Ltd.[271] Under this structure, Sega Games was responsible for the home video game market and consumer development, while Sega Interactive Co., Ltd., comprised Sega's arcade game business.[270] The two were consolidated in 2020, renamed as Sega Corporation.[286] The company includes Sega Networks, which handles game development for smartphones.[268] Sega Corporation develops and publishes games for major video game consoles and arcade cabinets, and has not expressed interest in developing consoles again. According to former Sega Europe CEO Mike Brogan, "There is no future in selling hardware. In any market, through competition, the hardware eventually becomes a commodity ... If a company has to sell hardware then it should only be to leverage software, even if that means taking a hit on the hardware."[54]

Sega Toys Co., Ltd., originally known as Yonezawa Toys and acquired by Sega in 1991, has created toys for children's franchises such as Oshare Majo: Love and Berry, Mushiking: King of the Beetles, Lilpri, Bakugan, Jewelpet, Rilu Rilu Fairilu, Dinosaur King and Hero Bank. Products released in the West include the home planetarium Homestar and the robot dog iDog. The Homestar was released in 2005 and has been improved several times. Its newest model, Flux, was released in 2019. The series is developed by the Japanese inventor and entrepreneur Takayuki Ohira. As a recognized specialist for professional planetariums, he has received numerous innovation prizes and supplies large planetariums internationally with his company Megastar. Sega Toys also inherited the Sega Pico handheld system and produced Pico software.[303]

Since the late 1960s, Sega has been affiliated with operations of bowling alleys and arcades through its former Sega Entertainment Co., Ltd. subsidiary in Japan, as well as a number of other smaller regional subsidiaries in other countries.[270] Initiatives to expand operations in other territories, such as the US, UK, France, Spain, and Taiwan, have been more shortlived, and following the 85.1% majority acquisition of Sega Entertainment's shares in November 2020 to mitigate losses caused by the COVID-19 pandemic,[304] Sega's arcades in Japan since have been run under Genda Incorporated's Genda GiGO Entertainment division.[305] Its DartsLive subsidiary creates electronic darts games,[298] while Sega Logistics Service distributes and repairs arcade games.[270]

In 2015, Sega and Japanese advertising agency Hakuhodo formed a joint venture, Stories LLC, to create entertainment for film and TV. Stories LLC has exclusive licensing rights to adapt Sega properties into film and television,[306][307] and has partnered with producers to develop series based on properties including Shinobi, Golden Axe, Virtua Fighter, The House of the Dead, and Crazy Taxi.[308]

Software research and development

As a games publisher, Sega produces games through its research and development teams. The Sonic the Hedgehog franchise, maintained through Sega's Sonic Team division, is one of the best-selling franchises in the history of video games.[309] Sega has also acquired third-party studios, including ordered by assigned division:

  • Sega Corporation: Atlus,[253] Play Heart.[2]

Sega's software research and development teams began with one development division operating under Sega's longtime head of R&D, Hisashi Suzuki. As the market increased for home video game consoles, Sega expanded with three Consumer Development (CS) divisions. After October 1983, arcade development expanded to three teams: Sega DD No. 1, 2, and 3. Some time after the release of Power Drift, the company restructured its teams again as the Sega Amusement Machine Research and Development Teams, or AM teams. Each arcade division was segregated, and a rivalry existed between the arcade and consumer development divisions.[314] In what has been called "a brief moment of remarkable creativity",[150] in 2000, Sega restructured its arcade and console development teams into nine semi-autonomous studios headed by the company's top designers.[4][171][315] The studios were United Game Artists, Smilebit, Hitmaker, Sega Rosso, Sega Wow, Overworks, Amusement Vision, Sega AM2, and Sonic Team.[150][316] Sega's design houses were encouraged to experiment and benefited from a relatively lax approval process.[317] After taking over as company president in 2003, Hisao Oguchi announced his intention to consolidate Sega's studios.[220] Prior to the acquisition by Sammy, Sega began the process of re-integrating its subsidiaries into the main company.[318] Toshihiro Nagoshi, formerly the head of Amusement Vision, recalls this period, "in many ways a labour of love" from Sega, teaching the creatives the experience of managing a business.[319]

Sega still operates first-party studios as departments of its research and development division. Sonic Team exists as Sega's CS2 research and development department,[320] while Sega's CS3 or Online department has developed games such as Phantasy Star Online 2,[321][322] and Sega Interactive's AM2 department has more recently worked on projects such as smartphone game Soul Reverse Zero.[323] Toshihiro Nagoshi remained involved with research and development as Sega's chief creative officer or creative director while working on the Yakuza series until 2021.[324][325][326]

Legacy

 
Dreamcast arcade machine at the Finnish Museum of Games in Tampere, Finland in 2017

Sega is one of the world's most prolific arcade game producers, having developed more than 500 games, 70 franchises, and 20 arcade system boards since 1981. It has been recognized by Guinness World Records for this achievement.[327] Of Sega's arcade division, Eurogamer's Martin Robinson said, "It's boisterous, broad and with a neat sense of showmanship running through its range. On top of that, it has something that's often evaded its console-dwelling cousin: success."[328]

The Sega Genesis is often ranked among the best consoles in history.[329][330][331] In 2014, USgamer's Jeremy Parish credited it for galvanizing the market by breaking Nintendo's near-monopoly, helping create modern sports game franchises, and popularizing television games in the UK.[332] Kalinske felt Sega had innovated by developing games for an older demographic and pioneering the "street date" concept with the simultaneous North American and European release of Sonic the Hedgehog 2.[333] Sega of America's marketing campaign for the Genesis influenced marketing for later consoles.[334]

Despite its commercial failure, the Saturn is well regarded for its library,[108][335][336] though it has been criticized for a lack of high-profile franchise releases.[4] Edge wrote that "hardened loyalists continue to reminisce about the console that brought forth games like Burning Rangers, Guardian Heroes, Dragon Force and Panzer Dragoon Saga."[337] Sega's management was criticized for its handling of the Saturn.[4][108] According to Greg Sewart of 1Up.com, "the Saturn will go down in history as one of the most troubled, and greatest, systems of all time".[335]

The Dreamcast is remembered for being ahead of its time,[338][339][340] with several concepts that became standard in consoles, such as motion controls and online functionality.[341] Its demise has been connected with transitions in the video game industry. In 1001 Video Games You Must Play Before You Die, Duncan Harris wrote that the Dreamcast's end "signaled the demise of arcade gaming culture ... Sega's console gave hope that things were not about to change for the worse and that the tenets of fast fun and bright, attractive graphics were not about to sink into a brown and green bog of realistic war games."[342] Parish contrasted the Dreamcast's diverse library with the "suffocating sense of conservatism" that pervaded the industry in the following decade.[343]

In Eurogamer, Damien McFerran wrote that Sega's decisions in the late 1990s were "a tragic spectacle of overconfidence and woefully misguided business practice".[54] Travis Fahs of IGN noted that since the Sammy takeover Sega had developed fewer games and outsourced to more western studios, and that its arcade operations had been significantly reduced. Nonetheless, he wrote: "Sega was one of the most active, creative, and productive developers the industry has ever known, and nothing that can happen to their name since will change that."[4] In 2015, Sega president Haruki Satomi told Famitsu that, in the previous ten years, Sega had "betrayed" the trust of older fans and that he hoped to re-establish the Sega brand.[344] During the promotion of the Sega Genesis Mini, Sega executive manager Hiroyuki Miyazaki reflected on Sega's history, saying, "I feel like Sega has never been the champion, at the top of all the video game companies, but I feel like a lot of people love Sega because of the underdog image."[345] Former Sega management cited the absence of Dragon Quest and Final Fantasy games on their home consoles as a reason for the console division's struggles, especially in Japan.[346][347] In his 2018 book The Sega Arcade Revolution, Horowitz connected Sega's decline in the arcades after 1995 with broader industry changes. He argued that its most serious problems came from the loss of its creative talent, particularly Yuji Naka and Yu Suzuki, after the Sammy takeover, but concluded that "as of this writing, Sega is in its best financial shape of the past two decades. The company has endured."[348]

