In a recent interview by Inside Games, president of the recently formed SEGA Holdings, Hideki Okamura (formerly TMS CEO), spoke to them about many interesting things regarding the company. We translated the interview, take a read below:
Busy place today, thanks for taking the time (Inside Games’ Fumio Kurokawa is the interviewer). Okamura san, you were in the company since the Sega Saturn era, you were allowed to do much at the time. You were transferred in 2008 from to TMS Entertainment, were you have been president for six years. Now you have been appointed as the Sega Holdings President COO in April this year.
It has surprised me the most, honestly. I did not expect to come back to Sega originally. I was already familiar with TMS Animation, I was starting to love making videos. I was able to be involved in various good successful projects such as “Yowamushi Pedal” and “Detective Conan“.
Speaking of, your involvement with SEGA dates back to the launch of the Mega Drive.
At first, I was in SEGA’s education division. Back in the day, it was decided to start a business that can be of social contribution. At that time SEGA’s business was sales and facilities management, then home games and amusement equipment. Unfortunately, game room on that era had a strong image of failure for hanging out, there was a momentum of wanting to transform that image to industry basis. SEGA wanted that so-called “Game Center” to be better called as “amusement facilities”. Education Division is practically a new trend, the Pico infant computer has dominated the sector since its appearance.
It was something ahead of its time.
That’s right. SEGA is pretty often in those cases (laughs).
I’ll ask later for those stories (LOL). Instead I’d like to ask you a little story from when you were a student.
At first I had a part-time job and club activities, I was an ordinary student. But then I entered the skiing club, I hurted my knee because I slip a ridge while I was drunk. I stopped skiing. It’s painful now when I run. I wonder if it was a good story…
It is interesting. Then you were in a cosmetics company, and from there you were asked to move to SEGA.
After graduating from the Hosei University, I joined a trading company. About six years from then on I changed my jobs for one in the cosmetics foreign sector. At that time the concepts of marketing were not that known in Japan, I was allowed to study ahead of others. And from there I moved to SEGA. There was a Propaganda Department at Sega at that time, the idea of marketing was not clear. It was from the Sega Saturn era were this gradually changed.
IN MARKET AND OUTER MARKET
SEGA has “creative life” as a mission statement, always to make a new game incorporating advanced technology. The idea was stronger than just “sell if you make something good.”
Not only Sega, there are technology power companies that think there is such a tendency. Strong idea for the outer product, but a weak concept for the in-market. Especially at the time when SEGA was strong at large enclosure games for amusement facilities, but at home we were making what you cannot absolutely enjoy. If you make a great game, the audience will absolutely come, therefore the market is born. There was so much to be proud of and achievements. Such as the AM2 Institute, it was such a department.
Starting with “Virtua Fighter”, a variety of hit titles were born. However, now the environment surrounding the games has changed. Since you were away for so long from the game industry, I think the difference might feel huge for you.
The most big differece would be the spread of smartphones. Extremely high convenient and popular, it is possible to play a variety of them while watching the screen. It has become an era where anyone can carry such a device. Though not essentially changes that to provide a fun time for customers. I’m saying, that’s when entertainment becomes space business. Amusement is was provided at arcade facilities and consoles at home. It is more handy on smartphones, you can now experience it anywhere. Resulting in, its transformation has become a big market.
In fact, most of the domestic market has now become Smartphone Games.
In Japan, despite game consoles were only spread there, the market has changed drastically in a short period of time. The difference between the US and European markets are becoming more pronounced too. Whether this is Japan as a global perspective to be ahead, I do not know, only that this is alienating Japan, it is one of the characteristics that is now a fact.
“CREATIVE LIFE” AND NOT “MY CREATIVE LIFE”
But it is not being borne the steering of Sega Holdings under these circumstances, industry changes, in which companies continue to mature, is there a point where you have felt the challenge?
It is important to provide an “impressive experience” as an entertainment company, the numbers are something that should come later, though profit is an important indicator nonetheless. I don’t think there’s much meaning in being compared with the previous Sega, but I think that there is more potential in. Just spoke a little while ago about the mission statement, “creative life”, that’s what we want, not “my creative life”. If you don’t have a sense of what or who you are creating for, how much making games means for the company’s DNA, it will evolve in the wrong direction. We want everyone to understand that point as soon as possible.
Individual force is amazing, and it is not in the power of the company.
In the former Sega I think there was such surface too.
The newly established Sega Holdings works as an intermediate holding company since earlier this year, the entire system group has changed significantly.
