The history of Sega, a Japanese multinational video game and entertainment company, has roots tracing back to American Standard Games in 1940 and Service Games of Japan in the 1950s. The formation of the company known today as Sega is traced back to the founding of Nihon Goraku Bussan[a], which became known as Sega Enterprises, Ltd.[b] following the acquisition of Rosen Enterprises in 1965. Originally an importer of coin-operated arcade games to Japan and manufacturer of slot machines and jukeboxes, Sega began developing its own arcade games in 1966 with Periscope, which became a surprise success and led to more arcade machine development. In 1969, Gulf and Western Industries (then-owner of Paramount Pictures) bought Sega, which continued its arcade game business through the 1970s.
In response to a downturn in the arcade-game market in the early 1980s, Sega began to develop video game consoles—starting with the SG-1000 and Master System—but struggled against competing products such as the Nintendo Entertainment System. Around the same time, Sega executives David Rosen and Hayao Nakayama executed a management buyout of the company from Gulf and Western, with backing from CSK Corporation. Sega released its next console, the Sega Genesis (known as the Mega Drive outside North America) in 1988. Although it initially struggled, the Genesis became a major success after the release of Sonic the Hedgehog in 1991. Sega's marketing strategy, particularly in North America, helped the Genesis outsell main competitor Nintendo and their Super Nintendo Entertainment System for four consecutive Christmas seasons in the early 1990s. While the Game Gear and Sega CD achieved less, Sega's arcade business was also successful into the mid 1990s.
Sega had commercial failures in the second half of the decade with the 32X, Saturn, and Dreamcast, as the company's market strategy changed and console newcomer Sony became dominant with the PlayStation, in addition to further competition from Nintendo. Sega's arcade business, on the other hand, continued to be successful with arcade revenues increasing during the late 1990s, despite the arcade industry struggling in the West as home consoles became more popular than arcades. A merger was attempted with toy company Bandai during this time, but failed (Bandai would later merge with Sega's rival, Namco, in 2005). Following five years of losses, Sega exited the console hardware market in 2001 and became a third-party developer and publisher. In 2001, Sega CEO and CSK chairman Isao Okawa died; his will forgave Sega's debts to him and returned his stock to the company, which helped Sega endure the transition financially.
In 2004, Sammy Corporation purchased a controlling interest in Sega through a takeover, establishing the holding company Sega Sammy Holdings. Chairman Hajime Satomi announced that Sega would focus on its then-recovering arcade business and less on console games, returning the company to better profits. Sega has since been restructured again, with the establishment of Sega Holdings Co., Ltd. and the separation of its divisions into separate companies. Recent years have seen the company achieving greater success in console games and parting with a number of its arcade divisions, though Sega continues to be prevalent in the sector through licence agreements and the remaining games that are still developed for Japan.
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