Sega | Code Like It's 198x

Sega’s name is a short form of an English one: Service Games. The company that became one of the leading arcade makers of the 1980s, and then Nintendo’s main rival in home consoles, grew out of American businesses that supplied slot machines, jukeboxes and arcade games to US servicemen in post-war Japan. An American, David Rosen, led it for most of its first twenty years, and from 1969 it belonged to an American conglomerate. Sega’s own histories, and the magazines that retold them, do not agree on how it all began.

Fast facts

Origins: American-run coin-op distributors in Japan, from the early 1950s.
Name: from SErvice GAmes.
Sega Enterprises: formed by a merger with David Rosen’s company, Rosen Enterprises, in 1965.
Owners: Gulf+Western from 1969; a management buyout backed by the Japanese company CSK in April 1984.
Arcade games: Periscope, then the Gremlin-developed video games of the early 1980s, then Yu Suzuki’s Hang-On, Space Harrier, Out Run and After Burner.
Home consoles: SG-1000 (1983), Mark III and Master System (1985–86), Mega Drive (1988), Game Gear, Saturn (1994), Dreamcast (1998).
End of the hardware: in January 2001 Sega announced that it would stop making the Dreamcast and publish games for other companies’ machines.
Sega Sammy: the pachinko maker Sammy became Sega’s largest shareholder in December 2003; the two became subsidiaries of Sega Sammy Holdings in October 2004.
Studios bought: The Creative Assembly (2005), Sports Interactive (2006), Relic (2013, sold 2024), Atlus (2013), Amplitude (2016, sold 2024), Rovio (2023).

Service Games and David Rosen

Every account starts in the same place. After the Second World War, and during the Korean War, there were American servicemen in Japan and money to be made entertaining them. The details depend on who is telling it.

Sega Visions, Sega of America’s own magazine, told its readers in February 1993 that Service Games was already selling “jockey tables” and electro-mechanical pinball machines in 1951, and that “in 1965, Service Games merged with Rosen Enterprises, Ltd. (founded in Japan by American David Rosen), to become SEGA Enterprises Japan, its new name derived from SErvice GAmes.”

Computer and Video Games gave a fuller version in November 1998. A company called Nihon Goraku Bussan began importing pinball machines and jukeboxes for the soldiers in the early 1950s, and traded under the brand name Service Games. Rosen, an ex-serviceman, had been importing air-rifle games and other coin-operated amusements since the late 1950s. In 1965 the two merged, “and the merger with Rosen Enterprises gave the now familiar Sega Enterprises”.

Edge, a month later, told the story as Rosen’s alone. After the Korean War he went back to Tokyo, and from 1954 imported instant photo booths, because occupied Japan wanted a photograph on every identity card. Repairing the booths led to repairing pachinko machines, and in Edge’s version Service Games was the name of Rosen’s own pachinko operation. The other accounts give Service Games a separate history from his.

Two later sources push the story further back. The 2019 book SEGA Master System: a visual compendium says Sega was “established in the 1940s as Standard Games”, supplying slot machines to US military bases, and moved to Japan as Service Games in 1953. The Wikipedia history, a secondary source, names the Americans involved: Bromley, Bromberg and James Humpert set up Standard Games in Honolulu in 1940, and Service Games in 1946. It also explains the date Sega itself uses. Service Games of Japan was wound up in May 1960, and two new companies, Nihon Goraku Bussan and Nihon Kikai Seizō, took over its business in June. Sega’s parent company counts from 1960: it marked Sega’s 60th anniversary in 2020.

The accounts measure different events. 1960 is the incorporation of the company that later became Sega, 1965 is the merger that produced Sega Enterprises, and the 1940s are the American businesses that came before either.

Gulf+Western, Gremlin and the 1984 buyout

Once it became Sega, the compendium says, the company began making its own games instead of distributing other people’s, and the submarine game Periscope was the first of its hits. In 1969 Gulf+Western Industries bought Sega Enterprises. In the late 1970s Sega bought Gremlin Industries of San Diego, which knew how to make video games when Sega did not, and for several years arcade cabinets in America carried the name Sega/Gremlin. Gulf+Western also owned Paramount Pictures, which is how Sega came to make Star Trek: Strategic Operations Simulator.

