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Article Title

Date of Article

Sega Re-Structuring at Risk

March 21, 2000

Namco To Close 50 Arcades

March 3, 2000

101 Bln Yen for Sega

March 2, 2000

Aruze Also Buys Sigma

February 1, 2000

Aruze Buys SNK

February 1, 2000

Aruze Profits Up 31%

February 1, 2000

Namco, Sega Invest in SGI Div.

January 10, 2000

New Sega Games Look Good

December 18, 1999

Namco/AOL Japan Tie Up

December 10, 1999

Sega To Spin Off R&D

November 30, 1999

Namco Sets Up R&D School

November 30, 1999

Taito Set To Record Loss

November 17, 1999

Konami, Sega on Bad Terms

November 15, 1999

Sega Unveil "18 Wheeler"

November 11, 1999

Namco File Against Konami

November 9, 1999

Namco/Hitachi in Joint R&D

November 9, 1999

New Taito Flight Simulator

November 4, 1999

Namco R&D Subsidiary

November 4, 1999

Sega Found Guilty of Unfair Dismissal

October 20, 1999

Osaka Court Rules Used Game Sales Illegal

October 14, 1999


(updated March 21, 2000)

Low Share Price Threatens Sega Re-Structuring

Shares of Sega Enterprises Ltd. finished at JPY2,225 in Tokyo market trading today (March 21), much less than the 2,816 yen price the company has set for its planned private offering of new shares.

The planned capital increase would greatly improve Sega's cash position but the company may have to review its restructuring plans if the share price remains low.

Sega is faced with the redemption of about 88 billion yen of convertible bonds in September this year. It had cash reserves of 92.1 billion yen at the end of September 1999, but these have been dissipated by poor operating results. Sega expects to incur an operating loss of 33.8 billion yen for the fiscal year ending March 31.

(updated March 3, 2000)

Namco To Close 50 Arcades in Japan

Namco plans to reduce the number of game arcades it operates directly by about 10% by March 2002. The company at present operates around 450 arcades and aims to reduce this number to about 400 within two years. Of its present arcades, 70-100 locations will be closed with 20 new arcades opening.

Namco also plans to close 15 sales offices around Japan as part of its restructuring program. The amusement division's gross operating margin at present is 8% and Namco wants to raise this to 15%. The closure of sales offices is predicted to give savings of 2 billion yen per year while the closure of unprofitable arcades is expected to improve earnings by 3-4 billion yen.

(updated March 2, 2000)

Sega To Get 101 Billion Yen in New Capital

Sega announced on February 28 that it will issue 101.3 billion yen's worth of new shares through private placements with its parent company CSK Corporation and CSK chairman Isao Ohkawa. This will take place on April 3.

The capital injection became necessary due to flagging sales of Sega's Dreamcast console. Sales of the console were initiallly forecast to reach 1.1 million in the second half of the fiscal year but the target is now only 600,000. Similarly, game software sales are expected to total on 4.3 million against initial targets of 8.75 million. This means that Sega's home video game division is expected to incur an operating loss of 39.6 billion yen for the fiscal year, more than 20 billion yen more than expected.

With flagging domestic sales of the Dreamcast game console, the video game machine maker expects to post a 35.3 billion yen net loss in the current fiscal year ending March 31, far exceeding the 10.9 billion yen loss forecast earlier.

CSK Corp. and Ohkawa will each purchase 18 million new shares raising CSK's share in Sega to 24.5% and Ohkawa's to 13%.

(updated February 1, 2000)

Aruze Also Buys Sigma

Aruze Corp. has announced that it intends to acquire 4.35 million shares of Sigma Inc. for 1.68 billion yen, which would give it a 61.4% share in Sigma. Sigma operates over 70 game arcades in Japan as well as manufacturing coin-op gaming machines.

Aruze, which is a large pachinko machine manufacturer, will purchase the stock from Sigma President Katsuki Manabe and other top shareholders, with the deal due to be complete by the end of February. Aruze also wants to buy 2.5 million new shares for 950 million yen.

Aruze's goal is use the profits from its pachinko machines to develop a new business section operating amusement centers as a new source of earnings. It bought Osaka-based game software developer SNK Corp. earlier this month.

