Sega Corporation is a Japanese video game company. It is a subsidiary of Sega Sammy Holdings and is based in Tokyo. Sega creates many popular game series for arcades and consoles, including Sonic the Hedgehog, Angry Birds, Football Manager, Phantasy Star, Puyo Puyo, Super Monkey Ball, Bayonetta, Total War, Virtua Fighter, Megami Tensei, Sakura Wars, Persona, and Yakuza. From 1983 to 2001, Sega also made its own video game consoles.

Sega was founded on June 3, 1960, by Martin Bromley and Richard Stewart as Nihon Goraku Bussan. Soon after, it bought the assets of Service Games of Japan. In 1965, the company became known as Sega Enterprises, Ltd. after purchasing Rosen Enterprises, a company that imported coin-operated games. Sega created its first coin-operated game, Periscope, in 1966. In 1969, Sega was sold to Gulf and Western Industries. In the early 1980s, the arcade business declined, so Sega began making video game consoles, starting with the SG-1000 and Master System. However, Sega struggled to compete with Nintendo Entertainment System. In 1984, Sega executives David Rosen and Hayao Nakayama led a management buyout with support from CSK Corporation.

In 1988, Sega released the Mega Drive, called the "Genesis" in North America. The Mega Drive faced competition in Japan, but the Genesis became popular outside Japan after the release of Sonic the Hedgehog in 1991. It briefly sold more units than the Super Nintendo Entertainment System in the United States. In 2001, after several unsuccessful consoles, including the 32X, Saturn, and Dreamcast, Sega stopped making consoles and became a third-party developer and publisher. In 2004, Sega was acquired by Sammy Corporation. In 2015, Sega Holdings Co., Ltd. was formed. Sega Corporation was renamed to Sega Games Co., Ltd., and its arcade division became Sega Interactive. In 2020, Sega Games and Sega Interactive merged to form Sega Corporation.

Sega's international branches, Sega of America and Sega Europe, are based in Irvine, California, and London. Sega has several development studios, including internal research and development teams (which use the Ryu Ga Gotoku Studio and Sonic Team brands for major games), Sega Sapporo Studio (which supports Tokyo-based teams and helps develop games), and Atlus (including its research and development divisions). Sega also has five studios in the UK and Europe: Creative Assembly, Sports Interactive, Sega Hardlight, Two Point Studios, and Rovio Entertainment (including Ruby Games). Sega is one of the world's largest producers of arcade games, and its mascot, Sonic, is well known globally. Sega is recognized for its video game consoles, creativity, and innovations. In recent years, it has faced criticism for some business choices and the quality of its games.

As the entertainment division of Sega Sammy Holdings, Sega also owns Sega Fave, a company that makes toys and arcade machines. Sega Fave includes two animation studios: TMS Entertainment, which creates, produces, and distributes anime, and Marza Animation Planet, which specializes in computer-generated animation.

History

In May 1940, American businessmen Martin Bromley, Irving Bromberg, and James Humpert created a company called Standard Games in Honolulu, Hawaii. They wanted to provide machines that people could use by inserting coins, such as slot machines, to military bases. More soldiers were stationed there because of World War II, so there was a need for entertainment. In 1945, the founders sold Standard Games and started a new company called Service Games the next year. The name "Service Games" was chosen because the company focused on military work. In 1952, the U.S. government banned slot machines in its territories, so Bromley sent employees Richard Stewart and Ray LeMaire to Tokyo to start Service Games of Japan. They provided coin-operated slot machines to U.S. bases in Japan. In 1955, all five men created Service Games Panama to manage Service Games worldwide. Over the next seven years, the company expanded to South Korea, the Philippines, and South Vietnam. The name "Sega" was first used in 1954 on a slot machine called the Diamond Star, which was an abbreviation of Service Games.

In 1960, Service Games of Japan was closed after the U.S. government investigated its business practices. On June 3, 1960, Bromley created two new companies, Nihon Goraku Bussan and Nihon Kikai Seizō, to take over Service Games of Japan’s business. These companies bought all of Service Games of Japan’s equipment. Kikai Seizō, which operated as Sega, Inc., made slot machines. Goraku Bussan, which operated as Utamatic, Inc. under Stewart, sold and managed coin-operated machines, especially jukeboxes. These two companies merged in 1964 and kept the name Nihon Goraku Bussan.

