Sega Corporation (株式会社セガ, Kabushiki gaisha Sega, often stylized as SEGA) is a Japanese multinational video game developer and publisher as well as a former home console manufacturer.
Throughout the '80s and '90s, the company rose to prominence with its video game consoles (including the Genesis, Sega CD, Game Gear, 32X, Saturn, and Dreamcast) as well as its highly advertised States-side feud with Nintendo. However, in recent years, Sega is more best known for its multiple franchises including Sonic the Hedgehog, Jet Set Radio, Virtua Fighter, Space Channel 5, NiGHTS into Dreams..., Super Monkey Ball, Shenmue, Phantasy Star Online, Valkyria Chronicles, and Yakuza.
Sega began life in 1940 as Standard Games in Honolulu, Hawaii. It was founded by American businessmen Martin Bromley, Irving Bromberg, and James Humpert to produce slot machines for military bases that were growing due to the ongoing World War II. Following the war's conclusion, Standard Games was sold in 1945 and Service Games was established a year later. A Japanese branch in Tokyo was established by employees Richard Stewart and Ray LeMaire in 1952 after the U.S. government outlawed slot machines in its territories. A year later, the company expanded with the opening of Service Games Panama which oversaw worldwide affairs.
The Japanese offices were closed down on May 31, 1960, as the U.S. government increased their investigations into criminal business practices. In its place, Bromley established Nihon Goraku Bussan and Nihon Kikai Seizō which in turn bought all of Service Games of Japan's assets to continue its business activities, with the former being distributor and operator of coin-operated machines under the name Utamatic Inc. and the latter focused on manufacturing slot machines under the name Sega Inc. (the name being a shortened portmanteau of Service Games). The two companies would eventually merge in 1964 while keeping the Nihon Goraku Bussan name. A year later, the company acquired Rosen Enterprises (a coin-operated machine importing business) to form Sega Enterprises Ltd.
1965-1982: Early games
Sega wouldn't make their coin-operated games until late into the '60s with the release of Periscope. This had come about due to Sega constantly making replacement parts for its imported games that required heavy maintenance. Periscope became a surprise massive hit in Japan and was quickly exported to Europe and the United States. Due to the success, Sega began creating and exporting more games eight to ten times a year in the following two years. During this time, Sega was sold to the American company Gulf and Western Industries in 1969. The company would stop exporting in 1970 due to the increase in piracy in the industry.
The late 1970's and 80's proved to be a prosperous time for Sega as they were benefiting from the arcade game craze at the time, with revenue rising to over $214 million by 1980. During this time, Sega acquired Gremlin Industries (microprocessor-based arcade game manufacturer) and Esco Boueki (a coin-operated machine distributor). The founder and CEO of the latter, Hayao Nakayama, was placed in Sega's managerial role towards Japanese operations after the purchase of his company. By the early '80s, Sega had grown to become one of the top five arcade manufacturers in the United States.
1982-1989: Early consoles
Unfortunately, the arcade business began declining in 1982. As a result, Gulf and Western began selling its arcade manufacturing organization and licensing rights to Bally Manufacturing in 1983 while still keeping Sega's American and Japanese branches. As the arcade business continued to dwindle, Nakayama suggested the company take its hardware expertise into other electronic ventures targeted towards a home market. Upon learning that Nintendo was developing their own home console, the company went to work on its own, which would end up becoming the SG-1000. Though it sold over 160,000 units (which exceeded Sega's expectations) in 1984, it was quickly outsold by Nintendo's Famicom. This was in part due to Nintendo collaborating with multiple third-party developers whereas Sega had been hesitant to do so as they were still their competitors in the arcade market.
In 1985, Sega released its next console - the Master System, which was an improved model of the SG-1000. To support the system with its lack of third-party developers, Sega began creating its own games as well as acquiring rights to port games from other developers who hadn't published their titles onto the Famicom. For the U.S. launch, Sega partnered with toy company Tonka in a plan to market the console as a toy much like what Nintendo did for the Nintendo Entertainment System. Upon release in Japan, it sold rather poorly despite being significantly more powerful than the Famicom, while in the States it didn't fare any better as a result of Tonka's poor marketing. However, the Master System became an eventual success in Europe, outselling the NES by a considerable margin with 6.25 million units sold. The console was also received considerably well in Brazil, with the system being regularly updated through 2016.
