Sega Cash Reserves During the Console Years

[OriginalName]

I was wondering if anyone could point me to some resources which spell out Sega's financial situation during their console years. It's easy enough to find current earnings reports and sales figures, but is there any good information on what kind of money they actually had in the bank during that time period? Everybody knows they were drowning in the red during the Dreamcast's lifespan and that they weren't turning a profit with the Saturn, but I've also read (from a source I unfortunately can't find -- I believe that it was on the old Eidolon's Inn, so it might be preserved in the "Service Games - The Rise and Fall of Sega" book since that's basically an expanded version of that article) that the untold story of the Sega Genesis is that in order to turn it into a marketing success, Sega of America ultimately had to spend more money on promotions and commercials than they were actually making on the console, which garnered the ire of Sega of Japan. So, with that in mind, not only did they seemingly come into console gaming with a relatively small bankroll and a couple of small, dingy offices, but they actually spent those entire two decades operating on that same meager cash and less.

There are a lot of frustrating misconceptions about Sega that sites such as this one, for instance, are constantly having to clear up just to make it through even the most routine articles. It's hard to escape the bogus notions that Sega started making consoles after Nintendo ("copying them"), that Sega "lost" the 16-Bit war, that the Sega Saturn had no redeeming qualities, that Sega only has and only will make Sonic games, et cetera... I can't think of very many companies inside or outside of video games that are more misunderstood and misrepresented.

However, if I'm to understand that the history of Sega is not so much "They had money and they lost it" as it is "They never had money to begin with, but pretended like they did for as long as they could", this completely alters the Sega narrative in ways those aforementioned details can't touch. Yes, Sega did mess up in the mid-90's, but if their financial situation truly was never anything but dire throughout, their history has to be told in a completely different tone: compared to Nintendo and Sony these guys were hopelessly broke, but became a face of the industry in spite of that (just because they felt like it). Can you really "fail" if financial success was impossible from the beginning?

It raises so many questions... how on Earth could such hideously expensive projects like the early Virtua titles (produced on simulation hardware purchased from the US military), Sega Channel, Joypolis, and SegaNet, let alone full-blown multi-media ad campaigns, televised promotional tours and events, and Saturday morning cartoons have ever even been considered? People criticize Shenmue for having an overblown budget, but it seems like Sega's very existence was predicated on an overblown budget! These people were insane!

I really want to write about Sega from this angle, but I can't find the data I need so far. Can anyone help me out?

[Kori-Maru]

I believe Aki-at, our financial report contributor for SEGAbits, can answer your question.

[jonboy101]

I was wondering if anyone could point me to some resources which spell out Sega's financial situation during their console years. It's easy enough to find current earnings reports and sales figures, but is there any good information on what kind of money they actually had in the bank during that time period? Everybody knows they were drowning in the red during the Dreamcast's lifespan and that they weren't turning a profit with the Saturn, but I've also read (from a source I unfortunately can't find -- I believe that it was on the old Eidolon's Inn, so it might be preserved in the "Service Games - The Rise and Fall of Sega" book since that's basically an expanded version of that article) that the untold story of the Sega Genesis is that in order to turn it into a marketing success, Sega of America ultimately had to spend more money on promotions and commercials than they were actually making on the console, which garnered the ire of Sega of Japan. So, with that in mind, not only did they seemingly come into console gaming with a relatively small bankroll and a couple of small, dingy offices, but they actually spent those entire two decades operating on that same meager cash and less.

There are a lot of frustrating misconceptions about Sega that sites such as this one, for instance, are constantly having to clear up just to make it through even the most routine articles. It's hard to escape the bogus notions that Sega started making consoles after Nintendo ("copying them"), that Sega "lost" the 16-Bit war, that the Sega Saturn had no redeeming qualities, that Sega only has and only will make Sonic games, et cetera... I can't think of very many companies inside or outside of video games that are more misunderstood and misrepresented.

However, if I'm to understand that the history of Sega is not so much "They had money and they lost it" as it is "They never had money to begin with, but pretended like they did for as long as they could", this completely alters the Sega narrative in ways those aforementioned details can't touch. Yes, Sega did mess up in the mid-90's, but if their financial situation truly was never anything but dire throughout, their history has to be told in a completely different tone: compared to Nintendo and Sony these guys were hopelessly broke, but became a face of the industry in spite of that (just because they felt like it). Can you really "fail" if financial success was impossible from the beginning?

It raises so many questions... how on Earth could such hideously expensive projects like the early Virtua titles (produced on simulation hardware purchased from the US military), Sega Channel, Joypolis, and SegaNet, let alone full-blown multi-media ad campaigns, televised promotional tours and events, and Saturday morning cartoons have ever even been considered? People criticize Shenmue for having an overblown budget, but it seems like Sega's very existence was predicated on an overblown budget! These people were insane!

I really want to write about Sega from this angle, but I can't find the data I need so far. Can anyone help me out?

I remember they were about a five billion dollar company in 1994 (which is about how much they're worth today, after the merger, etc.). They certainly were not faking it until they were making it in the early to mid 90s. 

[OriginalName]

Interesting, jonboy101... I could definitely see that being that case, I just wish I could find some sort of documentation to back it up either way. What tends to confuse me (and a lot of people) though, is what is meant when someone says that such and such is an $X company. I don't know if that refers to just what's in their bank, or if that's the appraised value of their properties. Not that I'm trying to hard-headed, I'd just like something that spells it out clearly if possible. I know that CSK Holdings was definitely a multi-billion corporation, which might explain away any a lot of my questions, regardless.

I think I'll also PM Aki-At, Kori-Maru. Thanks for the tip!

Thanks for the replies!

[Centrale]

What tends to confuse me (and a lot of people) though, is what is meant when someone says that such and such is an $X company.

In the case of a public company like Sega, they are referring to market capitalization.

Sega has always had multiple revenue streams, and in the 80s and 90s they were one of the most successful manufacturers of arcade machines. They definitely had the money to go all out in the 16-bit era.

[ROJM]

They had three sources of funding. The revenue that they were receiving via their company's products, investment options and CSK.
CSK was really Sega's treasure trove or nest egg..because its founder, Isao Okawa (may Sega bless his soul)was always willing to give them the cash whenever they needed it or bail them out whenever they were in trouble. No doubt he more likely helped them steer the course during their early years as a consumer console manufacturer when the earlier systems and specifically the Master system really weren't gaining ground in two of the bigger markets apart from Europe. Because of this especially during the DC period i find Sega japan could take the risks in developing any type of game they wanted because they had a backer that would help them out. But now they don't as the company is very strict in their money reserves and only goes for a more safer option which currently means their main focus is on Japan only as far as SOJ is concerned.