Sega

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Sega Holdings Co., Ltd.
Native name
株式会社セガホールディングス
Kabushiki gaisha
Subsidiary
Industry Video games
Amusement
Entertainment
Founded 1940 (1940) in Honolulu, Hawaii, U.S.
Founders
  • Martin Bromley
  • Irving Bromberg
  • James Humpert
  • David Rosen
Headquarters Ōta, Tokyo, Japan
Area served
Worldwide
Key people
  • Hideki Okamura
    (President and COO)
  • John Cheng
    (COO, Sega of America)
  • Jürgen Post
    (COO, Sega Europe)
Products
Owner
Number of employees
~4,865 (FY 2014)[1][2]
Parent Sega Sammy Holdings
Divisions
Subsidiaries
Website

Sega Holdings Co., Ltd. (株式会社セガホールディングス Kabushiki-gaisha Sega hōrudingusu?), originally short for Service Games and officially styled as SEGA, is a Japanese multinational video game developer and publisher headquartered in Tokyo, Japan, with multiple offices around the world. Sega developed and manufactured numerous home video game consoles from 1983 to 2001, but the financial losses incurred from their Dreamcast console caused the company to restructure itself in 2001, and focus on providing software as a third-party developer from then on. Nonetheless, Sega remains the world's most prolific arcade producer, with over 500 games in over 70 franchises on more than 20 different arcade system boards since 1981.[3]

Sega, along with their sub-studios, are known for their multi-million selling game franchises including Sonic the Hedgehog, Virtua Fighter, Phantasy Star, Yakuza, and Total War, amongst others. Sega's head offices are located in Ōta, Tokyo, Japan. Sega's North American division, Sega of America, is headquartered in Southern California, having moved there from San Francisco, California in 2015. Sega's European division, Sega Europe, is headquartered in the Brentford area of London, England.

History

Company origins (1940–1982)

SEGA Diamond 3 Star

In 1940, American businessmen Martin Bromley, Irving Bromberg, and James Humpert formed a company called Standard Games in Honolulu, Hawaii, to provide coin-operated amusement machines; mostly slot machines to military bases located which they saw as a potential market since due to the onset of World War II, the number of men stationed at the military bases had increased and they would have needed something to pass their spare time. After the war, the company changed its name to Service Games due to military focus and seeing Japan which was under Allied occupation as a potential market, started exporting slot machines there to the U.S. military bases. In 1951, when the government of United States started outlawing slot machines, the company moved its base to Tokyo, Japan. There the company provided coin-operated slot machines to U.S. bases in Japan and changed its name again to Service Games of Japan in 1952. Soon, the company also started providing the slot machines for the Japanese public and the company's focus shifted from the U.S. military bases to the Japanese public.[4][5][6][7]

David Rosen, an American officer in the United States Air Force stationed in Japan, launched a two-minute photo booth business in Tokyo in 1954.[4] This company eventually became Rosen Enterprises, and in 1957, began importing coin-operated games to Japan. By 1965, Rosen Enterprises grew to a chain of over 200 arcades, with Service Games its only competitor. Rosen then orchestrated a merger between Rosen Enterprises and Service Games, who by then had their own factory facilities, becoming chief executive of the new company, Sega Enterprises, which derived its name from Service Games.[8]

Within a year, Sega began the transition from importer to manufacturer, with the release of the Rosen designed submarine simulator game, Periscope. The game sported light and sound effects considered innovative for that time, eventually becoming quite successful in Japan. It was soon exported to both Europe and the United States, becoming the first arcade game in the US to cost 25 cents per play.[8]

In 1969, Rosen sold Sega to American conglomerate Gulf and Western Industries, although he remained as CEO following the sale. Under Rosen's leadership, Sega continued to grow and prosper, and in 1972, Gulf and Western made Sega Enterprises a subsidiary, taking the company's stock public. Sega prospered heavily from the arcade gaming boom of the late 1970s, with revenues climbing to over US$100 million by 1979.[8]

Entry into the home console market (1982–1989)

