SEGA:
THE RISE AND FALL
Company origins and arcade success (1940–1982)
In 1940, American businessmen Martin Bromley, Irving Bromberg, and James Humpert formed a company called Standard Games in Honolulu, Hawaii, to provide coin-operated amusement machines to military bases. They saw that the onset of World War II, and the consequent increase in the number of military personnel, would mean there would be demand for something for those stationed at military bases to do in their leisure time. After the war, the founders sold that company and established a new distributor called Service Games, named for the military focus. In 1951, the government of the United States outlawed slot machines in US territories, so Bromley sent two of his employees, Richard Stewart and Ray LeMaire, to Tokyo, Japan, in 1952 to establish a new distributor. The company provided coin-operated slot machines to U.S. bases in Japan and changed its name to Service Games of Japan by 1953. Service Games' first use of the name Sega occurred in 1954 on slot machines, in particular on one model called the Diamond Star Machine.
On May 31, 1960, Service Games of Japan was formally dissolved. A few days later, on June 3, two new companies were established to take over its business activities: Nihon Goraku Bussan and Nihon Kikai Seizo. Kikai Seizo focused on manufacturing Sega machines, while Goraku Bussan served as a distributor and operator of coin-operated machines, particularly jukeboxes. The two companies were merged in 1964.
David Rosen, an American officer in the United States Air Force stationed in Japan, launched a two-minute photo booth business in Tokyo in 1954.[1] This company eventually became Rosen Enterprises, and in 1957, began importing coin-operated games to Japan. In 1965, Nihon Goraku Bussan acquired Rosen's company to form Sega Enterprises, Ltd. Rosen was installed as the CEO and managing director of the new company. Shortly afterward, Sega stopped its focus on slot machines and stopped leasing to military bases in order to focus on becoming a publicly-traded company of coin-operated amusement machines. Products imported included Rock-Ola jukeboxes and pinball games by Williams, as well as pinball and gun games by Midway Games.
Because Sega imported second-hand machines that frequently required maintenance, Sega began the transition from importer to manufacturer by constructing replacement guns and flippers for its imported games. According to former Sega director Akira Nagai, this led to Sega developing their own games as well. Sega's first release of their own manufactured electromechanical game was the submarine simulator game, Periscope. The game sported light and sound effects considered innovative for that time, eventually becoming quite successful in Japan. It was soon exported to both Europe and the United States and was placed in malls and department stores, becoming the first arcade in the US to cost 25 cents per play. Sega was surprised by Periscope's success, and for the next two years, Sega produced between eight and ten games per year, exporting all of them.
After dealing with financial struggles and rampant piracy, in 1969, Sega was sold to American conglomerate Gulf and Western Indeustries, although he remained as CEO following the sale. Rosen continued to develop his relationship with Gulf and Western chairman Charles Bluhdorn, and in 1974, Gulf and Western made Sega Enterprises, Ltd. a subsidiary of an American company renamed Sega Enterprises, Inc. During 1973, Sega would release Pong-Tron, its first video-based game.
Despite late competition from Taito's hit arcade game Space Invaders in 1978, Sega prospered heavily from the arcade gaming boom of the late 1970s, with revenues climbing to over Us $100 million by 1979. During this period, Sega acquired Gremlin Industries, a manufacturer of microprocessor-based arcade games. In the early 1980s, Sega was one of the top five arcade game manufacturers active in the United States, as company revenues rose to $214 million. 1979 saw the release of Head On, which would introduce the "eat the dots" gameplay Namco would later use in Pac-man. During 1981, Sega licensed and released Frogger, its most successful title up until then. In 1982, Sega introduced the first game with isometric graphics, Zaxxon.
Entry into the home console market (1982–1989)
A downturn in the arcade business starting in 1982 seriously hurt Sega, leading Gulf and 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 and Western executives turned to Sega Enterprises, Ltd.'s president, Hayao Nakayama, a Japanese businessman who owned Esco Boueki (Esco Trading) which had been acquired by Rosen in 1979, 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. Though Sega only released the SG-1000 in Japan, rebranded versions were released in several other markets worldwide. The SG-1000's launch did not prove to be successful. Due in part to the SG-1000's steadier stream of releases, and in part to a recall on Famicom units by primary competitor Nintendo, the SG-1000 chalked up 160,000 units in sales in 1983, far exceeding Sega's projection of 50,000 units. By 1984, the Famicom's success began to outpace the SG-1000, in part because Nintendo boosted its games library by courting third-party developers, whereas Sega was less than eager to collaborate with the same companies they were competing with in arcades.