At the same time, David Rosen, an American Air Force officer in Japan, started a photo booth business in Tokyo in 1954. This company became Rosen Enterprises and began importing coin-operated games into Japan in 1957. In 1965, Nihon Goraku Bussan bought Rosen Enterprises to form Sega Enterprises, Ltd. Rosen became the CEO and managing director, while Stewart was president and LeMaire was the director of planning. Soon after, Sega stopped providing machines to military bases and focused on other types of coin-operated games. The company imported Rock-Ola jukeboxes, pinball games from Williams, and gun games from Midway Manufacturing.

Because Sega imported used machines that needed frequent repairs, the company started making replacement parts for its games. This led to Sega creating its own games. The first game Sega made was the submarine simulator Periscope, released worldwide in the late 1960s. It used light and sound effects that were new and became popular in Japan. Periscope was later sold in Europe and the United States and helped set the standard for arcade games costing 25 cents per play in the U.S. Sega was surprised by its success and made between eight and ten games each year for the next two years. Periscope’s success started a new wave of innovative games in the late 1960s and early 1970s. However, copying of Sega’s games led the company to stop exporting its products around 1970.

In 1969, Sega was bought by the American company Gulf and Western Industries, but Rosen stayed as CEO. In 1974, Gulf and Western made Sega Enterprises, Ltd. a subsidiary of an American company called Sega Enterprises, Inc. Sega released its first video-based game, Pong-Tron, in 1973. Even though Taito’s game Space Invaders was released in 1978, Sega did well during the arcade video game boom of the late 1970s. By 1979, Sega’s revenue reached over $100 million. During this time, Sega bought Gremlin Industries, which made microprocessor-based arcade games, and Esco Boueki, a coin-operated machine distributor owned by Hayao Nakayama. Nakayama was placed in charge of Sega’s operations in Japan. In the early 1980s, Sega was one of the top five arcade game makers in the U.S., with revenue reaching $214 million. In 1979, Sega released Head On, a game that inspired the "eat-the-dots" gameplay later used in Pac-Man. In 1981, Sega licensed Konami’s Frogger, its most successful game at the time. In 1982, Sega introduced Zaxxon, the first game with isometric graphics.

After the arcade business declined starting in 1982, Gulf and Western sold its North American arcade manufacturing and licensing rights to Bally Manufacturing in 1983. Gulf and Western kept Sega’s research and development operations and its Japanese subsidiary, Sega Enterprises, Ltd. As the arcade business dropped, Sega Enterprises, Ltd. president Nakayama pushed for the company to move into the home consumer market in Japan. This led to the creation of a computer called the SC-3000. Learning that Nintendo was making a games-only console called the Famicom, Sega developed its first home video game system, the SG-1000, alongside the SC-3000. Rebranded versions of the SG-1000 were sold in other countries. The SG-1000 sold 160,000 units in 1983, which was more than Sega expected but less than Nintendo’s Famicom. This was partly because Nintendo added more games by working with outside developers, while Sega was hesitant to do the same.

In November 1983, Rosen announced he would leave his position as president of Sega Enterprises, Inc. on January 1, 1984. Jeffrey Rochlis was named the new president and CEO. Soon after the launch of the SG-1000, and the death of Gulf and Western’s founder Charles Bluhdorn, the company began selling its other businesses. In 1984, Nakayama and Rosen arranged for a group of investors, with financial help from Computer Service, to buy Sega’s Japanese operations for $38 million. Isao Okawa, head of CSK, became chairman, and Nakayama became CEO of Sega Enterprises, Ltd.

In 1985, Sega began working on the Mark III, a redesigned version of the SG-1000. For North America, Sega rebranded the Mark III as the Master System, with a futuristic design to appeal to Western customers. The Mark III was released in Japan in October 1985. Even though it had more powerful hardware than Nintendo’s Famicom in some areas, it was not successful when it launched. Nintendo required third-party developers not to sell their games on other consoles, so Sega made its own games and got rights to port games from other developers. To promote the Master System in North America, Sega partnered with Tonka, an American toy company, to use Tonka’s experience in the toy industry. Ton

Corporate structure

Since 2004, Sega has been part of Sega Sammy Holdings. Sega's main office is in Shinagawa, Tokyo, Japan. Sega also has offices in Irvine, California (Sega of America), London (Sega Europe), Seoul, South Korea (Sega Publishing Korea), and in Singapore, Hong Kong, Shanghai, and Taipei. In other regions, Sega works with companies to sell its games and consoles, such as Tectoy in Brazil. Sega once had offices in France, Germany, Spain, and Australia, but those areas now use other companies to sell Sega products.