In 1982, Sega's revenues would surpass $214 million, and they introduced the industry's first three-dimensional game, SubRoc 3D. The following year, an overabundance of arcade games led to the video game crash, causing Sega's revenues to drop to $136 million. Sega then pioneered the use of laser disks in the video game Astronbelt, and designed and released its first home video game console, the SG-1000 for the third generation of home consoles. Despite this, G&W sold the U.S. assets of Sega Enterprises that same year to pinball manufacturer Bally Manufacturing, and in January 1984, Rosen resigned his post with the company.[8]

The Japanese assets of Sega were purchased for $38 million by a group of investors led by Rosen, Robert Deith, and Hayao Nakayama, a Japanese businessman who owned Esco Boueki (Esco Trading) an arcade game distribution company that had been acquired by Rosen in 1979.[8][9] Nakayama became the new CEO of Sega, Robert Deith Chairman of the Board, and Rosen became head of its subsidiary in the United States. In 1984, the multibillion dollar Japanese conglomerate CSK bought Sega, renamed it to Sega Enterprises, headquartered it in Japan, and two years later, shares of its stock were being traded on the Tokyo Stock Exchange. David Rosen's friend, Isao Okawa, the chairman of CSK, became chairman of Sega.[8]

Sega would also release the Sega Master System and the first game featuring Alex Kidd, who would be Sega's unofficial mascot until he was replaced by Sonic the Hedgehog in 1991. While the Master System was technically superior to the NES,[10] it failed to capture market share in North America and Japan due to highly aggressive strategies by Nintendo and ineffective marketing by Tonka, who marketed the console on behalf of SEGA in the United States.[11] However, the Master System was highly successful in Europe, Australia, New Zealand, and Brazil with games still being sold well into the 1990s alongside the Mega Drive and Nintendo's NES and SNES.

In the mid 1980s, Sega released Hang-On and After Burner, titles that make use of hydraulic cabinet functionality and force feedback control. Sega also released the 360 degree rotating machine R-360. For arcade system boards, Sega released the System series and the Super Scaler series. UFO Catcher was introduced in 1985 and is Japan's most commonly installed claw crane game.[12] Sega was also one of the first to introduce medal games with World Bingo and World Derby in the 1980s, a sub-industry within Japanese arcades up to its current day.[citation needed]

Expansion and mainstream success (1989–2001)

Sonic the Hedgehog has been Sega's mascot since the character's introduction in 1991.

With the introduction of the Sega Genesis in North America in 1989, Sega of America launched an anti-Nintendo campaign to carry the momentum to the new generation of games, with its slogan "Genesis does what Nintendon't." This was initially implemented by Sega of America President Michael Katz.[13] When Nintendo launched its Super Nintendo Entertainment System in North America in August 1991, Sega changed its slogan to "Welcome to the next level."

The same year, Sega of America's leadership passed from Michael Katz to Tom Kalinske, who further escalated the "console war" that was developing.[14] As a preemptive strike against the release of the SNES, Sega re-branded itself with a new game and mascot, Sonic the Hedgehog. This shift led to a wider success for the Genesis and would eventually propel Sega to 65% of the market in North America for a brief time. Simultaneously, after much previous delay, Sega released the moderately successful Sega CD in Japan in 1991 and in North America in 1992 as a hardware add-on to the Genesis, giving developers the ability to make longer, more sophisticated games. Sonic the Hedgehog 2 was also released in 1992 for the Genesis, and became the most successful game Sega ever produced, selling over six million copies in total.[15] During this period, local North American development also increased with the establishments of Sega Technical Institute in 1990, Sega Midwest Studio in 1992, Sega Multimedia Studio in 1993, and the acquisition of Interactive Designs in 1992.

In 1990, Sega launched the Game Gear to compete against Nintendo's Game Boy. However, due to issues with its short battery life, lack of original titles, and weak support from Sega, the Game Gear was unable to surpass the Game Boy, selling approximately 11 million units. The Game Gear was succeeded by the Sega Nomad in 1995 and discontinued in 1997.