See also

Notes

  1. ^ Japanese: 株式会社セガ, Hepburn: Kabushiki gaisha Sega
  2. ^ Japanese: 日本娯楽物産株式会社, Hepburn: Nihon goraku bussan kabushiki gaisha, Japanese Amusement Products Stock Company
  3. ^ Japanese: 日本機械製造株式会社, Hepburn: Nihon kikai seizō kabushiki gaisha, Japanese Machine Manufacturers Co., Ltd.
  4. ^ Japanese: 株式会社セガ・エンタープライゼズ, Hepburn: Kabushiki gaisha Sega Entapuraizezu

References

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  2. ^ a b "沿革 - Play Heart". Retrieved October 26, 2021.
  3. ^ Smith, Alexander (2019). They Create Worlds: The Story of the People and Companies That Shaped the Video Game Industry, Vol. I: 1971–1982. CRC Press. p. 105. ISBN 978-0-429-75261-2.
  4. ^ a b c d e f g h i j k l m Fahs, Travis (April 21, 2009). . IGN. Archived from the original on August 24, 2012. Retrieved July 29, 2015.
  5. ^ Plunkett, Luke (April 4, 2011). "Meet the four Americans who built Sega". Kotaku. from the original on July 26, 2015. Retrieved August 1, 2015.
  6. ^ Sánchez-Crespo Dalmau, Daniel (2004). Core Techniques and Algorithms in Game Programming. New Riders. p. 3. ISBN 978-0-13-102009-2. from the original on November 23, 2015. Retrieved August 2, 2015.
  7. ^ a b c d e Horowitz, Ken (2018). The Sega Arcade Revolution, A History in 62 Games. McFarland & Company. pp. 3–6. ISBN 978-1-4766-3196-7.
  8. ^ Kent, Steven L. (2001). The Ultimate History of Video Games: The Story Behind the Craze that Touched our Lives and Changed the World. Prima Publishing. p. 331. ISBN 978-0-7615-3643-7.
  9. ^ "Sammy Corporation and SEGA Corporation Announce Business Combination: SEGA SAMMY HOLDINGS INC". Business Wire. May 19, 2004. from the original on April 26, 2016. Retrieved April 12, 2016.
  10. ^ "Sega and Utamatic Purchase Assets of Service Games". Billboard. Vol. 72, no. 34. September 5, 1960. p. 71.
  11. ^ "Service Games Inc. Bought By Sega and Uta Matic". Cashbox. Vol. 21, no. 51. September 3, 1960. p. 52.
  12. ^ Horowitz 2018, p. 7
  13. ^ a b c d Sega Arcade History (in Japanese). Enterbrain. 2002. pp. 20–23. ISBN 978-4-7577-0790-0.
  14. ^ Horowitz 2018, pp. 10–11
  15. ^ Smith, Alexander (November 19, 2019). They Create Worlds: The Story of the People and Companies That Shaped the Video Game Industry, Vol. I: 1971-1982. CRC Press. pp. 119–20, 188–91. ISBN 978-0-429-75261-2.
  16. ^ a b Horowitz 2018, pp. 14–16
  17. ^ Horowitz 2018, pp. 21–23
  18. ^ a b c Pollack, Andrew (July 4, 1993). "Sega Takes Aim at Disney's World". The New York Times. pp. 3–1. from the original on May 26, 2015. Retrieved May 7, 2015.
  19. ^ Brandt, Richard; Gross, Neil (February 20, 1994). "Sega!". Businessweek. from the original on December 3, 2013. Retrieved October 10, 2013.
  20. ^ Horowitz 2018, pp. 24–26
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sega, games, redirects, here, list, video, games, published, lists, games, other, uses, disambiguation, corporation, japanese, multinational, video, game, entertainment, company, headquartered, shinagawa, tokyo, international, branches, america, europe, headqu. Sega Games redirects here For a list of video games published by Sega see Lists of Sega games For other uses see Sega disambiguation Sega Corporation a is a Japanese multinational video game and entertainment company headquartered in Shinagawa Tokyo Its international branches Sega of America and Sega Europe are headquartered in Irvine California and London respectively Its division for the development of both arcade games and home video games Sega Games has existed in its current state since 2020 from 2015 to that point the two had made up separate entities known as Sega Games and Sega Interactive Co Ltd Sega is a subsidiary of Sega Sammy Holdings From 1983 until 2001 Sega also developed video game consoles Sega CorporationLogo since 1976Headquarters in Tokyo JapanNative name株式会社セガRomanized nameKabushiki gaisha SegaFormerlyNihon Goraku BussanSega Enterprises Ltd Sega Games Co Ltd TypeSubsidiaryIndustryVideo gamesPredecessorService Games of JapanFoundedJune 3 1960 62 years ago June 3 1960 FoundersMartin BromleyRichard StewartHeadquartersShinagawa Tokyo JapanArea servedWorldwideKey peopleHaruki Satomi Chairman and CEO Shigeru Yamashita Vice Chairman Yukio Sugino President and COO Ian Curran President Sega wbr of America Gary Dale President Sega wbr Europe ProductsGamesArcade gamesArcade systemsVideo game consolesMobile gamesFranchisesRevenue 247 7 billion 2020 Operating income 14 8 billion 2020 Number of employees3 238 2020 ParentSega Sammy HoldingsDivisionsList of development studiosSubsidiariesAmplitude StudiosAtlusCreative AssemblyHardlightIgnited Artists 1 Play Heart 2 Relic EntertainmentSega ToysSports InteractiveTwo Point StudiosTMS EntertainmentWebsitesega wbr comFootnotes references Sega Sammy Holdings Fiscal Year 2020 Full Results Appendix PDF Sega Sammy Holdings May 13 2020 Archived from the original PDF on May 15 2020 Retrieved May 15 2020 Notice of Changes of Directors and Executive Officers at SEGA SAMMY HOLDINGS INC and its Major Subsidiaries PDF Sega Sammy Holdings February 28 2020 Retrieved May 17 2020 Sega was founded by American businessmen Martin Bromley and Richard Stewart as Nihon Goraku Bussan b on June 3 1960 shortly after the company acquired the assets of its predecessor Service Games of Japan Five years later the company became known as Sega Enterprises Ltd after acquiring Rosen Enterprises an importer of coin operated games Sega developed its first coin operated game Periscope in 1966 Sega was sold to Gulf and Western Industries in 1969 Following a downturn in the arcade business in the early 1980s Sega began to develop video game consoles starting with the SG 1000 and Master System but struggled against competitors such as the Nintendo Entertainment System In 1984 Sega executives David Rosen and Hayao Nakayama led a management buyout with backing from CSK Corporation Sega released its next console the Sega Genesis known as the Mega Drive outside North America in 1988 The Genesis struggled against the competition in Japan but found success overseas after the release of Sonic the Hedgehog in 1991 and briefly outsold its main competitor the Super Nintendo Entertainment System in the U S Later in the decade Sega suffered several commercial failures such as the 32X Saturn and Dreamcast consoles In 2001 Sega stopped manufacturing consoles to become a third party developer and publisher and was acquired by Sammy Corporation in 2004 In the years since Sega has been more profitable Sega Holdings Co Ltd was established in 2015 Sega Corporation was renamed Sega Games Co Ltd and its arcade entertainment and toy divisions separated into other companies In 2020 Sega Games and Sega Interactive merged and were renamed Sega Corporation Sega has produced several multi million selling game franchises including Sonic the Hedgehog Total War and Yakuza Sonic Sega s mascot is internationally recognized Sega is one of the world s most prolific arcade game producers with long running series such as Virtua Fighter and Initial D Arcade Stage Its name and branding are used for affiliated companies that operate amusement arcades and produce other entertainment products including Sega Toys however these are largely separate ventures Sega is recognized for its video game consoles creativity and innovations In more recent years it has been criticized for its business decisions and the quality of its creative output Contents 1 History 1 1 1940 1982 Origins and arcade success 1 2 1982 1989 Entry into the game console market and arcade resurgence 1 3 1989 1994 Genesis Sonic the Hedgehog and mainstream success 1 4 1994 1998 32X Saturn falling console sales and continued arcade success 1 5 1998 2001 Dreamcast and continuing struggles 1 6 2001 2003 Shift to third party software development 1 7 2003 2015 Sammy takeover and business expansion 1 8 2015 present Restructuring 2 Corporate structure 2 1 Subsidiaries of Sega Corporation 2 2 Software research and development 3 Legacy 4 See also 5 Notes 6 References 7 External linksHistoryMain article History of Sega 1940 1982 Origins and arcade success The Diamond 3 Star was a coin operated slot machine produced by Sega in the 1950s In May 1940 American businessmen Martin Bromley Irving Bromberg and James Humpert formed Standard Games in Honolulu Hawaii Their aim was to provide coin operated amusement machines including slot machines to military bases as the increase in personnel with the onset of World War II would create demand for entertainment After the war the founders sold Standard Games in 1945 and in 1946 established Service Games named for the military focus 3 After the United States government outlawed slot machines in its territories in 1952 Bromley sent employees Richard Stewart and Ray LeMaire to Tokyo to establish Service Games of Japan to provide coin operated slot machines to U S bases in Japan 4 5 6 A year later all five men established Service Games Panama to control the entities of Service Games worldwide The company expanded over the next seven years to include distribution in South Korea the Philippines and South Vietnam 7 The name Sega an abbreviation of Service Games 8 was first used in 1954 on a slot machine the Diamond Star 7 Due to notoriety arising from investigations by the US government into criminal business practices Service Games of Japan was dissolved on May 31 