 In the early 1980s, Sega Enterprises, Inc., then a subsidiary of Gulf and Western, was one of the top five arcade game manufacturers active in the United States, as company revenues rose to $ 214 million. A downturn in the arcade business starting in 1982 seriously hurt the company, leading Gulf & Western to sell its North American arcade manufacturing organization and the licensing rights for its arcade games to Bally Manufacturing. The company retained Sega's North American R & D operation, as well as its Japanese subsidiary, Sega Enterprises, Ltd. With its arcade business in decline, Gulf & Western executives turned to Sega Enterprises, Ltd.' s president, Hayao Nakayama, for advice on how to proceed. Nakayama advocated that the company leverage its hardware expertise gained through years working in the arcade industry to move into the home console market in Japan, which was in its infancy at the time. Nakayama received permission to proceed, leading to the release of Sega's first home video game system, the SG-1000.
