Commentary

Sega’s shifting status: How far will ramifications spread?

The change in the status quo could see operators, distributors, spare parts and even exhibition and media companies being forced to quickly adapt or perish.

Image courtesy of iStock.

May 17, 2021 by Kevin Williams

After reporting a few months back about the developments that had rocked Sega — including the replacement of the CEO, the renaming of the Sega Corp. (retaining the amusement machine development) and the selling of Sega Entertainment (the amusement facility business) to Genda — more information has come to light that bears scrutiny for the industry.

At the time, it was claimed that Sega still had an active interest in the amusement sector, and would be continuing to release a roster of planned new titles. The 10th anniversary release of "Initial D: The Arcade" was used to illustrate this point, though information on other new titles seemed sparce. Many of those Japanese executives who attended the private "JAEPO Online Business Meetings" questioned the lack of any real amusement machine business announcements.

The writing, however, seemed to be on the wall regarding the future of the Sega amusement machine operation. It was revealed that Andamiro would be releasing the upright version of the shooter "House of the Dead: Scarlet Dawn," with no plans for a Japanese or Western release.

Internally, all future amusement machine projects in Japan were suspended, and several prominent executives started to undertake interviews to muse on their legacy.

Western amusement representation of the corporation through Sega Amusement International was seen to be a safe stewardship of the brand, being the amusement machine developer for the Western market in concert with its Japanese counterparts.

Restructuring begins

In October 2020 well-placed sources in Japan revealed major developments about to hit. The restructuring of the operation under Sega Sammy Holding was exposed to be much more extensive than anyone had previously revealed, and the amusement machine operation of the corporation was now to be consolidated. Those elements of value would be incorporated into the consumer game development operation, while the remaining amusement interests would be transferred.

This would leave Sega only offering IP and branding support of the created Genda Sega Entertainment and CA Sega Joypolis interests.

Sega has continued amusement operations in the U.S. through SAI. Back in 2011, the collapse of the Sega Amusement USA interest saw the creation of the Play-It Amusement operation which was then directed by a renamed Sega Amusement Europe (now SAI). All of this will now be consolidated under the SAI umbrella, and the team in the U.K. was keen to confirm they are moving forward on a pipeline of new developments, seeing this move as ensuring a bright future.

Sega is now focused on organizational structure and the need to reduce fixed costs. The amusement machine business has been severely impacted by the international lockdown of operations, and transferring control.

Impact on the West

This marks a major restructuring of the Japanese amusement factories presence in the West, along with the impacts on amusement machine business at home. Although, from a Western perspective, this is not a new situation; rather it is an inevitable and predicted decline in a once dominant Japanese position.

Not since Konami Amusement of America closed its doors and left the Western amusement business in 2003 has a Japanese factory walked away from direct presence in the Western amusement scene. This will leave Bandai Namco Amusement as the only Japanese amusement subsidiary, a subsidiary that just saw its U.S. entertainment facility division shuttered and sold off.

This move means the company now joins names such as Taito, Capcom, Universal, Nintendo of America, Centaur, SNK, American Sammy, Data East, Seibu/Fabtek, Irem, Kaneko, Mitchell, Hudson, Jaleco, Cave, Seta, Toaplan/Romstar, Banpresto, Tatsumi, Atlus, Tecmo, as well as Konami and now Sega in the footnotes in the Western amusement industry's history.

During the 60th anniversary of the formation of Sega, this marks an ignominious point in the corporation's history, and may explain why certain Japanese executives have been so keen to attempt to manage the message of how such a successful and dominant force in the video games industry has been brought to this point. And how accusations of mismanaging the business since the glory days of the 1990s could be levelled at a litany of missed opportunities and poor business decisions ruled by arrogance. Gatekeepers once again under scrutiny, if not accountability.

What will change?

For the Western amusement trade, the removal of Sega as a Japanese subsidiary, and now as a newly consolidated and independent operation, will change little on the surface of day-to-day business.

In North America, Sega acting through Play-It Amusement has been low key compared to former glory, but in Europe and the U.K. SAI had represented one of the leading distributors, with partnerships in the UAE through ASI and across other territories.

SAI will now be a new force on the chess board, some even calling this move "the creation of a U.K. Raw Thrills." These developments will inevitably create a tectonic fracture across the industry and we will see a major "resetting" of the business power struggle.

The consolidation of Sega's amusement machine business, while not totally removing sales and distribution, does bring up questions about the impact on the facility business beyond the sites now sold to Genda.

The Sega "ALL.Net" (Amusement Linkage Live Network) distribution and payment platforms' operation has yet to be defined following recent restructuring and sale of facility business. So, the loss of most amusement machine operation could mean its collapse, and the momentous implications for the rest of the operator scene remain dependent on its infrastructure.

The news of the fracturing of Sega 's amusement business will mark the first of the big industry impacts attributable to the COVID-19 saga. But the ramifications and reverberations of this loss have only started to be felt and it could be a "domino" moment for the traditional amusement industry.

The change in the status quo could see operators, distributors, spare parts and even exhibition and media companies being forced to quickly adapt or perish. We await the next development.

(Editor's note: Extracts from this blog are from recent coverage in The Stinger Report, published by KWP and its director, Kevin Williams, the leading interactive out-of-home entertainment news service covering the immersive frontier and beyond.)

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About Kevin Williams

Along with advisory positions with other entrants into the market he is founder and publisher of the Stinger Report, “a-must-read” e-zine for those working or investing in the amusement, attractions and entertainment industry. He is a prolific writer and provides regular news columns for main trade publications. He also travels the globe as a keynote speaker, moderator and panelist at numerous industry conferences and events. Author of “The Out-of-Home Immersive Entertainment Frontier: Expanding Interactive Boundaries in Leisure Facilities,” the only book on this aspect of the market, with the second edition scheduled for a 2023 release.

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