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Sega research and development[edit]

Sega, a Japanese multinational video game developer and publisher, was founded as Nihon Goraku Bussan[a] on June 3, 1960 and became known as Sega Enterprises, Ltd.[b] following the acquisition of Rosen Enterprises in 1965. Originally an importer of coin-operated games to Japan and manufacturer of slot machines and jukeboxes, Sega began developing its own arcade games in 1966 with Periscope, which became a surprise success and led to more arcade machine development. Since beginning development of its own arcade games, Sega has maintained first-party research and development teams and studios for arcade and console games.

Early research and development (1960-1977)[edit]

Prior to their work in developing arcade games, Nihon Goraku Bussan and its sister company, Nihon Kikai Seizō,[c] were focused on the production of slot machines and jukeboxes.[1][2][3] The two companies were merged in 1964,[4] and acquired Rosen Enterprises, owned by David Rosen, in 1965.[5] With the merger, the company took the name Sega Enterprises, Ltd., using the branding of Nihon Goraku Bussan at the time that was first used by its predecessor, Service Games of Japan, in 1954.[4][6] Shortly afterward, Sega stopped its focus on slot machines and stopped leasing to military bases in order to focus on becoming a publicly traded company of coin-operated amusement machines.[5] Products imported included Rock-Ola jukeboxes and pinball games by Williams, as well as gun games by Midway Manufacturing.[7]

According to Rosen, poor conditions in the US coin-op manufacturing market prompted the company's development of electromechanical games. Both Nihon Goraku Bussan and Rosen Enterprises had had engineers on staff.[8] Because Sega imported second-hand machines that frequently required maintenance, Sega began the transition from importer to manufacturer by constructing replacement guns and flippers for its imported games. According to former Sega director Akira Nagai, this led to Sega developing their own games as well.[9] Rosen sketched out the design of Sega's first game, Periscope, personally.[10] As a result of Periscope's success, Sega created between eight and ten games a year for the next two years, and exported all of them.[8][11] Despite this, rampant piracy in the industry would eventually lead to Sega stepping away from exporting its games.[12] One such example occurred when Sega developed Jet Rocket. According to Rosen, after its American release in 1970, it was cloned by three Chicago manufacturers. This negatively affected the game's market performance.[8]

One of Sega's most important research and development hires occurred in 1962. Hisashi Suzuki, an engineer, joined in large part because foreign-ran companies including Sega used five-day work weeks, whereas most Japanese companies worked six days at the time. Suzuki was hired as a designer, and initially was responsible for a number of slot machines and jukeboxes. He transitioned to electromechanical games, where he designed 1970's Missile and Killer Shark—Suzuki himself has stressed the significant difference between design and development in electromechanical games that is less so in video games. Eventually, Suzuki would become Sega's head of the research and development division and later a member of the company's board of directors, until his retirement in 2004.[13][14] Another important hire was Hideki Sato, who was hired in 1971. He later became the deputy general manager of research and development in 1989,[15] and president of the company in 2001.[16]

After being acquired by American conglomerate Gulf and Western Industries, Sega released Pong-Tron, its first video-based game, in 1973. A clone of Pong, Pong-Tron utilized discrete transistor-transistor logic (TTL) hardware.[17] Although additional later releases such as 1976's Fonz also used discrete logic hardware,[18] during this time frame Sega was still focused on electromechanical games.[17]

Sega/Gremlin era (1978-1983)[edit]

An arcade cabinet with Star Trek logos
Star Trek: Strategic Operations Simulator, released in 1983.

