NOVEMBER 11, 2007 • In the face of the PlayStation Juggernaut many critics back in 2001 argued that it was time for both Sega of Japan and Nintendo Co. Ltd. to get out of the video game hardware business. Despite a strong catalog of franchises, Sega never drew the level of third-party support to its Dreamcast necessary to build strong market share, and took the advice to become a software-only operation.
Six years later and a lot has changed. Sega found the transition to successful third-party publisher rather more involved than providing first-party content to its own platforms, yet persevered. And it was with former arch rival Nintendo that Sega found an especially friendly reception. With Nintendo now ascendant in market share with both the DS and Wii, that relationship is now a decidedly powerful one.
Between the Dreamcast and 2007, Sega restructured and reinvented itself worldwide. In 2004, Sega merged with Japanese amusement machine manufacturer Sammy. That provided some needed financial stability. Sega of America has also been in the process of a reemergence. If the division was a little too tied to the product line from Japan, that no longer is the case. Rather than subdivide responsibilities into a separate organization to go after the PC game segment – which once upon a time was led to SegaSoft – this time around Sega of America is embracing PC games within the division. To better understand the Sega of America of today, DFC spoke with the president and chief-executive Simon Jeffery.
DFC: What has Sega of America learned from being platform-agnostic that would not have been learned from being platform-specific?
SJ: We have learned how tough it is to be truly successful across multiple platforms, and that despite what the games business often serves up, platform users have distinct and disparate tastes. Our market share growth over the past three years – we’ve moved from outside the top 20 to ranking number 6 among all third-party publishers – clearly illustrates that we have learned from some of our previous mistakes, and our forward thinking strategy lies toward creating content that feels platform-appropriate.
DFC: An old criticism of SoA was that your release slate was too reliant on Japanese product. How has SoA addressed this criticism in recent years?
SJ: We now have a completely global approach to product research and development. We consider ourselves truly unique in the publishing world in this respect. With the world-class third party development partners that we are now working with in the West – Creative Assembly, Gas Powered Games and BioWare, to name a few – we are not predominantly Japanese, or American, or European. About a third of our output comes from each territory.
DFC: What percentage of SoA’s releases during the fiscal year are now new IP? Are you comfortable with that percentage?
SJ: I can’t go into specifics, and figures change year on year, but we are happy with the overall direction and balance that our new IP approach is showing.
DFC: SoA has made a significant commitment to PC games. How is that strategy working out? What tweaks should still be made to further success with the PC segment?
SJ: We firmly believe that the PC market is here to stay. We are strong supporters of Microsoft’s Games for Windows and Games for Windows Live initiatives, and have been happy to collaborate in some pioneering efforts with them – notably on Universe at War, the first 3rd party title with online cross platform gameplay between PC and Xbox 360. Overall the PC gaming market is consistent with a core group of gamers and we believe that this core group will always seek out appropriate product, and with franchises like Total War and Football Manager, we are well placed to keep them happy.
DFC: How does SoA define the consumer demographic for each platform: Wii, Xbox 360, PS3, DS, PSP and PC?
SJ: One of Sega’s strengths is that we recognize that different consumers have distinct platform preferences. For example, the Xbox 360 and the PS3 traditionally cater to a more hardcore group of gamers, where the Wii is very popular with people outside the traditional 18-35 year-old male demographic. We know that each platform has a different audience, and we realize the importance of creating material that is appropriate for each platform and that delivers unique experiences for each type of user.
DFC: How much interaction/input does SoA have in shaping Sega’s overall expansion into new territories worldwide?
SJ: SoA, SoE and SoJ act very much as interlocking pieces that combine to form a greater whole. This includes not only product development and marketing initiatives, but also strategic direction and collaboration on ventures into new geographies.
DFC: How significantly is SoA using European as well as U.S. developers to diversify sources of new franchises? What is your strategy: more wait-and-see what games are shopped to you by developers, or more go-out-and-find partners and projects that interest you?
SJ: As I mentioned earlier, European developers are as important to us as U.S. and Japanese development. As well as external development relationships with the likes of Bizarre Creations, we have three studios in Europe – Sega Racing Studio (Sega Rally Revo), Creative Assembly (Total War franchise) and Sports Interactive (Football Manager.) We are actively pitching projects to external teams on an ongoing basis, and our A&R team is always looking for great new games and ideas to bring on-board.
DFC: What title or franchise best defines Sega in the U.S. today, and why?
SJ; I think that the breadth of our portfolio is what defines Sega today. We have AAA movie licenses, like The Golden Compass; AAA legacy franchises like Sonic; and AAA original content like Condemned and The Club. When it comes to our legacy franchises, we are able to shake things up and reinvigorate. For example, The Sonic RPG project being built with BioWare, and Mario & Sonic at the Olympic Games, a world first partnership with Nintendo.
DFC: How is your relationship with retail different today than seven years ago? What changing retail dynamics have you had to address in order to keep Sega games in front of consumer eyeballs, and how did you address them?
JS: Retail is a dynamic, ever-changing landscape. Product speaks louder than anything. We now have a strong sales team that interacts directly with retail, and that is heavily involved in the formative stages of marketing plans. Looking after retail is also vital today – keeping the channel clean, listening to the needs and marketing wants of our retail partners – and staying on top of the relationship.
DFC: What makes for a great Wii game?
SJ: The definition of this will keep getting reinvented. Nintendo has always been the absolute masters of their platforms, but Sega has a similar gaming mindset and we were the leading third-party on GameCube in North America. Currently, the Wii gamer wants fun, fun, and fun. Games like the upcoming Mario and Sonic at the Olympic Games really tap into the Wii market – providing great variety of gameplay, characters and themes consistent with those sought by Wii gamers, and most of all – fun!
DFC: We understand that there is a Wii version of Samba de Amigo in the works. Do you anticipate that this title can capture the attention of the non-core gamers who have loved Wii Sports, and how far will you go to market the game to them?
SJ: Samba de Amigo was one of the world’s first rhythm games. The huge success of games like Guitar Hero have opened the genre to a wider market, and we hope that the new Samba de Amigo game will satisfy the non-core just as much as the fan boys! It certainly is a lot of fun, and can result in a great living room experience for the whole family without the need for expensive peripherals.
DFC: How comfortable are you that SoA has the Wiimote dynamic figured out?
SJ: There is no singular Wiimote dynamic. The interesting challenge around the Wii control mechanisms and the Wii demographic is to keep pushing, keep discovering and keep bringing innovation. It is opening up new areas of creative game development. For years, control mechanism was a given and game design made fundamental control assumptions, but now the Wii (and DS) have opened up new areas of creative exploration. New ideas for human/computer interface will keep arising, and that’s great for the creative energy of the entire industry.