1940-1988

Sega was originally founded in 1940 as Standard Games (later Service Games) in Honolulu, Hawaii [1], by Martin Bromely, Irving Bromberg, and James Humpert to provide coin-operated amusements for American servicemen on military bases. Bromely suggested that the company move to Tokyo, Japan in 1951 and in May 1952 "SErvice GAmes of Japan" was registered.

In 1954, another American businessman David Rosen fell in love with Tokyo and established his own company, Rosen Enterprises, Inc., in Japan to export art. When the company imported coin-operated instant photo booths, it stumbled on a surprise hit: The booths were very popular in Japan. Business was booming, and Rosen Enterprises expanded by importing coin-operated electro-mechanical games.

Rosen Enterprises and Service Games merged in 1965 to make Sega Enterprises. Within a year, the new company released a submarine-simulator game called "Periscope" that became a smash-hit worldwide.

In 1969, Gulf+Western purchased Sega, and Rosen was allowed to remain CEO of the Sega division. Under Rosen's leadership, Sega continued to grow and prosper.

In the videogame arcades, Sega was known for producing Frogger and creating Zaxxon.

Sega's revenues would hit $214 million by 1982 and in 1983, Sega would release its first video game console, the SG-1000, the first 3D arcade video game, Subroc-3D, which used a special periscope viewer to deliver individual images to each eye, and the first action-based laserdisc arcade game, Astron Belt.

In the same year, Sega was hit hard by the American video game crash. Hemorrhaging money, Gulf+Western sold the U.S. assets of Sega to famous pinball manufacturer Bally Manufacturing Corporation. The Japanese assets of Sega were purchased for $38 million by a group of investors led by Rosen and Hayao Nakayama, a Japanese businessman who owned a distribution company that had been acquired by Rosen in 1979. Nakayama became the new CEO of Sega, and Rosen became head of its subsidiary in the United States.

In 1984, the multi-billion dollar Japanese conglomerate CSK bought Sega, renamed it to Sega Enterprises Ltd., headquartered it in Japan, and two years later, shares of its stock were being traded on the Tokyo Stock Exchange. David Rosen's friend, Isao Okawa, the chairman of CSK, became chairman of Sega.

In 1986, Sega of America was established to take advantage of the expanding video game market in the United States.

Sega would also release the Sega Master System and the first Alex Kidd game, who would be SEGA's mascot until 1991 when Sonic the Hedgehog took over. While a relative failure in both America and Japan, the Master System managed to dominate the European and Barazilian markets until Sega discontinued the system in 1996.

With the introduction of the Sega Mega Drive (known as Sega Genesis in North America), and to carry the momentum to the 2nd generation of games, Sega of America launched a direct anti-Nintendo campaign with slogans such as "You can't do this on Nintendo" and "Genesis does what Nintendon't"; When Nintendo launched its Super Nintendo Entertainment System, in 1991, Sega changed its slogan to "Welcome to the next level". Early on Sega's main line of games consisted of ports of their highly popular arcade games, such as Altered Beast, the Golden Axe series and the Shinobi series.

In 1991, in an all out effort to smash the upcoming Super Nintendo before it left the stable, Sega rebranded itself with a new mascot, Sonic the Hedgehog, and implied that Sonic, given his attitude-focus and fluid gameplay, was cooler than Mario, Nintendo's mascot. This shift led to a wider success for the Mega Drive and would eventually propel Sega to 65% of the market in North America. Simultainiously, after much previous delay, Sega released the moderatley successful Sega CD as an add-on feature, allowing for extra storage in games due to their CD-Rom format, giving developers the ability to make longer, more sophisticated games, the most popular of which was Sega's own Sonic CD.

In 1992 Sega lost the Sega v. Accolade case, which involved independently produced software for the Sega Mega Drive/Genesis console that copied a small amount of Sega's code. The verdict set a precedent that copyrights do not extend to non-expressive content in software that is required by another system to be present in order for that system to run the software. The case in question stems from the nature of the console video game market. Hardware companies often sell their systems at or below cost, and rely on other revenue streams such as in this case, game licensing. Sega was attempting to "lock out" game companies from making Mega Drive/Genesis games unless they paid Sega a fee (ostensibly to maintain a consistent level of quality of games for their system.) Their strategy was to make the hardware reject any cartridge that did not include a Sega trademark. If an unlicensed company included this trademark in their game, Sega could sue the company for trademark infringement. Though Sega lost this lawsuit, all later Sega systems seemed to incorporate a similar hardware requirement.

The 1993 release of Virtua Fighter was widely held as one the greatest achievements in Sega's history; utilizing their newest arcade cabinet, the Model 1, they managed to create graphics and gameplay that were, at the time, revolutionary, as recognized by the Smithsonian Institution, which has a Virtua Fighter cabinet on display. As well as being a massive critical success, the game was a smash hit with consumers, spawning four direct sequels, as well as the 3D Fighting genre.

Sega followed that success with Daytona USA, an equally impressive game that was the first to connect arcade cabinets together for multiplayer use. The success of Daytona USA would be unparalleled in the history of the arcades, becoming the most profitable game ever released in that medium.