Shortly after the launch of the SG-1000, Gulf and Western began to divest itself of its non-core businesses after the death of company founder Charles Bluhdorn, so 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.
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 titles for the Famicom not be published on other consoles. To overcome this, Sega developed its own titles and obtained the rights to port games from other developers, but they did not sell well. 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. Contrary to its performance in Japan and North America, the Master System was eventually a success in Europe, where it outsold the NES by a considerable margin. 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.
Sega Genesis/Mega Drive and mainstream success (1989–1994)
Sega released the Master System's successor, the Mega Drive, in Japan on October 29, 1988, though the launch was overshadowed by Nintendo's release of Super Mario Bros. 3 a week earlier. Positive coverage from magazines Famitsu and Beep! helped to establish a following, but Sega only managed to ship 400,000 units in the first year. The Mega Drive was unable to overtake the venerable Famicom and remained a distant third in Japan behind Nintendo's Super Famicom and NEC's PC Engine (known as TurboGrafx 16 in America) throughout the 16-bit era. Sega announced a North American release date for the system on January 9, 1989. At the time, Sega did not possess a North American sales and marketing organization, but ultimately decided to launch the console through its own Sega of America subsidiary, which launched later that year.
For the North American market, where the console was renamed "Sega Genesis", former Atari executive and new Sega of America CEO Michael Katz instituted a two-part approach to build sales in the region. The first part involved a marketing campaign to challenge Nintendo head-on and emphasize the more arcade-like experience available on the Genesis, summarized by slogans including "Genesis does what Nintendon't". Since Nintendo owned the console rights to most arcade games of the time, the second part involved creating a library of instantly recognizable games which used the names and likenesses of celebrities and athletes. Nonetheless, it had a hard time overcoming Nintendo's ubiquitous presence in consumers' homes. Tasked by Nakayama to sell one million units within the first year, Katz and Sega of America managed to sell only 500,000 units.
While Sega was seeking a flagship series to compete with Nintendo's Mario series along with a character to serve as a company mascot, Naoto Ohshima designed "a teal hedgehog with red shoes that he called Mr. Needlemouse." This character won the contest and was renamed Sonic the Hedgehog, spawning one of the best-selling video game franchises in history. The gameplay of Sonic the Hedgehog originated with a tech demo created by Yuji Naka, who had developed an algorithm that allowed a sprite to move smoothly on a curve by determining its position with a dot matrix. Naka's original prototype was a platform game that involved a fast-moving character rolling in a ball through a long winding tube, and this concept was subsequently fleshed out with Ohshima's character design and levels conceived by designer Hirokazu Yasuhara. Sonic's blue pigmentation was chosen to match Sega's cobalt blue logo, and his shoes were a concept evolved from a design inspired by Michael Jackson's boots with the addition of the color red, which was inspired by both Santa Claus and the contrast of those colors on Jackson's 1987 album Bad; his personality was based on Bill Clinton's "can do" attitude.
In mid-1990, Nakayama hired Tom Kalinske to replace Katz as CEO of Sega of America. Although Kalinske initially knew little about the video game market, he surrounded himself with industry-savvy advisors. A believer in the razor and blades business model, he developed a four-point plan: cut the price of the console, create a U.S.-based team to develop games targeted at the American market, continue and expand the aggressive advertising campaigns, and replace the bundled game Altered Beast with a new game, Sonic the Hedgehog. The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." Magazines praised Sonic as one of the greatest games yet made, and Sega's console finally became successful. In large part due to the popularity of Sonic the Hedgehog, the Sega Genesis outsold its main competitor, Nintendo's SNES, in the United States nearly two to one during the 1991 holiday season. This success led to Sega having control of 65% of the 16-bit console market in January 1992, making it the first time Nintendo was not the console leader since December 1985. Sega was able to outsell Nintendo four Christmas seasons in a row due to the Genesis' head start, a lower price point, and a larger library of games when compared to the Super Nintendo at its release.
