Foundations

As the late Carl Sagan might have said, let us board the starship of our imagination and take a trip beyond the boundaries of space and time to a place and an era that is now no more. Our journey begins in the island nation of Japan, which has been under military occupation by American forces ever since the end of World War II. The year is 1950, long before most of you readers were born. Our object? We are looking for beginnings, you could say.

"The beginnings of what?" you might ask.

We seek the beginnings of a company which has since gone on to become one of the major players in the videogame industry. A company whose name is legend, whose people are revered, whose software is almost worshipped by millions of gamers worldwide of all ages and social backgrounds. A company which has made a point of surfing the cutting edge of technology, one which has seen its fortunes rise and fall, one whose finances have run the gamut from excessive profitability to the brink of near-bankruptcy. This is a company that has had its successes and failures, a corporate entity that has had its share of internal rivalries and confusions, and an organization that has always managed to pull itself back up by its own bootstraps even during times when it seemed that it could not be saved from its own blindness.

"What company?" is the inevitable question.

Sega - one of the true pioneers in videogame history.

The Birth Of The Legend

On 24 June 1950, Communist forces from North Korea invaded South Korea with aid from Communist China, attacking United Nations forces along a broad front. U.S. General of the Army Douglas MacArthur, military governor of Japan and looking forward to an honorable retirement, was suddenly thrust into the unwelcome role of supreme commander of U.S. military forces in what would become known as the Korean War. It was a part he did not relish despite his earlier war record, for he viewed the conflict as another Manchuria - or Anschluss for you European readers - and was determined to stop the spread of Communism on the Korean peninsula by any means necessary. He therefore ordered a hurried evacuation of American civilian personnel from Korea, brought the U.S. Seventh Fleet to the area, and began working with his staff on preparations for a counterattack even as North Korean forces drove the U.N. defenders southward towards Pusan.

One of the inevitable results of the Korean War was a massive build up of American personnel at U.S. military bases across Japan. By now, the Japanese were quite used to the loud and brash American culture, and many a Japanese company quickly moved to profit from this unexpected situation. One of these was Nihon Goraku Bussan, a vending company originally founded in April of 1951. They secured contracts with an American entrepreneur named Marty Bromley in May of 1952 to provide American bases and staging areas with all different kinds of coin-op vending machines. Eventually the Bromley/Bussan partnership became so large that the operation was officially organized in 1960 as its own subsidiary of Bussan - the Japan Entertainment Trading Company. As for Nihon Goraku Bussan, it would in time become the second biggest player in the Japanese amusement industry. Bromley's involvement in the enterprise was purely profit-driven - the U.S. Senate had imposed severe restrictions on the vending machine industry back in the early 1950s and had just thrown his coin-op business out of Hawaii's many military installations in 1952. He saw Japan as an excellent place to run his game rooms without a bunch of do-gooding American politicians looking over his shoulder. Once he set up shop and began to do well, Bromley never looked back. Many a soft drink dispenser, slot machine, and jukebox at American military installations across Japan was put there by the Bussan/Bromley partnership, as well as a new type of coin-op machine. Pinball was by now a mainstay of American pop culture - a table game not unlike the pachinko with which the Japanese were so familiar and to which they could easily relate. Bromley seized upon this opportunity and dutifully imported pinball games to Nihon Goraku Bussan under their lucrative American military contracts. Their move was welcomed by American servicemen, and made quite an impression on one in particular.

Serving with the U.S. forces during the Korean conflict was a young man by the name of David Rosen. He was station in Japan from 1949 to 1952 and spent a lot of time absorbing the local culture, as well as making several trips to China as his military duties required. He fell in love with Japan and saw a budding opportunity for business in the burgeoning Japanese coin-op market. Once his tour of duty was over, Rosen set up shop in his newly adopted country and founded Rosen Enterprises, Ltd. in 1954. He started by importing coin-op photo booths to American military bases for shooting passport photos under the brand name Nifun Shashin, i.e. Photorama, charging approximately ¥200 per picture. Rosen soon found himself at the head of a rather profitable and growing business, and was eventually forced to franchise Photorama out to independent in order to remain competitive. He was the first Japanese entrepreneur to establish a franchise business, but Photorama eventually collapsed due to its own weight. By then, however, Rosen's second business venture was already well underway. In 1956 he began importing coin-op target gun arcade games and setting them out outside his Photorama booths. He bought them used from American warehouse sales at US$200 apiece and had them shipped to Japan, charging roughly US10¢ per play. Rosen is often credited with founding Japan's arcade game industry just by this seemingly simple act. Rosen's games, such as Bear Gun, used modified air rifles to simulate the experience of a real target range. They eventually proved so popular that he made back his initial investment within two months and began installing them at U.S. military bases across Asia. It was there he eventually came into direct competition with Nihon Goraku Bussan, who had started producing its own home-grown coin-op arcade games but simply could not compete with the superior American machines. They were better by far than anything that Bussan and other local Japanese companies such as Taito could crank out, and it was as a result of this experience that Rosen would learn a valuable business formula for success - superior technology plus great gameplay equals market success.