1960 7 On June 3 9 Bromley established two companies to take over its business activities Nihon Goraku Bussan and Nihon Kikai Seizō c The two new companies purchased all of Service Games of Japan s assets Kikai Seizō doing business as Sega Inc focused on manufacturing slot machines Goraku Bussan doing business under Stewart as Utamatic Inc served as a distributor and operator of coin operated machines particularly jukeboxes 7 10 11 The companies merged in 1964 retaining the Nihon Goraku Bussan name 7 During the same time frame David Rosen an American officer in the United States Air Force stationed in Japan launched a photo booth business in Tokyo in 1954 4 This company became Rosen Enterprises and in 1957 began importing coin operated games into Japan In 1965 Nihon Goraku Bussan acquired Rosen Enterprises to form Sega Enterprises Ltd d Rosen was installed as the CEO and managing director while Stewart was named president and LeMaire was the director of planning Shortly afterward Sega stopped leasing to military bases and moved its focus from slot machines to coin operated amusement machines 12 Its imports included Rock Ola jukeboxes pinball games by Williams and gun games by Midway Manufacturing 13 Former logo Because Sega imported second hand machines which required frequent maintenance it began constructing replacement guns and flippers for its imported games According to former Sega director Akira Nagai this led to the company developing its own games 13 The first arcade electro mechanical game EM game Sega manufactured was the submarine simulator Periscope released worldwide in the late 1960s It featured light and sound effects considered innovative and was successful in Japan It was then exported to malls and department stores in Europe and the United States and helped standardize the 25 cent per play cost for arcade games in the U S Sega was surprised by the success and for the next two years the company produced and exported between eight and ten games per year 14 The worldwide success of Periscope led to a technological renaissance in the arcade industry which was reinvigorated by a wave of audio visual EM novelty games that followed in the wake of Periscope during the late 1960s to early 1970s 15 However rampant piracy led Sega to cease exporting its games around 1970 16 In 1969 Sega was sold to the American conglomerate Gulf and Western Industries although Rosen remained CEO In 1974 Gulf and Western made Sega Enterprises Ltd a subsidiary of an American company renamed Sega Enterprises Inc Sega released Pong Tron its first video based game in 1973 16 Despite late competition from Taito s hit arcade game Space Invaders in 1978 13 Sega prospered from the arcade video game boom of the late 1970s with revenues climbing to over US 100 million by 1979 During this period Sega acquired Gremlin Industries which manufactured microprocessor based arcade games 17 and Esco Boueki a coin op distributor founded and owned by Hayao Nakayama Nakayama was placed in a management role of Sega s Japanese operations 18 In the early 1980s Sega was one of the top five arcade game manufacturers active in the United States as company revenues rose to 214 million 19 1979 saw the release of Head On which introduced the eat the dots gameplay Namco later used in Pac Man 20 In 1981 Sega licensed Frogger its most successful game until then 21 In 1982 Sega introduced the first game with isometric graphics Zaxxon 22 1982 1989 Entry into the game console market and arcade resurgence Further information SG 1000 and Master System Sega s first video game console the SG 1000 Following a downturn in the arcade business starting in 1982 Gulf and Western sold its North American arcade game manufacturing organization and the licensing rights for its arcade games to Bally Manufacturing in September 1983 23 24 25 Gulf and Western retained Sega s North American R amp D operation and its Japanese subsidiary Sega Enterprises Ltd With its arcade business in decline Sega Enterprises Ltd president Nakayama advocated for the company to use its hardware expertise to move into the home consumer market in Japan 26 This led to Sega s development of a computer the SC 3000 Learning that Nintendo was developing a games only console the Famicom Sega developed its first home video game system the SG 1000 alongside the SC 3000 27 Rebranded versions of the SG 1000 were released in several other markets worldwide 27 28 29 30 The SG 1000 sold 160 000 units in 1983 which far exceeded Sega s projection of 50 000 in the first year but was outpaced by the Famicom 27 This was in part because Nintendo expanded its game library by courting third party developers whereas Sega was hesitant to collaborate with companies with which it was competing in the arcades 27 In November 1983 Rosen announced his intention to step down as president of Sega Enterprises Inc on January 1 1984 Jeffrey Rochlis was announced as the new president and COO of Sega 31 Shortly after the launch of the SG 1000 and the death of company founder Charles Bluhdorn Gulf and Western began to sell off its secondary businesses 32 Nakayama and Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation a prominent Japanese software company 33 Sega s Japanese assets were purchased for 38 million by a group of investors led by Rosen and Nakayama Isao Okawa head of CSK became chairman 18 while Nakayama was installed as CEO of Sega Enterprises Ltd 34 The Master System released in North America in 1986 and Europe in 1987 In 1985 Sega began working on the Mark III 35 a redesigned SG 1000 36 For North America Sega rebranded the Mark III as the Master System 37 with a futuristic design intended to appeal to Western tastes 38 The Mark III was released in Japan in October 1985 39 Despite featuring more powerful hardware than the Famicom in some ways it was unsuccessful at launch As Nintendo required third party developers not to publish their Famicom games on other consoles Sega developed its own games and obtained the rights to port games from other developers 35 To help market the console in North America Sega planned to sell the Master System as a toy similar to how Nintendo had done with the Nintendo Entertainment System Sega partnered with Tonka an American toy company to make use of Tonka s expertise in the toy industry 40 Ineffective marketing by Tonka handicapped sales of the Master System 41 By early 1992 production had ceased in North America The Master System sold between 1 5 million and 2 million units in the region 42 This was less market share in North America than both Nintendo and Atari which controlled 80 percent and 12 percent of the market respectively 43 The Master System was eventually a success in Europe where its sales were comparable to the NES 44 As late as 1993 the Master System s active installed user base in Europe was 6 25 million units 44 The Master System has had continued success in Brazil New versions continue to be released by Sega s partner in the region Tectoy 45 By 2016 the Master System had sold 8 million units in Brazil 46 During 1984 Sega opened its European division of arcade distribution Sega Europe 47 It re entered the North American arcade market in 1985 with the establishment of Sega Enterprises USA at the end of a deal with Bally The release of Hang On in 1985 would prove successful in the region becoming so popular that Sega struggled to keep up with demand for the game 48 UFO Catcher was introduced in 1985 and as of 2005 was Japan s most commonly installed claw crane game 49 In 1986 Sega of America was established to manage the company s consumer products in North America beginning with marketing the Master System 50 During Sega s partnership with Tonka Sega of America relinquished marketing and distribution of the console and focused on customer support and some localization of games 40 Out Run released in 1986 became Sega s best selling arcade cabinet of the 1980s 51 Former Sega director Akira Nagai said Hang On and Out Run helped to pull the arcade game market out of the 1982 downturn and created new genres of video games 13 1989 1994 Genesis Sonic the Hedgehog and mainstream success Further information Sega Genesis The Sega Genesis second North American version pictured Sega s successor to the Master System took control of the 16 bit console market in much of the world during the fourth generation of video game consoles With the arcade game market once again growing Sega was one of the most recognized game brands at the end of the 1980s In the arcades the company focused on releasing games to appeal to diverse tastes including racing games and side scrollers 52 Sega released the Master System s successor the Mega Drive in Japan on October 29 1988 The launch was overshadowed by Nintendo s release of Super Mario Bros 3 a week earlier Positive coverage from magazines Famitsu and Beep helped establish a following with the latter launching a new publication dedicated to the console but Sega shipped only 400 000 units in the first year 53 The Mega Drive struggled to compete against the Famicom 54 and lagged behind Nintendo s Super Famicom and NEC s PC Engine in Japanese sales throughout the 16 bit era 55 For the North American launch where the console was renamed Genesis Sega had no sales and marketing organization After Atari declined an offer to market the console in the region Sega launched it through