In 1990, Sega launched the Game Gear to compete against Nintendo's Game Boy. The console had been designed as a portable version of the Master System, and featured more powerful systems than the Game Boy, including a full-color screen, in contrast to the monochromatic screen of its rival. However, due to issues with its short battery life, lack of original games, and weak support from Sega, the Game Gear was unable to surpass the Game Boy, selling approximately 11 million units. Sega launched the Mega-CD in Japan on December 1, 1991, initially retailing at JP¥49,800. The CD add-on was launched in North America on October 15, 1992, as the Sega CD, with a retail price of US$299; it was released in Europe as the Mega-CD in 1993. In addition to greatly expanding the potential size of its games, this add-on unit upgraded the graphics and sound capabilities by adding a second, more powerful processor, more system memory, and hardware-based scaling and rotation similar to that found in Sega's arcade games. The Mega-CD sold only 100,000 units during its first year in Japan, falling well below expectations. Sega also experienced success with arcade games. In 1992 and 1993, the new Sega Model 1 arcade system board showcased Sega AM2's Virtua Racing and Virtua Fighter (the first 3d fighting game), which played a crucial role in popularizing 3D polygonal graphics.
Sega Saturn, 32X, and sales difficulties (1994–1999)
In January 1994, Sega began to develop an add-on for the Genesis, the 32X, which would serve as a less expensive entry into the 32-bit era. The decision to create the add-on was made by Nakayama and widely supported by Sega of America employees. The 32X would not be compatible with the Saturn, but Sega executive Richard Brudvik-Lindner pointed out that the 32X would play Genesis games, and had the same system architecture as the Saturn. Sega released the 32X on November 21, 1994 in North America, December 3, 1994 in Japan, and January 1995 in PAL territories, and was sold at less than half of the Saturn's launch price. After the holiday season, however, interest in the 32X rapidly declined.
Sega released the Sega Saturn in Japan on November 22, 1994, at a price of ¥44,800. Virtua Fighter, a faithful port of the popular arcade game, sold at a nearly one-to-one ratio with the Saturn console at launch and was crucial to the system's early success in Japan.Fueled by the popularity of Virtua Fighter, Sega's initial shipment of 200,000 Saturn units sold out on the first day, and was more popular than the PlayStation in Japan. In March 1995, Sega of America CEO Tom Kalinske announced that the Saturn would be released in the U.S. on "Saturnday" (Saturday) September 2, 1995. However, Sega of Japan mandated an early launch to give the Saturn an advantage over the PlayStation. At the first Electronic Entertainment Expo (E3) in Los Angeles on May 11, 1995, Kalinske gave a keynote presentation in which he revealed the release price of US$399 (including a copy of Virtua Fighter), and described the features of the console. Kalinske also revealed that, due to "high consumer demand", Sega had already shipped 30,000 Saturns to Toys "R" Us, Babbage's, Electronics Boutique, and Software Etc. for immediate release. The Saturn's release in Europe also came before the previously announced North American date, on July 8, 1995, at a price of ₤399.99. Within two days of its September 9, 1995 launch in North America, the PlayStation sold more units than the Saturn had in the five months following its surprise launch, with almost all of the initial shipment of 100,000 units being sold in advance, and the rest selling out across the U.S. Within its first year, the PlayStation secured over 20% of the entire U.S. video game market. In spite of the launch of the PlayStation and the Saturn, sales of 16-bit hardware/software continued to account for 64% of the video game market in 1995. Sega underestimated the continued popularity of the Genesis, and did not have the inventory to meet demand for the product. Sega was able to capture 43% of the dollar share of the U.S. video game market and sell more than 2 million Genesis units in 1995, but Kalinske estimated that "we could have sold another 300,000 Genesis systems in the November/December timeframe."
Due to long-standing disagreements with Sega of Japan, Kalinske lost most of his interest in his work as CEO of Sega of America.[90] On July 16, 1996, Sega announced that Shoichiro Irimajiri had been appointed chairman and CEO of Sega of America, while Kalinske would be leaving Sega after September 30 of that year. A former Honda executive, Irimajiri had been actively involved with Sega of America since joining Sega in 1993. Sega also announced that David Rosen and Nakayama had resigned from their positions as chairman and co-chairman of Sega of America, though both men remained with the company. Bernie Stolar, a former executive at Sony Computer Entertainment of America, was named Sega of America's executive vice president in charge of product development and third-party relations. Stolar was not supportive of the Saturn due to his belief that the hardware was poorly designed, and publicly announced at E3 1997 that "The Saturn is not our future." While Stolar had "no interest in lying to people" about the Saturn's prospects, he continued to emphasize quality games for the system, and subsequently reflected that "we tried to wind it down as cleanly as we could for the consumer." At Sony, Stolar opposed the localization of certain Japanese PlayStation games that he felt would not represent the system well in North America, and advocated a similar policy for the Saturn during his time at Sega, although he later sought to distance himself from this perception. These changes were accompanied by a softer image that Sega was beginning to portray in its advertising, including removing the "Sega!" scream and holding press events for the education industry. As a result of the company's deteriorating financial situation, Nakayama resigned as president of Sega in January 1998 in favor of Irimajiri. Stolar would subsequently accede to become CEO and president of Sega of America.
