It’s been over a month since Sega revealed to its shareholders that they were going to be restructuring after a dismal year in 2014. With the profit projection being over two hundred million less than the previous year and coming in at a paltry $34 million, Sega has proposed axing 300 jobs by closing its San Francisco office and moving to strictly mobile and PC games. Sega has always been known as a company sailing behind Nintendo’s insurmountable wake, with some exceptional highs and disappointing lows, but they have never tread this deep below before. Can Sega pull itself out of this situation for some much needed air?
Sega may seem like they’re heading the way of Atari, once a juggernaut in its own right, but this company may have the right ideas going for them. They’re innovators, and their past shows that they’ve pulled themselves out of bad situations before. With a legion of fans ready to inject cash back into the company, given a few years Sega could rise like a phoenix. In order to understand, let’s look back at a brief history of the company.
It All Started With Pachinko Machines
Sega (Originally Service Games) wasn’t actually founded in Japan, but originally in Hawaii as a distributor of early pachinko and slot machines. After merging with Rosen Enterprises, they decided their new company should get into designing games. After having massive success with Periscope, an electro-mechanical cabinet based on submarine warfare, many consider this being a turning point for arcades.
The international success of this game lead to Sega releasing Japan’s first cartridge-based video game console, the SG-1000 in 1982. Shortly after came the video game crash, which Sega despite initial losses was able to survive through, came out surviving and with a clear market ahead of them. They did however have contenders waiting in the wings, including the Atari’s 2600 (Known as the Atari 2800 in Japan) and the Nintendo Family Computer (Nintendo Entertainment System in North America).
Sega was showing it’s ability to hold it’s own in a booming, and yet unstable market. Sega continued growing, as it released the Sega Mark III in Japan in 1985 and later as the Master System in America in 1986. Since then, Sega has been in a rush to keep up with the market dominating Nintendo. They handed U.S. marketing over to Tonka, a toy company that had no idea how to handle a game system, leading to horrible box art and little exposure. Despite these hurdles, Sega made some decent sales, selling over 10 million units of the Master System.
Sega had trouble signing licensing agreements and getting third party developers to agree to work for them, rather than a demanding yet more profitable Nintendo. Sega needed the gamers to pull in developers, and without them the system would always be struggling to find quality content. So, when Sega began work on the next console, they decided they wanted to build something that offered far more than the NES. The Sega Mega Drive (Known in the States as Genesis) was an impressive console, but again was overshadowed by the soon to be released Super Family Computer (Super Nintendo in NA). Sega would continue this trend of releasing a console first, but being outshined by Nintendo and their mascot Mario.
Every Nintendo console was released with a free game starring everyone’s favorite plumber, and this freebie marketing was killing Sega. The Mega Drive did come packaged with Altered Beast, but this wasn’t nearly as enticing as Super Mario World. As such, the Genesis had a problem of playing second fiddle to Nintendo’s Opus. They needed a mascot stronger than Alex Kidd if they were going to make it in this growing industry.
Sega changed it’s model, by attacking Nintendo with it’s newly created character Sonic The Hedgehog. Because of their marketing of ‘blast-processing’ and fast-paced games such as Sonic, many people bought into the hype that ‘Sega does what Nintendon’t.’ Sega was fighting back, and for the first time in the company’s history, they overtook Nintendo in terms of sale and popularity.
Sega Was Suddenly The Best Selling Console
Shortly after their successful overtaking of the market, they lost overall focus and spread themselves too thin, perhaps showing how the tortoise will usually win out over the hare. Sega seeing themselves as a pioneer, began releasing add-ons such as Sega CD and 32X, all of which didn’t sell well and only brought doubt to it’s fans. In an attempt to stay ahead of the curve, they tripped up and never fully recovered, even when it came to software. The game Sonic Xtreme was their attempt at creating a fully 3D game with their titular mascot for the upcoming Saturn. The game was consider a disaster, leading to tons of redevelopments and eventually it’s cancellation. This was a huge hit to the company.
Shortly after, Sega decided to quickly released the Saturn after realizing Sony was going to be entering the market with a CD-Based console as well. They decided to surprise everyone at E3 ‘95 by announcing they would release the console immediately, at a price of $399.99 (About $600 today). This hindered retailers from properly promoting its sale and gamers from researching their purchasing decisions. Because of this, gamers decided to invest in the new Sony Playstation which came out several months later, right before that holiday season. Many others decided to wait for the eventual release of Nintendo’s next entry.