its own Sega of America subsidiary The Genesis was launched in New York City and Los Angeles on August 14 1989 and in the rest of North America later that year 56 The European version of the Mega Drive was released in September 1990 57 Former Atari executive and new Sega of America president Michael Katz developed a two part strategy to build sales in North America The first part involved a marketing campaign to challenge Nintendo and emphasize the more arcade like experience available on the Genesis 56 58 with slogans including Genesis does what Nintendon t 53 Since Nintendo owned the console rights to most arcade games of the time the second part involved creating a library of games which used the names and likenesses of celebrities such as Michael Jackson s Moonwalker and Joe Montana Football 4 59 Nonetheless Sega had difficulty overcoming Nintendo s ubiquity in homes 60 Despite being tasked by Nakayama to sell a million units in the first year Katz and Sega of America sold only 500 000 53 Characterized by the matching blue color of its long standing logo Sonic the Hedgehog has been Sega s mascot since 1991 61 After the launch of the Genesis Sega sought a new flagship line of releases to compete with Nintendo s Mario series 62 Its new character Sonic the Hedgehog went on to feature in one of the best selling video game franchises in history 63 64 Sonic the Hedgehog began with a tech demo created by Yuji Naka involving a fast moving character rolling in a ball through a winding tube this was fleshed out with Naoto Ohshima s character design and levels conceived by designer Hirokazu Yasuhara 65 Sonic s color was chosen to match Sega s cobalt blue logo his shoes were inspired by Michael Jackson s boots and his personality by Bill Clinton s can do attitude 66 67 68 Nakayama hired Tom Kalinske as CEO of Sega of America in mid 1990 and Katz departed soon after Kalinske knew little about the video game market but surrounded himself with industry savvy advisors A believer in the razor and blades business model he developed a four point plan cut the price of the Genesis create a U S team to develop games targeted at the American market expand the aggressive advertising campaigns and replace the bundled game Altered Beast with Sonic the Hedgehog The Japanese board of directors disapproved 60 but it was approved by Nakayama who told Kalinske I hired you to make the decisions for Europe and the Americas so go ahead and do it 53 In large part due to the popularity of Sonic the Hedgehog 60 the Genesis outsold its main competitor the Super Nintendo Entertainment System SNES in the United States nearly two to one during the 1991 holiday season By January 1992 Sega controlled 65 percent of the 16 bit console market 69 Sega outsold Nintendo for four consecutive Christmas seasons 70 due to the Genesis head start lower price and a larger library compared to the SNES at release 71 Nintendo s dollar share of the U S 16 bit market dropped from 60 at the end of 1992 to 37 at the end of 1993 72 Sega claimed 55 of all 16 bit hardware sales during 1994 73 and the SNES outsold the Genesis from 1995 through 1997 74 75 76 In 1990 Sega launched the Game Gear a handheld console to compete against Nintendo s Game Boy The Game Gear was designed as a portable version of the Master System and featured a full color screen in contrast to the monochrome Game Boy screen 77 Due to its short battery life lack of original games and weak support from Sega the Game Gear did not surpass the Game Boy having sold approximately 11 million units 78 Sega launched the Mega CD in Japan on December 1 1991 initially retailing at JP 49 800 79 The add on uses CD ROM technology Further features include a second faster processor vastly expanded system memory a graphics chip that performed scaling and rotation similar to Sega s arcade games and another sound chip 80 81 In North America it was renamed the Sega CD and launched on October 15 1992 with a retail price of US 299 80 It was released in Europe as the Mega CD in 1993 79 The Mega CD sold only 100 000 units during its first year in Japan falling well below expectations 79 Larger Virtua Formula installation of Virtua Racing at the Sega VirtuaLand arcade in Luxor Las Vegas circa late 1993 Throughout the early 1990s Sega largely continued its success in arcades around the world In 1992 and 1993 the new Sega Model 1 arcade system board showcased in house development studio Sega AM2 s Virtua Racing and Virtua Fighter the first 3D fighting game which though expensive played a crucial role in popularizing 3D polygonal graphics 82 83 84 85 In addition complex simulator equipment like the rotational R360 kept Sega competing with machines by rival arcade companies including Taito 86 New official region specific distributors and manufacturers including the UK s Deith Leisure allowed Sega to sell its machines outside of Japan with ease 87 Sega s domestic operations division also opened hundreds of family oriented suburban Sega World amusement arcades in Japan during this period 88 as well as large over 18s GiGO facilities in the high profile urban areas of Roppongi and Ikebukuro 89 In 1993 this success was mirrored in overseas territories with the openings of several large branded entertainment centers such as Sega VirtuaLand in Luxor Las Vegas 90 91 In 1994 Sega generated a revenue of 354 032 billion or 3 464 000 000 equivalent to 6 333 000 000 in 2021 92 In 1993 the American media began to focus on the mature content of certain video games such as Night Trap for the Sega CD and the Genesis version of Midway s Mortal Kombat 93 94 This came at a time when Sega was capitalizing on its image as an edgy company with attitude and this reinforced that image 54 To handle this Sega instituted the United States first video game ratings system the Videogame Rating Council VRC for all its systems Ratings ranged from the family friendly GA rating to the more mature rating of MA 13 and the adults only rating of MA 17 94 Executive vice president of Nintendo of America Howard Lincoln was quick to point out in the United States congressional hearings in 1993 that Night Trap was not rated at all Senator Joe Lieberman called for another hearing in February 1994 to check progress toward a rating system for video game violence 94 After the hearings Sega proposed the universal adoption of the VRC after objections by Nintendo and others Sega took a role in forming the Entertainment Software Rating Board 94 1994 1998 32X Saturn falling console sales and continued arcade success Further information Sega Saturn and 32X Sega began work on the Genesis successor the Sega Saturn more than two years before showcasing it at the Tokyo Toy Show in June 1994 95 According to former Sega of America producer Scot Bayless Nakayama became concerned about the 1994 release of the Atari Jaguar and that the Saturn would not be available until the next year As a result Nakayama decided to have a second console release to market by the end of 1994 Sega began to develop the 32X a Genesis add on which would serve as a less expensive entry into the 32 bit era 96 The 32X would not be compatible with the Saturn but would play Genesis games 34 Sega released the 32X on November 21 1994 in North America December 3 1994 in Japan and January 1995 in PAL territories and was sold at less than half of the Saturn s launch price 97 98 After the holiday season interest in the 32X rapidly declined 96 99 The Sega Saturn failed to repeat the western success of the Genesis Sega released the Saturn in Japan on November 22 1994 100 Virtua Fighter a port of the popular arcade game sold at a nearly one to one ratio with the Saturn at launch and was crucial to the system s early success in Japan 101 102 103 Sega s initial shipment of 200 000 Saturn units sold out on the first day 4 103 104 and it was more popular than the new competitor Sony s PlayStation in Japan 103 105 In March 1995 Sega of America CEO Tom Kalinske announced that the Saturn would be released in the U S on Saturnday Saturday September 2 1995 106 107 Sega of Japan mandated an early launch to give the Saturn an advantage over the PlayStation 104 At the first Electronic Entertainment Expo E3 in Los Angeles on May 11 1995 Kalinske revealed the release price and that Sega had shipped 30 000 Saturns to Toys R Us Babbage s Electronics Boutique and Software Etc for immediate release 106 A by product of the surprise launch was the provocation of retailers not included in Sega s rollout KB Toys in particular decided to no longer stock its products in response 106 The Saturn s release in Europe also came before the previously announced North American date on July 8 1995 108 Within two days of the PlayStation s American launch on September 9 1995 the PlayStation sold more units than the Saturn 109 110 Within its first year the PlayStation secured over twenty percent of the U S video game market 111 The console s high price point surprise launch and difficulty handling polygonal graphics were factors in its lack of success 112 Sega also underestimated the continued popularity of the Genesis 16 bit sales accounted for 64 percent of the market in 1995 113 114 Despite capturing 43 percent of the U S market dollar share and selling more than 2 million Genesis units in 1995 Kalinske estimated that if prepared for demand another 300 000 could have been sold 115 