Founded in 1951 by American David Rosen, who moved permanently to Japan after WWII, Sega (originally dubbed Rosen Enterprises) started out as an art export company. By the late 1950's Rosen had moved on to importing instant photo booths and coin-op games from the United States.
Rosen Enterprises continued to expand. In 1965 the company purchased a jukebox manufacturing company, which was then merged into Rosen Enterprises. Upon completion of the merger, the company was renamed to Sega, which was a contraction of "Service Games." Sega soon began producing their own coin-op games and competed directly against American imports. In 1970, Sega was bought by Gulf & Western.
Throughout the late 70's and early 80's, Sega produced arcade games and software for early home videogame consoles, such as the Atari 2600 and the ColecoVision. Sega wasn't exactly an industry powerhouse yet, but they had scored a few hits with games like Turbo (which was packaged with the ColecoVision's driving controller), Frogger, and Zaxxon.
By this time Sega had an American division dubbed Sega Enterprises, which primarily dealt with console software. This division was sold to Bally, a large pinball and arcade game company, in 1983. Soon, Sega of Japan was sold to a group of Japanese investors, and Sega officially became Sega Enterprises, Ltd.
Sega released a string of arcade hits in the mid-80's, strengthening its position in the U.S. market especially. Games like Out Run (1986), After Burner (1987), and Shinobi (1987) not only raked in cash for future arcade development, but also gave Sega a recognized stable of successful games that could be ported Sega produced home consoles.
Following the "videogame crash" of 1984, the American home videogame industry was in bad shape. Most consumers had ditched their consoles in favor of cheap home computers, and all the major industry players of the early 80's (like Atari, Mattel, and Coleco) had either given up on selling videogames, sold off, or rendered insolvent. Meanwhile in Japan, Sega's Mark III competed with Nintendo's very successful Famicom.
After the incredibly successful launch of Nintendo's American version of the Famicom, the NES, Sega decided to bring the Mark III to America as well. The Mark III was re-christened as the Sega Master System for the U.S. market and launched to general apathy in 1986. While the SMS was technically superior to the NES, boasted some pretty cool accessories, and was marketed by toy powerhouse Tonka, the NES controlled nearly 90% of the market, had the advantage of a huge head start, and a stranglehold on third-party developers. At the time, developers who made games for the NES couldn't produce games for any other system, which left Sega, Activision, and Parker Brothers as the only companies producing games for the system. While these restrictions were later lifted due to government pressure, the combination of poor marketing, bad timing, lack of third-party software developers, and the absence of a "killer app" helped lead to the Master System's demise. Sega Master System technology was later used in Sega's first cartridge-based portable, the Game Gear, which was released in 1990
Three years later, Sega took another shot at the home videogame market with the Sega Genesis, a 16-bit next generation system far superior to the NES. At launch, the Genesis (sold as the 'Mega Drive' in Europe and Japan) was $189 and came packaged with one controller and Altered Beast. The "Power Base Converter," an adapter that allowed Sega Master System games on the Genesis was immediately released and Sega planned to release a modem and possibly a keyboard for the system by the end of the year.
Although NEC's TurboGrafx-16 had beaten the Genesis to market by over four months, the Genesis was backed up by strong third-party support (Electronic Arts being the most significant), great marketing, good timing, and popular games. It wasn't until the release of the Super NES in late 1991 that Sega faced stiff competition, but by then the Genesis had amassed a large user-base and was releasing blockbuster games like Sonic the Hedgehog.
On the arcade side of things, Sega released the first holographic videogame, Time Traveler, in 1991. 1993's Virtua Fighter kicked off the successful Virtua Fighter franchise, while a string of popular racing games like Sega Rally cemented Sega's presence in American arcades. In 1996, Sega teamed up with Dreamworks SKG to launch their own chain of arcade \ entertainment centers, Sega Gameworks.
In 1993, Sega began to lose its grip on the home console market. The SNES was gaining in popularity and the long-promised Sega CD, a CD-ROM-based expansion for the Genesis that was released later that year, sold poorly due to lack of good games and expensive price. By 1994, 32-bit systems had started to appear and Sega released the ill-fated 32X in an attempt to upgrade the aging Genesis and revive some interest in the system. The 32X sold well initially, but almost complete lack of worthwhile software and buzz surrounding the upcoming Sega Saturn and Playstation sent the 32X to the bargain bins within a year.
1995 was the year in which Sega formed SegaSoft, its new computer software division, and launched the Sega Saturn in the United States. While the Saturn had a head start of a couple of weeks over the competing Sony Playstation, the Playstation was much easier to develop for and quickly overtook the Saturn in sales. While the Saturn had some great conversions of popular Sega arcade games and was one of the first consoles with Internet capabilities (via the NetLink adapter), the lack of good software and strong competition from the PlayStation doomed the Sega Saturn to a fate similar to that of the Master System.
Aside from some successful arcade games like House of The Dead and Virtua Fighter 3, Sega was relatively quiet after the slow demise of the Saturn, which was much more successful in Japan than it was in the states and Europe.
The Dreamcast, Sega's 128-bit system, launched in Japan in November 1998 and in September 1999 for the US and Europe. The Dreamcast's popularity in US and Europe soared during late 1999 and 2000 thanks to an impressive array of Sega games, and the company had bold plans for its little white box including but not limited to the launch of SegaNet, the world's first gaming ISP.
However, four years of losses stemming from the Saturn and Dreamcast left the company no choice but to stop production of the console at the end of March 2001. Sega has ensured that existing Dreamcast owners will receive a steady supply of software into 2002 while the company looks into becoming a third-party developer, giving UK manufacturer Pace rights to create devices using the Dreamcast technology.
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