Sega

**Sega Corporation** (株式会社セガ *Kabushiki gaisha Sega*?, stylized as **SEGA**) is a Japanese multinational video game entertainment company. The company had success with both arcades and home consoles, but in 2001, Sega officially left the consumer console business and since began concentrating on software development instead for multiple third-party platforms, as well as general production of otaku goods such as arcades and anime production.

Sega's main offices, as well as the main offices of its domestic division, Sega Corporation, are located in Shinagawa-ku, Tokyo, Japan. Sega's European division, **Sega Europe Ltd.**, is headquartered in the Brentford area of London. Sega's North American division, **Sega of America Inc.**, is headquartered in Irvine, California, having moved there from San Francisco, California in 2015. They were originally based in Redwood City, California. **Sega Publishing Korea'**s headquarters are located in Jongno, Seoul, Korea. On 1 November 2000, Sega changed its company name from **Sega Enterprises, Ltd.** to **Sega Corporation**.

As of 1 July 2012, **Sega Australia** and all other European operations apart from United Kingdom have closed down due to economic pressure. However, all the employees from Sega Australia formed a company called **Five-Star Games** which handles the distribution of Sega products in Australia, still located in Sydney, New South Wales.

Sega, along with their sub-studios, is known for its many multi-million selling game franchises including *Sonic the Hedgehog*.

## History

### Origins (1945–1989)

Sega was founded in 1940 as **Standard Games** (later Service Games) in Honolulu, Hawaii, United States, by Marty Bromely, Irving Bromberg, and James Humpert  to provide coin-operated amusements for American servicemen on military bases. Bromely suggested that the company move to Tokyo, Japan in 1951 and in May 1952 "**Se**rvice **Ga**mes of Japan" was registered.

In 1954, another American businessman, David Rosen, moved to Tokyo and established the company Rosen Enterprises, Inc., in Japan to export art. When the company imported coin-operated instant photo booths, it stumbled on a surprise hit: the booths were very popular in Japan. Business was booming, and Rosen Enterprises expanded by importing coin-operated electro-mechanical games.

Rosen Enterprises and Service Games merged in 1965 to create Sega Enterprises. Within a year, the new company released a submarine-simulator game called *Periscope* that became a smash-hit worldwide.

In 1969, Gulf+Western purchased Sega, and Rosen was allowed to remain CEO of the Sega division. Under Rosen's leadership, Sega continued to grow and prosper. In 1976, they released a large screen TV, Sega-Vision (not to be confused with their portable media player, Sega Vision).

In the video game arcades, Sega was known for games such as *Zaxxon*, the first game to employ axonometric projection, and *Hang-On*, the world's first full-body-experience video game.

Sega's revenues would hit $214 million by 1982 and in 1983, Sega would release its first video game console, the SG-1000, the first 3D arcade video game, *SubRoc-3D*, which used a special periscope viewer to deliver individual images to each eye, and the first laser-disc arcade game, *Astron Belt*.

In the same year, Sega was one of the victims of the video game crash. Hemorrhaging money, Gulf+Western sold the U.S. assets of Sega to famous pinball manufacturer Bally Manufacturing Corporation. Gulf+Western had been looking to sell Sega since G+W chairman Charles Bluhdorn's death that year, with his successor, Paramount Pictures executive Martin S. Davis, prioritizing more profitable divisions such as the aforementioned studio. The Japanese assets of Sega were purchased for $38 million by a group of investors led by Rosen 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. Nakayama became the new CEO of Sega, and Rosen became head of its subsidiary in the United States.

In 1984, the multi-billion dollar Japanese conglomerate CSK bought Sega, renamed it to Sega Enterprises Ltd., 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. In 1986, Sega of America was poised to take advantage of the resurgent video game market in the United States.

Sega would also release the Sega Master System and the first Alex Kidd game, who would be Sega's unofficial mascot until 1991 when Sonic the Hedgehog took over. While the Master System was technically superior to the NES, it failed to capture market share in North America and Japan due to highly aggressive strategies by Nintendo and ineffective marketing by Tonka in the United States. However, it did dominate the European and Brazilian markets until Sega discontinued the system in Europe in 1996, and in Brazil in 2000.

### Sega as a major console manufacturer (1989–2001)

#### Sega Mega Drive

With the introduction of the Sega Mega Drive, titled "Sega Genesis" in America due to legal reasons, 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. When Nintendo launched its Super Nintendo Entertainment System in 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. As a preemptive strike against the release of the Super Nintendo, Sega re-branded itself with a new game and mascot, Sonic the Hedgehog. With his hip attitude and style, he was marketed to seem "cooler" than Mario, Nintendo's mascot. 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 as an add-on feature, allowing for extra storage in games due to their CD-ROM format, giving developers the ability to make longer, more sophisticated games, the most popular of which was Sega’s own *Sonic the Hedgehog CD*. *Sonic the Hedgehog 2* was also released at this time, and became the most successful game Sega ever made, selling six million copies as of June 2006.