Sega announced that Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America in July 1996 while Kalinske left Sega after September 30 of that year 116 117 A former Honda executive 118 119 Irimajiri had been involved with Sega of America since joining Sega in 1993 116 120 The company also announced that Rosen and Nakayama had resigned from their positions at Sega of America though both remained with Sega 116 121 Bernie Stolar a former executive at Sony Computer Entertainment of America 122 123 became Sega of America s executive vice president in charge of product development and third party relations 116 117 Stolar was not supportive of the Saturn believing its hardware was poorly designed 4 While Stolar had said the Saturn is not our future at E3 1997 he continued to emphasize the quality of its games 4 and later reflected that we tried to wind it down as cleanly as we could for the consumer 123 At Sony Stolar had opposed the localization of certain Japanese PlayStation games that he felt would not represent the system well in North America He advocated a similar policy for the Saturn generally blocking 2D arcade games and role playing games from release although he later sought to distance himself from this stance 4 124 125 Other changes included a softer image in Sega s advertising including removing the Sega scream and holding press events for the education industry 126 Tokyo Joypolis the flagship Sega indoor theme park in 1999 Sega partnered with GE to develop the Sega Model 2 arcade system board building on 3D technology in the arcade industry at the time This led to several successful arcade games including Daytona USA launched in a limited capacity in late 1993 and worldwide in 1994 Other popular games included Virtua Cop Sega Rally Championship and Virtua Fighter 2 127 Virtua Fighter and Virtua Fighter 2 became Sega s best selling arcade games of all time surpassing their previous record holder Out Run 128 There was also a technological arms race between Sega and Namco during this period driving the growth of 3D gaming 129 Beginning in 1994 Sega launched a series of indoor theme parks in Japan under a concept dubbed Amusement Theme Park 130 including Joypolis parks sited in urban Tokyo locations such as Yokohama and Odaiba 131 A rapid overseas rollout was planned with at least 100 locations across the world proposed to be opened by 2000 18 however only two SegaWorld London and Sega World Sydney would ultimately materialise in September 1996 and Match 1997 respectively 132 133 Following on from difficulties faced in setting up theme parks in the United States Sega established the GameWorks chain of urban entertainment centers in a joint venture with DreamWorks SKG and Universal Studios during March 1997 134 In 1995 Sega partnered with Atlus to launch Print Club purikura 135 an arcade photo sticker machine that produces selfie photos 136 137 Atlus and Sega introduced Purikura in February 1995 initially at game arcades before expanding to other popular culture locations such as fast food shops train stations karaoke establishments and bowling alleys 138 Purikura became a popular form of entertainment among youths across East Asia laying the foundations for modern selfie culture 136 137 By 1997 about 47 000 Purikura machines had been sold earning Sega an estimated 25 billion 173 million or 283 000 000 equivalent to 478 000 000 in 2021 from Purikura sales that year Various other similar purikira machines appeared from other manufacturers with Sega controlling about half of the market in 1997 139 Sega also made forays in the PC market with the 1995 establishment of SegaSoft which was tasked with creating original Saturn and PC games 140 141 From 1994 to 1999 Sega also participated in the arcade pinball market when it took over Data East s pinball division renaming it Sega Pinball 142 In January 1997 Sega announced its intentions to merge with the Japanese toymaker Bandai The merger planned as a 1 billion stock swap whereby Sega would wholly acquire Bandai was set to form a company known as Sega Bandai Ltd 143 144 Though it was to be finalized in October of that year it was called off in May after growing opposition from Bandai s midlevel executives Bandai instead agreed to a business alliance with Sega 145 As a result of Sega s deteriorating financial situation Nakayama resigned as Sega president in January 1998 in favor of Irimajiri 118 Nakayama s resignation may have in part been due to the failure of the merger as well as Sega s 1997 performance 146 Stolar became CEO and president of Sega of America 123 147 After the launch of the Nintendo 64 in the U S during 1996 sales of the Saturn and its games fell sharply in much of the west 123 The PlayStation outsold the Saturn three to one in the U S in 1997 and the latter failed to gain a foothold in Europe and Australia where the Nintendo 64 would not release until March 1997 111 After several years of declining profits 92 Sega had a slight increase in the fiscal year ended March 1997 partly driven by increasing arcade revenue 92 while outperforming Nintendo during the mid term period 148 However in the fiscal year ending March 1998 Sega suffered its first financial loss since its 1988 listing on the Tokyo Stock Exchange as both a parent company and a corporation as a whole 149 Shortly before the announcement of the losses Sega discontinued the Saturn in North America to prepare for the launch of its successor the Dreamcast releasing remaining games in low quantities 118 123 The decision to discontinue the Saturn effectively left the North American home console market without Sega games for over a year with most of its activity in the country coming from arcade divisions 150 The Saturn lasted longer in some Europe territories and particularly Japan with it notably outperforming the Nintendo 64 in the latter 119 Nonetheless Irimajiri confirmed in an interview with Japanese newspaper Daily Yomiuri that Saturn development would stop at the end of 1998 and games would continue to be produced until mid 1999 151 With lifetime sales of 9 26 million units 152 the Saturn is retrospectively considered a commercial failure in much of the world 153 While Sega had success with the Model 3 arcade board and titles like Virtua Fighter 3 Sega s arcade divisions struggled in the West during the late 1990s 154 On the other hand Sega s arcade divisions were more successful in Asia with Sega s overall arcade revenues increasing year on year throughout the late 1990s but it was not enough to offset the significant declining revenues of Sega s home consumer divisions 92 1998 2001 Dreamcast and continuing struggles Further information Dreamcast The Dreamcast discontinued in 2001 was Sega s last video game console Despite a 75 percent drop in half year profits just before the Japanese launch of the Dreamcast Sega felt confident about its new system The Dreamcast attracted significant interest and drew many pre orders 155 Sega announced that Sonic Adventure the next game starring company mascot Sonic the Hedgehog would be a Dreamcast launch game It was promoted with a large scale public demonstration at the Tokyo Kokusai Forum Hall 156 157 158 Due to a high failure rate in the manufacturing process Sega could not ship enough consoles for the Dreamcast s Japanese launch 155 159 As more than half of its limited stock had been pre ordered Sega stopped pre orders in Japan 160 Before the launch Sega announced the release of its New Arcade Operation Machine Idea NAOMI arcade system board which served as a cheaper alternative to the Sega Model 3 161 NAOMI shared technology with the Dreamcast allowing nearly identical ports of arcade games 150 162 The Dreamcast launched in Japan on November 27 1998 The entire stock of 150 000 consoles sold out by the end of the day 160 Irimajiri estimated that another 200 000 to 300 000 Dreamcast units could have been sold with sufficient supply 160 He hoped to sell more than a million Dreamcast units in Japan by February 1999 but less than 900 000 were sold The low sales undermined Sega s attempts to build up a sufficient installed base to ensure the Dreamcast s survival after the arrival of competition from other manufacturers 163 Sega suffered a further 42 881 billion consolidated net loss in the fiscal year ending March 1999 and announced plans to eliminate 1 000 jobs nearly a quarter of its workforce 164 165 Before the Western launch Sega reduced the price of the Dreamcast in Japan by JP 9 100 effectively making it unprofitable but increasing sales 155 On August 11 1999 Sega of America confirmed that Stolar had been fired 166 Peter Moore whom Stolar had hired as a Sega of America executive only six months before 167 was placed in charge of the North American launch 166 168 169 170 The Dreamcast launched in North America on September 9 1999 150 163 171 with 18 games 171 172 173 Sega set a record by selling more than 225 132 Dreamcast units in 24 hours earning 98 4 million in what Moore called the biggest 24 hours in entertainment retail history 167 Within two weeks U S Dreamcast sales exceeded 500 000 167 By Christmas Sega held 31 percent of the U S video game market by revenue 174 On November 4 Sega announced it had sold more than a million Dreamcast units 175 Nevertheless the launch was marred by a glitch at one of Sega s manufacturing plants which produced defective GD ROMs