However, despite their advances in the arcades, Sega's share of the home market would plummet by 1994 to 35% after Nintendo released key franchise titles for the Super Nintendo Entertainment System such as Donkey Kong Country and Super Metroid, along with an internal shift in focus away from the Genesis to Sega's upcoming Saturn and the release of the Sega 32X, a disastrous blunder as it was abandoned almost upon release, despite relatively high demand (Sega never even filled the advance orders). The quick manner in which Sega dropped the console left many early adopters disgruntled in Sega's arrogance and ignored the Saturn in the following year. Also in 1994, Sega launched the Sega Channel, a subscription gaming service delivered by local cable companies affiliated with Time-Warner Cable or TCI through which subscribers received a special cartridge adaptor that connected to the cable connection. At its peak, the Sega Channel had approximately 250,000 subscribers.

In 1995 Sega released the Sega Saturn with Virtua Fighter which utilized a 32 bit processor and preceded both the PlayStation and the Nintendo 64. However, poor sales in the west (including the traditional stronghold markets in Europe) led to the console being abandoned within three years. Ironically, it was Sega's only success in its home country of Japan, where it managed to outpace the Playstation well into 1996, and soundly defeated the Nintendo 64.

In 1997 Sega entered into a short-lived merger with Bandai. However it was later called off, citing "cultural differences" between the two companies. Around the same time, Sega announced that the Saturn was not Sega's future and quickly began moving high profile titles (most notoriously Virtua Fighter 3) over to their upcoming next generation game console, the Dreamcast.

With one last effort for Sega to redeem itself from the overwhelming debt incurred by Saturn's worldwide failure and their own lavish spending, the Sega Dreamcast was launched in Japan in 1998 and in North America on September 9, 1999 (with the marketing ploy 9/9/99). The Dreamcast, at the time, became the fastest-selling video game console until the 2000 launch of Sony's PlayStation 2. [citation needed]. The Dreamcast was widely considered ahead of its time and Sega often featured revolutionary technology on their latest games; Seaman's voice recognition, Chu Chu Rocket as the first online console game, Phantsy Star Online as the first console MMORPG, Jet Set Radio's cel-shading technology, and so on and so forth.

Although the Dreamcast had a successful release, and many well received games, it failed to gather a foothold in the market against the Sony PlayStation 2.

In 2000, Sega Enterprises, Ltd. was renamed Sega Corporation. It's nine "AM" studios were given autonomy as second party developers and quickly proceeded to make some of the most hallowed games in Sega's history.

In 2001, Sega discontinued the Dreamcast and ended its run as a video game hardware manufacturer, to the shock of the industry.

2001 would see a major shift in focus for Sega as it would move out of the home console market.

The company has since evolved primarily into a platform-agnostic software company, known as a "third-party publisher", that creates games that will work on a variety of game consoles produced by other companies, many of them formal rivals.

Arcade units were still being produced under the Sega NAOMI name, with subsequent releases of further arcade hardware including Sega NAOMI 2, Sega HIKARU, Sega Chihiro, Triforce (in collaboration with Nintendo and Namco) and the Sega Lindbergh. Sega today is the major force in the arcade industry today, virtually controlling the market.

In 2003, Sega fell on extremely hard times, and after the death of CSK founder Isao Okawa in 2001, who spent over US$40 billion to help Sega, CSK put Sega on the auction block. The first suitor was Japan's Sammy who discussed a merger, but plans fell through. Discussions also took place with Namco, Bandai, Electronic Arts and Microsoft.

In August 2003, Sammy bought the outstanding 22% of shares that CSK had, and Sammy chairman Hajime Satomi became CEO of Sega. With the Sammy chairman at the helm of Sega, it has been stated that Sega's activity will focus on its profit-making arcade business rather than its loss-making home software development.

During the middle of 2004, Sammy bought a controlling share in Sega Corporation at a cost of $1.1 billion, creating the new company Sega Sammy Holdings, one of the biggest games companies in the world. With the merger, Sega reabsorbed its second party studios and began to reorganize them.. Many Sega employees, most notably Tetsuya Mizuguchi, walked out in protest.

On January 25, 2005, Sega sold Visual Concepts, a studio Sega dubbed a "1.5" developer, to Take Two Interactive for $24 million. Sega used the parlance "1.5" as a mid-point of sorts between first-party and second-party developer status: that is, a wholly owned studio that would otherwise be known as a first-party developer, but was outside of internal development teams. Visual Concepts was known for many Sega Sports games including the ESPN NFL Football series, formerly NFL2K. The sale also came with Visual Concept's wholly-owned subsidiary Kush Games. Take Two subsequently announced the start of the publishing label 2K Games because of this purchase.

Sega recently bought the rights to all output from Sports Interactive, maker of Football Manager, the old Championship Manager, has acquired developer Creative Assembly best known for its PC strategy games Medieval: Total War and Rome: Total War along with Secret Level. Simultaneously they have founded two new studios, Prope, which consists of former Sonic Team employees (most famous of whom is Yuji Naka) and Sega Racing Studio, whose members come mostly from Codemasters, Rare and Rockstar North.

1st June 2007 After less than two years of operation in China, Sega China is rumored to be pulling out of China.

According to various local media, the company sent an internal email to all its employees saying that they had to dissolve the online games business department due to inadequate operations. Each employee will get an amount of compensation depending on the duration they worked with the company and the position they took at the company, but the compensation amount shall not be less than three months' salary of each employee.