page_title: History of Sega
section_title: Management buyout and Master System
hierarchical_section_title: History of Sega / Entry into the home console market (1982–1989) / Management buyout and Master System
caption_attribution_description: English: The Sega Master System video game console shown with original "joystick" controller. This is the JPG version.
context_page_description: The history of Sega, a Japanese multinational video game developer and publisher, has roots tracing back to Standard Games in 1940 and Service Games of Japan in the 1950s. The formation of the company known today as Sega is traced back to the founding of Nihon Goraku Bussan, which became known as Sega Enterprises, Ltd. 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. In 1969, Gulf and Western Industries bought Sega, which continued its arcade game business through the 1970s.
  In response to a downturn in the arcade-game market in the early 1980s, Sega began to develop video game consoles—starting with the SG-1000 and Master System—but struggled against competing products such as the Nintendo Entertainment System. Around the same time, Sega executives David Rosen and Hayao Nakayama executed a management buyout of the company from Gulf and Western, with backing from CSK Corporation.
context_section_description: Shortly after the launch of the SG-1000, Gulf and Western began to divest itself of its non-core businesses after the death of Bluhdorn. At the time, Gulf and Western owned 91 percent of Sega Enterprises, Inc.  Nakayama and Rosen arranged a management buyout of the Japanese subsidiary in 1984 with financial backing from CSK Corporation, a prominent Japanese software company.  The Japanese assets of Sega were purchased for $38 million by a group of investors led by Rosen and Nakayama. Isao Okawa, chairman of CSK, became the chairman of Sega, while Nakayama was installed as CEO of Sega Enterprises, Ltd. Following the buyout, Sega released another console, the SG-1000 II, on July 31, 1984. The SG-1000 II replaced the hardwired joystick with two detachable joypads. UFO Catcher was introduced in 1985 and as of 2005 was Japan's most commonly installed claw crane game.
  As a result of the lack of success of the SG-1000, Sega began working on the Mark III in Japan in 1985.  Engineered by the same internal Sega team that had created the SG-1000, the Mark III was a redesigned iteration of the previous console.  For the console's North America release, Sega restyled and rebranded the Mark III under the name "Master System".  The futuristic final design for the Master System was intended to appeal to Western tastes.  The Sega Mark III was released in Japan in October 1985 at a price of ¥15,000.  Despite featuring technically more powerful hardware than its chief competition, the Famicom, the Mark III did not prove to be successful at its launch. Difficulties arose from Nintendo's licensing practices with third-party developers at the time, whereby Nintendo required that games for the Famicom not be published on other consoles. To overcome this, Sega developed its own games and obtained the rights to port games from other developers, but they did not sell well.  While games such as Alex Kidd in Miracle World were successful—and with Alex Kidd considered an unofficial mascot for Sega—the Master System's installed user base was too poor to capitalize.
  By early 1992, Master System production ceased in North America.  By the time of its discontinuation, Master System had sold between 1.5 million and 2 million units in the United States, finishing behind both Nintendo and Atari, which controlled 80 percent and 12 percent of the market, respectively.  Sales in the United States were handicapped by ineffective marketing by Tonka, who marketed the console on behalf of Sega in the United States. As late as 1993, the Master System's active installed user base in Europe was 6.25 million units.  The Master System has had continued success in Brazil, where new variations have continued to be released, long after the console was discontinued elsewhere, distributed by Sega's partner in the region, Tectoy. By 2016, the Master System had sold 8 million units in Brazil.  Because Tectoy continued to produce the Master System years after its cancellation, the console is considered the longest-lived in the history of video game consoles.
caption: The Master System, released in North America in 1986 and Europe in 1987
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