The group has been reorganized under Sega Holdings: SEGA Games, Sega Interactive, Sega Toys, and the 10 companies that form TMS Entertainment. Beyond the game part, in the category of consumer entertainment, this form has been grouped together so it can be able to demonstrate comprehensive strength. SEGA Games among them is a new company, which merged the old SEGA consumer sector and Sega Networks (a mobile phone, PC, and smart device oriented division) do the planning, development and sales of home-use game machine contents.
Even when the company changed its name to SEGA from Sega Enterprises in 2000, 10 Studio companies have been spun off. Based on the responsibility for the creator’s content flow, what is the difference between now and those days?
The crucial difference is that development and sales were fused. Also, it must be said that development studios were separated at the time, while SEGA was in charge of sales. Funding projects business was also why SEGA was working apart. That was half-hearted, now it is part of the cause for re-integration. This time a consumer, development and sales divisions in SEGA Games have been fused. Management rights now are easily delegated, I had to have a responsibility for the PL and cash flow. That is, not only the self-satisfaction of making things is that the company is likely to be standing.
Even once in that same Sega, there was a difference for business and home. It now gives the feel that it is more managed by itself.
That’s right. Autonomy has been increased for each company, the management location and responsibilities are now clearer. However, if the way turns all bad, it is not a new way to say that is all good. And either to shed some light also changes the appearance of things. There just that, do not get me wrong.
You were previously talking about space-time business, that doesn’t stop only for Sega Holdings, there are various companies. There is value overall, where will it go towards to?
Again, because we are an entertainment company, our essential mission is to make the world exciting, I think we need to provide an impressive experience to our customers. Entertainment companies that cannot do this will disappear from the world. The Sega Holdings on the line, games, amusements, toys, and animation. These are peripheral to each other, it generates synergy. You can also create new IPs for the entire group in some cases. There is great value, it is the direction in which we have to aim.
You proceed in all directions. There is a huge variety of past IPs (intellectual properties), there is an impression that these are not being utilized enough. Do you have any ideas, such as to widely open the IP to outside creators?
We are having lots of in-house discussions for IP re-utilization. Certainly this a powerful IP group, but whether they are accepted or not by the extent of today’s customers, there will be room for discussion. That is the part where you have to go carefully. In addition, we don’t have at the moment such concepts as proposed partnerships to release the IPs.
THE INNOVATION AND CREATION OF NEW IPS FOR SEGA
We hear nowadays very often about VR content. This was an area where SEGA was most preceding, but I think if SEGA is not currently at a time they can exert the most force for it.
We are progressing in the field with a variety of in-house research and development, yet we are not able to talk anything about it at the moment. After that there is one relevant case, I think there was a large enclosure called R360. The other day we issued a new attraction for it with the “Transformers Human Alliance Special”. But it began operations in Joypolis at Qingdao, China, now we have already introduced it to Tokyo Joypolis in Japan. It evolved as an unusual technology, it is an example that is connected to business and a third-party IP.
Speaking of new IPs, such as “chain Chronicle” and “Monster Gear”, these were born as Smartphone Games. And they compete with traditional consumer business, they have quite different players too, but how do you continue to steer?
Speaking without fear of a misunderstanding, any game even in the early days with maturity will change the quality. The art will be more polished, customers will continue to ask for a rich experience. We are in such case, because it continues being a business for decades as a hobby game, I believe that’s a high advantage in the smartphone games. It has ingrained the know-how and solutions to each employee, and I have been in the DNA of the company for so long. It will become a severe competition from now on, I think the aspect of success or failures will become determined by such point. Smartphone games are also growing the market’s future, we will continue to aggressively invest in it, including on the overseas market.
FOR THE OVERSEAS MARKET
Is either market to focus overseas?
PC development studios have remained big and with steady sells worldwide for Europe, first of all, we believe we most focus on the Asian and North American regions. However due to the current economic conditions, it is not something were we can get immediate results. In Southeast Asia, at least, because the average disposable income per capita is less than Japan’s. Japan’s 100 million people population is strong, however, we are not able to expand market due to the declining birthrate and aging population. On the other hand, in Southeast Asia have about a 600 million people market. The first absolute number is large, it will also become a local income in the future. It is important to grow the brand from now. As in the case of Japanese animation, I want to grow the game division in the same way. Because Asia is mainly set for smartphone games, where Japan is strong and I think living comes.
What about the console game prospects? Decrease in the number of titles available is worrisome.
The domestic market has shifted from console games to smartphones, I also think this was reduced as a transition period for SEGA as a group. However, speaking of the worldwide market, I would say we are giving a good fight. We have 2 good European development studios in the United Kingdom, and one studio in Canada, we are continuing some investments, including M & A. The Creative Assembly Ltd. Is now one of the hottest studios in the United Kingdom, there is a great number of applicants for recruitment, I heard that they are currently in a situation where joining them is not that easy. Sports Interactive Ltd. is also booming, they are constantly selling millions for its popular title Football Manager every year.