Aruze Buys SNK

On January 18, Aruze invested five billion Yen in SNK, thereby effectively taking over the company and making it its subsidiary. According to Aruze's news release, both companies intend to cooperate in the development and sales of coin-op and home video games as well as the operation of amusement arcades.

Aruze's long-term plan is to become an all-round amusement company and the buy-out of SNK gives Aruze entry into the amusement business alongside its pachislot and pachinko machine businesses.

Aruze 3rd Q'ter Profits Up 31%

Aruze Corp. posted Yen 20.7 billion in pretax profit for the period October to December 1999, up 31% from the same period last year. However, due to sluggish sales of pachinko machines, revenue for the quarter was only 35.6 billion yen, much lower than the forecast of 42 billion yen.

Aruze sold only 23,000 pachinko machines, much lower than the forecast of 85,000 units. However, with strong sales of pachi-slot machines, Aruze is expected to reach its full-year target of 140 billion yen in sales and 70.9 billion yen in pretax profit.

Yubis Seeks Protection of Courts

Yubis Corp., one of the largest amusement machine distributors in Japan, closed its doors on January 18 and filed for protection against its creditors to the Osaka District Court. Debts are estimated at five billion Yen.

Major Namco Arcade Opens In Kyoto

Namco opened a large-scale entertainment facility in Kyoto on December 22. The new arcade "Namco Wondercity Kyoto-Minami" has an area of 9,000 square meters making it the largest arcade in Kyoto. The facility includes a video game arcade and billiard hall on one floor called "Plabo Kyoto Minami" and tenants on the othr floors including hamburger and sushi restaurants.

The facility has parking for 250 cars and Namco are expecting 2.4 million visitors a year and sales of 2.1 billion Yen.

(updated January 10 2000)

Sega Parent, Namco Invest in SGI Graphics Div. Spinoff

Sega's parent company CSK Corporation and Namco are have invested in Silicon Studio Ltd, the graphic contents division spun off by SGI Japan Ltd. The new company will leverage SGI's advanced digital technology in creating movies and video games. The new company is aiming for 3 billion Yen in sales in fiscal 2000.

The new company is capitalized at 210 million yen Company employees hold a 40% stake with the remainder being held by SGI Japan (19%), Sony Computer Entertainment Inc. (10%) CSK Corp. and Sumisho Electronics Co. (5% each), and Creek and River, Namco, Gaga Communications Inc. and CRC Research Institute Inc. (2% each).

(updated December 18 1999)

New Sega Games: Virtua NBA, Virtua Tennis & "18 Wheeler"

Sega held private shows throughout Japan in November to highlight the following three new games:

"18 Wheeler": this is a driving game with an 18-wheeler truck theme. The player uses a large truck steering wheel to traverse his truck across the US of A racing against other truckers. Looks very good, 10-4 good buddy.

"Virtua Tennis": this is called "Power Smash" in Japan. Sega used motion-capture technology to put the likenesses of top pro-tennis players into this tennis game. Price in Japan is JPY258,000 and release is December.

"Virtua NBA": this is a 5-on-5 basketball game based on a licence from the NBA. The game includes actual players' likenesses and play-styles. Again, looks good.

Namco & AOL in Internet Tie-Up

AOL Japan are to feature Namco's "X-Day" games on its internet game arcade. The games were developed for the internet by Prohouse under license from Namco. "X-Day" checks the player's level of abnormality, life expectancy, lovability and other juicy tidbits. Price per play is between JPY100-300 but AOL members just pay the connection fee.

(updated December 6, 1999)

Sega To Spin Off & List R&D Divisions, Follows Konami Example

In an effort to control spiralling game development costs, Sega intends to spin off its nine video game development divisions into independent companies. The top-performing subsidiaries will be eventually listed on the numerous new Nasdaq-style stock exchanges now appearing in Japan. Sega intends to complete the spin-off of the divisions by April 2000.

The nine R&D divisions employ around 900 people, accounting for a quarter of the company's total work force. One of the nine divisions will be sold to CSK Corporation, Sega's mother company, for approximately 4-5 billion yen and Sega expects to list half of the remaining eight divisions on the stock exchange by 2002.

