Sega Hints at Leaving Hardware Business

Sega Hints at Leaving Hardware Business

by November 11, 1999

UPDATE 11/13: It appears that we finally have concrete information about this from the Gaming Intelligence Angency. Here is an portion of a message from the GIA’s Message Board:

There’s been a lot of (justified) confusion over whether or not Sega is leaving the console hardware business (due in no small part to three separate GIA articles on the story), and I just wanted to clear things up. The official line from Sega of Japan is that Sega IS abandoning hardware production — videogames.com’s original story was correct, and SegaWeb and IGNDC are on crack. In other words, no mistranslation was made; everything in the original story is correct, the “correction” is the story that’s wrong, and we were right all along.

Stay with TSSZ, and we will keep you up to date; however, this looks to be the real deal.

11/12: Several big-time sites-SegaWeb, Daily Radar, IGNDC, and others, have either made reports that falsify the information below, or confirm its sad truth. Sega X has even called Sega of America, and they have denied such information. Unfortunately, this has caused much confusion with many Sega fans, including myself. All this weekend, we will continue updating with the latest information, and as soon as we get a definite response from Sega of Japan, the only branch of Sega that can probably tell us what’s right and wrong, we’ll post it right here.

Original Story 11/11: Let’s get right to it, the first news is from GameSpot. Read closely; while there is good news, there is also very bad news:

Tonight at a special ceremony for the Okawa Foundataion (a non-profit organization which contributes to the growth and development of technology), CSK and Sega Enterprises chairman Isao Okawa revealed the Dreamcast’s future. A future that goes beyond just games – Sega is moving online, and in a big way.

Okawa addressed members of the Okawa Foundation, honored individuals of the foundation, Sega members, and the press with a speech about the Internet. He stressed how the 21st century will be the century of the networked society. CSK is attempting to poise itself on the cutting edge of the Internet revolution, and the Dreamcast will play a big part. With strategic alliances with Internet services and future peripherals like the Dreamcast digital camera and zip drive he sees the console as a very powerful online component.

The Dreamcast Zip Drive was finally displayed at the Okawa Foundation event. Resting underneath the Dreamcast unit itself, the two hardware components connected gave off a great aura – they looked perfect together. The possibilities the zip drive will allow for are wonderful – new downloads for games including characters and stages. Not to mention the ability to create material and store it on the drive (which Sega claims will read and write much faster than current zip drive units employed in PC configurations). Sega of America did not reveal a US release date for the device, but GameSpot News has previously learned that it will be launched in Japan in February.

Okawa also showed off an early demonstration unit of the Dreamcast Digital Camera. The device, resting atop of a TV monitor, will be able to display your face on a second player’s monitor while interacting in a game. The demonstration at the event had two of the Dreamcast units networked, and video was being transferred between the two. Players could also chat in real time via the Dreamcast microphone device.

Following the Okawa Foundation speeches and other ceremonial events, Mr. Okawa took questions from the press. This is where it got very interesting. One question was in regard to how Sega’s Dreamcast will be able to compete with upcoming consoles like the Sony PlayStation2 and the next Nintendo platform (currently code-named Dolphin). Okawa responded that he feels that the Dreamcast price is very competitive, especially compared to the PlayStation2. As well, he feels that the Dreamcast’s online elements (such as the inclusion of a modem right out of the box – the PlayStation2 will ship sans a modem) are its real strength. Future online network elements such as connectivity with watches and cellular phones are also coming.

However, the greatest revelation during our discussions came as a huge shock to many of us seated next to Mr. Okawa. While this has been hinted at by media and even members of Sega in the past, hearing the chairman of Sega Enterprises officially stating it was very surreal: Sega is moving out of the hardware business. The Dreamcast will likely be the company’s final console. Even when asked what Sega’s plans will be if the Dreamcast proves to be a major success, Okawa reaffirmed that the company is moving from the hardware market. He stated that the future of Sega rests in the Internet and its software lines. Previous discussions as to the expandable nature of the Dreamcast may come in to play sooner than previously expected. If this is Sega’s last major “console,” we may begin to see more add-on devices early next year (i.e. the DVD drive, cable modem interface). In fact, on display, behind a glass case, was an Ethernet cable designed to fit where the 56K modem normally would. While there were no concrete revelations regarding the future configurations of the hardware, success or not, the Dreamcast appears to be Sega’s final hardware effort.

The subject of Sega Enterprises branching off a new Internet company (to handle e-business and online gaming for the Dreamcast) was once again brought up. Okawa stated that current plans are for such a company to be launched in the US in the near future.

About the Isao Okawa and the Foundation for Information and Telecommunications: Established in 1986, the Okawa Foundation is a non-profit organization which contributes to the growth and development of technology by offering financial aid and grants to faculty researchers and children programs. The foundation offers out an Okawa Prize annually. Mr. Okawa oversees 90 companies, with a total annual turnover of approximately US$7.5 billion.

Now, keep in mind that this is from Gamespot, and this could be false. Stay tuned for the developments, as well as if this is not true.

The next story comes from GameFan, and it contains an investigation being conducted by the Fair Trade Commission on Sega of Japan:

Reuters and other news services are reporting that Sega of Japan is under fire from Japan’s Fair Trade Commission. According to the report, the FTC has inspected Sega of Japan on suspicion that they have illicitly controlled prices of the Dreamcast and game software at the retail level.

Sega shares were down 94 yen or 4.96 percent at 1,801 yen in late morning trade; Sega of Japan has not commented in regards to the investigation.