Relations between Sega's offices have not always been easy. In the 1990s, some problems may have happened because Sega president Nakayama favored Sega of America. Kalinske said some Japanese executives felt jealous of Nakayama's support for U.S. leaders. Steven L. Kent said Nakayama sometimes acted harshly toward American leaders and believed Japanese executives made better decisions. Kent also said that Sega of America leaders avoided meetings with Japanese executives.

After Sega Group was formed in 2015 and Sega Holdings was created, the old Sega Corporation was renamed Sega Games Co., Ltd. Under this new structure, Sega Games handled home video games and consumer products, while Sega Interactive Co., Ltd. managed arcade games. In 2020, these two companies were combined and renamed Sega Corporation. In 2021, Sega Group was officially merged into Sega Corporation. Sega Networks, part of the company, develops games for smartphones. Sega Corporation creates and sells games for major consoles but has not said it will make consoles again. Former Sega Europe CEO Mike Brogan said, "Selling hardware is not the future. Companies should focus on software, even if hardware sales are not profitable."

Sega Fave Corporation, originally named Yonezawa Toys and bought by Sega in 1991, makes toys for children's characters like Oshare Majo: Love and Berry, Mushiking: King of the Beetles, Lilpri, Bakugan, Jewelpet, Rilu Rilu Fairilu, Dinosaur King, and Hero Bank. Products sold in the West include the home planetarium Homestar and the robot dog iDog. The Homestar was released in 2005 and has been updated several times. Its newest version, Flux, came out in 2019. The series was created by inventor Takayuki Ohira, who also works with his company Megastar to build planetariums worldwide. Sega Toys also inherited the Sega Pico handheld system and made games for it. The company also develops and sells arcade games until 2024.

Since the late 1960s, Sega has been connected to bowling alleys and arcades through its former Sega Entertainment Co., Ltd. in Japan and other smaller companies in other countries. Attempts to grow in places like the U.S., UK, France, Spain, and Taiwan were short-lived. In November 2020, Sega bought most of Sega Entertainment's shares to reduce losses from the pandemic. Since then, Sega's Japanese arcades have been run by Genda Incorporated's Genda GiGO Entertainment division. Its DartsLive subsidiary makes electronic darts games, and Sega Logistics Service repairs and distributes arcade games.

In 2015, Sega partnered with a Japanese advertising company, Hakuhodo, to form a joint venture called Stories LLC. Stories LLC has the right to make films and TV shows based on Sega properties. It has worked on projects based on Shinobi, Golden Axe, Virtua Fighter, The House of the Dead, and Crazy Taxi.

Sega makes games using its own research and development teams. The Sonic the Hedgehog series, managed by Sega's Sonic Team, is one of the best-selling video game franchises. Sega has also bought other game studios, including Atlus, Play Heart, Creative Assembly, Hardlight, Sports Interactive, Two Point Studios, and Rovio Entertainment.

Sega's software development teams began with one group led by Hisashi Suzuki, Sega's head of research and development. As home consoles became more popular, Sega added three Consumer Development (CS) teams. After October 1983, three arcade development teams were created: Sega DD No. 1, 2, and 3. After the game Power Drift was released, Sega reorganized its teams into the Sega Amusement Machine Research and Development Teams, or AM teams. These teams were separated, and competition existed between arcade and consumer development divisions.

In 2000, Sega restructured its arcade and console teams into ten independent studios led by top designers. The studios were United Game Artists, Smilebit, Hitmaker, Sega Rosso, WOW Entertainment, Overworks, Wave Master, Amusement Vision, Sega-AM2, and Sonic Team. These studios were encouraged to experiment and had less strict approval processes. In 2003, Hisao Oguchi became company president and planned to combine Sega's studios. Before Sammy acquired Sega, the company began merging its subsidiaries back into the main company. Toshihiro Nagoshi, who once led Amusement Vision, described this time as "a labor of love" for Sega, helping creatives learn business skills.

