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Sega Corporation (株式会社セガ Kabushiki-kaisha Sega?) is a Japanese multinational video game software and hardware development company, and a home computer and former console manufacturer headquartered in Ōta, Tokyo, Japan. The company is famous for its SEGA! chant that appeared on both commercials and games like Sonic the Hedgehog. The company had success with both arcades and home consoles, but as of 31 January 2001 Sega officially left the consumer console business and began concentrating on software development instead for multiple third-party platforms.[1]

Sega's main offices, as well as the main offices of its domestic division, Sega Corporation (Japan), are located in Ōta, 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 San Francisco, California, having moved there from Redwood City, California in 1999.[2][3] 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.[4]

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 form a company called Five-Star Games which handles the distribution of Sega products in Australia, still located in Sydney, New South Wales.

History

Origins (1945–1989)

Sega was founded in 1940 as Standard Games (later Service Games) in Honolulu, Hawaii, United States,[5] 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 "SErvice GAmes 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[6] 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.[7]

Sega's revenues would hit $214 million by 1982 and in 1983,[5] 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. 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[8] 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,[9] 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/Genesis

Main article: Mega Drive
Original Sega Intro00:03

Original Sega Intro

Original Sega Intro

With the introduction of the Mega Drive/Genesis (the latter named in America due to Sega unable to secure legal rights to the Mega Drive name in the said country), 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.[10] 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.[11] 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.[12] 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.[13] 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 CD.[14] Sonic the Hedgehog 2 was also released at this time, and became the most successful game Sega ever made,[15] selling six million copies as of June 2006.[15]

Despite their massive advances in the arcades, Sega’s share of the home market plummeted to 35% by 1994.[13] 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.[16] Within a year, it was in the bargain bins of many stores.[17] 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.[18]

Sega versus Accolade

In 1992, Sega lost the Sega v. Accolade case, which involved independently produced software for the Sega Mega Drive/Genesis console. Accolade had copied a small amount of Sega's code to achieve compatibility with the Sega Genesis 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.[19] 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

Main article: 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.[12] 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.[20] Entertainment fun center GameWorks was founded in 1997 as well as the now defunct Sega World theme parks.

Dreamcast

Main article: Dreamcast

In September 1999 (the date 9/9/99 featured heavily in U.S. promotion), 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.[21] 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 didn't enter 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.

Shift to a 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.[22] 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".[23][24] Then on 31 January 2001, Sega of America officially announced they were becoming a third-party software publisher.[1]

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.[25] To help with Sega's debt, CSK founder Isao Okawa, before his death in 2001, gave the company a $695.7 million private donation,[26] and also talked to Microsoft about a sale or a merger with their Xbox division, but those talks failed.[27] On February 13, 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 IP's 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,[28] 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.[29]

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)

Current Sega Logo00:04

Current Sega Logo

Current Sega Intro

By the end of 2005, Sega experienced strong earnings growth across multiple divisions. Contributing to the company's success were strong pachinko sales,[30] 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.[31] 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 2006, in which they managed to sell 1.5 million copies,[32] the deal was said to be worth in the region of £30 million ($52 million) by Miles Jacobson, Sports Interactive’s Managing Director.[33] 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,[34] 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")[35] in which Sega helped provide 10% startup capital[36] 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 March 31, 2006, being posted at ¥66.2 billion ($577 million), as well as an increase in operating profit growing by 13% from the previous year, being posted at ¥553.2 billion ($4.82 billion).[37] Notable titles to have helped Sega increase profits in the West, such as Shadow the Hedgehog (which sold over a million copies)[38] 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,[39] 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.[40] 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.[41] 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 August 26, 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 [42] and also partnered themselves with Fox to develop two new games based on the Alien franchise.[43] 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 February 12, 2013. Sega has also been publishing games from independent studios (such as Platinum Games), and is currently considering turning them into franchises.

Sega has also designed an online flash game site dubbed "PlaySEGA," which includes both original games and ports of classic games, with retro Sonic games being promised in the long run.[44] Users of this site earn various amounts of "PlaySEGA Rings," which they can use 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 Mega Drive/Genesis 6-button pad.[45] Sega also approved a patent for USB Flash Memory cards and hard drive on 7 July 2009.[46] 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 the those three Sonic games in Europe and Australia would be Nintendo's responsibility. Sega, however, published Sonic Lost World in North America and Japan.

