Sammy tells Sega to focus on arcade

Sammy president and CEO Hajime Satomi has told Bloomberg Japan that he wants Sega to concentrate on the arcade games business and be more strict about pouring money into loss-making home console releases, news which is likely to further inflame Sega's loyal fanbase at the end of a tumultuous week for the venerable games publisher.

Not only does Satomi-san hope Sega will increase its arcade output, but he also hopes Sega will make use of Sammy's Atomiswave system, a low-cost, cartridge-based, JAMMA-compatible arcade setup that runs on the same CPU as Sega's Dreamcast console and Naomi arcade systems. "It's low cost enough that even a single play at 10 yen a game can turn a profit," he said this week. "We can sell it in third-world countries as well."

Although the news will have Sega fans up in arms, it's only a reflection of Sammy's own focus on profit. As a business decision, the logic is plain to see. In its last reported six-month figures, Sega posted a massive loss - 2.5 billion yen - in the home console business, which was only offset by a similarly gigantic 5.6 billion yen profit in the arcade sector. Its home console titles continue to review relatively well, but Sega has clearly struggled to harness that critical momentum.

Sammy's ambition puts Sega in an awkward position. Whether or not the company agrees, by purchasing a 22.4 per cent stake in Sega from one-time parent company CSK, Sammy has become Sega's largest shareholder, with Satomi-san, who owns over 50 per cent of Sammy, now the company's largest single shareholder. It's only a matter of time before Satomi-san is elevated to the board - with a meeting scheduled for February 17th effectively to install him in an advisory capacity - and he's already said that "if [Sammy's] vision does not agree with that of Sega then we might have to consider taking more shares." Which sounds an awful lot like executive speak for "Struggle and we'll just squeeze harder."

Following events this week, Sega is reportedly planning a special shareholders meeting in the next few days to discuss Sammy's recent acquisition of CSK's stake. Meanwhile, other reports suggest that Sammy will soon attempt to appoint two of its executives to Sega's board, one to head up arcade and one to handle home entertainment. However the full scale of Sammy's plans for the publisher has yet to emerge, and Satomi-san has already said he "won't rule out the possibility of making [Sega] a subsidiary." We'd advise Sega fans to hold onto their stomachs - the worst could be yet to come.