Sega did the best they could, riding out the storm with high expectations for the Sega Dreamcast, their upcoming console for the sixth generation. They felt this would be the system that would put them back on the map. It’s numerous innovative features were impressive to say the least, and came out well before the Playstation 2 could hurt its chances. Sega also learned their lesson when it came to the price, bringing the console down to $199.99 ($280.00 today). Unfortunately, with Microsoft also planning on throwing their hat into the ring after working with Sega to create their online capabilities, it was simply too late to dig themselves out of their hole. Sega announced it had more consoles than it could ever sell, and that they would start developing games for Microsoft.
Sega Focuses On Game Development and Distribution
With the release of the Xbox, Sega and Team Sonic focused on delivering games for the new console, and had some decent releases including Shenmue 2, Gun Valkyrie, ToeJam and Earl 3, and Crazy Taxi 3. The company’s financial problems, after 5 years of being well below projections, started to pull itself out of collapse, and turn a profit. This lead to the president Isao Okawa to make a nearly 700 million dollar donation to keep Sega afloat.
Team Sonic continued creating games for various platforms, including their former rival Nintendo. These games ranged from fun to lackluster. Unfortunately, as the company continued developing, the quality of their games dipped more and more, and lead to releases such as Sonic: The Hedgehog (2006), and Sonic Unleashed (2008), Sonic and the Black Knight (2009) and more recently Sonic Lost World (2013).
As Publishers they worked with or outright purchased quality studios, however the condition of the games were simply not there, leading up to disasters like Creative Assembly’s Total War: Rome II (2013) and Gearbox Software’s Aliens: Colonial Marines (2013). With the poorly received release of Sonic Boom: Rise of Lyric late last year by Big Red Button, a mostly unknown indie developer. The former gaming empire is now facing their current predicament of having nowhere to turn. Their main mascot has lost his appeal due to years of poorly made software, and they’re even losing established trademarks such as Shenmue due to inactivity.
What Sega Can Do To Rebuild Their Failing System
It will be a hard road, but Sega can pull themselves out of their situation by focusing on what they have, and what they did right in the past. Their current plan is to focus primarily on PC and Android mobile market, and I think this is the right move for them. They can release directly to consumers, avoiding messy partnership deals and middle men looking to take advantage of their situation. Sonic is known well enough to entice the average consumer, and as even Dungeon Keeper has shown, people will buy a name.
The next thing Sega should focus on is to stop allowing other companies to sully their brands. Sega’s failings can be seen early when they started to release their properties to developers who hadn’t proven themselves enough to handle such a huge franchise.
What pre-internet Atari lacked Sega has though- an online distribution of PC and Android based games, crowdsurfing and early access. With the release of a new portable game called Sonic Runners for Android, Sega could theoretically make enough money to keep the company afloat, allowing them to hang back for a year or so. Take that time, and then put their money into a proven developer to help give them a real chance in rebuilding Sega. Team Sonic, as they are now though, needs massive restructuring and some new faces.
I’d hang up Sonic’s boots for awhile when it comes to consoles, and let Nintendo keep him popular, as they continue to use him as nostalgia bait. They seem to only be interested in the milk, so hold the cow back and keep the property as long as you can. Then, create a stellar 2.5D game that harkens back to Sonic 3 and Knuckles that utilizes blazing fast speed that focuses less on fighting and more on thrills.
Sonic is still very presentable, and has a sleek and timeless look to him. Mario has stayed the same for nearly 15 years, with only slight changes to his uncomplicated character model. Making him look more realistic, or adding ‘scarfs’ will only make him feel gimmicky and cheap. Sonic needs to return to a simpler time, and a more nostalgic look.
And lastly, Sega needs to rebuild trust with it’s core audience, along with the casual observers. Many were offended by the fabrications Sega presented throughout the years of promoting their products, most noticeably Colonial Marines with it’s gameplay demo. Who can say whose fault it was when it came to that game, but if Gearbox took the money and ran, Sega should seek to recoup some of their loses.
I’m hopeful we haven’t seen the end of this company, but if they are to fail or sell themselves to someone else, it’ll be completely understandable. Whereas Nintendo has had failures, they recover quickly and bring innovation to the market. Sega floundered the minute things went wrong, and they were never able to pull themselves back up. What Sega was recognized for were their innovations, and they need one of those revolutionary ideas quick, because re-releasing Sonic games will only keep them around for another few years. Sega needs another Periscope, or they can commit themselves to forever staying beneath the tides.