Rosen was still at the head of the company. In May 1983 JoyStik quoted him as chairman of the board, and reported that the company had dropped the Gremlin half of its name because the combined name was “a bit awkward”. The same year he appears in a story told by Richard Stearns of Parker Brothers, who wanted the home rights to Konami’s Frogger, which Sega distributed in America. Stearns called the game “kind of a mediocre arcade game” at the time. Sega said the rights were going elsewhere, so Parker Brothers tried again with more money: “we called up David Rosen and almost heard his chin hit the table when we made our offer.”

Sega of America’s 1993 history lists the “firsts” the company claimed by 1983: the first laser-disc game (Astron Belt) and the first 3-D video game (Subroc-3D). These are Sega’s own claims, made a decade later.

The American arcade business then slumped, and Gulf+Western sold. The compendium records that it sold Sega’s American assets to Bally Manufacturing in 1983. In April 1984, as Sega Visions told it, Sega Enterprises in Japan was “purchased from Gulf + Western by a partnership made up of CSK … and Sega Enterprises Japan management”. The compendium names the two men behind the buyout, Hayao Nakayama and David Rosen, with Nakayama as chief executive. Sega of America was set up the same year.

The arcade hits

Yu Suzuki joined Sega in 1983. The compendium credits him with a run of games built into cabinets that home machines could not copy. Hang-On (1985) had a ride-on motorcycle that the player leaned into the corners, the first of what Sega called taikan (“body sensation”) games. Space Harrier put the player in a hydraulic cabinet, and Enduro Racer, Out Run, Thunder Blade, Super Hang-On and After Burner followed. Their “Super Scaler” boards drew the road and the scenery by scaling sprites, not polygons.

The polygons came in the 1990s. When the Saturn went on sale in Japan, Edge found that the only worthwhile launch game was a conversion of the arcade polygon fighting game Virtua Fighter.

Consoles

Sega’s first home console, the SG-1000, went on sale in Japan on 15 July 1983, the same day as Nintendo’s Famicom, according to the compendium. Its successor, the Mark III, became the Master System, which lost heavily to Nintendo in Japan and North America but did well in Europe and Brazil. Its entry has the details.

The Mega Drive followed in Japan at the end of 1988 and, ACE reported, sold out its first 50,000 or so within two days. Sega Visions called its American version, the Genesis, “the first … affordable 16-bit video game system” when it arrived in 1989 at $189.95, and said that by 1992 it topped the national best-seller list for all toys and games. Those were Sega’s own figures. The Mega Drive’s entry covers its hardware and its marketing.

The Saturn went on sale in Japan on 22 November 1994. Edge was in Tokyo for the launch: 200,000 machines sold out on the first day at ¥44,800, and a Sega source said the company had held back 300,000 more for when Sony’s PlayStation arrived. The Dreamcast followed in Japan on 27 November 1998.

It was the last one. Edge reported the announcement in March 2001. On 24 January Sega said it would stop making the Dreamcast, and on 31 January it confirmed that it was leaving the hardware business to publish games for other companies’ consoles. Virtua Fighter 4 would appear on PlayStation 2.

Sega on home computers

In Britain and Europe most people first played Sega’s arcade games at home through licensed conversions for computers. US Gold published Out Run for the Spectrum at £8.99 (CRASH listed it at £7.99) and claimed 200,000 copies sold in its first two weeks. CRASH’s reviewers split over it in February 1988: one called it “an essential purchase”, another “one of the worst multiloads in history”. Elite published Space Harrier, and Activision Afterburner, which CRASH rated 86%. The compendium is blunt about these conversions, calling them “poor facsimiles of the real thing”. It adds that Sega marketed the Master System in Europe as the faithful way to play the same games at home.

A publisher for everyone else

The man who had steered Sega out of hardware did not see the new company take shape. Isao Okawa, Sega’s chairman and president, died of heart failure on 16 March 2001, aged 74. Shortly before, as the Globe and Mail reported, he had given Sega a private donation worth $695.7 million: his entire holdings in Sega and in other companies of the group, including CSK and Ascii.

By June the new Sega was ready to explain itself. At its annual strategy conference on 5 June 2001, Edge reported, the new chief operating officer, Tetsu Kayama, shared the stage with the heads of Sega’s studios, among them Yu Suzuki, Yuji Naka, Toshihiro Nagoshi and Tetsuya Mizuguchi, to set out plans for games on every format and for mobile phones. Sonic Team was already working for Nintendo, whose machines Sega had spent a decade fighting. Sonic still sold: Sonic Heroes was sixth in Britain’s chart of the best-selling games of 2004.

