The approach to investments and marketing is a fickle thing. Investment groups depend heavily on investors to make the right moves and right calls. Sometimes putting all your eggs in one basket can either hurt you or bring down your entire company. In SEGA's case, the CSK years was a lesson in pragmatism, learning to stay gold,careful and conservative. That you must handle your core market with care and cautiousness. The one takeaway of success from that era is that SEGA learned that they had something other Arcade veteran brands didn't, the ability to successfully stay healthy as a home game console brand, and stronger gaming talent that made them the World Arcade leaders. The failure was taking that for granted and being too overambitious about their 1st party consumer brand, too one-sided on how to run its console brand and too overzealous about its core Arcade market.
People don't know this, but SEGA never really FAILED as a console maker. Although they had 7 game platforms on the market in 1996-1997, they weren't taking wholesale losses like Sony is with PS3 and VITA and Saturn's US failure didn't really do much damage as most people think, all it did was ruin Sega of America,cost them $450 million in losses(just $700 million if you adjust inflation) and take away 30% of SEGA's full revenue. SEGA's downfall wasn't just how doubled minded and divided they were as a company in the mid 1990s, it was how they invested and how mismanaged they were.
There's an Elephant in the room that everyone ignores. Dreamcast didn't last long because of PS2 and the 5th Gen console blunders, SEGA lost the financial ability to keep the console business going because they put all thier capital into the Amusement market when it was in a worldwide Recession during the 90s. The DISASTROUS investment blunder that cut off funding for Dreamcast was "Sega GameWorks".
Sega's attempt to do their own Dave & Busters WAY back in 1996 resulted in a whopping $2 billion dollar investment into setting up a billion dollar Amusement Retail Chain in America and in South America. If you adjust inflation that's $5 billion half the budget of PS3!
GameWorks was a failure, a set-up. At the time, $4 billion in budget was left for SEGA from CSK. You have to understand, in 1991 SEGA had $10 billion in cash and a $12 billion dollar market cap. $2 billion was spent on development of the Model arcade series, $1 billion was spent on development of Jupiter,Mars and Saturn combined, SEGA gave SOA $500 million for 32X,another $500 million for PICO and Nomad, each year they pumped $1 billion into the Arcade Industy and by 1994 had $6 billion left but kept spending it on Arcade silicon.
So what happened? Well by 1997, the collapse of the global Amusement market had taken its toll on Operators. Not enough people were going to Arcades, and the cost of running Arcade machines especially Model 2 and Model 3 was too much. SEGA had to invest in another $1 billion, $500 million for Dural/Black Belt/Katana which became the "Dreamcast" and $500 million into the NAOMI Arcade machine.
By 1999, SEGA was only left with $800 million. They just couldn't keep funding both markets and had to spend most of that on Dreamcast. Although NAOMI revived the Arcade market, SEGA/CSK's revenue had dissapeared, GameWorks was beginning to bleed them and in 2000, SEGA was left with loan options on how to move forward. Isao Okawa choose to sacrifice their console market to save the amusement market and so because of GameWorks without them having considered letting them go bankrupt, SEGA left the hardware business in 2001.
So now, late in 2012 SEGA has found Resurrection in their console brand. Now armed with $3.5 billion in budget cash thanks to SegaSammy's 3 strong years of revenue, and a circle of investors loaning them $10 billion and reportedly requiring to pay it all back in 15 years, with each division of ORBI being established with $1 billion each and a budget of $200-300 million to spend, SEGA can now enter new markets and learn from their mistakes of the past and are now healthy enough financially to sell and release a console. The question is simply with SEGA have shuttered half of GameWorks back in 2009, should SEGA FINALLY pull the plug on it with plenty of cheaper Amusement center options? I think so. Doing so will automatically result in $2 billion offered from filing for bankruptcy not to mention an additional $5 billion in assets for them.
People don't know this, but SEGA never really FAILED as a console maker. Although they had 7 game platforms on the market in 1996-1997, they weren't taking wholesale losses like Sony is with PS3 and VITA and Saturn's US failure didn't really do much damage as most people think, all it did was ruin Sega of America,cost them $450 million in losses(just $700 million if you adjust inflation) and take away 30% of SEGA's full revenue. SEGA's downfall wasn't just how doubled minded and divided they were as a company in the mid 1990s, it was how they invested and how mismanaged they were.
There's an Elephant in the room that everyone ignores. Dreamcast didn't last long because of PS2 and the 5th Gen console blunders, SEGA lost the financial ability to keep the console business going because they put all thier capital into the Amusement market when it was in a worldwide Recession during the 90s. The DISASTROUS investment blunder that cut off funding for Dreamcast was "Sega GameWorks".
Sega's attempt to do their own Dave & Busters WAY back in 1996 resulted in a whopping $2 billion dollar investment into setting up a billion dollar Amusement Retail Chain in America and in South America. If you adjust inflation that's $5 billion half the budget of PS3!
GameWorks was a failure, a set-up. At the time, $4 billion in budget was left for SEGA from CSK. You have to understand, in 1991 SEGA had $10 billion in cash and a $12 billion dollar market cap. $2 billion was spent on development of the Model arcade series, $1 billion was spent on development of Jupiter,Mars and Saturn combined, SEGA gave SOA $500 million for 32X,another $500 million for PICO and Nomad, each year they pumped $1 billion into the Arcade Industy and by 1994 had $6 billion left but kept spending it on Arcade silicon.
So what happened? Well by 1997, the collapse of the global Amusement market had taken its toll on Operators. Not enough people were going to Arcades, and the cost of running Arcade machines especially Model 2 and Model 3 was too much. SEGA had to invest in another $1 billion, $500 million for Dural/Black Belt/Katana which became the "Dreamcast" and $500 million into the NAOMI Arcade machine.
By 1999, SEGA was only left with $800 million. They just couldn't keep funding both markets and had to spend most of that on Dreamcast. Although NAOMI revived the Arcade market, SEGA/CSK's revenue had dissapeared, GameWorks was beginning to bleed them and in 2000, SEGA was left with loan options on how to move forward. Isao Okawa choose to sacrifice their console market to save the amusement market and so because of GameWorks without them having considered letting them go bankrupt, SEGA left the hardware business in 2001.
So now, late in 2012 SEGA has found Resurrection in their console brand. Now armed with $3.5 billion in budget cash thanks to SegaSammy's 3 strong years of revenue, and a circle of investors loaning them $10 billion and reportedly requiring to pay it all back in 15 years, with each division of ORBI being established with $1 billion each and a budget of $200-300 million to spend, SEGA can now enter new markets and learn from their mistakes of the past and are now healthy enough financially to sell and release a console. The question is simply with SEGA have shuttered half of GameWorks back in 2009, should SEGA FINALLY pull the plug on it with plenty of cheaper Amusement center options? I think so. Doing so will automatically result in $2 billion offered from filing for bankruptcy not to mention an additional $5 billion in assets for them.
