The Rise And Fall of SEGA: What The Heck Happened to Them?

What first comes to mind when you think of Sega? Is it their old arcade games from the 60s and 70s? Their home consoles? Or is it the absolute masterpiece that was Micheal Jackson’s Moonwalker?

Chances are, your answer was “none of the above.” Instead, your answer probably involved a well-known hedgehog by the name of Sonic. Of course, everyone knows of their titular mascot. He’s the fast, fun-loving, blue ball of fur. Best known for collecting power-up rings, and defeating the notorious Eggman. But there’s more to this company than meets the eye. The story of SEGA is one of short-lived prosperity, uncharted potential, and a surprising loss of opportunity. 

As much of a fan we are of Sonic, one has to wonder why SEGA isn’t known for more. To answer that question, we gotta take it back to the very beginning. This is the rise and fall of SEGA.

How it All Started

Surprisingly enough, SEGA started out as two different companies. Companies that didn’t even focus on video games. You see, in 1940 there was this small company located in Hawaii, called Service Games. They were best known at the time for selling slot machines and jukeboxes for the American soldiers. Soon enough the company relocated to Tokyo, Japan. 

It was there when they met with another small American company, Rosen Enterprises. They ended up merging together, and forming SEGA Enterprises. The cool thing about this name is that SEGA is derived from the first two letters of each word in “Service Games.” 

SEGA mainly operated in Japan but they also had headquarters set up overseas. Most notably, they had an American establishment. Throughout the 1960s, SEGA began to create their own arcade machines that were relatively successful. Expensive, but still proving to be popular. 

Growing Tensions

As technology evolved, so did the company itself. In the 1970s, they generated a plethora of successful arcade games. Soon enough, SEGA wanted to dip its toes into the world of home consoles. This is where they started to face some trouble. You see, by the 1980s, the home counseling industry was crazily oversaturated. It was very hard for them to compete.

And still, with all of the competition amongst game consoles, there was one that stood on top. And you know it wasn’t SEGA. It was Nintendo. Nintendo was the main shareholder when it came to the video game consoles in the 1980s. For a long time, it has dominated the market. And for a while, SEGA wanted to create something that could compete with them. 

Add even more fuel to the fire, Nintendo and Sega once released a new console same day. Though of course Nintendo’s gained much more success. Continuing to develop technology and games, SEGA experimented with multiple mascots that could potentially rival Mario. 

Nothing truly stuck until they created what’s known in America as the SEGA Genesis. Probably their most successful gaming counsel to date. The SEGA Genesis was moderately successful at the time, though still didn’t sell too well. 

SEGA realized that they had to bring something totally different and out there to rival other counsels. Something that would change the scope of their company forever.

Introducing: Sonic The Hedgehog

The original Sonic the Hedgehog is a platformer game, released in 1991. Though to understand how we got here, we must take it back to 1988. Remember when I said that Sega was in the interest of creating a character to rival Mario? Yeah well, this process went on for 3 years. And that’s where Sonic came in. 

Sonic was created by Naoto Ohshima. His idea prevailed against the slew of suggestions involving armadillos, kangaroos, and squirrels. Basically, they wanted to create an iconic character, among the likes of Mickey Mouse. 

Meanwhile, SEGA America was desperate to find a way to give it’s brand a leg up. They contacted Tom Kalinske; a well-known figure who’s worked in the toy industry, and knew quite a bit about product branding. 

When offered the position as the new president of the American division, Kalinske was promised to have full control. He was to do whatever he wanted with SEGA America. 

Now from my perspective, that sounds like a cool ass deal. I mean, the control freak in me LOVES the idea of power over everything. So of course Kalinske took the freaking deal. I would too. And once he got on board he made a total of 4 suggestions. 

First, he wanted to throw out the current game that came with SEGA Genesis, and replace it with Sonic the Hedgehog. Then, he wanted to lower the price of the system overall. He wanted SEGA to rebrand itself as hip, cool, and edgy. And he wanted to create games that resonated with a western audience. 

When Sega Japan got ahold of these requests, they HATEDit. Though reluctantly, they went through it with Kalinske’s plan.

Sonic was marketed to be the punkish rival to the goody-two-shoes Mario. And boy, did it work. Sonic is what games Sega its name. The company blew up with this new marketing strategy and its unique character. The Sega Genesis blasted its way into the mainstream gaming industry. Just as they wanted. 

Of course, we wouldn’t be here today if things didn’t go astray. Unfortunately, things didn’t stay all that great for SEGA.

The Fall of SEGA

As technology continued to evolve, SEGA tried to evolve with it. They released numerous experimental projects, including the SEGA CD and the Game Gear. Most notoriously however, SEGA was very excited about releasing their newest console, the SEGA Saturn. 

Perhaps the biggest setback what’s the constant head-butting between SEGA America and SEGA Japan. Back in America, Kalinske wanted to collaborate with other companies to improve on Sega Saturn. But SEGA Japan wasn’t really having it. They turned down multiple collaborations that would  ultimately provide the hardware needed for a successful consolel release. Kalinske pushed for in offer with Sony. Show me wanted to manufacture a piece of Hardware with SEGA, and then proceeding to create games in collaboration with each other. 

SEGA Japan, however, was stubborn. They had the idea for Sega Saturn, and they were sticking to that. Such a shame, really, because what Sony  was creating ended up becoming known as the PlayStation.

SEGA vs. PlayStation

So, around the time of Sega Saturn, they were facing some pretty big, competition. In the American Market PlayStation was also advertising itself as edgy and cool. Only this time it was made worse considering the fact that PlayStations were targeted at older people rather than kids. This meant that they could advertise with munch raunchier content. 

On May 11th, 1995, SEGA made a mistake at a Los Angeles video game conference. They excitedly announced the release of the Sega Saturn for $399. It was already on shelves, while the upcoming juggernaut that was PlayStation was still in the works. 

 What they didn’t think about was the fact that PlayStation executives had yet to make a speech. So, once SEGA got off stage, Sony was up next. The Sony spokesperson simply walked up on stage, and said this before immediately walking off; 

“$299.” 

In a way, SEGA never quite recovered from that ultimate diss. Yeah, it may sound like just a funny one off situation, but this is what set the gears in motion for PlayStation’s success. Due to the console not releasing just yet, they were able to build up hype and momentum. They also focused on tweaking their games and software so that it could compete with SEGA Saturn. 

Safe to say, the gaming console which SEGA was so excited for flopped. And they missed a huge opportunity to work with Sony on developing the PlayStation. Not too long after this situation, Kalinske decided to step down. I would too, Kalinske. I get it.

It had a few other projects since then, such as the Dreamcast. But ultimately, they were not able to rival their competitors. 

Current Times

As of 2022, SEGA is known for producing video games. And that’s about it. No more consoles, and no more trying to outdo competitors. Instead they focus on their Flagship character Sonic the Hedgehog. They create games for many different platforms, including the Nintendo switch. 

Sonic has honestly taken on a life of his own. He makes up the majority of SEGA revenue, with a long history of video games, comics, and even TV shows. Hell, SEGA was even willing to collaborate with Nintendo on multiple occasions. Anyone remember those Sonic and Mario games for the Wii? Cause that was the ultimate cross-over of my childhood.

Contrary to normal rise and fall stories, SEGA is still around and still achieving success in the industry. It’s just not what they were originally going for. And you know what? That might be fine for them. Rumor has it that SEGA Japan has a new console in the works. If these words are true, SEGA we’ll have a massive fan base ready for their return.