Rosen dearly desired to expand his operations and service local Japanese businesses, but it was at this point that he ran afoul of the Japanese government. In order to establish a vending company that would service Japan proper, Rosen needed a license from the Ministry of Industrial Trade and Industry (MITI), and they were not forthcoming in giving it. You must remember that Japan was still in the process of rebuilding from the devastation wrought by American carpet bombing during the closing stages of World War II, with the average Japanese worker having a 6.5 day work week, and the Ministry felt that Japanese citizens were too busy to enjoy such luxuries. It took Rosen over a year to convince the Industry that "such luxuries" could actually benefit Japan by giving its people an emotional release from the drudgery of work, and he was eventually granted a license to import some US$200,000 worth of used coin-op arcade games in 1957. As it turned out, Rosen's instincts had been right all along. The Japanese took to the coin-op arcades in droves - even more so than the Americans - and both games imported from America and produced locally raked in profits for all of the industry players, Rosen Enterprises included. Branching out from an initial toehold with two major Japanese theater chains, Rosen Enterprises soon had dedicated arcades in every major Japanese city. By 1960, Rosen Enterprises had cornered the arcade game business, Bussan dominated the jukebox business, and another Japanese company, Taito, played strong number two to both.

In 1964, Rosen and Bromley joined forces and merged their export businesses into a single organization under the Rosen Enterprises banner. By the following year, Rosen Enterprises had become so successful that it merged with former rival Nihon Goraku Bussan, thus gaining access to the latter's 6,000 manufacturing plants in Japan. This was something of a coup for Rosen, since it greatly expanded his company's manufacturing base. More importantly, gaining access to their former rival's large local resources meant that it no longer had to continually import new products from America. Rosen stayed on as president of the newly merged company, with the rest of the organization retained its strong Japanese cultural roots. This was fine with Rosen, who would not have had it any other way. The name of the new firm was changed to Sega Enterprises, Ltd. "Sega" was an acronym originally conceived by Nihon Goraku Bussan that stood for "SErvice GAmes" - the name under which they had marketed their products in Japan itself. It was meant to remind employees and customers of the company's primary purpose - to serve the public by providing and servicing the best coin-op arcade games available. Sega Enterprises, or Sega for short, remained committed to Nihon Goraku Bussan's goal of serving the public with quality products and to Rosen's business axiom of providing high-tech, great-playing games. Their dedication would pay off sooner than any of them had hoped.

Sega's first locally produced arcade game, Periscope, was released in Japan in 1966. It was an instant hit, and gained rapid worldwide popularity in a fairly short amount of time. A submarine combat game, it allowed players to "stand at the con" of a military submarine and sink as many enemy vessels as they could. It even included a custom periscope controller, similar to a real periscope, so players could sight their targets just like real sub commanders did. Mind you, this was a electromechanical game, since that was all the available technology could produce at the time. It was exported to the West the following year, and its success caught the attention of the Gulf and Western corporation. They decided that Sega would be a valuable asset to their portfolio, so in 1967 Gulf and Western made Sega an offer it couldn't refuse. Gulf and Western bought out Sega in 1970 after three years of extensive negotiations, making it a wholly owned subsidiary but retaining the Sega name and logo, and again Rosen stayed on as Sega president after the transition. Not so Marty Bromley - he was getting along in years, so he took the opportunity to retire from the business. In 1974, Sega "went public" for the first time, with its stock openly traded on the New York Stock Exchange. Not surprisingly, Gulf and Western was listed as its principal shareholder.