As Sega entered the end of the 1970s, the company began to make attempts to transition into microprocessor-based games. Attempts to build microprocessors had cost the company US$5 million in losses in 1977 and 1978. On September 29, 1978, Sega purchased San Diego-based arcade game manufacturer Gremlin Industries, which was already producing microprocessor-based games. After the acquisition, Sega sold its arcade games as "Gremlin/Sega", which changed to "Sega/Gremlin" in 1981.[19] Sega's acquisition of Gremlin occurred in time for the golden age of arcade video games.[20]

During Sega's ownership of Gremlin, Rosen applied a strategy in which both Sega's Japanese and Gremlin's American research and development would establish a presence in arcades. At Gremlin, Head On was designed by Lane Hauck and programmed by Bill Blewitt with some influence from Sega of Japan.[21] Hauck would also design the shooting game Carnival with programming by Medo Moreno.[citation needed] Murphy Bivens designed Space Fury, the first arcade game to feature color vector graphics. It also was the debut of Sega's G80 arcade system board, developed in collaboration between Gremlin and Sega of Japan, which introduced the ability to change the game in the arcade cabinet.[22] A team at Sega/Gremlin developed Eliminator, which featured two and four-person multiplayer, but underperformed in arcades.[citation needed] Sam Palahnuk, along with Bivens and others, developed and released Star Trek: Strategic Operations Simulator, with Sega/Gremlin releasing it in 1983.[citation needed]

In addition, Sega of Japan developed Monaco GP, its last TTL-based game, and released it in 1979. Turbo was developed by Steve Hanawa of Sega and released in 1981. At the insistence of Sega/Gremlin employee Elizabeth Falconer, Sega/Gremlin licensed Frogger from Konami and released it in 1981. Sega's 1982 game Zaxxon and its 1983 game Congo Bongo are believed to have been developed by Ikegami Tsushinki—outsourcing development of games was not an uncommon practice at the time. Another such title was Pengo, developed by Coreland.

Japanese management buyout and video game consoles (1983-1991)[edit]


At the end of 1982, Sega/Gremlin announced a name change to Sega Electronics, Inc.[23] Starting that year,[24] a downturn in the arcade business seriously hurt Sega, leading Gulf and Western to sell its North American arcade manufacturing organization and the licensing rights for its arcade games to Bally.[25][26] Rosen subsequently resigned from Sega on January 1, 1984,[27] but returned with Sega Enterprises, Ltd. executive Hayao Nakayama and completed a management buyout of Sega in 1984 with backing from CSK Corporation, owned by Isao Okawa.[28] A year before the acquisition, Nakayama advocated that Sega enter the home consumer market in Japan,[29] leading to the SC-3000 computer released in 1983, the SG-1000 video game console in 1983 and II in 1984, the Master System in 1985, and the Sega Genesis (also known as the Mega Drive outside North America) in 1988.[citation needed] Two of the employees working on these hardware developments were Hideki Sato and Masami Ishikawa. Hired on at Sega in 1979, Ishikawa was involved in SG-1000 and Master System development, and later led development of the Genesis. He later held a management position in the research and development division.[30]

Significant hires[edit]

During the 1980s, Sega made a number of new hires to its in-house research and development. Rikiya Nakagawa joined Sega as a programmer in 1983.[31] Working for Sega's development division, he programmed arcade games including Ninja Princess, Alien Syndrome, and Choplifter.[32] Hisao Oguchi joined Sega in 1984. As part of his earliest work, he worked on project planning for the Master System, and his first game developed was Doki Doki Penguin. He also worked as director on Super Derby, as well as Super Monaco GP, Rad Mobile, and Heavyweight Champ.[33] Makoto Uchida was hired on as a tester for After Burner, and directed his first game, Altered Beast, in 1988.[34] He eventually became the head of Sega's Shanghai research and development division.[35]

Yu Suzuki joined Sega in 1983 as a programmer.[36] At the time Suzuki joined Sega, there was only one development division at the company.[37] In his first year, he created a 2D boxing game called Champion Boxing for the SG-1000. He was promoted to project leader while still in his first year at the company.[36] Suzuki's next project was the motorcycle racing game Hang-On. To accomplish his desire to make a 3D game despite technological limitations at the time,[38] he specified the design of Sega's new Super Scaler arcade system board,[39] which utilized 16-bit graphics and sprite-scaling.[40][41] Hang-On was very popular at launch and sold well for Sega.[39] Suzuki's success followed with additional titles Space Harrier, Out Run, and Enduro Racer.[39][42] 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.[43] Suzuki and his team relocated to "Studio 128", a more private location where After Burner and Power Drift were developed.[44] He also worked on development of G-LOC: Air Battle and the R360 arcade cabinet.[37]

