Thoughts on the History of Sega, Part 02

Last time, we plowed through the deepest roots of SEGA—how it was formed in the first place, the steps taken that eventually led to SEGA’s first video game.  Today, we’re going to continue that discussion by delving into the beginnings of SEGA’s foray into the video game market.

By Nineteen Seventy-Nine, video games were becoming only more and more popular.  By this point, the SEGA/Gremlin brand had a good few titles under their belt.  It was Head On that proved to be the most popular.  It was a “maze chase” game, a genre that, a year later, would be utterly dominated by Pac-Man (it would become so synonymous with the genre that you can still find gamers who believe Pac-Man started it).

Also in ‘Seventy-Nine, SEGA Enterprises acquired a distribution company founded by one Hayao Nakayama, who was named Vice-President of Distribution, a bright beginning to a long (and at times controversial) career with SEGA.  The company continued to produce hit after hit, including a first for the industry—a three-dimensional game.

SubRoc-3D was an interesting game.  The game itself was fairly straightforward, even for the times—a first-person perspective, where you shot at the things coming at you.  The interesting part, the innovation, was from it being the first three-dimensional game.  The idea took the industry and the gamers alike by storm.

SubRoc-3D was just another in a long line of successful titles, and of “firsts”.  There was SEGA’s first foray into the home video game market, then still very much in its infancy, with the SG-1000 (which we’ll get to in a moment).  Then there was the first laser disc-based game, Astron Belt.  It must have been seen to be a golden age—they were doing equally well in the arcade and burgeoning home video game market, they’d picked up numerous investors such as Bally-Midway, then a prolific pinball machine producer, and  Gulf&Western Industries was renamed Paramount Communications, after its leading subsidiary, Paramount Pictures.

David Rosen, however, always one to keep his ear to the ground and his relationship with business contacts well-maintained, could see what was coming.  He started offering conversion kits to help arcade owners “turn over” machines (basically turning one game into another, from the internal circuitry to the cabinet artwork), but nothing he said or did helped.

The video game crash of ‘Eighty-Three impacted the industry far and wide—though just how much is still up for debate.

And now for a small digression—it’s really only fair to call it the “North American game crash”, as that’s about the extent of it.  Further, it’s not like arcades started going out of business left and right, or anything; while arcades were affected, it was mainly the still-blossoming home video game market that was affected.  Taken as a whole, then, calling it just the “great video game crash” is a bit of an exaggeration.

Along those lines, the Japanese “scare” came a year earlier, as arcade sales had started to decline.  This is what propelled SEGA and Nintendo into the home console business, a rivalry that would last for nearly two decades.

Nintendo’s attempt was the Famicom, which took gamers by storm.  SEGA’s attempt was the S.G.-1000, which, well—didn’t take gamers by storm.  Part of the problem is that it was released around the same time as the Famicom, but the main problem is the system itself.  Where the Famicom/N.E.S. was a technological innovation, the S.G.-1000 was basically slapped together with off-the-shelf parts that left the system no better than the Colecovision and its brethren.

The low sales gave David Rosen the chance to buy back the company he’d helped to found, and he started looking around for buyers to help pay the thirty-eight million dollars that Gulf&Western was asking.  Eventually, he found C.S.K. Holdings, headed by Isao Okawa.

It’s important, here, to not forget Hayao Nakayama.  He and Rosen had an interesting partnership that was equal parts friendship and rivalry.  David Rosen, by all accounts, was quiet, even taciturn, preferring to think carefully before opening his mouth.  Hayao Nakayama couldn’t have been more different—fearless, some may have even said ruthless (long-time SEGA producer Yu Suzuki alluded to such, saying Nakayama would declare a game ready to ship far too early, and it can be easily surmised that he wasn’t exactly someone to be easily disagreed with).  He and Rosen often warred with each other, but like all good historical warriors, they had the deepest respect for each other—at the end of the day, they were working toward the same goals, even when they came at a problem from opposing perspectives.

Contrast Nakayama with Okawa.  By all accounts, Okawa was the best of both worlds, as it were.  As passionate as Nakayama, but as carefully plotting as Rosen.  He believed in the Dreamcast so much he sunk a sizable portion of his own money into it—adjusted for a decade’s inflation, well over five hundred thousand U.S. dollars (or over three hundred and fifty thousand Euros, or almost forty billion yen).  That was out of his own pocket, mind you.  Long after his death, the Okawa Foundation continues attempting to reward innovation with grants and prizes.  Not a bad legacy, that.

Getting back to our time line, the S.G.-1000 bombed—but it was a valuable learning experience.  As more and more companies started poking around the home-computing idea, SEGA was ready.  They came out with the S.C.-3000 and, a year later, the S.G.-1000 II.

Though those two machines didn’t sell well at all, they did do two things.  One: They made SEGA reconsider the new-fangled “playing video games at home” idea, and two, as a result, they helped open the door to that market to SEGA, wide enough to let SEGA see who their only real rival would be in the business—Nintendo.  The gaming giant had already been gathering gamers left and right, and it would take some careful planning to not be crushed.

There were some games for the S.G. systems; nothing stellar, but they, too, were valuable learning experiences.  There was a lot of information gathered under SEGA’s belt, and with that information, they looked to the future, and how to compete with Nintendo.  SEGA couldn’t rely on off-the-shelf hardware anymore; they had to come up with something new and powerful—and they did.

We’ll see just what that was—on Monday.  See you tomorrow for a special Friday Flashback Five!


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