The Emergence Of Sega Videogames

It is around this time that a new industry begins to emerge, thanks to the birth and rapid growth of the Information Age. The computer has begun to play an increasingly large role in every aspect of business. A new form of entertainment, computer videogames, has literally burst upon the scene and was rapidly increasing in popularity. The concept had actually been invented by William Higginbotham back in 1958, but it took the pioneering efforts of such giants as Steve Russell, Ralph Baer, and Nolan Bushnell to mould the concept into a profitable reality. Videogames promise to remold the entertainment industry in ways that are almost impossible to imagine. Gulf and Western is in a perfect position to take advantage of this new market, for its arcade subsidiary, Sega, is already hard at work riding its edge. They gave free rein to Sega's innovative ideas, while at the same time continuing to build on company's original marketing and strategy formulas. In fact, Gulf and Western narrowed Sega's focus so that its sole remaining purpose was the creation and marketing of videogames. Sega would produce at least one videogame game a year from that point forward. They were new to the business, new to the concepts involved, but as with most Japanese companies, they learned quickly. The first thing Sega did was to buy a U.S. videogame company named Gremlin. The company would go on to develop many arcade videogames for Sega for the U.S. market and also marketed Sega's own Japanese-produced titles Stateside. Many classic Sega arcade titles from this era were produced under the Sega and Gremlin trademarks, or more frequently a combination of both. There was The Fonz (1976) which was inspired by the motorcycle-riding character from the TV sitcom Happy Days. Not long after came Space Attack (1977) - an unabashed clone of Taito's Space Invaders - and the following year saw the classic arcade racing game Head-On (1979) - itself a shameless ripoff of Atari's Dodge 'Em. None of these were very original, but at least they kept the cash coming in while Sega's R&D was busy cooking up its own concepts.

It was in the 1980s, though that Sega's arcade videogames really began to hit their stride. Most of the vintage Sega titles that arcade gamers fondly remember come from this decade, and their influences continued throughout Sega's subsequent product line up. Here are some of the best known examples of what kind of videogames Sega was producing during this time: Monaco GP (1980), Astro Blaster (1980), Space Fury (1981), Eliminator (1981), Pulsar (1981), Frogger (1981), Turbo (1981), Pengo (1982), Tac/Scan (1982), Zaxxon (1982), Star Trek (1982), Up 'n' Down (1983), and SpyHunter (1984). All of these are now considered arcade videogame classics, and it comes as no surprise that people are still playing them today. Sega also helped lead the burgeoning videogame market in technical innovations. They introduced the first color vector graphics game (Space Fury), the first laserdisc-based videogame (Astron Belt), and the first 3D videogame (SubRoc). Zaxxon in particular proved so successful that Sega opened up its very first American corporate office with proceeds from sales of the game. They also jumped on another industry bandwagon for another type of product - one which had been pioneered in American and was selling like crazy over there. If it was good enough for America, Sega reasoned, then the idea should work equally well in Japan.

The Rise And Fall Of The Home Videogame Market

The early 1980s also found Sega involved in a subgenre of the evolving videogame industry - the home consumer market. These were the heady days for Nolan Bushnell's Atari, which dominated both the arcade and home videogame industries, so it should come as no surprise that Sega was approached to make ports of its popular arcade games for Atari's home systems. This they subsequently did, due largely in part to a new wrinkle in its business dealings. Gulf and Western, which had by this time spun of 20% of Sega's U.S. holdings, had by this time bought back all of its public shares of Sega stock and subsequently sold the U.S. division to Bally Manufacturing. The popular American videogame company was looking to enter the home cartridge sweepstakes, and Sega seemed to be the perfect vehicle for doing just that. Ports of popular Bally and Sega arcade titles were produced for the dominant console at the time, the Atari VCS (i.e. the Atari 2600), as well as its successor system the Atari 5200. It also produced ports for several other popular consoles and computer systems of the day - including the ColecoVision, the Mattel Intellivision, and the Commodore 64 personal computer. Soon enough, titles of such popular Sega arcade favorites as Buck Rogers, Congo Bongo, and Star Trek found their way in cartridge form to the homes of many an American gamer.

Like all other players in the market at that time, though, Sega was caught completely off guard by the "great crash" of 1983. Over in America, the videogame market imploded of its own weight largely due to the heavy-handed behavior of a profit-hungry Atari. This caused a market crash beginning at the tail end of 1982 and continuing through 1983 whose effects would be felt around the world. Sega's fortunes failed in the West along with many other players in the videogame market at that time; however, things took quite a different turn in Japan. Sega managed to survive in its home country thanks to the intervention of its founder, David Rosen. Back in 1979, he had bought a Japanese distribution company which had been founded by a entrepreneur named Hayao Nakayama. After the videogame market crashed, Rosen and Nakayama personally intervened to save Sega from destruction. With the backing of Nakayama and a number of other investors, they managed to buy the entire Japanese assets of the company from Bally in March of 1984 for a mere US$38 million, along with the Sega name. The newly revived Sega was then split into two major branches, with Nakayama becoming the first president of Sega of Japan and Rosen becoming the first president of Sega of America. Rosen also retained his titular role as Sega CEO for the time being, thus reassuring investors that the company would continue with business as usual once the smoke and debris had been cleared, but eventually ceded the job to Nakayama and focused his energies instead on propping up Sega of America.