Hired as a graphic designer, Rieko Kodama joined Sega in 1984.[45] Her first work was on character design for Champion Boxing,[46] and she also worked on Alex Kidd in Miracle World and Ninja Princess. She also served as the main designer on Phantasy Star[45] and Phantasy Star II. Kodama was the director for Phantasy Star IV: The End of the Millennium.[46][47] Additionally, she provided artwork for Sonic the Hedgehog and Sonic the Hedgehog 2.[46] Kodama later became a producer for Sega,[48] and was dubbed by Nintendo Power as the "First Lady of RPGs".[47]

Sonic the Hedgehog co-creators: programmer Yuji Naka (left) and artist Naoto Ohshima (right)

In 1983, programmer Yuji Naka was hired into Sega's Consumer Development division.[49] His first task was designing maps and checking floppy disks for a game titled Road Runner for the SF-7000 expansion for the SG-1000,[50] and his first game he programmed was Girl's Garden, which he and composer Hiroshi Kawaguchi created as part of their training process.[51] For his next game, Phantasy Star, Naka created pseudo-3D animation effects.[52] He met artist Naoto Ohshima while working on the game,[53] who had been hired as a designer in 1987 with Phantasy Star as his first project. He, Naka, and Kodama worked together on the game as well as its sequel.[54] In 1990, Nakayama decided Sega needed a flagship series and mascot to compete with Nintendo's Mario series.[55] The gameplay of Sonic the Hedgehog (1991) originated with a tech demo created by Naka, who had developed an algorithm that allowed a sprite to move smoothly on a curve by determining its position with a dot matrix. Naka's prototype was a platform game that involved a fast-moving character rolling in a ball through a long winding tube.[56] Sega management accepted the duo's project and they were joined by designer Hirokazu Yasuhara,[57]: 20–33, 96–101 [58] who had joined Sega in 1988.[59] After Yashura joined Naka and Ohshima, their focus shifted to the protagonist, who Sega hoped could become its mascot.[57]: 20–33, 96–101  The protagonist was initially a rabbit able to grasp objects with prehensile ears, but the concept proved too complex for available hardware. The team moved on to animals that could roll into a ball, and eventually settled on Sonic, a teal hedgehog created by Ohshima.[60][61] Naka's prototype was then fleshed out with Ohshima's character design and levels conceived by Yasuhara.[56] The team, which included Kodama and totaled 15 people,[54] took the name Sonic Team for the game's release.[62]

Technological developments[edit]

  • Brief development of SG-1000, II, Master System, and Sega Genesis, and why certain advancements were made.
  • Arcade hardware: Super Scaler, Out Run, X Board, Y Board

Amusement Machine Research and Development Teams (1991-1993)[edit]

Some time after the release of Power Drift, Sega began to separate the amusement division into the Amusement Machine Research and Development teams, or AM teams.[44][63] According to Suzuki, Sega employed approximately 600 people in research and development, and that AM2 began as a group of around 100 people. He has also stated the reason for this separation was the advent of advanced computer graphics technology.[63]

Reorganization and frequent team changes (1993-1998)[edit]

  • Team Andromeda
  • Formation of AM Annex from AM3 (AM Annex -> AM8 -> AM9 (United Game Artists)
    • Mizuguchi separates from Sasaki, Sasaki's group AM12, then AM5 (Sega Rosso)
  • CD splits into three CS departments
  • Original AM5 becomes Mirai R&D?
  • SegaSoft
  • STI collapses in 1996
  • Sega PC, headed by Shun Arai
  • Sega Digital Studio, later AM10, as a sound team
  • Nagoshi is granted his own AM, AM11, later AM4 (Amusement Vision)