Sammy

The company that ended up owning Sega made its money from pachinko and pachislot machines, the pinball-like gambling games of Japanese parlours. Sammy Corporation surprised analysts early in 2003 by announcing a merger with Sega, and Edge wrote that the deal faced internal opposition. By June 2003 the talks were in trouble and Namco had declared its own interest. The merger collapsed.

Sammy bought its way in instead. In December 2003 it bought all of the Sega shares that CSK held, 22.4%, and became Sega’s largest shareholder. “We won’t rule out the possibility of making [Sega] a subsidiary,” Sammy’s president, Hajime Satomi, told a press conference. A few weeks later Sega’s shareholders appointed him chairman. Edge found him blunt about the numbers he gave the press: Sega’s home console games had lost ¥2.5 billion while its arcades made a profit of ¥5.6 billion, and he wanted Sega to choose its console releases “more strictly”. In October 2004 the two companies became subsidiaries of a new holding company, Sega Sammy Holdings.

Western studios

Under Sega Sammy, Sega bought studios in Britain, North America and France. In March 2005 it announced Spartan: Total Warrior, the first console game by The Creative Assembly, and the next day announced that it had bought the whole company. Edge called The Creative Assembly “a standard bearer of independent UK development”, funding itself through careful production cycles and TV deals for shows built on its Total War battle engine.

Sports Interactive followed in April 2006. The London studio had left Eidos, and the Championship Manager name, in 2003, and Sega had published its Football Manager games since Football Manager 2005 in November 2004. When THQ went bankrupt, Sega bought Relic Entertainment, the Vancouver studio behind Homeworld and Company of Heroes, at auction in January 2013 for $26.6 million, just ahead of ZeniMax’s $26.3 million bid. Later the same year Sega Sammy won the auction for Index Corporation, the bankrupt owner of Atlus, for about ¥14 billion, bringing Shin Megami Tensei and Persona into the group. Amplitude Studios of Paris, makers of the Endless strategy games, joined in 2016, Two Point Studios in 2019, and in 2023 Sega paid €706 million for Rovio, the Finnish company behind Angry Birds.

Some of it was sold again. In March 2024 Sega sold Relic to an outside investor and cut 240 jobs at Sega Europe and The Creative Assembly, with a few more at the mobile studio Hardlight. In November 2024 Amplitude’s founders and staff bought their studio back, and Sega recorded a loss of about ¥5.9 billion on the sale.

The arcades went too. After heavy losses while the coronavirus pandemic kept customers away, Sega Sammy sold 85.1% of Sega Entertainment, the company that ran its arcades in Japan, to the amusement company Genda in November 2020. It sold the rest in January 2022, and Genda renamed the arcades GiGO. Sega still makes arcade machines; it no longer runs arcades.

Sonic after the consoles

In March 2007 Sega and Nintendo announced that Mario and Sonic would appear in the same game for the first time. Mario & Sonic at the Olympic Games, for the Wii and DS, was due for Christmas 2007, published by Sega in Europe and North America and by Nintendo in Japan.

Sonic’s own games had a harder time. Wireframe listed “embarrassments like 2006’s Sonic the Hedgehog and 2014’s Sonic Boom: Rise of Lyric” among his 3D outings. A game from his fans did better. Sonic Mania, released in August 2017, was built by Christian Whitehead and other developers from the fan community; Wireframe called it “hugely well-received”, a game “officially endorsed, and published, by Sega”.

Then Sonic went to the cinema. The first Sonic the Hedgehog film, from Paramount, opened in February 2020 with the biggest American opening weekend yet for a film based on a video game; Wireframe put its worldwide takings at £208 million within weeks. The third film arrived in December 2024, and by January 2025 the three had taken more than $1 billion between them.

The Mega Drive Mini

In 2019 Sega sold its old console again, in miniature. The Mega Drive Mini was announced with 40 built-in games, among them Sonic, Ecco, ToeJam & Earl, Altered Beast, Space Harrier II and Gunstar Heroes, and two controllers, for release on 19 September. Europe waited until 4 October, at £69.99. Earlier licensed Mega Drive plug-in consoles, made by AtGames, had disappointed; Sega gave this one’s emulation to M2, a Tokyo studio that had been porting games to Sega’s hardware since the early 1990s. “The biggest challenge was the hardware restrictions inherent to the board we based the Mega Drive Mini on,” M2’s chief executive, Naoki Horii, told Wireframe.