What about North America compared to Europe? Reports say that Sega of America (SOA) has been reduced.
This is the result of the times for SOA to be in the need for restructuring. We acquired Canada’s Relic Entertainment in 2013 (though SEGA of Europe operates it), and we invested in other smartphone related studios such as Demiurge Studios and Ignited Artists. Also for Asia expansion, but there will be also a time were we will have to invest in China, and we are promoting now investment in Southeast Asia. It is important to always continue to change according to the situation.
For the overseas market, what is that promoted local initiative?
That’s right. The first priority place, for now, is for the titles to be a hit in Japan, made in Japan, and even the game itself then to also be a hit overseas, have reduced reduced across the industry. These get a limited thousands of dollars because the income comes from pocket money, then when competitors increase the hit rate falls, of course. Rather than SEGA not being healthy anymore, I think the competition has changed greatly. That will be the basis for SEGA Games, as I mentioned earlier, aim first for the Southeast Asia market. After that, we will continue aiming the North American market.
According to the latest financial report, advertising expenses and research and development in the past three years has increased, equipment costs have dropped. How I can get the impression that operating margin is down due to this, is it really what’s happening?
It is in our policy to put money only when and where it’s necessary from a long time ago. In terms of advertising expenses, marketing costs, which is determined by what you sell changes. When it was about game consoles, it lacked more cost.
Certainly that’s right.
On the other hand, if you compare it to the TV there is always a time when the CM of smartphones games are flowing. It isn’t comparable to car and cosmetics, I think Sega and Sony are not greater in amount or equal to the drop that has been invested in the entire smartphone games sector. Then you start thinking that this is the wave of the times, advertising costs have gone up as they are.
LOCATION BUSINESS AND THE SHENMUE POSSIBILITIES
For the Arcade business it has continued to be quite a severe situation, location-based services such as “Ingress”, I think that there is a possibility for SEGA. What are your thoughts on this?
SEGA in the beginning with the national ranking of “Virtua Fighter 3”, we have promoted a network of facilities. Besides our company has a corporate culture to do new things and to take the initiative. SEGA implemented first the free to play arcades. It is the same as with the VR business, but you may not say that it can be said in this area, there are a variety of initiatives. In terms of simple performance, because of the limited time and money scramble, it would rather be that the competition on the sector has increased.
I believe the Free to Play business model is close to the arcade experience, it feels that SEGA’s efforts have been delayed.
Certainly we’ve missed the deployment in Garake, development of a native application, such as “Kingdom Conquest” was ahead of its time. I’m not in the position to say it, but Sega Networks as a Company of SEGA Games is strong. Such as the Arcade development teams behind “Chain Chronicle” (AM1 Labs.), their hit game is alive.
Long ago in the fighting game genre, racing game genre, and so on… “territoriality” there was a presence for these genres in every department.
Nowadays in the company, there is no strange consciousness among departments. The first place is to straddle the format as a matter of course, synchronization such as the arcade with smartphone games, everyone has them considered as a commonplace. It is useless and cannot be both.
Development of “Shenmue 3” seems backed by SCE. But “Shenmue” is still a Sega IP, do you have considered any support initiative of the sort?
Certainly “Shenmue” is a very important IP, as well for SEGA, it is a title that has affected a lot of games. In a closed world, you can go anywhere, it can be anything, and It was a pioneer the open-world genre. Yu Suzuki san has a strong desire to create a “Shenmue 3” game. He will be able to create the game people have been waiting for. Of course, even now SEGA has a lot of contact with Yu Suzuki. We have continued to support “Shenmue 3” too.
A keynote lecture was held at the Tokyo Game Show by the CESA chairman. Exhibition contents were compared to the old days even though much has changed dramatically, I think there was not a surprised fraction.
What was symbolic is that a large number of foreign companies have pulled out of the domestic market. Not only on console games, the companies that had huge booths increased in the smartphone games sector. Such as CESA itself to integrate itself with the JASGA at the end of last year, we have continued to change in accordance with the new tendency. Also new companies appeared, and there are new platforms around. Originally because SEGA was a former hardware manufacturer, we were a quasi-member of the long CESA, changes to the software producers this time were appointed as the responsibility of the president. Eventually he was appointed to the industry turning point in many ways and I think that helped us.
The expectation from the old fans is big for such an icon as Okamura san. Finally, towards the fans, please comment.
I don’t think myself as an icon. However, we are very grateful to our old fans and costumers, we hope to properly meet this expectations. We aim for SEGA to be a unique experience as it can be.
[Photos and interview via Inside Games, translated by Köpke]