In 1992, Sega introduced the Model series of arcade hardware, which saw the release of Virtua Fighter and Virtua Racing, which laid the foundation for 3D racing and fighting games.[16] In 1994, Sega released the Sega 32X in an attempt to upgrade the Genesis to the standards of more advanced systems at the time. It sold well initially, but had problems with lack of software and hype about the upcoming Sega Saturn and Sony's PlayStation.[17] Within a year, it was in the bargain bins of many stores.[18]

Also in 1994, Sega Channel, a subscription gaming service delivered by local cable companies affiliated with Time Warner Cable, was launched in the United States, through which subscribers received a special cartridge adapter that connected to the cable connection. At its peak, the Sega Channel had approximately 250,000 subscribers. Various technical issues began disrupting the service in late 1997, eventually leading to the Sega Channel being discontinued worldwide in 1998.[19]

On November 22, 1994, Sega launched the Sega Saturn in Japan. It utilized two 32-bit processors and preceded both the Sony PlayStation and the Nintendo 64. However, poor sales in the West led to the console being abandoned by 1998.[20] The lack of strong titles based on established Genesis franchises, along with its high price in comparison to the Sony PlayStation, were among the reasons for the console's failure.[21] Notable titles in Japan include Radiant Silvergun, Sakura Wars, Panzer Dragoon, and arcade ports such as The House of the Dead, Virtua Fighter 2 and Sega Rally Championship. Tomb Raider was initially developed with the Sega Saturn in mind, but with the Saturn's failure to attract the greater market share, development for the game and its sequels were focused on the PlayStation. With the failure of the Saturn in the West, Sega made forays in the PC market with the establishment of SegaSoft in 1995, which was tasked in creating original PC titles.

In 1996, Sega opened Joypolis, an amusement park and arcade center in Yokohama, Japan, with the overseas versions called SegaWorld. In 1997, Sega entered into a short-lived merger with Bandai. However, it was later called off, citing "cultural differences" between the two companies.[22] The first Purikara machine in Japan was made jointly by Atlus and Sega in 1995.

On November 27, 1998, Sega launched the Dreamcast in Japan. The console was competitively priced, partly due to the use of off-the-shelf components, but it also featured technology that allowed for more technically impressive games than its direct competitors, the Nintendo 64 and PlayStation. An analog 56k modem was also included, allowing for online multiplayer. It featured titles such as the action-puzzle title ChuChu Rocket!, Phantasy Star Online, the first console-based massively multiplayer online role-playing game (MMORPG), Quake III Arena and Alien Front Online, the first console game with online voice chat. The Dreamcast's launch in Japan was a failure; launching with a small library of software and in the shadow of the upcoming PS2, the system would gain little ground, despite several successful games in the region.

After closures of all their former American developers in 1995, and the closure of the PC SegaSoft division, Sega invested in the American Visual Concepts and the French No Cliché, although the latter was closed in 2001.

The Dreamcast's Western launch in 1999 was accompanied by a large amount of both first-party and third-party software and an aggressive marketing campaign. In contrast to the Japanese launch, the Western launch earned the distinction of the "most successful hardware launch in history," selling a then-unprecedented 500,000 consoles in its first week in North America.[20] Sega was able to hold onto this momentum in the US almost until the launch of Sony's PlayStation 2. The Dreamcast is home to several innovative and critically acclaimed games of the time, including one of the first cel-shaded titles, Jet Set Radio (Jet Grind Radio in North America); Seaman, a game involving communication with a fish-type creature via microphone; Samba de Amigo, a rhythm game involving the use of maracas, and Shenmue, a large-scope adventure game with freeform gameplay and a detailed in-game city. Sega also produced the NAOMI series, which were the last arcade boards built uniquely rather than being based on existing consoles and PC architecture.