According to Sega's own public accounts, it was from this time that they learned a new lesson, and one that they would learn well - never stick with the same concept for too long, since every form of technology has a limited life span. It also marked would turn out to be something of a trend for Sega's corporate mindset - when faced with abject failure of your product line, work the problem and try not to make the same mistakes again.

Sega's First System

In July of 1983, Sega produced the SG-1000 - its very first home videogame console. It represented the company's first stab at making and selling a home console of their own. It was first released in Japan for ¥15,000 (US$125) and made it to the rest of Asia shortly thereafter. Like its fellow consoles from that time, it was a 4-bit system with 64K of RAM running at a "speedy" 1.2 MHz. It came with one SJ-300 control pad. A second incarnation, the SG-1000 Mark II, or Sega Mark II for short, was introduced about a year later featured three significant changes - a redesigned case, a detachable keyboard (model SK-1000), and a beefier 2.3 MHz CPU. The Mark II model was intended to serve primarily as a personal computer, with an optional keyboard and printer, while the original Mark I was designed purely to play videogames and nothing else. To that end, a BASIC programming cartridge was developed and marketed for the Mark II system. Both versions were distributed exclusively in Japan, although a few managed to squeeze out to such export markets in Australia and New Zealand at ridiculously high prices - even for that time. Both systems supported software loading via cartridges, but the Mark II model also permitted users to load software from tape as well. The Mark II was also the first to introduce the Sega 4-bit Game Card, which were essentially smaller cartridges and could be played on either console model by means of the special Card Catcher module.

It was unfortunate for Sega that they brought the SG-1000 product line to market when they did. The market crash of 1983 combined with the advent of the Commodore 64 - the most powerful and popular 8-bit computer of its day - pretty much ruined any chance Sega had of marketing the SG-1000 Mark II as a personal computer outside of Japan. While it did quite well in its home country, the collapse of the American videogame market meant that the SG-1000 would never saw the light of day in the West - save as a pricey export in such out-of-the-way places as Australia and South Africa. It was no surprise that Sega instead quickly move on to an 8-bit product line as its primary focus until it could come up with something else. For the next three years, all new software and what few hardware accessories Sega released were designed exclusively for the 8-bit product line. The original SG-1000s quickly faded away into obscurity, save for the last of them (an 8-bitter, by the way), and were rarely heard from again after that. All of their accessories and software library would eventually be absorbed into the new product line. Sega would continue to offer belated support for the older SG-1000 consoles, but mostly as a matter of corporate honor. Only 100 or so titles would ever be made for the 4-bit SG-1000 hardware, and a fair number of those would be produced long after the system itself had faded into official obscurity. Most of the software and add-on hardware developed for the system in later years would be by hobbyists and what few third parties remained dedicated to the system.

The Penultimate Configuration

Not long after the SG-1000 product line was first introduced, Sega integrated the planned SG-1000 Mark II and its optional keyboard into a single housing. Redubbed the SC-3000, or CSC-3000 according to some accounts, the new system was released in November 1983 for an initial asking price of ¥29,800 (US$250). It marked what would be the first iteration of Sega's 8-bit product line. Sega's marketing plans for the SC-3000 were rather straightforward. If you wanted a dedicated gaming system, you would buy a SG-1000. If you wanted something more, you would buy an SC-3000. It was of course compatible with all SG-1000 hardware and software, and even worked with the SG-1000's "card catcher" adapter for the small Sega Game Cards. Officially, the SC-3000 was available in three flavors - white with tactile keyboard (Japan), black with tactile keyboard (export), and black with standard keyboard and extra memory (SC-3000H, all markets). A redesigned, smaller SJ-300 control stick was provided with each and every SC-3000 sold. An add-on expansion unit, the SF-7000, added such personal computer essentials as a 3" floppy disk drive (similar to that used in other Japanese systems), a parallel printer port, and additional system memory. Here is a complete rundown of the SC-3000 system specs.