where data was not properly recorded onto the disc 176 Sega released the Dreamcast in Europe on October 14 1999 175 While Sega sold 500 000 units in Europe by Christmas 1999 155 sales there slowed and by October 2000 Sega had sold only about a million units 177 Though the Dreamcast s launch was successful Sony s PlayStation still held 60 percent of the overall market share in North America at the end of 1999 175 On March 2 1999 in what one report called a highly publicized vaporware like announcement 178 Sony revealed the first details of the PlayStation 2 179 180 The same year Nintendo announced that its next console would meet or exceed anything on the market and Microsoft began development of its own console the Xbox 181 182 183 Sega s initial momentum proved fleeting as U S Dreamcast sales which exceeded 1 5 million by the end of 1999 184 began to decline as early as January 2000 185 Poor Japanese sales contributed to Sega s 42 88 billion 404 million consolidated net loss in the fiscal year ending March 2000 This followed a similar loss of 42 881 billion the previous year and marked Sega s third consecutive annual loss 164 186 Sega s overall sales for the term increased 27 4 percent and Dreamcast sales in North America and Europe greatly exceeded its expectations However this coincided with a decrease in profitability due to the investments required to launch the Dreamcast in Western markets and poor software sales in Japan 164 At the same time worsening conditions reduced the profitability of Sega s Japanese arcade business prompting the closure of 246 locations 164 187 Moore became the president and chief operating officer of Sega of America on 8 May 2000 188 He said the Dreamcast would need to sell 5 million units in the U S by the end of 2000 to remain viable but Sega fell short of this goal with some 3 million units sold 174 189 Moreover Sega s attempts to spur Dreamcast sales through lower prices and cash rebates caused escalating financial losses 190 In March 2001 Sega posted a consolidated net loss of 51 7 billion 417 5 million 191 While the PlayStation 2 s October 26 U S launch was marred by shortages this did not benefit the Dreamcast as much as expected as many disappointed consumers continued to wait or purchased a PSone 174 192 193 Eventually Sony and Nintendo held 50 and 35 percent of the U S video game market respectively while Sega held only 15 percent 155 The Puyo Puyo IP was acquired by Sega in 1998 194 2001 2003 Shift to third party software development 92 164 195 196 CSK chairman Isao Okawa replaced Irimajiri as president of Sega on May 22 2000 197 Okawa had long advocated that Sega abandon the console business 198 Others shared this view Sega co founder David Rosen had always felt it was a bit of a folly for them to be limiting their potential to Sega hardware and Stolar had suggested Sega should have sold the company to Microsoft 4 199 In a September 2000 meeting with Sega s Japanese executives and heads of its first party game studios Moore and Sega of America executive Charles Bellfield recommended that Sega abandon its console business In response the studio heads walked out 167 Sega announced an official company name change from Sega Enterprises Ltd to Sega Corporation effective November 1 2000 Sega stated in a release that this was to display its commitment to its network entertainment business 200 On January 23 2001 Japanese newspaper Nihon Keizai Shinbun reported that Sega would cease production of the Dreamcast and develop software for other platforms 201 After an initial denial Sega released a press release confirming it was considering producing software for the PlayStation 2 and Game Boy Advance as part of its new management policy 202 On January 31 2001 Sega announced the discontinuation of the Dreamcast after March 31 and the restructuring of the company as a platform agnostic third party developer 203 204 Sega also announced a Dreamcast price reduction to eliminate its unsold inventory estimated at 930 000 units as of April 2001 205 206 This was followed by further reductions to clear the remaining inventory 207 208 The final manufactured Dreamcast was autographed by the heads of all nine of Sega s first party game studios plus the heads of sports game developer Visual Concepts and audio studio Wave Master and given away with 55 first party Dreamcast games through a competition organized by GamePro 209 Okawa who had loaned Sega 500 million in 1999 died on March 16 2001 Shortly before his death he forgave Sega s debts to him and returned his 695 million worth of Sega and CSK stock helping the company survive the third party transition 210 211 212 He held failed talks with Microsoft about a sale or merger with their Xbox division 213 According to former Microsoft executive Joachim Kempin Microsoft founder Bill Gates decided against acquiring Sega because he didn t think that Sega had enough muscle to eventually stop Sony 214 A business alliance with Microsoft was announced where Sega develops 11 games for the new Xbox console 215 As part of the restructuring nearly one third of Sega s Tokyo workforce was laid off in 2001 216 2002 was Sega s fifth consecutive fiscal year of net losses 217 After Okawa s death Hideki Sato a 30 year Sega veteran who had worked on Sega s consoles became company president Following poor sales in 2002 Sega cut its profit forecast for 2003 by 90 percent and explored opportunities for mergers In 2003 Sega began talks with Sammy Corporation a pachinko and pachislot manufacturing company and video game company Namco The president of Sammy Hajime Satomi had a history with Sega as he was mentored by Isao Okawa and was previously asked to be CEO of Sega 218 On February 13 Sega announced that it would merge with Sammy however as late as April 17 Sega was still in talks with Namco which was attempting to overturn the merger Sega s consideration of Namco s offer upset Sammy executives The day after Sega announced it was no longer planning to merge with Sammy Namco withdrew its offer 219 In 2003 Sato and COO Tetsu Kamaya stepped down Sato was replaced by Hisao Oguchi the head of the Sega studio Hitmaker 220 Moore left Sega in January 2003 following a meeting in which he was frustrated by Japanese executives refusing to adapt to industry changes such as the demand for mature games such as Grand Theft Auto III 221 Hideaki Irie who had worked at Agetec and ASCII became the new president and COO of Sega of America in October 2003 222 2003 2015 Sammy takeover and business expansion Sega Sammy Holdings current logo pictured was founded in 2004 with pachinko and pachislot manufacturer Sammy Corporation s purchase of Sega In August 2003 Sammy bought 22 4 percent of Sega s shares from CSK making Sammy into Sega s largest shareholder 223 224 In the same year Hajime Satomi said Sega s activity would focus on its profitable arcade business as opposed to loss incurring home software development 225 In 2004 Sega Sammy Holdings an entertainment conglomerate was created Sega and Sammy became subsidiaries of the new holding company both companies operating independently while the executive departments merged According to the first Sega Sammy Annual Report the merger went ahead as both companies were facing difficulties Satomi said Sega had been operating at a loss for nearly ten years 226 while Sammy feared stagnation and overreliance of its highly profitable pachislot and pachinko machine business and wanted to diversify 49 Sammy acquired the remaining percentages of Sega completing a takeover 227 The stock swap deal valued Sega between 1 45 billion and 1 8 billion 226 228 Sega Sammy Holdings was structured into four parts Consumer Business video games Amusement Machine Business arcade games Amusement Center Business Sega s theme parks and arcades and Pachislot and Pachinko Business Sammy s pachinko and pachislot business 229 In response to the decline of the global arcade industry in the late 1990s Sega created several novel concepts tailored to the Japanese market 230 Derby Owners Club was an arcade machine with memory cards for data storage designed to take over half an hour to complete and costing JP 500 to play Testing of Derby Owners Club in a Chicago arcade showed that it had become the most popular machine at the location with a 92 replay rate While the eight player Japanese version of the game was released in 1999 the game was reduced to a smaller four player version due to size issues and released in North America in 2003 231 The machine considered was too expensive for the western market and it did not perform consistently well at all locations 232 Similar issues were faced with trading card game machines such as World Club Champion Football and Mushiking The King of Beetles or bringing internet functionality to arcades with ALL Net a network system for arcade games 233 234 While the Japanese market retained core players western arcades had become more focused on casual footfall and Sega Amusements Europe the entity created to officially distribute and manufacture Sega s machines on the continent after the consolidation of its regional divisions subsequently decided to develop more games locally that were better suited to western tastes 235 The GameWorks chain of arcades came under the sole ownership of Sega which previously was shared with Vivendi Universal 236 The chain was sold in 2011 