References

  1. 1.0 1.1 Shahed Ahmed (Jan-31-2001). Sega announces drastic restructuring. GameSpot.
  2. "Corporate." Sega. Retrieved on January 13, 2009.
  3. Angwin, Julie and Laura Evenson. "Sega Expected to Move HQ To S.F. From Redwood City." San Francisco Chronicle. Thursday June 11, 1998. Retrieved on January 13, 2009.
  4. "Sega Enterprises, Ltd. Changes Company Name". November 1st, 2000 - Sega Corporation.
  5. 5.0 5.1 http://www2.sega.com/corporate/corporatehist.php - Sega Of America
  6. periscope gun game, sega enterprises, ltd. (1968)
  7. GameCenter CX - 2nd Season, Episode 13
  8. "Sega Takes Aim at Disney's World (Page 4 of 4)" The New York Times by Andrew Pollack: Sunday, July 4, 1993
  9. Sega Master System (SMS) - 1986-1989 - Classic Gaming
  10. Ken Horowitz (2006-04-28). Interview: Michael Katz. Sega-16.com. Retrieved on 2009-03-28.
  11. Ken Horowitz (2005-02-18). Tom Kalinske: American Samurai. Sega-16.com. Retrieved on 2009-03-28.
  12. 12.0 12.1 The 1990's
  13. 13.0 13.1 Download Sega Genesis Roms - Starting with S
  14. Top Sega CD Games - Best Sega CD Video Games - Best Sega CD Games - Top Sega CD Video Games
  15. 15.0 15.1 Gamasutra - Feature - "A Detailed Cross-Examination of Yesterday and Today's Best-Selling Platform Games"
  16. A History of Home Video Games from Atari to Xbox, Playstation and Wii
  17. PlanetDreamcast: About - Sega History
  18. The SEGA Channel - Retro Feature at IGN
  19. Reverse Engineering
  20. Sega, Bandai Merger Canceled - News at GameSpot
  21. Vidgame.net: Sega Dreamcast (archive.org)
  22. Brandon Justice (2001-01-23). Sega Sinks Console Efforts?. IGN.
  23. 弊社ドリームキャスト事業に関する一部の報道について. Sega (2001-01-24).
  24. Anoop Gantayat (2001-01-23). Sega Confirms PS2 and Game Boy Advance Negotiations. IGN.
  25. "Analysts say Sega taking its toll on CSK's bottom line" Taipei Times via BLOOMBERG, Tokyo - Thursday, Mar 13, 2003, Page 12
  26. "Late Sega exec leaves legacy, new leadership" Tokyo, Japan CNN By Kristie Lu Stout - March 19, 2001
  27. "Microsoft Explores A New Territory: Fun (Page 2 of 5)" The New York Times By Chris Gaither - November 4, 2001
  28. Sammy merging with Sega - News at GameSpot
  29. Kikizo Staff. Tetsuya Mizuguchi Interview 2005. October 13, 2005. Retrieved August 13, 2008.
  30. http://www.segasammy.co.jp/english/pdf/release/Notice070206-Adjustment%20_2_.pdf
  31. SEGA signs Obsidian for next-generation RPG // GamesIndustry.biz
  32. SEGA acquires Sports Interactive // GamesIndustry.biz
  33. Sega deal is worth "circa GBP 30m" - Sports Interactive boss // GamesIndustry.biz
  34. SEGA establishes new internal development arm in US // GamesIndustry.biz
  35. 株式会社プロペ 公式サイト
  36. Sonic creator sets up new studio with help from SEGA // GamesIndustry.biz
  37. http://www.segasammy.co.jp/english/pdf/release/tanshin_english_final.pdf
  38. Sega Sammy reports 31 per cent rise in profits // GamesIndustry.biz
  39. http://www.segasammy.co.jp/english/pdf/release/200703_1q_e.pdf
  40. http://www.segasammy.co.jp/english/pdf/release/200609tanshin_englishver_1110.pdf
  41. Sega Sammy sees 52 per cent profits rise // GamesIndustry.biz
  42. http://web.archive.org/web/20061109161314/http://www.sega-europe.com/en/NewsStory/1293.htm
  43. ALIENS
  44. PlaySEGA
  45. Controller and expansion unit for controller.
  46. Card stack reader, card thereof, card case, method for manufacturing card, game machine using the same, computer-readable storage medium on which game program is recorded.

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