Despite their massive advances in the arcades, Sega’s share of the home market plummeted to 35% by 1994. That year, Sega released the Sega 32X in an attempt to upgrade the Mega Drive/Genesis to the standards of more advanced systems. It sold well initially, but had problems with lack of software and hype about the upcoming Sega Saturn and Sony's PlayStation. Within a year, it was in the bargain bins of many stores. Also in 1994, Sega launched the Sega Channel, a subscription gaming service delivered by local cable companies affiliated with Time-Warner Cable or TCI 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.

#### Sega versus Accolade

In 1992, Sega lost the Sega v. Accolade case, which involved independently produced software for the Sega Mega Drive console. Accolade had copied a small amount of Sega's code to achieve compatibility with the Mega Drive platform. The verdict set a precedent that copyrights do not extend to non-expressive content in software that a system requires to be present to run the software. The case in question stems from the nature of the console video game market. Hardware companies often sell their systems at or below cost and rely on other revenue streams such as in this case, game licensing. Sega was attempting to "lock out" game companies from making Mega Drive/Genesis games unless they paid Sega a fee (something its competition has done in the past). Their strategy was to make the hardware reject any cartridge that did not include a Sega trademark. If an unlicensed company included this trademark in their game, Sega could sue the company for trademark infringement. Though Sega lost this lawsuit, all later Sega systems seemed to incorporate a similar hardware requirement.

#### Sega Saturn

On May 11, 1995, Sega released the Sega Saturn (with *Virtua Fighter*) in the American market, which utilized a 32-bit processor and preceded both the PlayStation and the Nintendo 64. However, poor sales in the West (including the traditional stronghold markets in Europe) led to the console being abandoned. Notable titles include several titles exclusive to the Japanese market, like *Radiant Silvergun* and *Sakura Taisen*, involving fighting games like *Last Bronx*, rail shooters such as *Panzer Dragoon* and *The House of the Dead* and a few well regarded RPGs: *Panzer Dragoon Saga*, *Grandia*, and *Shining Force 3*.

In 1997, Sega entered into a short-lived merger with Bandai. However, it was later called off, citing "cultural differences" between the two companies. Entertainment fun center GameWorks was founded in 1997 as well as the now defunct Sega World theme parks.

#### Dreamcast

In September 1999 (the date 9 September 1999 was featured heavily in American promotions), Sega launched the Dreamcast game console in North America. The Dreamcast 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 gamers to play multiplayer games online on a home console for the first time, featuring titles such as the action-puzzle title *Chu Chu Rocket*, *Phantasy Star Online*, the first console-based MMORPG, and the innovative *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 not gain great success, despite several successful games in the region. The Western launch a year later was accompanied by a large amount of both 1st party and 3rd party software and an aggressive marketing campaign. It was extremely successful and earned the distinction of "most successful hardware launch in history," selling a then-unprecedented 500,000 consoles in its first week in North America. 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 cell-shaded titles, *Jet Set Radio*; *Seaman*, a game involving communication with a fish-type creature via microphone; a rhythm game involving the use of maracas, *Samba de Amigo*, *Shenmue*, an adventure game of vast scope with free-form gameplay and a striking attempt at creating a detailed in-game city and *Sonic Adventure*, the first true 3D action/adventure Sonic game which was notable for being the top-selling game for the Dreamcast, selling 2.5 million copies. Despite receiving critical acclaim, these titles failed to garner much public attention in the face of the upcoming PlayStation 2 launch.

Faced with debt and competition from Sony's PlayStation 2, Nintendo's GameCube, and Microsoft's Xbox (although Microsoft hadn't entered the video game market at this point), Sega officially discontinued the Dreamcast hardware in 2001. The final game Sega released for it was *NHL 2K2*. This was the last SEGA console to be released in the USA, while in Japan, Advanced Pico Beena was the last console to be released in Japan.

### Shift to a third-party software manufacturer (2001–2005)

On 23 January 2001, a story ran in *Nihon Keizai Shimbun* that said Sega was going to cease production of the Dreamcast and develop software for other platforms. After the initial denial, Sega Japan then put out a press release confirming they were considering producing software for PlayStation 2 and Game Boy Advance as part of their "New Management Policy". Then on 31 January 2001, Sega of America officially announced they were becoming a third-party software publisher.

The company has since developed primarily into a platform-neutral software company, known as a "third-party publisher", that creates games that will launch on a variety of game consoles produced by other companies, many of them former rivals, the first of which was a port of *Chu Chu Rocket* to Nintendo's Game Boy Advance.

