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Short: The Death of Sega

Acquired

Mon Apr 17 2023



Sega's Evolution from Arcades to Home Consoles:

  • Sega, a major player in the arcade industry, transitioned into the home console market to challenge Nintendo's dominance.
  • The Genesis successfully competed with Nintendo in North America but made critical errors with add-ons like the Sega CD and 32X.
  • These add-ons limited their target market and led to declining sales as the shift towards CDs posed cost challenges for Sega compared to traditional cartridges.

Sony's Game-Changing Impact with PlayStation:

  • Sony recognized the potential of 3D polygon graphics after seeing Sega's success with Virtua Fighter in arcades.
  • They developed the PlayStation to bring cutting-edge arcade technology into homes at an affordable price point.
  • Collaborating with Namco on Tekken for both arcades and PlayStation hardware signified a significant technological shift in gaming.

The Iconic E3 Conference of 1995:

  • At E3 in 1995, Sony stole the spotlight by announcing the PlayStation release date and pricing, overshadowing Sega Saturn's surprise launch earlier that day.
  • Steve Race unveiling PlayStation for $299 undermined Sega Saturn's higher-priced offering and limited game library, marking a pivotal moment in gaming history.

Transition of Sega from Hardware Manufacturer to Game Developer:

  • Following intense competition with Sony, Sega pivoted away from hardware production towards game development and publishing on platforms like PlayStation and Xbox.
  • Despite initial challenges during this transition period, Sega eventually found success as a games business by adapting to industry changes over time.

Sega's Transition to Software Business:

  • Sega shifted its focus from developing hardware, like the Saturn and Dreamcast consoles, to software development.
  • The company struggled with high R&D costs for new consoles and faced tough competition from Sony's PlayStation in the gaming market.
  • Despite attempts at revenue generation through partnerships, Sega ultimately could not sustain its hardware business due to changing market dynamics.

Sammy's Acquisition of Sega:

  • Sammy, a Japanese Pachinko machine manufacturer, acquired Sega and merged it into their video game division.
  • This acquisition led to the formation of Sega Sammy as a publicly traded entity but has been viewed as a "zombie company" with limited market value relative to revenue.

Evaluation of Sega's Intellectual Property (IP) Potential:

  • Sega still holds valuable IP such as Sonic the Hedgehog and the Yakuza franchise despite past challenges.
  • Discussions have arisen around potential takeover opportunities or leveraging existing IP for future growth prospects.
  • Contrasting Sega's arcade-style games like Sonic with Nintendo's franchises like Mario showcases difficulties in creating enduring gameplay experiences.

Missed Opportunity with SGI Partnership:

  • Tom Kalinske proposed collaborating with SGI for advanced chips in Sega's next-gen console but was rejected by Sega of Japan.
  • The rejection highlighted internal conflicts within Sega that may have impacted the success of Dreamcast or other future ventures.

Additional Insights:

  • Naoto Oshima revealed that he designed Sonic based on elements from Felix the Cat and Mickey Mouse, shedding light on Sonic's unique creation process.
  • Daryl Morey's interview on Invest Like the Best podcast was recommended for his insightful perspectives beyond basketball or sports interests.
  • Recommendations were made to watch Succession TV show, follow SpaceX Starship launches, and view Six Days to Air documentary showcasing South Park's rapid episode production process.