In late 1999, Sega Enterprises Chairman Isao Okawa spoke at an Okawa Foundation meeting, saying that Sega's focus in the future would shift from hardware to software, but adding that they were still fully behind the Dreamcast. On November 1, 2000, Sega changed its company name from Sega Enterprises to Sega Corporation.[23]

Shift to third-party software development (2001–2005)

Sega's financial trouble in the 1998–2002 time periods.[24][25][26][27]

On January 23, 2001, a story ran in Nihon Keizai Shimbun claiming that Sega would cease production of the Dreamcast and develop software for other platforms in the future.[28] After initial denial, Sega Japan then put out a press release confirming they were considering producing software for the PlayStation 2 and Game Boy Advance as part of their "New Management Policy".[29] Subsequently on January 31, 2001, Sega of America officially announced they were becoming a third-party software publisher.[30] The company has since developed into a third-party publisher that oversees games that launch on game consoles produced by other companies, many of their former rivals, the first of which was a port of ChuChu Rocket! to Nintendo's Game Boy Advance. On March 31, 2001, the Dreamcast was discontinued.

By March 31, 2002, Sega had five consecutive fiscal years of net losses.[31] To help with Sega's debt, CSK founder Isao Okawa, before his death in 2001, gave the company a $692 million private donation,[32] and talked to Microsoft about a sale or merger with their Xbox division, but those talks failed.[33] Discussions also took place with Namco, Bandai, Electronic Arts and again with Microsoft.[citation needed] In August 2003, Sammy, one of the biggest pachinko and pachislot manufacturing companies, bought the outstanding 22% of shares that CSK had,[34] and Sammy chairman Hajime Satomi became CEO of Sega. In the same year, Hajime Satomi stated that Sega's activity will focus on their profitable arcade business as opposed to their loss-incurring home software development sector.[35] After the decline of the global arcade industry around the 21st century, Sega introduced several novel concepts tailored to the Japanese market. Derby Owners Club was the first large-scale satellite arcade machine with IC cards for data storage. Trading card game machines were introduced, with titles such as World Club Champion Football for general audiences and Mushiking: King of the Beetles for young children. Sega also introduced internet functionality in arcades with Virtua Fighter 4 in 2001, and further enchanced it with ALL.Net, introduced in 2004.[36]

During mid-2004, Sammy bought a controlling share in Sega Corporation at a cost of $1.1 billion, creating the new company Sega Sammy Holdings, 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.

Continued expansion and acquisitions (2005–2013)

In 2005, Sega sold its major western studio Visual Concepts to Take-Two Interactive,[37] and purchased UK-based developer Creative Assembly, known for its Total War series.[38] In the same year, the Sega Racing Studio was also formed by former Codemasters employees.[39] In 2006, Sega Europe purchased Sports Interactive, known for its Football Manager series.[40] Sega of America purchased Secret Level in 2006, which was renamed to Sega Studio 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 Studio 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.[41] It was subsequently shut down due to low subscription numbers.[42] In 2013, following THQ's bankruptcy, Sega bought Relic Entertainment, known for its Company of Heroes series.[43] Sega has also collaborated with many western studios such as Bizarre Creations, Backbone Entertainment, Monolith, Sumo Digital, Kuju Entertainment, Obsidian Entertainment and Gearbox Software. In 2008, Sega announced the closure of Sega Racing Studio, although the studio was later acquired by Codemasters.[39] Closures of Sega Studio San Francisco and Sega Studio Australia followed in 2010 and 2012, respectively.

The Sonic the Hedgehog series continued to be internationally recognized, having sold 150 million in total,[1] although the critical reception of games in the series has been mixed.[44] In 2007, Sega and Nintendo teamed up using Sega's acquired Olympic Games license, to create the Mario and Sonic at the Olympic Games series, which has sold over 20 million in total. In the console and handheld business, Sega of Japan found success with the Yakuza and Hatsune Miku: Project DIVA series of games, amongst others primarily aimed at the Japanese market. In Japan, Sega distributes titles from smaller Japanese game developers and localizations of western titles.[45][46] In 2013, Index Corporation was purchased by Sega Sammy after going bankrupt.[47] After the buyout, Sega officially split Index, making Atlus, the video game developer and publisher, a wholly owned subsidiary of Sega.[48] Atlus is known for its Megami Tensei and Persona series of role-playing games.

