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Issue Date: Vol. 44, No. 6, June 2004, Posted On: 6/7/2004


How To Recognize A White Knight


Marcus Webb

It is great news for this industry, as well as for Sega, that Sammy Corp. has finally achieved full ownership and control of Sega. At least, that's Sammy's intention. A stock swap announced on May 18 will effectively deliver Sega to Sammy's control on Oct. 1 - assuming nothing torpedoes the deal. And where Sega is involved, that's not an assumption you can make lightly. In recent years Sega has announced, and then shot down, several mergers. Most recent was a 2003 merger with Sammy.

This time around, let's hope Sega's management, creative programmers and engineers recognize their good fortune. Last year they didn't. Behind all of the talk in 2003 about clashing corporate cultures lay Sega's failure to realize that Sammy was a true "white knight," a champion who could rescue it. The culture-clash talk indicated that the Sega folks were refusing to recognize or admit that they needed a white knight in the first place.

But after five years of big losses, subsidiaries spinning out of control, massive debt and no clear strategic direction, the company has been crying out for a visionary with a firm hand and the resources to implement his plans. Sammy's CEO Hajime Satomi could not be more perfectly cast for the part if he had ridden in on a white charger and carried a lance.

To begin with, Satomi-san has the wisdom and perspective to realize what Sega is good at (making great arcade games, operating Japanese fun centers) and what it is not good at (home video games, merging its corporate soul with the Internet, etc.). Second, Satomi has the broad vision needed to see where, and how, Sega can reach its full potential and return to true greatness. Third, he has the managerial smarts and vigorous leadership skills needed to make the organizational changes that can realize that vision. Fourth, Sammy has the financial resources to put Sega back on sound financial footing.

Last year, Satomi sensibly advised Sega to stick to its knitting and reign in its overly diffuse corporate structure. While denying it needed his help, Sega began doing just that last summer. After Satomi bought a plurality interest in Sega last December, the next phase of his vision began to kick in. Sega games were going to appear on Sammy's "Atomiswave" platform, he said. Now that Satomi has lined up a complete takeover of Sega, he can implement that vision even more aggressively.

Many Japanese stock market analysts pooh-poohed last year's news of a Sammy-Sega merger. This time around, the negative assessments have started up again. Like generals who are always fighting the previous war, stock analysts are always assuming that recent corporate history indicates future performance. That's fine for advising investors, but utterly irrelevant to the visionary zeal required to build great companies. Satomi is investing in the future. He sees in Sega what many of its admirers do: a talented but undisciplined resource that, given proper direction and support, could ascend straight to the top of the coin-op pyramid once again. He sees a company that, in partnership with Sammy and under his leadership, can potentially reinvent not just Sammy, but the entire amusements industry.

That's why what happens with the Sega-Sammy merger matters to every member of this industry, worldwide. And that is why we hope chairman Satomi gets a chance to realize his visions. These days, the whole industry could use a white knight.

(P.S.: Sammy's clout derives from its success as Japan's leading slot machine manufacturer. To some Americans, a merger between a slot maker and a video game creator seems odd. But that impression exists only because the U.S. uniquely insists on an artificial distinction between gambling and amusements. Design talent, themes and technology increasingly flow from amusements to gambling. A gambling mentality also powers redemption and merchandiser markets. So, Sammy and Sega are not odd bedfellows, but natural allies.)


Topic: Editorial: Music and Games

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