Despite the Master System's shortcomings in the States and Japan, Sega would soon have successes in those regions with the releases of several stand-alone games. The arcade title Hang-On was released in the United States on 1985 and became so popular that Sega struggled to keep up with the high demand for the game. For Japan, the claw game UFO Catcher was released that same year and has since become Japan's most commonly installed claw game machine. Following Sega of America's establishment in 1986, the arcade game Out Run was released to positive reception and high sales. Both Hang-On and Out Run have since been credited for reversing the arcade business's economic downturn and creating new genres for future games.
1989-1994: Mainstream success
Due to the new boom in the arcade business, Sega rose to prominence with their releases that were meant to appeal to diverse tastes. At the same time, the company began creating the Master System's successor - the Mega Drive. It was launched in Japan on October 29, 1988, which was unfortunately overshadowed with the release of Super Mario Bros. 3 occurring a week earlier. Despite its positive reception and coverage from gaming publications, Sega only shipped 400,000 units, struggling to keep pace with both the Famicom and Super Famicom. For its American launch, Sega did it through its own American branch due to not having a sales and marketing organization at the time. The system was launched in New York City and Los Angeles on August 14, 1989 (with the rest of the country following soon afterward and in Europe a year later) with a new name: the Sega Genesis.
To market the Genesis, then newly-appointed Sega of America president Michael Katz developed a two-part strategy. Part one invoked a marketing campaign challenging Nintendo to boast its better hardware and more arcade-like experience, which birthed the infamous slogan "Genesis Does What Nintendon't". Part two involved acquiring a library of games that used the names and likenesses of celebrities such as Michael Jackson and Joe Montana. Despite this strategy, the Genesis failed to catch up to Nintendo's high sales, only selling 500,000 units.
In 1990, Sega launched its first handheld system, the Game Gear, in an effort to further compete with Nintendo and their Game Boy system. The Game Gear was designed to be a portable version of the Master System and featured a full-color screen, something handhelds at the time could not achieve. Unfortunately, the Game Gear could not match the Game Boy's sales, selling 11 million units. This was in part due to the system's short battery life, lack of original games, and lack of support from Sega themselves.
By the mid-1990s, Nakayama hired Tom Kalinske to succeed Katz as Sega of America president after his departure. Kalinske developed a new four-point plan to help boost sales of the Genesis: slash the price of the system, establish a U.S. development team to create games catered towards the American demographic, expand on the aggressive marketing campaign, and replace the bundled game Altered Beast with Sega's newest intellectual property to rival the Super Mario series - Sonic the Hedgehog. The plan was approved by Nakayama despite the rejection from the board of directors, telling Kalinske "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." As a result of the cheaper price and popularity of Sonic the Hedgehog, the Genesis began outselling the Super Nintendo Entertainment System nearly two to one during the 1991 holiday season, which continued for four consecutive years.
In late-1991, Sega released the Mega-CD in Japan (and a year later in the States as the Sega CD) as an add-on for the Genesis. It uses CD-ROM technology with a faster processor, expanded system memory, an improved graphics chip to match the company's arcade systems, and a second sound chip. The Sega CD sold well below expectations in Japan, selling only 100,000 units during its first year.
During the American media's concerns regarding violent content in video games, Sega established the Videogame Rating Council (VRC), the United States' first video game rating system. This came as a response to the controversies surrounding Night Trap and Mortal Kombat, both of which were released on Sega CD and Genesis respectively. The VRC's rating system ranged from GA (General Audiences) to MA-13 and MA-17 (Mature). After several congressional hearings, Sega proposed the VRC be universally adopted, a notion that was rejected by several other games companies. Sega would eventually partake in the formation of the Entertainment Software Rating Board (ESRB).