Delays in developing new video game titles have lead to development costs skyrocketing to 30 billion Yen per year which has severely hurt earnings. The company is forecasting a net loss for the present fiscal year, its third year of losses in succession. Spinning off the divisions is expected to reduce Sega's development costs by 20-30%. While the new subsidiaries are expected to become self-supporting, it is not clear if they will be free to develop games for companies other than Sega.

Konami enjoyed windfall profits from the spin-off and listing of its subsidiary Konami Computer Entertainment Osaka in Spring this year.

Namco Follows Konami Lead in Establishing R&D Training Centre

Namco plans to set up a training centre for video game developers in Spring 2000 in cooperation with Digital Hollywood Corp., an operator of game design schools in Japan. The centre will be called Namco Digital Hollywood Game Lab and will be located in Yokohama. The courses at the centre will be aimed at programmers who already have experience of basic computer graphics and will be six months in duration. Namco then plans to hire 30 graduates a year. The aim is to save on the in-house training period that new recruits usually have to go through before they can contribute to the company.

This step by Namco mirrors the training centre that Konami established in Kobe and which has been providing Konami with a regular stream of top-quality young game designers that have been behind the company's recent run of hit games such as Beat Mania, Dance Dance Revolution, Silent Scope and Thrill Drive.

(updated November 19, 1999)

Namco Sue U.S. Firm Over Pac-Man Copies

On November 18, Namco filed suit against the Texan company Two-Bit Score Amusements. Namco brought the case to the U.S. District Court in San Francisco and is seeking an injunction to prevent Two-Bit from manufacturing and selling what Namco call copy circuit boards of Pac-Man video games. According to Namco, Two-Bit Score Amusements had been selling the boards over the Internet.

(updated November 17, 1999)

Namco Profit Falls Over 40% in 1st Half

Namco Ltd's mid-term results for the period up to end September 1999 showed a drop in sales of 14% to JPY48 billion and steep fall in pretax profit of 42% to JPY2 billion. Namco blames the poor results on lower income from its amusement centres and lack of hit consumer software.

Taito To Suffer Loss For Year

Taito seem set to post a loss of JPY3 billion for the current fiscal year up to March 31, 1999. The main reason is the poor sales of the home video game "Go By Train 2". The game was released in March 1999 and while initial sales were good at over 500,000 in the first month, they tapered to a meager 20,000 copies in the subsequent months.

In addition, Taito's other main business areas, arcade operation and karaoke machine leasing, are also mired in a slump.

(updated November 15, 1999)

Konami & Sega Hopping Over Music Games

Konami are making lots of money in Japan at the moment but not many friends. They are embroiled in lawsuits with Namco and Jaleco and are refusing to supply any of their popular music machines to Sega.

The reason Konami are not selling their games to Sega is in response to Sega refusing to sell Virtua Fighter 2 to Konami several years ago. Several are trying various routes to get their hands on "Dance Dance Revolution" and other popular Konami games but with little success.

One operator in northern Japan advised us that they had bought one unit of "Dance Dance Revolution" for Sega. One day after Konami technicians installed the machine at their location, they took it out and sold it to Sega. However, they received a visit from the local Konami salesman the following week who demanded to know where the machine had gone. Upon learning that it had gone to Sega, Konami promptly closed their account with the operator and are refusing to sell them any more games.

(updated November 11, 1999)

Sega Unveil New Driver "18 Wheeler"

Sega held a private show on November 9 in Tokyo where they unveiled a new truck-themed game "18 Wheeler". The player drives a big 18-wheeler truck. Looks pretty good and plays real nice, good buddy.

(updated November 9, 1999)

Namco Claim Konami Infringes Patent

Namco filed a patent infringement lawsuit against Konami at the Tokyo District Court at the end of October. This is the latest in the ongoing tit-for-tat, and very un-Japanese, legal wrangling between Konami, Namco and Jaleco. Namco are claiming that a baseball game for Playstation that Konami released in summer this year contains elements that infringe a patent that Namco registered in January 1998. The patent concerns a mini-game that the player can enjoy while the game is booting up.