Sega today

The company that owns Sega is a pachinko and pachislot maker as well as a game publisher: Sega Sammy Holdings runs both businesses. In 2020 Sega Games absorbed its sister company Sega Interactive and took back the name Sega Corporation. Its games still come from Sonic Team in Japan, from Atlus, and from The Creative Assembly and Sports Interactive in Britain.

Sources

Sega Visions (Sega of America), February 1993, pp. 80–81: Service Games in 1951; the 1965 merger with Rosen Enterprises and the name; Gulf+Western’s purchase in 1969; Sega’s claimed “firsts” by 1983; the April 1984 purchase by CSK and Sega management; Sega of America formed in 1984; the Genesis at $189.95 in 1989 and Sega’s 1992 sales claims.
Computer and Video Games issue 204, November 1998, p. 87: Nihon Goraku Bussan, David Rosen’s imports since the late 1950s, the 1965 merger, the Service Games brand, the purchase of Gremlin and the Sega/Gremlin name.
Edge issue 66, Christmas 1998: Rosen’s photo booths from 1954, pachinko repairs and Service Games; the sale to Gulf & Western in 1969 and the management buyout in the mid-1980s.
Steve Jarratt and Damien McFerran, SEGA Master System: a visual compendium (Bitmap Books, 2019), pp. 6 and 88–90: Standard Games and Service Games; Periscope; Gremlin Industries; Paramount and Star Trek; Bally in 1983 and CSK in 1984; Nakayama and Rosen; the SG-1000’s launch date; Yu Suzuki’s taikan games and Super Scaler hardware; the verdict on home computer conversions and the Master System’s European marketing.
JoyStik vol. 1 no. 5, May 1983: Sega/Gremlin renamed Sega; David Rosen as chairman of the board.
Video Games (US) vol. 2 no. 1, October 1983, pp. 21–22: interview with Richard Stearns of Parker Brothers on buying the Frogger licence from Sega.
ACE issue 17, February 1989: the Mega Drive’s Japanese launch and first sales.
Edge issue 17, February 1995: the Saturn’s Japanese launch on 22 November 1994, sales, price and Virtua Fighter.
Edge issue 65, December 1998: the Dreamcast’s Japanese release date of 27 November 1998.
Edge issue 95, March 2001, pp. 8–9: Sega’s announcements of 24 and 31 January 2001, Virtua Fighter 4 for PlayStation 2 and Sonic Team’s work for Nintendo hardware.
Sinclair User issue 70, January 1988, pp. 12–13, and Your Sinclair issue 27, March 1988, p. 28: Out Run reviews (£8.99).
CRASH issue 49, February 1988: Out Run review (US Gold, £7.99, the 200,000 sales claim, reviewers’ verdicts); CRASH issue 48, January 1988, review index (Space Harrier, Elite); CRASH issue 61, February 1989, letters (Afterburner, Activision, 86% in issue 59).
Wikipedia, “History of Sega” (web, secondary): Standard Games in 1940, Service Games in 1946, the 1960 reorganisation. https://en.wikipedia.org/wiki/History_of_Sega
Sega Sammy Holdings, corporate history (web, secondary): Sega’s 60th anniversary in 2020; Sega Sammy formed in October 2004; The Creative Assembly (2005), Sports Interactive (2006), Atlus (2013–14) and Two Point Studios (2019) as subsidiaries; Sega Games renamed Sega Corporation in 2020. https://www.segasammy.co.jp/en/corporate/history/
Globe and Mail, “Generous Sega boss dies”, March 2001 (web, secondary): Isao Okawa’s death at 74 and his $695.7 million donation. https://www.theglobeandmail.com/technology/generous-sega-boss-dies/article1179005/
Edge issue 100, August 2001, p. 6: Sega’s strategy conference of 5 June 2001, Tetsu Kayama and the studio heads; the passing of Isao Okawa.
Edge issue 122, April 2003, and issue 124, June 2003: the proposed Sega–Sammy merger, opposition to it and Namco’s interest.
Game Developer, “Sammy Buys Majority Stake In Sega”, 8 December 2003 (web, secondary): CSK’s 22.4% sold to Sammy; Hajime Satomi’s press conference; the failed merger talks. https://www.gamedeveloper.com/game-platforms/sammy-buys-majority-stake-in-sega
