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(you can find it at http://www.chicagotribune.com/business/chi...Dbusiness%2Dhed) but you have to register to read it.
Anyway I thought it was an interesting read so I figured I'd just post the entire text here. So here it is:
Quote
Sega's business becomes a dream
Comeback hinges on its software:
By Alex Pham. Special to the Tribune. Alex Pham is a staff writer for the Los Angeles Times, a Tribune newspaper Published June 24, 2002
Sonic the Hedgehog is back.
After pulling the plug on its money-draining Dreamcast console last year, video game company Sega Corp. has rebounded with an operating profit and a lineup of must-have titles that are turning former rivals Sony Corp., Nintendo Co., and Microsoft Corp. into suitors.
Although it is too early to declare Sega a financial success, analysts said Sega has transformed itself from a struggling hardware-focused company to one of the industry's most important software companies.
"They're one of the best comeback stories of the year," said P.J. McNealy, senior analyst for technology consulting company Gartner Inc. "They were able to pare off underperforming units and really reposition themselves as a significant software player in less than 18 months."
Nowhere was Sega's transformation more evident than at last month's Electronic Entertainment Expo--known as E3--the industry's biggest trade show. At an after-hours event at Sega's relatively modest booth, key executives from Nintendo, Microsoft and Sony buried hatchets and paid homage. Gamers lined up to get autographs from Sega developers, who passed out baseball cards instead of business cards as Sega games ran on Sony's PlayStation 2, Microsoft's Xbox and Nintendo's GameCube.
No one mentioned the Dreamcast, least of all Sega executives, who were painfully aware that Sega poured more than $1 billion into the failed console before discontinuing it in March 2001. The experience left Sega with $1.5 billion in debt, nearly equal to its annual revenue.
The decision to quit the hardware business after 15 years left fans and investors with a bad taste. Many predicted that the company would become irrelevant. Takeover rumors swirled, with reports that Nintendo or Microsoft would purchase Sega.
With Sega's future clouded, speculation was rampant that the company's developers would bolt. But Sega managed to hang on to most of its independence and most of its key talent.
The developers did not disappoint.
In the first three months of this year, Sega was the No. 1 independent publisher for GameCube, selling 22 percent of the games for that console. It also was the No. 3 publisher for PlayStation 2, with 7 percent of all games sold, boosted by strong sales of "Virtua Fighter 4" and "NBA2K2." Last year, Sega's "Jet Set Radio Future" and "Super Monkey Ball" bolstered the lineup of games at the launch of Xbox and GameCube.
At E3 this year, Sega's games continued to generate buzz.
"They have a fantastic lineup," said Geoff Keighley, a writer for Gamespot, an online game site. "Sega is without a doubt one of the most important third-party publishers for these consoles. You have `Shinobi' on PS2. On Xbox, there's `Panzer Dragoon,' based on their classic franchise. And `Sonic' is on GameCube. For gamers, these franchises are huge."
Sega's ability to recover lies in these franchises, which the company aggressively has milked for revenue this last year. An example of this strategy is "Sonic Adventure 2 Battle" for GameCube. The game--essentially identical to "Sonic Adventure 2" for the Dreamcast--sold 280,000 copies for the GameCube. Much of the revenue was gravy since the title required only minor changes in the Dreamcast version.
"That's revenue we would not have otherwise seen," said Peter Moore, president of Sega of America, the parent company's U.S. arm. "We've been unleashed from the Dreamcast."
Consolemakers, eager to get their hands on Sega's games, will be helping their former foe by giving Sega extra marketing and development dollars if it agrees to put games exclusively on their consoles.
Comeback hinges on its software:
By Alex Pham. Special to the Tribune. Alex Pham is a staff writer for the Los Angeles Times, a Tribune newspaper Published June 24, 2002
Sonic the Hedgehog is back.
After pulling the plug on its money-draining Dreamcast console last year, video game company Sega Corp. has rebounded with an operating profit and a lineup of must-have titles that are turning former rivals Sony Corp., Nintendo Co., and Microsoft Corp. into suitors.
Although it is too early to declare Sega a financial success, analysts said Sega has transformed itself from a struggling hardware-focused company to one of the industry's most important software companies.
"They're one of the best comeback stories of the year," said P.J. McNealy, senior analyst for technology consulting company Gartner Inc. "They were able to pare off underperforming units and really reposition themselves as a significant software player in less than 18 months."
Nowhere was Sega's transformation more evident than at last month's Electronic Entertainment Expo--known as E3--the industry's biggest trade show. At an after-hours event at Sega's relatively modest booth, key executives from Nintendo, Microsoft and Sony buried hatchets and paid homage. Gamers lined up to get autographs from Sega developers, who passed out baseball cards instead of business cards as Sega games ran on Sony's PlayStation 2, Microsoft's Xbox and Nintendo's GameCube.
No one mentioned the Dreamcast, least of all Sega executives, who were painfully aware that Sega poured more than $1 billion into the failed console before discontinuing it in March 2001. The experience left Sega with $1.5 billion in debt, nearly equal to its annual revenue.
The decision to quit the hardware business after 15 years left fans and investors with a bad taste. Many predicted that the company would become irrelevant. Takeover rumors swirled, with reports that Nintendo or Microsoft would purchase Sega.
With Sega's future clouded, speculation was rampant that the company's developers would bolt. But Sega managed to hang on to most of its independence and most of its key talent.
The developers did not disappoint.
In the first three months of this year, Sega was the No. 1 independent publisher for GameCube, selling 22 percent of the games for that console. It also was the No. 3 publisher for PlayStation 2, with 7 percent of all games sold, boosted by strong sales of "Virtua Fighter 4" and "NBA2K2." Last year, Sega's "Jet Set Radio Future" and "Super Monkey Ball" bolstered the lineup of games at the launch of Xbox and GameCube.
At E3 this year, Sega's games continued to generate buzz.
"They have a fantastic lineup," said Geoff Keighley, a writer for Gamespot, an online game site. "Sega is without a doubt one of the most important third-party publishers for these consoles. You have `Shinobi' on PS2. On Xbox, there's `Panzer Dragoon,' based on their classic franchise. And `Sonic' is on GameCube. For gamers, these franchises are huge."
Sega's ability to recover lies in these franchises, which the company aggressively has milked for revenue this last year. An example of this strategy is "Sonic Adventure 2 Battle" for GameCube. The game--essentially identical to "Sonic Adventure 2" for the Dreamcast--sold 280,000 copies for the GameCube. Much of the revenue was gravy since the title required only minor changes in the Dreamcast version.
"That's revenue we would not have otherwise seen," said Peter Moore, president of Sega of America, the parent company's U.S. arm. "We've been unleashed from the Dreamcast."
Consolemakers, eager to get their hands on Sega's games, will be helping their former foe by giving Sega extra marketing and development dollars if it agrees to put games exclusively on their consoles.