Sega still has first-party studios as part of its research and development division. Sonic Team is Sega's CS2 department, and Sega's CS3 or Online department created games like Phantasy Star Online 2. Sega's AM2 department recently worked on smartphone games like Soul Reverse Zero. Toshihiro Nagoshi continued working on the Yakuza series until 2021 as Sega's chief creative officer. Other studios include Ignited Artists and Play Heart.

Legacy

Sega is one of the world's most successful companies that makes arcade games. Since 1981, it has created more than 500 games, 70 game series, and 20 different types of arcade game systems. Guinness World Records has recognized Sega for this achievement. Eurogamer’s Martin Robinson described Sega’s arcade games as lively, varied, and full of showmanship. He also noted that Sega’s arcade games have achieved success that its console games sometimes lack. Hideki Sato, who helped design much of Sega’s hardware, said one major problem for Sega was not combining its arcade and console divisions to work together better.

The Sega Genesis is often considered one of the best video game consoles ever made. In 2014, USgamer’s Jeremy Parish said the Genesis helped change the market by challenging Nintendo’s dominance, starting modern sports game series, and making television-style games popular in the UK. Sega’s president, Jack Kalinske, believed Sega had made progress by creating games for older players and introducing the "street date" idea, which released Sonic the Hedgehog 2 at the same time in North America and Europe. Sega of America’s marketing for the Genesis influenced how later consoles were promoted.

The Sega Saturn is well known for its collection of games, but it did not have many famous game series. Edge magazine noted that dedicated fans still remember the Saturn for games like Burning Rangers, Guardian Heroes, Dragon Force, and Panzer Dragoon Saga. Sega’s management was criticized for how it handled the Saturn. Greg Sewart of 1Up.com said the Saturn will be remembered as one of the most challenging and impressive systems ever made.

The Dreamcast was ahead of its time, introducing ideas that later became standard in video game consoles, such as motion controls and online features. Its decline is linked to changes in the video game industry. Duncan Harris wrote in 1001 Video Games You Must Play Before You Die that the Dreamcast’s end marked the end of arcade gaming culture. He said the Dreamcast gave hope that fast, fun games and colorful graphics would not be replaced by dull, realistic war games. Jeremy Parish noted that the Dreamcast’s wide variety of games contrasted with the lack of creativity in the industry in the following decade.

Damien McFerran of Eurogamer said Sega’s decisions in the late 1990s were examples of overconfidence and poor business choices. Travis Fahs of IGN noted that after Sega was taken over by Sammy, the company made fewer games and relied more on Western studios, while its arcade operations declined. He also said Sega was one of the most creative and productive game developers in history, and nothing that happened afterward would change that. In 2015, Sega president Haruki Satomi told Famitsu that over the previous ten years, Sega had disappointed older fans and hoped to rebuild the Sega brand. During the promotion of the Sega Genesis Mini, Sega executive manager Hiroyuki Miyazaki reflected on Sega’s history, saying, "I feel like Sega has never been the top company in the video game industry, but many people still love Sega because of its underdog image." Former Sega leaders said the lack of popular games like Dragon Quest and Final Fantasy on Sega consoles hurt its success in Japan. In his 2018 book The Sega Arcade Revolution, Marc Horowitz linked Sega’s decline in arcades after 1995 to broader changes in the industry. He said Sega’s biggest problems came from losing key creative talent, like Yuji Naka and Yu Suzuki, after the Sammy takeover. However, he concluded that "as of this writing, Sega is in its best financial position in the past two decades. The company has endured."

Companies founded by ex-employees

Over the years, many employees from large Japanese game companies, such as Capcom and Square, have left to start their own studios. One of the first studios to form was Arc System Works, which was founded in 1988 by programmer Minoru Kidooka.

In October 1990, Hiroshi Hamagaki and Tomo Kimura left to start Genki. This studio later created the popular Tokyo Xtreme Racer (Shutokō Battle) series.

After designing the first two Tekken games for Namco, Seiichi Ishii, who was also a designer for Virtua Fighter, founded DreamFactory in November 1995. DreamFactory was a subsidiary of Square and included many employees from Sega and Namco. The studio developed games such as Tobal No. 1, its sequel, Ehrgeiz, and The Bouncer. Due to financial problems at Square, DreamFactory became independent in 2001. As of 2024, Seiichi Ishii, who now lives in Montreal, continues to manage the studio from his home.