237 In 2009 Sega Republic an indoor theme park opened in Dubai 238 Sega gradually reduced its arcade centers from 450 239 in 2005 to around 200 in 2015 240 However arcade machine sales incurred higher profits than the company s console mobile and PC games on a year to year basis until the fiscal year of 2014 241 In order to drive growth in western markets Sega announced new leadership for Sega of America and Sega Europe in 2005 Simon Jeffery became president and COO of Sega of America and Mike Hayes president and COO for Sega Europe 242 In 2009 Mike Hayes became president of the combined outfit of Sega West which includes both Sega of America and Sega Europe due to Simon Jeffery leaving 243 Mike Hayes is credited for re inventing Sega s software strategy taking it from failing to 500 Million in revenue focusing on PC with franchises like Total War and Football Manager selling Mario amp Sonic at the Olympic games and at one point being one of the top 3 costumers on Steam 244 In the console and handheld business Sega found success in the Japanese market with the Yakuza Phantasy Star Portable and Hatsune Miku Project DIVA series 245 246 247 Related to Hatsune Miku in 2010 Sega began providing the 3D imaging for her holographic concerts 248 Sega also distributes games from smaller Japanese game developers and sells localizations of Western games in Japan 249 250 In 2013 Index Corporation was purchased by Sega Sammy after going bankrupt 251 The year before Sega signed a deal to distribute Atlus titles in Japan 252 After the buyout Sega implemented a corporate spin off with Index The latter s game assets were rebranded as Atlus a wholly owned subsidiary of Sega 253 In the mobile market Sega released its first app on the iTunes Store with a version of Super Monkey Ball in 2008 254 Due in part to the decline of packaged game sales worldwide in the 2010s 255 Sega began layoffs and closed five offices based in Europe and Australia on July 1 2012 256 This was to focus on the digital game market such as PC and mobile devices 257 258 Strong performers for Sega on these platforms include Sonic Dash in Western markets and Phantasy Star Online 2 and Chain Chronicle in Asian markets In 2012 Sega also began acquiring studios for mobile development studios such as Hardlight Three Rings Design and Demiurge Studios becoming fully owned subsidiaries 259 260 261 19 older mobile games were pulled due to quality concerns in May 2015 262 263 To streamline operations Sega established operational firms for each of its businesses in the 2010s In 2012 Sega established Sega Networks as a subsidiary company for its mobile games 264 The same year Sega Entertainment was established for Sega s amusement facility business 265 In January 2015 Sega of America announced its relocation from San Francisco to Atlus USA s headquarters in Irvine California which was completed later that year 266 From 2005 to 2015 Sega s operating income generally saw improvements compared to Sega s past financial problems but was not profitable every year 267 Sega operating income 2005 2015 Japanese yen in millions Business year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Amusement Machine Sales 267 7 423 12 176 11 682 7 152 6 890 7 094 7 317 7 415 1 902 1 264 2 356Amusement Center Operations 267 5 472 9 244 132 9 807 7 520 1 338 342 355 1 194 60 946Consumer Business 267 8 809 9 244 1 748 5 989 941 6 332 1 969 15 182 732 2 089 4 0332015 present Restructuring In April 2015 Sega Corporation was reorganized into Sega Group one of three groups of Sega Sammy Holdings Sega Holdings Co Ltd was established with four business sectors under its control Haruki Satomi son of Hajime Satomi took office as president and CEO of the company in April 2015 268 269 Sega Games Co Ltd became the legal name of Sega Corporation and continued to manage home video games while Sega Interactive Co Ltd was founded to take control of the arcade division 270 271 Sega Networks merged with Sega Games Co Ltd in 2015 264 At the Tokyo Game Show in September 2016 Sega announced that it had acquired the intellectual property and development rights to all games developed and published by Technosoft 272 Effective from January 2017 85 1 of the shares in Sega s theme park business became owned by China Animations Character Co renaming the former Sega Live Creation to CA Sega Joypolis 273 Sega s headquarters in Shinagawa ku Tokyo Japan Sega Sammy Holdings announced in April 2017 that it would relocate its head office functions and domestic subsidiaries located in the Tokyo metropolitan area to Shinagawa ku by January 2018 This was to consolidate scattered head office functions including Sega Sammy Holdings Sammy Corporation Sega Holdings Sega Games Atlus Sammy Network and Dartslive 274 Sega s previous headquarters in Ōta was sold in 2019 and will likely be torn down 275 In June 2017 Chris Bergstresser replaced Jurgen Post as president and COO of Sega Europe 276 In June 2018 Gary Dale formerly of Rockstar Games and Take Two Interactive replaced Chris Bergstresser as president and COO of Sega Europe 277 A few months later Ian Curran a former executive at THQ and Acclaim Entertainment replaced John Cheng as president and COO of Sega of America in August 2018 278 In October 2018 Sega reported favorable western sales results from games such as Yakuza 6 and Persona 5 due to the localization work of Atlus USA 279 Despite a 35 percent increase in the sale of console games and success in its PC game business profits fell 70 percent for the 2018 fiscal year in comparison to the previous year mainly due to the digital games market which includes mobile games as well as Phantasy Star Online 2 In response Sega announced that for its digital games it would focus on releases for its existing intellectual property and also focus on growth areas such as packaged games in the overseas market Sega blamed the loss on market miscalculations and having too many games under development Projects in development at Sega included a new game in the Yakuza series the Sonic the Hedgehog film and the Sega Genesis Mini 280 281 which was released in September 2019 282 In May 2019 Sega acquired Two Point Studios known for Two Point Hospital 283 284 On April 1 2020 Sega Interactive merged with Sega Games Co Ltd The company was again renamed Sega Corporation while Sega Holdings Co Ltd was renamed Sega Group Corporation 285 According to a company statement the move was made to allow greater research and development flexibility 286 In April 2020 Sega sold Demiurge Studios to Demiurge co founder Albert Reed Demiurge said it would continue to support the mobile games it developed under Sega 287 As part of the company s 60th anniversary of the brand name Sega announced the Game Gear Micro microconsole scheduled for October 6 2020 in Japan 288 In announcement that was dubbed revolutionary Sega also announced its Fog Gaming platform which will use the unused processing power of arcade machines in Japanese arcades overnight to help power cloud gaming applications 288 During the latter half of 2020 much of the financial gains Sega made in the earlier part of the year were wiped out due to the impact of the COVID 19 pandemic on its Sega Entertainment division which ran its arcades 289 In November Sega Sammy sold 85 1 of its shares in the division to Genda Inc though the Sega branding and coin operated machines produced by the company continue to be found in the arcades Arcade game development was unaffected by the move 290 By January 2022 Sega sold the remaining portion of this division to Genda 291 Contrasting its losses brought forth by amusement operations in 2020 sales and critical reception of Sega s home console games improved Metacritic named Sega the best publisher of the year in 2020 292 Of its 28 releases that year 95 had good Metacritic scores above 75 including two with great scores above 90 for Persona 5 Royal and Yakuza 0 with an average Metacritic score of 81 6 for all 2020 Sega releases 293 294 Corporate structureSega s global headquarters are in Shinagawa Tokyo Japan The company was scheduled to move there in August 2018 295 Sega also has offices in Irvine California as Sega of America in London as Sega Europe 296 in Seoul South Korea as Sega Publishing Korea 297 and in Singapore Hong Kong Shanghai and Taipei 298 In other regions Sega has contracted distributors for its games and consoles such as Tectoy in Brazil 35 Sega has had offices in France Germany Spain and Australia 256 those markets have since contracted distributors 299 Relations between the regional offices have not always been smooth 300 Some conflict in the 1990s may have been caused by Sega president Nakayama and his admiration for Sega of America according to Kalinske There were some guys in the executive suites who really didn t like that Nakayama in particular appeared to favor the U S executives A lot of the Japanese executives were maybe a little jealous and I think some of that played into the decisions that were made 4 By contrast author Steven L Kent said Nakayama bullied American executives and that Nakayama believed the Japanese executives made the best decisions Kent also said Sega of America CEOs Kalinske Stolar and Moore dreaded meeting with Sega of Japan executives 301 In 2021 Sega Group Corporation was absorbed into Sega Corporation 302 Subsidiaries of Sega Corporation Club Sega