The Saturn failed to take the lead in the market as its predecessor had. After the launch of the Nintendo 64 in 1996, sales of the Saturn and its games were sharply reduced, while the PlayStation outsold the Saturn by three-to-one in the U.S. in 1997. Following five years of generally declining profits, in the fiscal year ending March 31, 1998 Sega suffered its first parent and consolidated financial losses since its 1988 listing on the Tokyo Stock Exchange. Shortly before announcing its financial losses, Sega announced that it was discontinuing the Saturn in North America to prepare for the launch of its successor. The Saturn would last longer in Japan and Europe. The decision to abandon the Saturn effectively left the Western market without Sega games for over one year. Sega suffered an additional ¥42.881 billion consolidated net loss in the fiscal year ending March 1999, and announced plans to eliminate 1,000 jobs, nearly a quarter of its workforce. With lifetime sales of 9.26 million units, the Saturn is considered a commercial failure, although its install base in Japan surpassed the Nintendo 64's 5.54 million.
Dreamcast and continuing struggles (1999-2001)
Despite taking massive losses on the Saturn, including a 75 percent drop in half-year profits just before the Japanese launch of the Dreamcast, Sega felt confident about its new system. The Dreamcast attracted significant interest and drew many pre-orders. Sega announced that Sonic Adventure, the next game starring company mascot Sonic the Hedgehog, would arrive in time for the Dreamcast's launch and promoted the game with a large-scale public demonstration at the Tokyo Kokusai. However, Sega could not achieve its shipping goals for the Dreamcast's Japanese launch due to a shortage of PowerVR chipsets caused by a high failure rate in the manufacturing process. As more than half of its limited stock had been pre-ordered, Sega stopped pre-orders in Japan. On November 27, 1998, the Dreamcast launched in Japan at a price of JP¥29,000, and the entire stock sold out by the end of the day. Sega estimated that an additional 200,000-300,000 Dreamcast units could have been sold with sufficient supply. Irimajiri hoped to sell over 1 million Dreamcast units in Japan by February 1999, but less than 900,000 were sold, undermining Sega's attempts to build up a sufficient installed base to ensure the Dreamcast's survival after the arrival of competition from other manufacturers. Prior to the Western launch, Sega reduced the price of the Dreamcast to JP¥19,900, effectively making the hardware unprofitable but increasing sales.
On August 11, Sega of America confirmed that Stolar had been fired, leaving Moore to direct the launch. The Dreamcast launched in North America on September 9, 1999 at a price of $199—which Sega's marketing dubbed "9/9/99 for $199". Eighteen launch games were available for the Dreamcast in the U.S. Sega set a new sales record by selling more than 225,132 Dreamcast units in 24 hours, earning the company $98.4 million in what Moore called "the biggest 24 hours in entertainment retail history". Within two weeks, U.S. Dreamcast sales exceeded 500,000. By Christmas, Sega held 31 percent of the North American video game marketshare. On November 4, Sega announced it had sold over one million Dreamcast units. Nevertheless, the launch was marred by a glitch at one of Sega's manufacturing plants, which produced defective GD-ROMs. Sega released the Dreamcast in Europe on October 14, 1999, at a price of GB₤200. While Sega sold 500,000 units in Europe by Christmas 1999, sales did not continue at this pace, and by October 2000, Sega had sold only about 1 million units in Europe.
Though the Dreamcast launch had been successful, Sony still held 60 percent of the overall video game market share in North America with the PlayStation at the end of 1999. On March 2, 1999, in what one report called a "highly publicized, vaporware-like announcement" Sony revealed the first details of its "next generation PlayStation", which Ken Kutaragi claimed would allow video games to convey unprecedented emotions. The same year, Nintendo announced that its next generation console would meet or exceed anything on the market, and Microsoft began development of its own console. Sega's initial momentum proved fleeting as U.S. Dreamcast sales—which exceeded 1.5 million by the end of 1999—began to decline as early as January 2000. Poor Japanese sales contributed to Sega's ¥42.88 billion ($404 million) consolidated net loss in the fiscal year ending March 2000, which followed a similar loss of ¥42.881 billion the previous year and marked Sega's third consecutive annual loss. Although Sega's overall sales for the term increased 27.4%, and Dreamcast sales in North America and Europe greatly exceeded the company's expectations, this increase in sales coincided with a decrease in profitability due to the investments required to launch the Dreamcast in Western markets and poor software sales in Japan. At the same time, increasingly poor market conditions reduced the profitability of Sega's Japanese arcade business, prompting the company to close 246 locations.