In January 1997, Adrian Stephens and Peter Morawiec of Sega Technical Institute founded Luxoflux after Sega of America closed STI in December 1996. Luxoflux created games like Vigilante 8 and the True Crime series for Activision. Activision acquired Luxoflux in October 2002, and the studio was closed in February 2010. Stephens and Morawiec had left Luxoflux in 2006 and later started Isopod Labs, which developed Vigilante 8 Arcade.

Marvelous Entertainment was founded in 1997 by Haruki Nakayama, the son of Sega president Hayao Nakayama. Haruki Nakayama was responsible for managing the media mix development of Sakura Wars. In 2011, Marvelous merged with AQ Interactive and Liveware to become MarvelousAQL, which is now the second version of Marvelous.

After working at General Entertainment on Pen Pen TriIcelon, Masanobu Tsukamoto, a former Sega marketer, founded Land Ho! in 1999 with members of the General team who also worked on the game.

Artoon was founded on August 27, 1999, by Naoto Ohshima, co-creator of Sonic the Hedgehog, and Yoji Ishii. The studio included members from Sonic Team and Team Andromeda, such as Manabu Kusunoki, the art director for the Panzer Dragoon series. Artoon developed games like Blinx: The Time Sweeper, Yoshi's Island DS for Nintendo, and Blue Dragon with Mistwalker. In 2005, Artoon became a wholly-owned subsidiary of AQ Interactive and was absorbed into AQ in 2010. Around the same time, Ohshima, Ishii, and key Artoon members formed a new studio called Arzest.

studiofake was founded in September 2000 by Keiji Okayasu, a programmer and director from AM2. The studio co-developed Odama with Vivarium. In May 2022, the studio was renamed FUN Corporation.

Kaya Takafumi, a planner from Sonic Team, left Sega in 2001 and founded Signal Talk the next year. Signal Talk created the mahjong game Maru-Jan.

Tetsuya Mizuguchi, the creator of Space Channel 5 and Rez, and head of United Game Artists, founded Q Entertainment in October 2003 after leaving Sega. This happened after the merger of UGA into Sonic Team the previous month. Q Entertainment developed games like Lumines, Meteos, and Rez HD. In 2014, Mizuguchi started Enhance, Inc., which released Tetris Effect and Rez Infinite.

Yuji Naka, co-creator of Sonic the Hedgehog, president of Sonic Team, and Sega executive officer, left during the development of the 2006 Sonic reboot. He founded Prope on May 23, 2006. In 2018, he joined Square Enix, where he created Balan Wonderworld with Arzest. In 2017, Prope was downsized to a one-person company. Naka was arrested for insider trading in 2022.

Kenji Sasaki, director of the Sega Rally series and other racing games, left Sega in 2005 and founded Bitster in June 2006.

Kotaro Hayashida left Sega in 1996 to join Game Arts. Ten years later, in September 2006, he founded Liber Entertainment, a mobile game developer.

Grounding Inc. was founded on February 7, 2007, by Mineko Okamura, producer of Space Channel 5; Yukio Futatsugi, creator of Panzer Dragoon; and Noboru Hotta, a founding member of Q Entertainment. The studio developed games like Crimson Dragon, Sakura Samurai: Art of the Sword, and Space Channel 5 VR: Kinda Funky News Flash!. Grounding Inc. also creates board games, including Machi Koro.

Yu Suzuki founded Ys Net in 2008 and officially left Sega in September 2011. Ys Net developed Shenmue III, a project funded by many people through Kickstarter, and the Apple Arcade game Air Twister.

Takeshi Hirai, who left Sega with Mizuguchi to become chief technology officer at Q Entertainment, founded Neilo in 2010. Neilo developed Orgarhythm.

Tez Okano, director of Segagaga and Astro Boy: Omega Factor, started the indie studio HUGA in January 2014. HUGA specializes in retro-styled side-scrolling shooters.

Shoichiro Kanazawa, a member of AM3, founded the support studio ArAtA in June 2016.

In November 2021, Toshihiro Nagoshi and Daisuke Sato left Sega and joined NetEase. They formed Nagoshi Studio with other former Sega employees. The studio is currently working on Gang of Dragon.