Arcade units are still being produced, first under the Sega NAOMI name, and then with subsequent releases of the Sega NAOMI 2, Sega HIKARU, Sega Chihiro, Triforce (in collaboration with Nintendo and Namco), and the Sega Lindbergh.

By 31 March 2002, Sega had five consecutive fiscal years of net losses. To help with Sega's debt, CSK founder Isao Okawa, before his death in 2001, gave the company a $695.7 million private donation, and also talked to Microsoft about a sale or a merger with their Xbox division, but those talks failed. On 13 February 2003, Sega announced plans to merge with Sammy, but plans fell through. Discussions also took place with Namco, Bandai, Electronic Arts and again with Microsoft.

With this shift to software development, this affected Sega's Australian operations. Sega Ozisoft ceased to operate in its current form with Sega Enterprises selling its share in Sega Ozisoft and was bought over by Infogrames in 2002. This led to Infogrames having an Australian presence for the first time but decided to change the company name for its Australian operations to GameNation. Sega then went to find an Australian distributor, and made a deal with THQ Asia Pacific, who at the time until 2006 had deals with Capcom. In 2003 GameNation was changed to Atari Australia and then challenged THQ Asia Pacific to the distribution rights to Sega's IPs in Australia but failed. In early 2008 Sega Corporation announced that Sega would re-establish an Australian presence, effectively ending THQ's distribution of Sega's products in Australia and would be a subsidiary of Sega of Europe, rather than being a separate local subsidiary like Atari Australia, Nintendo Australia and THQ Asia Pacific.

In August 2003, Sammy bought the outstanding 22% of shares that CSK had, and Sammy chairman Hajime Satomi became CEO of Sega. With the Sammy chairman at the helm of Sega, it has been stated that Sega's activity will focus on its profit-making arcade business rather than its loss-making home software development. In late December, Sega released *Sonic Heroes* selling over 2 million copies. It was the first *Sonic* game to be on both the Xbox and the PlayStation 2.

During the middle of 2004, Sammy bought a controlling share in Sega Corporation at a cost of $1.1 billion, creating the new company Sega Sammy Holdings, one of the biggest game manufacturing companies in the world. With the merger, Sega reabsorbed its second party studios and began to reorganize them. Tetsuya Mizuguchi, father of *Sega Rally* and *Space Channel 5*, cited the changes in the corporate culture after the Sega-Sammy merger.

In 2005, Mike Hayes became head of Sega in Europe. He would help to transition the company into becoming a third-party developer. He would later become head of Sega America in 2009.

On 25 January 2005, Sega's Visual Concepts, a studio Sega dubbed a "1.5" developer, was shut down by Take-Two Interactive. Sega used the parlance "1.5" as a mid-point of sorts between first-party and second-party developer status: that is, a wholly owned studio that would otherwise be known as a first-party developer but was outside of internal development teams. Visual Concepts was known for many Sega Sports games including the *ESPN NFL Football* series, formerly *NFL2K*. The sale also came with Visual Concept's wholly-owned subsidiary Kush Games. Take Two subsequently announced the start of the publishing label 2K Games because of this purchase.

### Current status (2006–present)

By the end of 2005, Sega experienced strong earnings growth across multiple divisions. Contributing to the company's success were strong pachinko sales, and sales of software titles *Ryu Ga Gotoku* (known as *Yakuza* outside of Asia), *Mushiking*, and *Sonic the Hedgehog*.

In an effort to appeal to western tastes, they partnered with Obsidian Entertainment to develop a new RPG for the PlayStation 3, Xbox 360, and PC based on the Aliens Franchise. The partnership was the latest in a series of collaborations with western video game studios, including Monolith Productions (*Condemned: Criminal Origins*), Bizarre Creations (*The Club*), and Silicon Knights (who have yet to announce their project with Sega).

That desire to have a more Western appeal for Sega was shortly followed up by Sega acquiring British developer Sports Interactive after a successful run of publishing *Football Manager 2005* and *Football Manager 2006*, in which they managed to sell 1.5 million copies, the deal was said to be worth in the region of £30 million ($52 million) by Miles Jacobson, Sports Interactive's Managing Director. This was, however, not the only developer Sega acquired, as they also purchased American developer Secret Level. Although the terms of the deal were not disclosed, Secret Level had begun work before being bought by Sega to "recreate a classic Sega franchise" for the PS3 and Xbox 360 in July 2005, which was revealed to be *Golden Axe: Beast Rider* later that year.

While Sega continued its expansion in the West, on 8 May 2006, it was announced Sega of Japan begun helping famed Sega developer and Sonic Team head Yuji Naka (known for being the main programmer for the original *Sonic the Hedgehog* games and *Nights into Dreams*) to start up his own company titled "Prope" (Latin for "beside" and "near future") in which Sega helped provide 10% startup capital and have the option to publish games produced from the studio if they wished to.