Konami originally filed lawsuits against Jaleco and Namco over Jaleco's DJ music game "VJ" which Konami claim infringes the originality of its "Beatmania" game and another lawsuit against Namco claiming that Namco's "Guitar Jam" game infringes Konami's "Guitar Freaks" originality.

Namco Develops 8-player Simulator with Hitachi

Namco and Hitachi Ltd. have jointly developed an 8-player arcade game simulator for use in theme parks and large amusement facilities. Software for the machine will also be jointlly developed bythe two companies. The machine is a capsule-shape and has a three-meter wide digital projector screen. Each player position will have individual controls so that the movement of the simulator will depend on the combined action of the players. The simulator is over 2 meters high with a base area of 12 square meteres.

The machine will be installed at Namco's "Wonder Egg" theme park in Tokyo from early december 1999.

(updated November 4, 1999)

Taito To Release New Flying Simulator

Taito are set to release "Landing High Japan" at the end of 1999 in Japan. Overseas release is not decided and with the title the way it is, it is not going to be an easy overseas sell. The game is similar to "Landing Gear", Taito's earlier flight simulator but this time the airports are all Japanese.

Namco Set Up R&D Subsidiary

Following on the heels of Konami, Namco have set up an independent R&D subsidiary Monolith Soft Ltd, based in Tokyo. Namco are investing 90% of the capital and two ex-employees of the major Japanese software house Square are investing the remaining 10%.

With the setting up of Nasdaq Japan and other similar start-up stock markets in the near future, the industry is likely to see more companies spinning off sections of their operations in the hope of attracting venture capital.

Monolith Soft will concentrate on the development of role-playing games for Playstation 2.

(updated October 20)

Sega Found Guilty of Unfair Dismissal

On October 18, the Tokyo District Court ordered Sega to re-instate and pay compensation of JPY3.2 million to an employee the company had dismissed for alleged "poor performance". The court justified its decision saying that the company could have improved the employee's performance through training.

There is a myth of lifetime employment in Japan, particularly regarding large public-quoted companies. The myth says that once you are in, you are guaranteed a job for life. Foreign companies have often had problems finding staff in Japan because the expectation is that the foreign company will close its Japan office at the first whiff of a downturn in the Japanese economy.

In this court case, it came to light that Sega had tried to get the man to quit voluntarily. This would have preserved Sega's myth of "lifetime employment". The methods used are embarrassing for Sega. The man was confined to Sega's so-called "Pasona Room", a room with no windows, a single telephone and nothing else. Those ordered there are not allowed to bring any personal belongings such as a magazine or a book with them. They are not given any work to do and if they want to leave the room, they must first get the permission of the personnel department.

Under normal circumstances, the employee confined to this room will resign voluntarily and Japan Inc. can continue to boast of its caring attitude to its staff.

(updated October 14)

Osaka Court Rules Used Game Sales Illegal

In a complete turnaround from the decision of the Tokyo District Court in May of this year, the Osaka District Court ruled on October 7 that the sale of used game software was illegal.

The re-sale of cinematographic works is prohibited in Japan so cases concerning the legality of re-selling used video games tends to come down to whether or not video games should also be considered cinematographic works.

In arriving at its decision in May, the Tokyo District Court ruled that video games are interactive and as such, the player can affect the sequence of images on the screen. As such, the court decided that video games are not cinematographic works and acknowledged the right of retailers to sell used video games.

However, in its ruling of October 7, the Osaka District Court decided that video games were in fact cinematographic works and acknowledged the right of the video game manufacturers to control the distribution of products, including used products.

In the Osaka case, the defence argued that the protection of cinematographic works enshrined in the Copyright Law was only meant to apply to theatrical movies which are distributed through movie theatres. They argued that it does not have any application for consumer video games which are mass-marketed to the general public and directly consumed by them.

While it would appear that the matter of whether a Japanese judge thinks a video game is a cinematographic work depends on which side of the bed he got out of, the fact that the Osaka judge completely disregarded the findings of the Tokyo court makes you wonder if the notion of precedent applies in the Japanese legal system.