Most people would not argue that Sega is a different company today than it was 20 years ago, but then the same could be said about most video game companies. However, it’s difficult to make a direct comparison between Sega the Third-Party Publisher and Sega the Console Manufacturer, as those are merely two eras in a history that actually stretches back much farther than that. Taken as a whole, Sega’s current position isn’t quite as unusual as it may seem.
Most people are aware of the storied history of Nintendo, having started in 1889 as a Hanafuda playing card company, and evolving through different ventures before becoming the video game company it’s known as today. Likewise, the history of Atari is also famous as being the brainchild of entrepreneur Nolan Bushnell before splitting into two companies, with each being purchased and sold by different parties until becoming today’s awkward incarnation (with Bushnell even back on the board of directors). However, for some reason, a lot less is said about the history Sega, which is an interesting story in its own right.
Sega Enterprises was born in 1964 out of the merger of two separate companies: Rosen Enterprises and Nippon Koraku Bussan (also known as Service Games), both of which were actually founded by Americans. Service Games began in Hawaii (then a US territory) in 1952 and later moved to Japan where they specialized in importing slots machines and pinball to US military bases. Rosen Enterprises was founded by US serviceman David Rosen in 1954 as a high-quality photomat. Both companies were very successful, and formed a merger in 1964, renaming itself an abbreviation of the words “Service Games”: Sega Enterprises.
Fun Fact: Taito Corporation, founded by Russian businessman Michael Kogan, was almost part of the Sega merger. Taito also later became a successful video game company, and is currently owned by Square Enix.
Sega began manufacturing mechanical amusement devices, the most successful being a shooting game called Periscope. The game was so successful that Sega began exporting it to the US and Europe, but due to the expense of it, Sega recommended that operators charge 25 cents-per-game, which set the standard for arcade game prices.
David Rosen and the founders of Service Games sold Sega to Gulf & Western in 1967, and the company continued to change hands a couple times in the proceeding decades, including acquisitions by Bally/Midway and CSK Corporation. However, David Rosen stayed on as Sega’s CEO, and continued to oversee the company in various positions until 1996.
Fun Fact: Former Disney CEO Michael Eisner was a member of Sega’s board of directors for a while in the late 70s.
In the 70s, Sega began developing successful arcade video games, but the industry crash in 1983 pushed them to break into the home console market. Early systems were only moderately successful in Japan against the dominance of Nintendo’s Famicom, but Sega got its break with the Mega Drive/Genesis, thanks to highly aggressive marketing and business strategies, particularly in North America.
Fun Fact: Much like Nintendo once approached Atari to manufacture and distribute the NES in North America, Sega also began working a similar deal with Atari for the Genesis. It fell through at the last minute because David Rosen and Atari Corp’s Jack Tramiel couldn’t agree on the final terms, so Sega went ahead on its own.
Sega never had the same level of success with their subsequent systems, the Saturn and Dreamcast, and pulled out of the console business in 2001 to become a third-party publisher for other platforms. Sega courted several other companies to merge with before being forcibly bought out by Sammy Corporation in 2003.
Most people tend to remember Sega as a console manufacturer, and thus that’s what the current form of Sega is often compared with. Being a console manufacturer does require a different approach, as the types of games produced must be considered in the context of supporting a platform. But as a third-party publisher, Sega’s operations are more like that of a company such as EA or Ubisoft. There is less need for them to produce franchises that contribute to a unified identity, and more opportunity to stretch themselves beyond their usual reputation. Recent interviews with Sega West CEO Mike Hayes have indicated that this is indeed the company’s current direction.
Sega may not be the same company that they used to be, but they are adapting as they always have. They are teaching themselves to be a third-party publisher, just as they had taught themselves to be a console manufacturer and an arcade developer, and they will likely continue to evolve in the future.
The Ultimate History of Video Games (Steven L. Kent, 2001)