game center in Akihabara Tokyo After the formation of Sega Group in 2015 and the founding of Sega Holdings the former Sega Corporation was renamed Sega Games Co Ltd 271 Under this structure Sega Games was responsible for the home video game market and consumer development while Sega Interactive Co Ltd comprised Sega s arcade game business 270 The two were consolidated in 2020 renamed as Sega Corporation 286 The company includes Sega Networks which handles game development for smartphones 268 Sega Corporation develops and publishes games for major video game consoles and arcade cabinets and has not expressed interest in developing consoles again According to former Sega Europe CEO Mike Brogan There is no future in selling hardware In any market through competition the hardware eventually becomes a commodity If a company has to sell hardware then it should only be to leverage software even if that means taking a hit on the hardware 54 Sega Toys Co Ltd originally known as Yonezawa Toys and acquired by Sega in 1991 has created toys for children s franchises such as Oshare Majo Love and Berry Mushiking King of the Beetles Lilpri Bakugan Jewelpet Rilu Rilu Fairilu Dinosaur King and Hero Bank Products released in the West include the home planetarium Homestar and the robot dog iDog The Homestar was released in 2005 and has been improved several times Its newest model Flux was released in 2019 The series is developed by the Japanese inventor and entrepreneur Takayuki Ohira As a recognized specialist for professional planetariums he has received numerous innovation prizes and supplies large planetariums internationally with his company Megastar Sega Toys also inherited the Sega Pico handheld system and produced Pico software 303 Since the late 1960s Sega has been affiliated with operations of bowling alleys and arcades through its former Sega Entertainment Co Ltd subsidiary in Japan as well as a number of other smaller regional subsidiaries in other countries 270 Initiatives to expand operations in other territories such as the US UK France Spain and Taiwan have been more shortlived and following the 85 1 majority acquisition of Sega Entertainment s shares in November 2020 to mitigate losses caused by the COVID 19 pandemic 304 Sega s arcades in Japan since have been run under Genda Incorporated s Genda GiGO Entertainment division 305 Its DartsLive subsidiary creates electronic darts games 298 while Sega Logistics Service distributes and repairs arcade games 270 In 2015 Sega and Japanese advertising agency Hakuhodo formed a joint venture Stories LLC to create entertainment for film and TV Stories LLC has exclusive licensing rights to adapt Sega properties into film and television 306 307 and has partnered with producers to develop series based on properties including Shinobi Golden Axe Virtua Fighter The House of the Dead and Crazy Taxi 308 Software research and development See also Sega development studios As a games publisher Sega produces games through its research and development teams The Sonic the Hedgehog franchise maintained through Sega s Sonic Team division is one of the best selling franchises in the history of video games 309 Sega has also acquired third party studios including ordered by assigned division Sega Corporation Atlus 253 Play Heart 2 Sega Europe Amplitude Studios 310 Creative Assembly 311 Hardlight 261 Relic Entertainment 312 Sports Interactive 313 Two Point Studios 283 284 Sega s software research and development teams began with one development division operating under Sega s longtime head of R amp D Hisashi Suzuki As the market increased for home video game consoles Sega expanded with three Consumer Development CS divisions After October 1983 arcade development expanded to three teams Sega DD No 1 2 and 3 Some time after the release of Power Drift the company restructured its teams again as the Sega Amusement Machine Research and Development Teams or AM teams Each arcade division was segregated and a rivalry existed between the arcade and consumer development divisions 314 In what has been called a brief moment of remarkable creativity 150 in 2000 Sega restructured its arcade and console development teams into nine semi autonomous studios headed by the company s top designers 4 171 315 The studios were United Game Artists Smilebit Hitmaker Sega Rosso Sega Wow Overworks Amusement Vision Sega AM2 and Sonic Team 150 316 Sega s design houses were encouraged to experiment and benefited from a relatively lax approval process 317 After taking over as company president in 2003 Hisao Oguchi announced his intention to consolidate Sega s studios 220 Prior to the acquisition by Sammy Sega began the process of re integrating its subsidiaries into the main company 318 Toshihiro Nagoshi formerly the head of Amusement Vision recalls this period in many ways a labour of love from Sega teaching the creatives the experience of managing a business 319 Sega still operates first party studios as departments of its research and development division Sonic Team exists as Sega s CS2 research and development department 320 while Sega s CS3 or Online department has developed games such as Phantasy Star Online 2 321 322 and Sega Interactive s AM2 department has more recently worked on projects such as smartphone game Soul Reverse Zero 323 Toshihiro Nagoshi remained involved with research and development as Sega s chief creative officer or creative director while working on the Yakuza series until 2021 324 325 326 Legacy Dreamcast arcade machine at the Finnish Museum of Games in Tampere Finland in 2017 Sega is one of the world s most prolific arcade game producers having developed more than 500 games 70 franchises and 20 arcade system boards since 1981 It has been recognized by Guinness World Records for this achievement 327 Of Sega s arcade division Eurogamer s Martin Robinson said It s boisterous broad and with a neat sense of showmanship running through its range On top of that it has something that s often evaded its console dwelling cousin success 328 The Sega Genesis is often ranked among the best consoles in history 329 330 331 In 2014 USgamer s Jeremy Parish credited it for galvanizing the market by breaking Nintendo s near monopoly helping create modern sports game franchises and popularizing television games in the UK 332 Kalinske felt Sega had innovated by developing games for an older demographic and pioneering the street date concept with the simultaneous North American and European release of Sonic the Hedgehog 2 333 Sega of America s marketing campaign for the Genesis influenced marketing for later consoles 334 Despite its commercial failure the Saturn is well regarded for its library 108 335 336 though it has been criticized for a lack of high profile franchise releases 4 Edge wrote that hardened loyalists continue to reminisce about the console that brought forth games like Burning Rangers Guardian Heroes Dragon Force and Panzer Dragoon Saga 337 Sega s management was criticized for its handling of the Saturn 4 108 According to Greg Sewart of 1Up com the Saturn will go down in history as one of the most troubled and greatest systems of all time 335 The Dreamcast is remembered for being ahead of its time 338 339 340 with several concepts that became standard in consoles such as motion controls and online functionality 341 Its demise has been connected with transitions in the video game industry In 1001 Video Games You Must Play Before You Die Duncan Harris wrote that the Dreamcast s end signaled the demise of arcade gaming culture Sega s console gave hope that things were not about to change for the worse and that the tenets of fast fun and bright attractive graphics were not about to sink into a brown and green bog of realistic war games 342 Parish contrasted the Dreamcast s diverse library with the suffocating sense of conservatism that pervaded the industry in the following decade 343 In Eurogamer Damien McFerran wrote that Sega s decisions in the late 1990s were a tragic spectacle of overconfidence and woefully misguided business practice 54 Travis Fahs of IGN noted that since the Sammy takeover Sega had developed fewer games and outsourced to more western studios and that its arcade operations had been significantly reduced Nonetheless he wrote Sega was one of the most active creative and productive developers the industry has ever known and nothing that can happen to their name since will change that 4 In 2015 Sega president Haruki Satomi told Famitsu that in the previous ten years Sega had betrayed the trust of older fans and that he hoped to re establish the Sega brand 344 During the promotion of the Sega Genesis Mini Sega executive manager Hiroyuki Miyazaki reflected on Sega s history saying I feel like Sega has never been the champion at the top of all the video game companies but I feel like a lot of people love Sega because of the underdog image 345 Former Sega management cited the absence of Dragon Quest and Final Fantasy games on their home consoles as a reason for the console division s struggles especially in Japan 346 347 In his 2018 book The Sega Arcade Revolution Horowitz connected Sega s decline in the arcades after 1995 with broader industry changes He argued that its most serious problems came from the loss of its creative talent particularly Yuji Naka and Yu 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