Independent corporations and AM2 of CRI (1998-2003)[edit]

Transitions into independent companies in 2000
R&D Department Designation Company name CEO
AM1 / R&D #1 Wow Entertainment Rikiya Nakagawa
AM3 / R&D #3 Hitmaker Hisao Oguchi
AM4 / R&D #4 (previously AM11) Amusement Vision Toshihiro Nagoshi
AM5 / R&D #5 (previously AM12) Sega Rosso Kenji Sasaki
AM6 / R&D #6 (previously CS1) Smilebit Shun Arai
AM7 / R&D #7 (previously CS2) Overworks Noriyoshi Ohba
AM8 / R&D #8 (previously CS3) Sonic Team Yuji Naka
AM9 / R&D #9 (previously CS4) United Game Artists Tetsuya Mizuguchi
AM10 (previously Digital Studio) Wave Master
AM2 of CRI (previously AM2) SEGA-AM2 Co., Ltd. Yu Suzuki

Prior to the Dreamcast's release, Sega purchased Visual Concepts for $10 million. Stolar's reasoning from the move was to recapture the success of sports games that Sega had had in the Genesis years. The move resulted in some difficulty for Sega when Electronic Arts refused to publish games for the system due to their demand to be the exclusive publisher of sports games for Dreamcast.[64][65] While the Dreamcast would have none of EA's popular sports games, "Sega Sports" games developed mainly by Visual Concepts helped to fill that void.[66][65]

In April 2000, CSK Research Institute (CRI) took management over AM2. CRI was a subsidiary of CSK Corporation, which was Sega's parent company at the time, and had previously published Aero Dancing. The new division became known as "AM2 of CRI", and Suzuki remained in charge.[67]

In what has been called "a brief moment of remarkable creativity",[68] in 2000, Sega restructured its arcade and console development teams into nine semi-autonomous studios headed by the company's top designers.[69][70] Studios included United Game Artists, Hitmaker, Smilebit, Overworks, Sega AM2, Sonic Team, WOW Entertainment, Amusement Vision, and Sega Rosso.[71] Sega's design houses were encouraged to experiment and benefited from a relatively lax approval process.[72] This resulted in games such as Rez,[73][74][75]The Typing of the Dead,[76][77] Seaman,[78] and Segagaga.[79] Sega also revived franchises from the Genesis era, such as Ecco the Dolphin.[80] AM2 developed what Sega hoped would be the Dreamcast's killer app, Shenmue, a "revenge epic in the tradition of Chinese cinema."[69][81] Incorporating a simulatedday/night cycle with variable weather, non-player characters with regular schedules, and the ability to pick up and examine detailed objects (also introducing the Quick-time event in its modern form[82][83]), Shenmue went over budget and was rumored[84] to have cost Sega over $50 million.[85] As the first fully 3D platforming game starring Sega's mascot, Sonic the Hedgehog, Sonic Team's Sonic Adventure was considered "the centerpiece of the [Dreamcast] launch".[68] Adventure garnered criticism for technical problems including erratic camera angles and glitches,[86][87] but was praised for its "luscious"[88] visuals, "vast, twisting environments" and iconic set pieces. It has been described as the Sonic series' creative apex.[89][86][90] In sports, Visual Concepts' NFL 2K football series and its NBA 2K basketball series were critically acclaimed.[91] Additionally, with the release of Sega's NAOMI arcade system board, the focus of the arcade divisions shifted to produce games that could easily be ported to the Dreamcast.[92]

In 2001, AM2 of CRI was renamed to SEGA-AM2 Co., Ltd.[93] After serving as a producer on Virtua Cop 3 and OutRun 2,[94] Suzuki left AM2 on October 1, 2003 in order to start a new studio with Sega, called Digitalrex.[95][96] He was promoted to non-executive board director.[95] Hiroshi Kataoka was placed in charge of AM2.[95][97]