Due to the continued success of Sega’s software sales, the company reported on 17 May 2006 a 31% rise in net profits from that of the previous year of the period ending 31 March 2006, being posted at ¥66.2 billion ($577 million USD), as well as an increase in operating profit growing by 13% from the previous year, being posted at ¥553.2 billion ($4.82 billion USD). Notable titles to have helped Sega increase profits in the west, such as *Shadow the Hedgehog* (which sold over a million copies) and *Sonic Riders*, whilst in Japan, games such as *Yakuza*, *Mushiking* and *Brain Trainer Portable* continued to have strong sales.

Although Sega seemed poised to continue increasing profits, the company reported a massive drop of 93% profits for the period ending 30 June 2006 compared to the same period the previous year. Net income for the company dropped from $98.3 million (a year earlier) to $7.12 million for this period as well as total sales dropping from $926.5 million to $809.1 million, Sega reported that the decrease in profits was due to no significant big releases by its slot machine division.

Despite this, Sega reported in November a massive 52% rise in profits for the periods between April and September 2006, compared to the same period last year. Software sales for the company had also increased with 5.75 million. Of those units, 1.76 million were sold in Japan, 1.59 million in Europe, 2.36 million in the US and 30,000 in other regions. a number of titles were said to have performed well, in particular *Super Monkey Ball: Touch & Roll* for the Nintendo DS and *Football Manager 2006* for the Xbox 360 having sold well. While Sega performed better in 2006, they had slashed their forecasts for the year ending March 2007 by 20% with an anticipated profit of $536.7 million, down from the initial profits of $656.7 million.

On 26 August 2007, IGN Australia announced that Sega would re-establish itself in Australia, ending THQ Asia Pacific's distribution of Sega products in Australia. Sega Australia has a very close relationship with Nintendo Australia, despite Sega Ozisoft and NAL previously being rivals in the Australian gaming market. Sega Australia currently do not distribute in New Zealand, instead like most other Australian publishers, they opt to let retailers take care of the distribution e.g. EB Games Australia and Kmart.

Continuing to prepare more games for the Western market, Sega was able to bridge a partnership with New Line Cinema in September to develop a game for the movie tie-in game *The Golden Compass*  and also partnered themselves with Fox to develop two new games based on the *Alien* franchise. Sega then assigned critically acclaimed developers Gearbox software to develop a first person shooter (*Aliens: Colonial Marines*) and Obsidian Entertainment to develop an RPG based on the popular film franchise for the PlayStation 3, Xbox 360, and PC. The latter was cancelled for undisclosed reasons by Sega. However, *Aliens: Colonial Marines* continued production by Gearbox and was released 12 February 2013. Sega has also been publishing games from independent studios (such as Platinum Games).

Sega has also designed an online Flash game site named PlaySega, which included both original games and ports of classic games. Users of this site earned various amounts of "PlaySEGA Rings," which they could have used to customize and house their avatar or enter weekly cash drawings.

On 10 February 2009, Sega approved a patent for two controller designs, one that looks similar to the Sega Saturn 3D pad with a added touch screen device and one that looks similar to the Sega Mega Drive 6-button pad. Sega also approved a patent for USB Flash Memory cards and hard drive on 7 July 2009. Because of these patents, rumors have been spreading that Sega is going to release a new home console based on Ring hardware in 2010 or 2011. There have also been rumors about a "Dreamcast 2", but Sega has announced nothing about these- and rumors is all they are. and the "Sega Phoenix". Sega announced that it has hired a company for a licensed console called "Sega Zone". It's an updated Zone 40 (available in Europe) with 20 classic Sega titles and 30 other games. Sixteen of those games will be motion-controlled. The system will not run additional games that do not come with the system. It's a plug in and play interface. The package will come with two controllers that are similar to the Wii Remote. It's will be released in the Summer and will be priced at £50 (about $80 US). This is an official Sega licensed product, and not a console that has been officially designed by Sega, nor is it rumored Ring-edge console.

On 17 May 2013, Nintendo announced a worldwide partnership with Sega for the Sonic the Hedgehog franchise. The next three *Sonic* games (*Sonic Lost World*, *Mario & Sonic at the Sochi 2014 Olympic Winter Games* and *Sonic Boom: Rise of Lyric*/*Sonic Boom: Shattered Crystal*) would be released exclusively to Nintendo consoles (Wii U and Nintendo 3DS). On that same day, Sega Europe announced that the publishing and distribution rights for those three Sonic games in Europe and Australia would be Nintendo's responsibility. Sega, however, published *Sonic Lost World* in North America and Japan. On 17 May 2019, Sega and Hardlight advocated their support for the LGBTQ+ community.