Moore stated that the Dreamcast would need to sell 5 million units in the U.S. by the end of 2000 in order to remain a viable platform, but Sega ultimately fell short of this goal with some 3 million units sold. Moreover, Sega's attempts to spur increased Dreamcast sales through lower prices and cash rebates caused escalating financial losses. In March 2001, Sega posted a consolidated net loss of ¥51.7 billion ($417.5 million). While the PS2's October 26 U.S. launch was marred by shortages, this did not benefit the Dreamcast as much as expected, as many disappointed consumers continued to wait for a PS2—while the PSone, a remodeled version of the original PlayStation, was the best-selling console in the U.S. at the start of the 2000 holiday season. Eventually, Sony and Nintendo held 50 and 35 percent of the US video game market, respectively, while Sega held only 15 percent.
Shift to third-party software development (2001–2003)
In late 1999, Sega Enterprises chairman Isao Okawa spoke at an Okawa Foundation meeting, saying that Sega's focus in the future would shift from hardware to software, but adding that they were still fully behind the Dreamcast. On November 1, 2000, Sega changed its company name from Sega Enterprises to Sega Corporation.
On May 22, 2000, Okawa replaced Irimajiri as president of Sega. Okawa had long advocated that Sega abandon the console business. His sentiments were not unique; Sega co-founder David Rosen had "always felt it was a bit of a folly for them to be limiting their potential to Sega hardware", and Stolar had previously suggested that Sega should have sold their company to Microsoft. In September 2000, in a meeting with Sega's Japanese executives and the heads of the company's major Japanese game development studios, Moore and Bellfield recommended that Sega abandon its console business and focus on software—prompting the studio heads to walk out.
On January 23, 2001, a story ran in Nihon Keizai Shimbun claiming that Sega would cease production of the Dreamcast and develop software for other platforms. After initial denial, Sega of Japan put out a press release confirming they were considering producing software for the PlayStation 2 and Game Boy Advance as part of their "new management policy". On January 31, 2001, Sega announced the discontinuation of the Dreamcast after March 31 and the restructuring of the company as a "platform-agnostic" third-party developer. The decision was Moore's. Sega also announced a Dreamcast price reduction to $99 to eliminate its unsold inventory, which was estimated at 930,000 units as of April 2001. After a further reduction to $79, the Dreamcast was cleared out of stores at $49.95. The final Dreamcast unit manufactured was autographed by the heads of all nine of Sega's internal game development studios as well as the heads of Visual Concepts and Wave Master and given away with 55 first-party Dreamcast games through a competition organized by GamePro magazine. Okawa, who had previously loaned Sega $500 million in the summer of 1999, died on March 16, 2001; shortly before his death, he forgave Sega's debts to him and returned his $695 million worth of Sega and CSK stock, helping the company survive the third-party transition. He also talked to Microsoft about a sale or merger with their Xbox division, but those talks failed. As part of this restructuring, nearly one-third of Sega's Tokyo workforce was laid off in 2001.[167] By March 31, 2002, Sega had five consecutive fiscal years of net losses.
Sammy takeover and business expansion (2003–2015)
In August 2003, Sammy, one of the biggest pachinko and pachislot manufacturing companies, bought 22.4% of Sega's shares from CSK, and Sammy chairman Hajime Satomi became chairman of the board of Sega. In the same year, Satomi stated that Sega's activity will focus on their profitable arcade business as opposed to their loss-incurring home software development sector. During mid-2004, Sammy bought a controlling share in Sega Corporation at a cost of $1.1 billion, creating the new company Sega Sammy Holdings, an entertainment conglomerate. Since then, Sega and Sammy became subsidiaries of the aforementioned holding company, with both companies operating independently, while the executive departments merged. According to the first Sega Sammy Annual Report, the merger of the two companies happened due to the companies facing difficulties. Satomi stated that Sega had been operating at a loss for nearly 10 years, while Sammy feared stagnation and over-reliance of its highly profitable pachislot and pachinko machine business, and wanted to diversify its business in new fields. Sega Sammy Holdings was structured into four parts, three of which were Sega: Consumer Business (video games), Amusement Machine Business (arcade games), Amusement Center Business (Sega's theme parks and arcades) and Pachislot and Pachinko Business (Sammy's pachinko and pachislot business).