1994-1999: Falling sales
Nakayama chose to release another add-on for the Genesis in 1994 during the development of its successor. The peripheral named the 32X was released in North America on November 21 and served as a cheap entry point into the 32-bit era of gaming. A day later, the Genesis' successor the Sega Saturn was released in Japan alongside the port of the arcade game Virtua Fighter. It sold 200,000 units, outselling Sony's new PlayStation console. For the U.S. launch, it was initially announced to be released on September 2, 1995, marketed as "Saturnday". However, Sega of Japan mandated an early launch to gain the advantage over Sony, who were scheduled to launch the PlayStation two days later; this resulted in the Saturn having a surprise launch on May 11 during the first E3 (a surprise release also occurred in Europe on July 8). Despite the head start, the PlayStation sold more in its first two days than Sega did in five months; its high price point, third-party companies being made unaware of the surprise release, developers having trouble with the polygonal graphics, and the underestimated popularity of the Genesis are often cited as the factors for its low sales.
Kalinske announced his leave from the company a year later, with former Honda executive Shoichiro Irimajiri succeeding him as Chairman and CEO. Former Sony Computer Entertainment of America executive Bernie Stolar also joined Sega of America as executive Vice President, while Rosen and Nakayama left their positions (but remaining within the company). While the Saturn continued to struggle, Sega still found some successes in their other markets. The company partnered with General Electric to create the Model 2 system board, allowing 3D technology into their arcade games, leading to the creation of new series including Daytona USA and Virtua Cop. Sega would enter the PC market with the establishment of SegaSoft, a development team creating games specifically for Saturn and PC. Several in-door theme parks named Sega World were opened throughout Japan, UK, and Australia. The company also briefly partook in the pinball business after acquiring Data East's pinball division.
Though despite these successes, Sega still found themselves in financial straits as the Saturn continued to struggle in the market mainly due to the popularity of the PlayStation and the newly-released Nintendo 64, as well as the arcade market experiencing a plummet as home console gaming increased in preferability. This would lead to Sega suffering financial losses in 1998 for the first time in ten years. As a result of the company's dwindling financial situation as well as a failed merger attempt with Bandai, Nakayama officially retired from being company president, with Irimajiri succeeding him as CEO and Stolar taking over Sega of America as President. With lifetime sales of 9.26 million units, the Saturn is considered Sega's biggest commercial failure to date.
1998-2000: Continuing struggles
The Saturn was quietly discontinued in North America in 1998 as to prepare for its successor. This new system, named the Dreamcast, saw heavy promotion which included a large-scale public demonstration at the Tokyo Kokusai Forum Hall. The Dreamcast launched in Japan on November 27, 1998 and quickly sold out. Though the company hoped to sell a million units by February, only 900,000 were sold, dashing hopes of establishing a sufficient install base as to ensure the console's survival and longevity. It was later launched in North America on September 9, 1999 and was met with a much bigger response, selling over 225,000 units. By two weeks, Dreamcast sales exceeded 500,000 and eventually reached a million by November 4.
Despite the Dreamcast's strong North American launch, it still struggled to catch up with the high sales of the PlayStation and Nintendo 64. By the beginning of the new millennium, Sega's initial momentum began to dwindle, superseded by the announcement of Sony and Nintendo's next-generation consoles as well as Microsoft revealing its intentions of entering the games industry. Sega of America president Peter Moore, who replaced Stolar before the launch of the Dreamcast after his termination from the company, estimated that 5 million units would need to be sold by the end of 2000 to remain viable; unfortunately, only 3 million managed to be sold, with lowered pricing and multiple cash rebates only causing more financial losses. By March 2001, Sega announced a consolidated net loss of ¥51.7 billion ($417.5 million).
2001-2003: Shift to third-party software development
By this point, several internal members had suggested that the company abandon the console business, which included Rosen, Stolar, and Isao Okawa, Sega's newly established President succeeding Irimajiri. During a meeting on September 2000, Moore and Sega of America executive Charles Bellfield recommended this move to the studio heads, who promptly walked out in response. On November 1, the official company name changed from Sega Enterpraises, Ltd. to Sega Corporation, stating it was to signify its commitment to its "network entertainment business".