For amusement arcades, Sega's most successful games continued to be based on network and card systems. Games of this type include Sangokushi Taisen and Border Break. Arcade machine sales incurred higher profits than their console, portable, and PC games on a year-to-year basis until 2014.[49]

In 2004, the GameWorks chain of arcades became owned by Sega, until the chain was sold off in 2011. In 2009, Sega Republic, an indoor theme park in Dubai, opened to the public. In 2010, Sega began providing the 3D imaging for Hatsune Miku's holographic concerts.[50] In 2013, in co-operation with BBC Earth, Sega opened the first interactive nature simulation museum, Orbi Yokohama in Yokohama, Japan.[51]

Company reshuffling and digital market focus (2013–present)

Due to the decline of packaged game sales both domestically and outside Japan in the 2010s,[52] 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.[53] This was done in order to focus on the digital game market, such as PC and mobile devices.[54][55] The amount of SKU gradually shrunk from 84 in 2005 to 32 in 2014. Because of the shrinking arcade business in Japan,[56] development personnel would also be relocated to the digital game area.[57] Sega gradually reduced its arcade centers from 450 facilities in 2005,[58] to around 200 in 2015.[59]

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.[60][61] 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.

In the 2010s, Sega established operational firms for each of their businesses, in order to streamline operations. In 2012, Sega established Sega Networks for its mobile games; and although separate at first, it merged with Sega Corporation in 2015. Sega Games is structured as a "Consumer Online Company" promoting cross-play between multiple devices, while Sega Networks focuses on developing games for mobile devices.[62] In 2012, Sega Entertainment was established for Sega's amusement facility business, and in 2015, Sega Interactive was established for the arcade game business.[63] These new divisions would replace the former Sega Corporation, and the new Sega Holdings would consolidate all entertainment companies from the Sega Sammy group, which became effective April 1, 2015. The exception to this is Sega Live Creation, formed in 2015, which derived from Sega Entertainment and contains the theme park development of the Joypolis and Orbi theme parks. Sega Live Creations is at the newly formed resort section of Sega Sammy.[64]

In January 2015, Sega of America announced their relocation from San Francisco to Southern California, which was completed by early summer.[65] Due to this, Sega of America did not have their own booth at E3 2015.[66]

Other products and services

Sega is involved in the merchandising of their own intellectual properties, such as Sonic the Hedgehog and The House of the Dead, as well as unaffiliated anime and manga franchises such as Bleach, Neon Genesis Evangelion, and Initial D.

In 2003, Sega had plans of broadening its franchises to Hollywood co-operating with John Woo,[67] but plans fell through.[68] In 2015, Sega, together with advertising agency Hakuhodo, established Stories LLC, in which they are tasked in creating various television shows and films based on forty video games by Sega.[69] Currently, Sega owns TMS Entertainment, who had business relationships with Sega dating back to 1992.[70] Marza Animation Planet spun off Sega's internal CGI production.

Sega Toys was founded when Yonezawa Toys, Japan's largest post-war toy manufacturer, was merged into Sega in 1994. It was briefly known as Sega-Yonezawa until the Yonezawa name was dropped entirely in April 1998.[71] Since the early 2000s Sega Toys has become a mostly separate entity from Sega with its own management structure and goals, with some occasional collaboration between the two; Sega and Sega Toys produce the UFO Catcher prize games jointly, where Sega manufactures the arcade equipment, while Sega Toys produces the prizes[citation needed]. They have created toys for children's franchises such as Oshare Majo: Love and Berry, Mushiking: King of the Beetles, Lilpri, Bakugan, Jewelpet, Dinosaur King and Hero Bank. Products by Sega Toys released in the West include the Homestar and the iDog. Sega Toys also inherited the Sega Pico handheld system and produced software for the console.

Company executives

Sega Corporate

Sega of America

Sega Europe

  • Robert Deith: Co-founder/chairman (1991–2001)
  • Naoya Tsurumi: CEO (2005–2009)[73][74]
  • Mike Hayes: President (2009–2012)
  • Jürgen Post: President (2012–present)

See also

References

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