The Future of Sega In the Wake of the Microsoft-Activision Deal
When the news of the Microsoft-Activision $68.7 billion deal broke, it sent shockwaves throughout the gaming industry. This record-shattering acquisition was not only the largest video game acquisition ever, dwarfing the $12.7 billion purchase of Zynga by Take-Two, but also the largest tech deal in history, surpassing even the Dell-EMC $67 million acquisition from 2016.
Such a drastic restructuring of the video game market sent other gaming companies scrambling to adjust their goals and strategies for this Brave New World or plan acquisitions of their own. We’ve already seen Sony’s response, which was to buy the Destiny and Halo (but not Halo Infinite) developer Bungie for $3.6 billion.
While Sega isn’t exactly on the level of Sony and Microsoft when it comes to revenue, it still stands among the richest companies in the industry. Fans and analysts are left wondering what will the beloved developer and publisher do to stay competitive in this upended market. Will Sega decide to purchase one of its smaller competitors, create new and revive old IPs, or become an acquisition target itself?
Abandoning Tradition or Ditching Dead Weight?
The first move by the Japanese company after the Microsoft-Activision deal was announced was to sell off remnants of its arcade business to Genda (also known as GiGO). Sega already sold 85% of shares to GiGO in 2020 due to COVID-19 impact on the arcade market, and announced it’ll be selling off the rest of the arcades to the same company in 2022.
Arcades were conceived as one of the core aspects of Sega’s brand, as it’s what helped the company gain recognition. Sega’s arcade history in Japan stretches back to the late 1960s and the fact that it’s completely leaving the arcade business came as huge news. Not only were the fans in disarray, but this move is also sure to significantly alter Tokyo’s visual identity, as the recognizable SEGA neon light signs strewn across the city will be replaced by GiGO’s.
While arcade fans certainly weren’t pleased with the news, the general public’s opinion on the move was split. To some, it appears as the company is selling everything apart from its life support systems in order to stay afloat and profitable next to cash-rich competitors.
Others interpret the move as removing dead weight in the form of an unprofitable sector which would prevent Sega from truly focusing on other projects. Other signals and developments seem to show the latter is the case.
Expansion to Western Markets
Throughout its history, Sega has mostly focused on the Japanese market. Both during its Sega Genesis and Dreamcast days and during the newer generation console era, a good portion of the most popular games the company created or published newer saw the light of the day in the West.
This included smash hits like Segagaga, Yakuza, Valkyra Chronicles, Phantasy Star Online, Bayonetta, and others that did not initially release in the West. This is one of the reasons why many Sega fans flocked to gaming-optimized VPNs in order to purchase or play Japan-only releases.
Things have thankfully changed in the last decade. Sega has started releasing many of its most beloved series in the west too, and with great success. Games like Yakuza and Persona, with their unique and quirky appeal, found a lot of fans in the new market. The repeated successes of their western releases should motivate Sega to consider further expansion into the European and North American markets. As the company already vowed in 2021 to aim for simultaneous worldwide releases, it seems this was the company’s line of thinking too.
The RTS Renaissance
The RTS (Real-Time Strategy) genre has been until recently in a very sorry state. Games were few and far between, as no company wanted to invest in a genre where monetization is so difficult. Unlike other types of games, RTS titles can hardly fit in a live service model, which seems to be all the rage currently.
The only vibrant RTS series around was Total War – a game developed by CA and published by Sega. The latest successes of this franchise are largely due to the release of the Total War: Warhammer series, which unsurprisingly drew huge interest. Warhammer games are in high demand, even though a WH-themed game seems to come out every month. Keep this in mind as we’ll come back to it later.
In the last year or two, several high-profile RTS games came out, as if heralding a rebirth of the RTS genre. New Age of Empires, Settlers, Stronghold, Iron Harvest – all these games drew a lot of praise and attention. Another sequel of a cult RTS franchise is coming out too – Company of Heroes 3.
CoH 3 is developed by Relic Entertainment and published by Sega, which bought Relic from THQ for $26.6 million back in 2013. Judging by the previews of the game, which is set to come out this year, it will be a great addition to the CoH series.
Relic is also behind a popular Warhammer game franchise – Dawn of War. While the third installment in that series proved to be somewhat of a disappointment, Sega would be wise to make further use of the Dawn of War franchise. Therefore, I wouldn’t be surprised if a new addition – or a remake of the first two installments – gets announced soon. Indeed, there’s already hush-hush talk on the Internet that it may be in the works.
To conclude, Sega’s potential honey pot for the foreseeable future could be RTS games & Warhammer – possibly combined in one product.
Gotta Go Fast
Probably the most popular and lucrative Sega’s IP is the ever-present Sonic the Hedgehog. Besides pumping out Sonic games, Sega has landed deals to create the Sonic 2 movie and a Sonic Netflix series. On top of that, Sonic games will be playable in new Tesla cars, which is bound to bring more visibility to the Sega brand.
Sticking to Sonic is the safest play Sega can make, and there’s really no reason they should let it go, as it’s still both very popular and profitable.
Lastly, Sega itself has stated that they plan on doing some acquisitioning themselves. In the company’s annual 2021 report, they said that they consider investing nearly $1 billion into game development capabilities in the next few years, as well as into the potential acquisition of other game companies.
In that report, Sega stated that they wish to release a major global title in the next few years, hinting at utilizing one of their existing IPs.
As it stands, Sega has several routes towards expansion and growth at its disposal: increasing attention to western markets, utilizing their talented RTS studios like CA and Relic to create RTS and Warhammer games, continue banking on the popularity of Sonic, and potentially buying a fruitful game studio.
Only time will tell what Sega will actually do (my guess is: all of these things), but one thing is almost certain – they won’t be in arcades anymore.