Why You Should Take a Business Lesson from SEGA

You remember SEGA. In the early 1990s, they were on top of the world. They were the “other” Nintendo, and for about a decade they went toe-to-toe with Mario and company on the battlefields of retail. So how can they help your tackle store?

The legacy of SEGA—their rise, fall and future—is an important lesson in when you should change your own business strategy to survive.

[divider]An Icon is Born[/divider]

Those of you not intimate with the video game industry might still remember SEGA’s signature mascot: Sonic the Hedgehog. Sonic was the anti-Mario. If Mario was the family-friendly video game, Sonic was the teenager riding a skateboard in the mall listening to the Sex Pistols. Sonic was a blue, sneaker-wearing blur that helped SEGA sell 40 million units of their video game console, the SEGA Genesis. That number was just 9 million units shy of Nintendo’s hugely successful Super Nintendo Entertainment System (SNES), and it racked in millions of dollars while positioning SEGA as an industry leader in their field.

In 1991, SEGA Genesis sales were soaring; Nintendo’s U.S. market share dropped from 90 percent to less than 50 percent. SEGA was playing the role of the ultimate market disruptor, and they were winning.

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But by 1995, the Genesis was growing old. Consumers were ready for a product, and SEGA’s follow-up console, the Saturn, was a flop. Nintendo’s first 3-D console, the Nintendo 64 was still a year away from its 1996 launch, and a gap was left in the industry.

That gap would prove to be a fatal blow for SEGA when Sony introduced the Playstation to North America in the fall of 1995.

SEGA—once king of the video game mountain—was stuck at base camp when Sony started to climb. And Sony would never look back.

By the late 1990s, Sony would reach the peak of that mountain—ahead of Nintendo, and out of sight from SEGA, who was relegated to a distant third place. While the Playstation went on to sell over 100 million units, the once mighty industry innovators at SEGA were rallying for one last fight. SEGA was a console company, and they were determined to build another console that would mirror the success of the Genesis.

[divider]Enter Dreamcast[/divider]

On September 9, 1999, SEGA launched their successor in North America. And they weren’t screwing around. Partnerships with Lockheed Martin, The 3DO Company and Alliance Semiconductor combined to produce what was at the time the most technologically advanced gaming system on the planet. It was called the Dreamcast, and it was lightyears ahead of both old rival Nintendo and newcomer Sony.

In 24 hours, the Dreamcast brought in $98 million.

By Christmas, SEGA had climbed from the bottom of the mountain to an over 30 percent market share. SEGA, it seemed, was back. However, not all was as it seemed.

To counter SEGA’s momentum, Sony—who was still the overall market leader—revealed plans for a new Playstation, and that announcement is widely credited with derailing the Dreamcast permanently. SEGA was still selling their new system when the Playstation 2 debuted, but they faced a choice: risk it all in a head-to-head war with Sony (a company with far deeper pockets and market share), or fundamentally change as a company.

They chose the latter.

Less than two years after the Dreamcast had positioned SEGA as a resurgent player in the console game, the company announced the discontinuation of the product. SEGA was changing direction; they would no longer make video game consoles. Instead, they would be creating games for their old rivals at Nintendo.

Sonic was branching out.

The announcement rocked the video game industry. I caused studio heads at SEGA to walk out, necessitated the layoffs of a full third of their Tokyo workforce, and fundamentally shifted the company’s focus.

It also saved them from destruction.

[divider]A New Life[/divider]

12 months after the life-altering announcement, SEGA showed a net profit for the first time in five years. At around ¥3 million, it was a shadow of their ¥28 million heyday in 1993. However, it was a start. And that is how the legacy of SEGA can help your store.

The market is always changing. Truthfully, it changes more slowly in the fishing industry than the world of high-tech video games, but the signs are still there. Sometimes, even a fishing tackle store needs to re-think the way it operates.

  • Are there ways you can incorporate online sales into your revenue stream?
  • Are you doing everything you can to make sure you build customer loyalty?
  • Is it time to let go of an old product or business practice and start something new?

Challenge yourself to ask those questions. Talk about them with your business partners and co-workers. Find a way to create your own tide—we’ll help, if we can.

Today, SEGA is still making games for Nintendo … and Sony, and Microsoft. They’re bringing in over $4 billion a year with profits of over $740 million, and they’ve even carved out a new niche as the market leader in an old mainstay—arcade machines.

Today’s lesson: never be afraid to re-invent yourself. “Okay high roller? It’s time to make some real dough…”