  • CSK takes over AM2 as AM2 of CRI, Yu Suzuki still in charge
  • Remainder of studios spun off into nine companies
  • Sonic Team USA (later Sega Studios USA)
  • Sato's presidency of the company
  • Visual Concepts purchased, negotiations with EA go sour
  • End of first-party consoles, development for other systems

Studio consolidation, reintegration, and numerous moves (2003-2012)[edit]

During mid-2004, Sammy Corporation bought a controlling share in Sega and created the new company Sega Sammy Holdings, an entertainment conglomerate. Since then, Sega and Sammy became subsidiaries of the aforementioned holding company, with both companies operating independently, while the executive departments merged.[98] Prior to the acquisition by Sammy, Sega began the process of re-integrating its subsidiaries into the main company,[99] which was completed by October 2004.[100] Sega would also restructure the development studios again, consolidating the divisions further into the Global Entertainment, Amusement Software, and New Entertainment R&D divisions.[101]


In 2005, Sega sold Visual Concepts to Take-Two Interactive,[102] and purchased UK-based developer Creative Assembly, known for its Total War series.[103] In the same year, Sega Racing Studio was also formed by former Codemastersemployees.[104] In 2006, Sega Europe purchased Sports Interactive, known for its Football Manager series.[105] Sega of America purchased Secret Level in 2006, which was renamed to Sega Studios San Francisco in 2008. In early 2008, Sega announced that they would re-establish an Australian presence, as a subsidiary of Sega of Europe, with a development studio branded as Sega Studios Australia. In the same year, Sega launched a subscription based flash website called "PlaySEGA" which played emulated versions of Sega Genesis as well original web-based flash games.[106] It was subsequently shut down due to low subscription numbers. In 2013, following THQ's bankruptcy, Sega bought Relic Entertainment, known for its Company of Heroes series.[107] In 2008, Sega announced the closure of Sega Racing Studio, although the studio was later acquired by Codemasters.[104] Closures of Sega Studios San Francisco and Sega Studios Australia followed in 2010 and 2013, respectively.[108][109]

Acquisition of Index Corporation and changes since (2012-present)[edit]

Also in 2013, Index Corporation was purchased by Sega Sammy after going bankrupt.[110] After the buyout, Sega implemented a corporate spin-off with Index, and re-branded the video game assets of the company as Atlus, a wholly owned subsidiary of Sega.[111]

Due to the decline of packaged game sales both domestically and outside Japan in the 2010s,[112] Sega began layoffs and reduction of their Western businesses, such as Sega shutting down five offices based in Europe and Australia on July 1, 2012.[113]

In the mobile market, Sega released its first app on the iTunes Store with a version of Super Monkey Ball in 2008. Since then, the strategies for Asian and Western markets have become independent. The Western line-up consisted of emulations of games and pay-to-play apps, which were eventually overshadowed by more social and free-to-play games, eventually leading to 19 of the older mobile games being pulled due to quality concerns in May 2015.[114][115] Beginning in 2012, Sega also began acquiring studios for mobile development, with studios such as Hardlight, Three Rings Design, and Demiurge Studios becoming fully owned subsidiaries.[116][117][118]

Sega announced at the Tokyo Game Show in September 2016 that they acquired the intellectual property and development rights to the games developed and published by Technosoft.[119][120] Factors that influenced the acquisition included the former Technosoft president stating that they did not want the Technosoft brand to desist, and so handing over the intellectual properties to Sega was the only other option. Sega and Technosoft also had an established collaboration during the Genesis/Mega Drive era and so this pre-established relationship was also a factor when acquiring the brand rights to Technosoft games.[121]

In 2019, Sega acquired Two Point Studios, known for its positively reviewed Two Point Hospital.[122][123]


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