On January 31, 2001, after several initial reports, Sega announced the discontinuation of the Dreamcast after March 31 and a company restructuring to occur in order to shift into a third-party developer. The final manufactured Dreamcast was autographed by the heads of the nine first-party studios as well as sports game developer Visual Concepts and audio studio Wave Master, and was given away with 55 first-party titles in a competition organized by games publication GamePro.
Isao Okawa died on March 16, 2001. Prior to his death, he forgave Sega's debts to him and returned his $695 million worth of stock to ensure a smooth transition for the company as well as forming a business alliance with Microsoft to create 11 games exclusively for its Xbox. Hideki Sato was announced to be Okawa's successor on 2002. In 2003, Sega began exploring potential mergers, which included pachinko and pachislot company the Sammy Corporation and fellow games developer Namco. Amidst negotiations, Sato and COO Tetsu Kamaya left the company, with Hisao Oguchi succeeding Sato. Peter Moore also departed from Sega of America after his frustration with the Japanese heads refusing to adapt to the changing game landscape due to the increase in mature titles being developed. Hideaki Irie succeeded Moore as President and COO of Sega of America.
2003-2015: Sammy Corporation acquisition
In August 2003, Sammy Corporation purchased 22.4% of Sega shares, effectively making them the company's largest shareholder. A year later, the two would form a new holding company known as Sega Sammy Holdings. The merger occurred as both companies were facing difficulties; Sega had recently reported more financial losses for the fifth year in a row while Sammy was fearing stagnation and overreliance on its best-selling pachislot and pachinko machines. Eventually, Sammy would purchase the remaining percentages of Sega, thus fully acquiring the company.
To make up for the rapid decline of the arcade business, Sega introduced several novel concepts made for the Japanese market. These include games with built-in memory cards, trading card game machines, and an internet network system for arcade games called ALL.Net. Though the company slowly reduced its arcade centers for a few years, its machines yielded higher profits than its console, mobile, and PC efforts until 2014.
In 2005, Irie was succeeded by Simon Jeffery as President and COO of Sega of America, and Mike Hayes was named President and COO of Sega Europe in an effort to drive growth with Western audiences. Hayes would go on to become the President of Sega West, a joint effort between both regions. Meanwhile in Japan, the company found success with games catered towards its audience with titles such as Yakuza and Hatsune Miku: Project Diva. Sega released its first mobile game in 2008 with the iOS version of Super Monkey Ball. As packaged game sales began to decline, Sega turned most of its attention to PC and mobile, with the most popular titles including Chain Chronicle and Phantasy Star Online 2. Several mobile development studios were also acquired.
To streamline operations, Sega established several separate operational firms for each of its businesses. These include Sega Networks for its mobile titles and Sega Entertainment for their indoor amusement parks. Inbetween 2005 and 2015, the company's operating income saw improvements compared to its low numbers during the 90's.
In September 18, 2013, it was reported that Sega Sammy Holdings had won a bid to acquire Index Digital Media, the parent company of the then-dissolved Atlus, for ¥14 billion, with all of its operations transferring to the newly-established Sega Dream Corporation subsidiary on November 1, which would change its name to Index Corporation. On February 18 of the following year, it was revealed that Index's contents and solution businesses were to be separated into its own subsidiary, with the old Index Corporation being renamed to Atlus effective on the following April 1st, allowing Atlus to return as a full development company. Index's former international subsidiary was also announced to revert back to its former identity, Atlus USA.
In April 2015, Haruki Satomi took over as President and CEO of the company, now legally known as Sega Games Co., Ltd. Another branch, named Sega Interactive Co., Ltd., was established to control the arcade division while Sega Games oversees home console releases. Several acquisitions and mergers would occur in recent years, first starting with Sega Networks merging with Sega Games. During the 2016 Tokyo Game Show, it was announced that the company purchased the intellectual property and development rights from Technosoft. In May 2019, Sega acquired Two Point Studios. In April 2020, Sega Interactive also merged with Sega Games, with the company being renamed back to Sega Corporation in an effort to allow greater research and development flexibility.