Component Description Processors Zilog Z-80A NEC D780C-1 CPU (Zilog Z80 clone) running at 3.58 MHz Texas Instruments SN-76596 PCM audio processor (6 channel sound) Graphics Texas Instruments TMS9929A VDP 16K VRAM 16-color palette with 16 intensities each (64 colors from a 256-color palette) Support for both 256x220 (SG-1000) and 256x192 (SC-3000) display modes 40x25 character text display mode Custom video out connector for color composite monitors Built-in RF adapter for direct TV connection Memory 18K system ROM 32K RAM (48K in SC-3000H) 64K total system (96K in SC-3000H) Connection One expansion slot Cartridge port SR-1000 tape drive port Dual joystick ports Commodore-style A/V and serial device ports Storage SG-1000 compatible cartridge port (Game Card "card catcher" optional) Standard audio cassettes (using SR-1000) 3" floppy disk drive (optional)

One should note that system memory was upped in the SC-3000H from 32 to 48K. That was because using Sega's BASIC 3 cartridge for programming left only 515 bytes free in the original SC-3000! The extra memory in the SC-3000H was included to get around this limitation but did not come cheaply - the original asking price was ¥33,800 (US$300), or about US$50 more for the privilege of having the additional 16K of system RAM.

Not many folks remember the Sega SC-3000 nowadays because it died a rather swift death in its home country. It was not fully compatible with the new MSX standard for personal computers, and the emergence of these systems marked the doom of the SC-3000. In comparison, MSX computers were more powerful and far less expensive than the SC-3000, so many a prospective Japanese buyer (like their counterparts around the world) let their pocketbooks govern their thinking. The SC-3000 quickly faded away into obscurity, with the Sega Mark II replacing it as the company's mainstay system in the computer videogame market. Nevertheless, you are well advised to remember the specifications for the Sega SC-3000 personal computer. They are going to bear an uncanny resemblance to the next Sega system we come across in our journey.

Fortunately for Sega, though, as well as the other players in the videogame industry, the hard times were not to last. Change was on the way, fresh ideas and new innovations were already in the wind, and the price of hardware was dropping. Cheap DRAM came into abundant supply by 1984, thus making available one of the primary ingredients for the next generation of home videogame consoles. Sega was ready, willing and able to join the industry's second generation despite its earlier failures, and work soon began on what would become the company's first 8-bit home system. It would be one that would incorporate ideas new and old, would bank on Sega's existing experience, would play ports of popular Sega arcade titles, and would pit it against a foe from its own country with which it had first rubbed shoulders back in the boom days of the arcade videogame industry. It would be the start of a sometimes genteel, sometimes bitter, but always entertaining rivalry that would last though the years up to this day. It would take Sega three years before they would re-enter the U.S. home videogame market with another product line - but once they did, they never looked back.

SG-1000/SC-3000 Factoids

• There are a number of 4-bit and 8-bit clones of Sega's SG-1000 console hardware. Most are dedicated SG-1000 clones, but at least one is actually a multiple-format machine and support games produced for another system. These include the following:
  • Dyna 2-in-1 (Telegames, 1983 - Japan, supports both SG-1000 and ColecoVision games)
  • Othello Multivision FG-1000 and FG-2000 (Tsudaka, 1983 - Japan, both originally selling for ¥19800)
  • Pioneer TV Video Game Pack SD-G5 (Pioneer, 1983 - Japan)
  • Telegames Personal Arcade (Telegames, 1983 - U.S. version of the Dyna 2-in-1)

• The Sega Card Catcher was a special accessory module that plugged into the unit's cartridge port. It allowed SG-1000 owners to play games released on the smaller and cheaper Sega Game Cards. It was later integrated directly into the hardware as part of Sega's 8-bit product line.

• The only version of the SG-1000 product line that did not provide support for the optional SK-1000 keyboard was the original SG-1000 Mark I.

• The issue of the SC-3000's rather limited RAM resources became such a problem for Sega that they eventually issued a standalone 16K RAM expansion module for it.

• The SF-7000 expansion unit was probably the ultimate in terms of accessories for the SC-3000 personal computer. Like the expansion box for the Texas Instruments TI-99/4A computer, it provided Sega's system with a lot of hardware that was not built into the system. In Sega's case, this included a Japanese standard 3" floppy disk drive, a Centronics parallel port, and 16 of additional system RAM. Also like the TI-99/4A expansion box, the SF-7000 was the single most expensive peripheral Sega ever made for the SC-3000. Its initial asking price of ¥79800 (US$830) meant that very few were ever sold.

• Both the SG-1000 and SC-3000 was exported to Australia and New Zealand, where it was marketed by Grandstand Leisure Ltd. under license to Sega from 1984 to 1986. The Grandstand SC-3000 far outsold the SG-1000, where it developed a loyal following similar to that enjoyed by the Commodore 64 in other parts of the world. According to the Obscure Pixels website, a number of market-specific tape-based applications and games were produced. In addition, certain third-part SC-3000 peripherals, such as a lightpen and a speech synthesis unit, were Australian and New Zealand market exclusives.

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