Interview with Sega COO Hisao Oguchi

Interview with Sega COO Hisao Oguchi
Bryan Chuang, Taipei; Steve Shen, DigiTimes.com [Thursday 16 December 2004]

Sega Corporation made the shocking decision in early 2001 that it would cease production of its Dreamcast online game console and instead focus on developing software titles for use with its former rivals’ game consoles, including the PlayStation 2, GameCube and Xbox. Company president and COO Hisao Oguchi spoke with DigiTimes about the flexibility this strategy afforded the company, and he also spoke about Sega’s goal of becoming the world’s largest provider of game software.

Q: Sega is now a major producer of arcade games, but your company also vowed to become the world’s largest developer of game software. How far has Sega gone toward achieving that goal?

A: Sega aims to start by becoming the world’s third-largest vendor of home-use game software and then move on to become the world’s largest developer of game software. We have developed online games targeting a variety of markets, including China, Europe, Taiwan, Japan and the US, and we have also established R&D facilities in China because of its market potential. However, we have not yet reached our targets.

Q: Sega decided to transform itself into a game software developer in March 2001. What was the impact of this decision on Sega’s development?

A: The decision to discontinue production of the Sega Dreamcast was the right choice. I believe it is a huge risk to invest in the development of a new hardware platform for game consoles. The shift to software development allowed Sega to concentrate our resources on our core competency.

As a designer myself, I think the software business is much easier to navigate than the hardware market, and a lot more fun.

Q: South Korea companies now dominate the software market for online console games in Taiwan and China, but some vendors in Taiwan assert that games related to Chinese martial arts and historical figures are likely to become the mainstream, and Korean companies are facing a creative drought. What is your opinion?

A: In addition to creativity, software development needs to satisfy commercial needs. Sega tailors the development of each of our games to the national, ethnic and cultural aspects of the various target markets. However, although there is a cultural gap between Asian and Western societies, it does not mean that people in Asia will only play games related to their own cultural background, and vice versa.

We do have research teams in Japan, the US, Europe and China developing new games based on the characteristics of the different cultures. Our next-generation online multiplayer game, Shenmue Online, which is scheduled to be launched next summer, is a good example of such efforts.

Q: Many game software developers prefer to focus on online games to avoid having their products pirated. Did Sega decide to develop game software with concerns about this?

A: Counterfeiting of home-use game software is very serious in Asia, especially in China. The most heavily anticipated games are already available in China the day after they are released in Japan. As a result, online games are attractive for software developers in Asia, as counterfeiting is so rampant.

Q: There are rumors that Sega might be acquired by Microsoft as Sega has long been a supporter of the Xbox. What are the next moves for Sega?

A: Many people have spoken about the close relationship between Sega and Microsoft, but the two companies have never discussed an acquisition or merger. However, there are many companies interested in Sega, and we also would be interested in other companies that have growth potential. Just recently we acquired the Japan-based Sammy Corporation, and we also have an interest in acquiring Taiwan software companies. During this trip to Taipei, we found that Xpec Entertainment and Interserv International both have good products and a talented staff.

Our investments will be targeted at companies that can help us keep pace with the industry, such as helping us produce products for next-generation platforms and high-performance PCs. New platforms such as the PlayStation 3 and Xbox 2 will likely be launched in 2005, and software for portable consoles is also expected to grow vigorously.

Q: Microsoft’s Halo 2 is a multi-million project. Does Sega also have such capital-intensive software development plans?

A: Sega’s strategy is very clear, and we will not commit blindly to huge investment projects. Instead, we invest and develop new products gradually, based on our expertise and assessment of market trends. For instance, the Dragon Crest-series online game has been developed steadily and is now in its eighth version. By developing our products in such a way, we have been able to build up an online user base, while also supplying a reasonable income for operators. Halo was developed under the same model, and many enthusiasts are looking forward to Halo 3.

Q: What will be the major events for the industry in 2005?

A:With the introduction of next-generation consoles such as the Xbox 2 and PS3, software design houses will be required to put more manpower and capital into developing new games to cope with demand. So I think that there will be no room for small-scale design houses to survive in the software market for these consoles. However, small-scale software companies may be able to shift their efforts into developing games for handsets or Nintendo consoles.

Q: Sega recently obtained a seven-year license to use Osamu Tezuka’s comic book content. What is the significance of this license agreement – how does it fit in with Sega’s overall strategy?

A: From a business point of view, the costs of the original games created by design houses are much cheaper than licensed products. Licensing fees are very high, so the period required to see a return on investment needs to be relatively long. Overall, we aim to reach a balance between original and licensed games, although the development of original games will remain our main focus.

Q: Some have criticized Sega’s sports games as being too similar to those from Electronic Arts (EA). Will this situation continue?

A: We also noticed this problem and so decided to reorganize our research team in November of this year. We will focus our development on games that are different from EA games in style and features.

Q: Does Sega have any plans to participate in game shows in Taipei?

A: We expect demand for our products to continue to expand in Taiwan. We also aim to establish an amusement center in Taiwan. The amusement center will serve as the best platform to showcase the creativity of our company. Internet cafes in Taiwan are also ideal locations to display our software.

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Not too much of interest...except that part about the introduction of Xbox 2 AND PS3 in 2005.  We knew about Xbox 2, but the introduction of PS3 as well?  

Nice interview

Although I believe Sega has great potential these are just nice sounding words.Their recent games lack when compared to other succesful titles from other developers.

Whats Sega\'s last original and hugely succesful game?

Also their work with PS2 shows some lazy work.The only game from Sega I ve seen using PS2\'s potential was VF4.Other titles dont even reach what they offered on DC

No Shenmue, no Nights, and their last Sonic game was just good but sucks on the PS2.I ve sen outrun in the arcades and it cant even match Burnout2 IMO

Most recent games involve remakes of old titles, or not so great efforts on original Sega titles.