In 2017, Atlus USA opened its own dedicated distribution and publishing team in Sega Europe's offices, finally allowing them to publish its original and localized titles through its parent company for the first time. In January 2018, Sega Sammy Holdings relocated its offices from the Tokyo metropolitan area to Shinagawa-ku. According to the company, this was to consolidate scattered head office functions such as Sega Games, Sammy Corporation, Sega Holdings, Atlus, and Dartslive.
For its 60th Anniversary in 2020, Sega released the Game Gear Micro, a microconsole version of the Game Gear in a similar vein to Nintendo's NES Classic and SNES Classic systems. It also unveiled its Fog Gaming platform, which uses the unused processing power of its Japanese arcade machines to help power cloud gaming applications. In September 2020, Sega closed its long-running arcade in Akihabara, with much of its ownership being sold to Genda Inc. the following November. Though Sega has since left the arcade operating business, they have stated they will continue to develop arcade titles.
- SG-1000 (1983 - 1985)
- Master System (1985 - 1996)
- Sega Mega Drive / Sega Genesis (1988-1997)
- Game Gear (1990 - 1997)
- Mega CD / Sega CD (1991 - 1996)
- Sega Pico (1993 - 2005)
- 32X (1994 - 1996)
- Sega Saturn (1994 - 1998)
- Dreamcast (1998 - 2001)
Involvement with Super Smash Bros.
Sega is the second third-party company to join the Smash Bros. series after company mascot Sonic the Hedgehog was added as a playable fighter in Super Smash Bros. Brawl. He brings with him a stage inspired by Green Hill Zone, a summonable Assist Trophy in the form of Shadow the Hedgehog, multiple music tracks, and several characters making cameos as Stickers and Trophies.
Sonic the Hedgehog's representation was expanded upon in Super Smash Bros. for Nintendo 3DS and Wii U with new music tracks, a new stage based on Windy Hill Zone from Sonic Lost World, and DLC Mii Fighter costumes based on Miles "Tails" Prower and Knuckles the Echidna alongside the return of the Green Hill Zone stage and Shadow Assist Trophy. Sega would also gain a second representative with the inclusion of Bayonetta, the game's final DLC fighter. She comes packaged with the stage Umbra Clock Tower from the first Bayonetta, several music tracks, and bonus Trophies.
Both Sonic and Bayonetta return for Super Smash Bros. Ultimate alongside their respective stages and music. Shadow also returns as an Assist Trophy alongside new additions Knuckles and Rodin. The Mii Fighter costumes modeled after Tails and Knuckles also return as separate paid DLC. Sega's representation is increased further with the inclusion of Joker, the protagonist of Persona 5 from Atlus, a wholly owned Sega subsidiary. He is the first character in the Fighters Pass and is bundled with the Mementos stage, several new music tracks, and Spirits. Mii Fighter costumes based on Morgana from Persona 5, the protagonist of Persona 3, and Yu Narukami and Teddie from Persona 4 are also available as separate paid DLC.
Sega's premier fighting game series Virtua Fighter also has substantial representation in Smash. Both protagonists, Akira Yuki and Jacky Bryant, have Mii Fighter costumes modeled after them and are paid DLC for both 3DS/Wii U and Ultimate. Akira himself also appears as a summonable Assist Trophy in Ultimate. Music and characters also appear from F-Zero GX, a game developed by Sega.
- Sega is tied with Konami, Capcom, and Square Enix for having the most fighters out of the other third-party companies, at three.
- They are the only company out of the four:
- Much like Konami, two of its characters originate from Mature-rated games, being Bayonetta and Joker.
- Much like Square Enix, none of its fighters are Echo Fighters.
- Sega is the first third-party company to have once been one of Nintendo's competitors in the console market, with SNK following suit.
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