Edge issue 135, April 2004: Sammy’s controlling interest; Satomi as Sega chairman; the console and arcade figures and “more strictly”.
Edge issue 146, February 2005: the UK’s best-selling games of 2004 (Sonic Heroes sixth).
Edge issue 149, May 2005: Sega’s purchase of The Creative Assembly and Spartan: Total Warrior.
Wikipedia, “Sports Interactive” (web, secondary): the split from Eidos in 2003, Football Manager 2005 published by Sega on 4 November 2004, and Sega’s purchase of the studio announced on 4 April 2006. https://en.wikipedia.org/wiki/Sports_Interactive
Computerworld, “Sega acquires game developer Relic from THQ auction”, 25 January 2013 (web, secondary): Relic for $26.6 million against ZeniMax’s $26.3 million. https://www.computerworld.com/article/1416014/sega-acquires-game-developer-relic-from-thq-auction.html
Nintendo Life, September 2013 (web, secondary): Sega Sammy’s purchase of the bankrupt Index, owner of Atlus, for ¥14 billion at an auction with about 20 other bidders; Persona and Shin Megami Tensei. https://www.nintendolife.com/news/2013/09/sega_sammy_acquires_atlus_parent_company_index_for_14_billion_yen
Sega Sammy Holdings news release, 17 April 2023, and Shacknews, August 2023 (web, secondary): the €706 million offer for Rovio and its completion. https://www.segasammy.co.jp/en/release/34194/ https://www.shacknews.com/article/136697/sega-rovio-deal-completed
Game Developer, “Sega sells off Relic Entertainment, will axe 240 jobs”, 28 March 2024 (web, secondary): the sale of Relic to an external investor and the European job cuts. https://www.gamedeveloper.com/business/sega-sells-off-relic-entertainment-will-axe-240-jobs
Game Developer, “Amplitude Studios becomes independent after parting ways with Sega”, 8 November 2024 (web, secondary): Sega’s purchase of Amplitude in 2016, the management buyout and the ¥5.9 billion loss. https://www.gamedeveloper.com/business/amplitude-studios-becomes-independent-after-parting-ways-with-sega
Game Developer, “Sega Sammy sells off arcade business as COVID takes its toll”, 4 November 2020, and Nintendo Life, 28 January 2022 (web, secondary): the sale of 85.1% of Sega Entertainment to Genda, the remaining 14.9%, the GiGO name, and Sega’s continuing arcade-machine business. https://www.gamedeveloper.com/business/sega-sammy-sells-off-arcade-business-as-covid-takes-its-toll https://www.nintendolife.com/news/2022/01/sega-is-exiting-the-japanese-amusement-arcade-business-after-half-a-century
Nintendo UK, “Mario & Sonic at the Olympic Games”, 28 March 2007: the joint announcement, the first game with both characters, Christmas 2007 and the publishing split. https://www.nintendo.com/en-gb/News/2007/Mario-Sonic-at-the-Olympic-Games-249801.html
Wireframe issue 57, November 2021, pp. 82–83: the 2006 and 2014 Sonic games; Sonic Mania made by fans and published by Sega.
Wikipedia, “Sonic Mania” (web, secondary): release on 15 August 2017; Christian Whitehead, Headcannon and PagodaWest Games. https://en.wikipedia.org/wiki/Sonic_Mania
Wireframe issue 34, March 2020, p. 15: the Sonic the Hedgehog film’s US opening weekend and £208 million worldwide.
ScreenCrush, “‘Sonic the Hedgehog’ Franchise Passes $1 Billion at Box Office”, 6 January 2025 (web, secondary): the third film’s release on 20 December 2024 and the three films’ $1.06 billion. https://screencrush.com/sonic-franchise-box-office/
Wireframe issue 12, April 2019, p. 15, and issue 20, August 2019, p. 15: the Mega Drive Mini’s games, dates and price, and the AtGames machines before it.
Sega Retro, “Mega Drive Mini” (web, secondary): the built-in game was Space Harrier II, which Wireframe 12 lists as Space Harrier.
Wireframe issue 31, January 2020, pp. 48–49: M2’s work on the Mega Drive Mini; Naoki Horii.