In the console and handheld business, Sega found success in Japan with the Yakuza and Hatsune Miku: Project DIVA series of games, amongst others primarily aimed at the Japanese market. In Japan, Sega distributes games from smaller Japanese game developers and localizations of Western games. In 2013, Index Corporation was purchased by Sega Sammy after going bankrupt. After the buyout, Sega implemented a corporate spin-off with Index, and re-branded the video game assets of the company as Atlus, a wholly owned subsidiary of Sega. For amusement arcades, Sega's most successful games continued to be based on network and card systems. Games of this type include Sangokushi Taisen and Border Break. Arcade machine sales incurred higher profits than their console, portable, and PC games on a year-to-year basis until 2010s. In 2004, the GameWorks chain of arcades became owned by Sega, until the chain was sold off in 2011. In 2009, Sega Republic, an indoor theme park in Dubai, opened to the public. In 2010, Sega began providing the 3D imaging for Hatsune Miku's holographic concerts.
Due to the decline of packaged game sales both domestically and outside Japan in the 2010s, Sega began layoffs and reduction of their Western businesses, such as Sega shutting down five offices based in Europe and Australia on July 1, 2012. This was done in order to focus on the digital game market, such as PC and mobile devices. The amount of SKU gradually shrunk from 84 in 2005 to 32 in 2014. Because of the shrinking arcade business in Japan, development personnel would also be relocated to the digital game area. Sega gradually reduced its arcade centers from 450 facilities in 2005, to around 200 in 2015. In the mobile market, Sega released its first app on the iTunes Store with a version of Super Monkey Ball in 2008. Since then, the strategies for Asian and Western markets have become independent. The Western line-up consisted of emulations of games and pay-to-play apps, which were eventually overshadowed by more social and free-to-play games, eventually leading to 19 of the older mobile games being pulled due to quality concerns in May 2015. Beginning in 2012, Sega also began acquiring studios for mobile development, with studios such as Hardlight, Three Rings Design, and Demiurge Studios becoming fully owned subsidiaries.
In the 2010s, Sega established operational firms for each of their businesses, in order to streamline operations. In 2012, Sega established Sega Networks for its mobile games; and although separate at first, it merged with Sega Corporation in 2015. Sega Games was structured as a "Consumer Online Company" , while Sega Networks focused on developing games for mobile devices. In 2012, Sega Entertainment was established for Sega's amusement facility business, and in 2015, Sega Interactive was established for the arcade game business. In January 2015, Sega of America announced their relocation from San Francisco to Atlus USA's headquarters in Irvine, California, which was completed later that year. Over the course of the existence of Sega Sammy Holdings to 2015, Sega's operating income generally saw improvements compared to Sega's past financial difficulties, but was not profitable every year of operation.
Sega Group restructuring (2015–present)
In April 2015, Sega Corporation was reorganized into Sega Group, one of three groups of Sega Sammy Holdings. Sega Holdings Co., Ltd. was established, with four business sectors under its organization. Haruki Satomi, son of Hajime Satomi, took office as president and CEO of the company in April 2015.
Sega announced at the Tokyo Game Show in September 2016 that they acquired the intellectual property and development rights to all the games developed and published by Technosoft from Kazue Matsuoka. Factors that influenced the acquisition included the former Technosoft president stating that they did not want the Technosoft brand to desist, and so handing over the intellectual properties to Sega was the only other option. Sega and Technosoft also had an established collaboration during the Genesis/Mega Drive era and so this pre-established relationship was also a factor when acquiring the brand rights to Technosoft games.
In April 2017, Sega Sammy Holdings announced a relocation of head office functions of the Sega Sammy Group and its major domestic subsidiaries located in the Tokyo metropolitan area to Shinagawa-ku by January 2018. Their stated reasoning was to promote cooperation among companies and creation of more active interaction of personnel, while pursuing efficient group management by consolidating scattered head office functions of the group, including Sega Sammy Holdings, Sammy Corporation, Sega Holdings, Sega Games, Atlus, Sammy Network, and Dartslive. In October 2017, Sega of America announced its own online store, known as the Sega Shop. Ian Curran, a former executive at THQ and Acclaim Entertainment, replaced John Cheng as president and COO of Sega of America in August 2018.
Below are some links to commercials from each era of Sega home consoles.