EA In Talks For Sega Partnership

Thanks to an anonymous reader for pointing out a Reuters report (via Yahoo News) that Sega have received an offer from Electronic Arts to form a North American sales alliance. The information, which comes from new Sega boss Hisao Oguchi, is scant on the actual details, but could be anything from a partial buy-out to simply a publishing alliance, with Oguchi saying "We have been badly beaten in the U.S. consumer video game market... If we can't resolve this on our own, then it's better to join hands with someone." Sega are still considering the deal, which could easily go the way of Sammy and Namco's failed discussions, and also denied rumors that Microsoft are interested in taking a stake in the company.

Comments

The new possibilities

[AndyAMPohl]

I guess Sonic the Hedgehog will be on the sidelines in Madden 2005! I'll buy it.

AP

Why, Sega Why?... Ok, I know why, but still!

[Painaxl]

I understand Sega's financial difficulty (meaning I understand that they have some, I'm not that good with business models), but why would you consider partnering with your biggest U.S. competitor in the very market (sports) that you've invested most of your North American development in? To me, this just doesn't make any sense.

They need to cut loose from Sega America

[Gizzmonic]

Sega America is the largest source of problems for Sega Japan. In the early to mid-nineties, SoA's CEO Bernie Stolar's "it's a different market" idea kept most of the Saturn's best games from reaching US shores.

During the Dreamcast era, SoA CEO Peter Moore played (mostly) the same fiddle. Sports titles received close to 100% of advertising money (most of the rest went to the flop called Space Channel 5). He let the DC fold with a whimper as soon as the PS2 was announced. Post-DC, his advertising spending spree cost SEGA millions in losses (I don't remember seeing a football game commercial break without a commercial for NFL2k3).

Sega of America has never made a good game (besides Toe Jam and Earl). Their marketing has hurt Sega a great deal. Working with EA, a company that understands the US market, would be great for both parties.

Re:They need to cut loose from Sega America

[Albert Pussyjuice]

Well, isn't it a different market? It seems to me that the biggest hits in Japan haven't always been the biggest hits in North America. I haven't checked out the global market much. I'm curious though.

Was GTA a big hit in Japan? Was it even sold there? I remember reading about Dance Dance Revolution being a huge hit in Japan and only being a niche market in North America (although, I seem to see Dance Dance Revolution everywhere I go). Does someone have a table of top ten selling video games for N. America and Japan? I would bet that a lot of the games would not match. I know that EA's line of FIFA games does very well worldwide BUT is overshadowed in N. America by many games.

Are sports games a big market in Japan? I'm going to go do some research on this topic.

Re:They need to cut loose from Sega America

[Babbster]

I don't disagree that SoA has made questionable decisions but pumping their sports games is necessary if they want to continue publishing them given EA's constant domination in that market. Despite the fact that the people who have played both 2k3 and Madden 2003 believe 2k3 is the superior game, EA continues to lead the market simply on the basis of name recognition and marketing.

Re:They need to cut loose from Sega America

[Gizzmonic]

During the 2003 season, I didn't see a single commercial break in any football game which did not include an NFL2k3 advertisement. And I watch a lot of football.

That type of exposure costs millions. And when Sega of America has to decide between continuing to spend tens of millions on this ad campaign (which obviously hasn't worked) and cut the budget by 50% and promote a variety of games, they've decided to continue the saturation advertising. And in my opinion, that's the wrong choice.

Re:They need to cut loose from Sega America

[Babbster]

How does it help to advertise 50% less and advertise many games instead of a few (or one)? Your logic - and more importantly your understanding of advertising - is flawed. The objective of television advertising is mindshare, making more people aware of your product. If you can't do that with ONE game and a ton of advertising, how do you do it with "a variety of games" and half as many ads?

Besides, companies try to market products to people already inclined to have interest in the product. It's an obvious choice to advertise your NFL video game during actual NFL games. Would you have them instead advertise it during tennis matches where the ad rates are much lower but fewer viewers will even care a little bit?

It's also important to take into account future sales of the product. A great many of the people exposed to the NFL 2k3 name during football games last year may have already gone with Madden and so were unlikely to buy a second game for that season. Some of those people may have been all but completely unaware of Sega's product (considering that 2k2 and before appeared first on Dreamcast, and the multi-console versions of the 2k2 games were near-straight ports of the DC games) and will check out the Sega line next year. If that happens then Sega may yet reap the rewards of their "saturation advertising." Again, it's all about mindshare, present and future.

Re:They need to cut loose from Sega America

[Gizzmonic]

I don't appreciate your tone. I am not a marketing genius, however I do have a background in communication theory. But here on Slashdot, we're both just pundits. The only difference is that one of us is an asshole about it.

Mr. Marketing Genius, you are arguing what communication theorists call the "magic bullet" theory. In other words, people receive a communication, and they decide to act on it. The louder you broadcast, the more people will hear.

If it was as simple as this, then the sales for games would be directly proportional to money spent on ads. "Blinx the Timesweeper" would top the charts, while Zelda wouldn't have sold anything. New Coke would still be on the shelves.

Tell me, what's the exposure difference between "An NFL2k3 commercial during every break" and "an NFL2k3 commercial during every commercial break, in Monday night games only." There's something called decreasing marginal utility, you should look it up.

What are SEGA's best selling games? Sonic the Hedgehog and Virtua Fighter. Both games had great pedigrees, and modest advertising campaigns. What other highly marketable and original games has SEGA passed on advertising (Jet Set Radio, Beach Spikers, House of the Dead 3) to splash on more football advertising? Is it worth $10 million? Would that money be better spent developing more games, or advertising others? "Don't put your eggs in one basket," is what i mean.

Re:They need to cut loose from Sega America

[Kris_J]

What's particularly stunning is that pretty much any avid video gamer will tell you that sports titles don't sell as well as non-sports titles. Major liquidations of stock will ultimately leave the retailer with a bargain bin full of only sports titles. Sell games on eBay and the sports titles will consistently get lower prices than the non-sports titles. Yet for some reason some executives just don't give the non-sports titles a fair go.

As a seperate point, language translation aside, we wouldn't have to worry about what to and what not to make available in a particular country if it wasn't for damn region coding. The Gameboy does fine and it doesn't have region coding, why can't we shake it off the consoles?

Re:Why, Sega Why?... Ok, I know why, but still!

[Albert Pussyjuice]

I'm going to play fast and hard with numbers here so watch out if something doesn't quite add up but anyway...

let's suppose Sega Sports spent 10 dollars on development to corner 33% of the sports game market. Now, EA spends 10 dollars to get their 33% of the market, leaving 33% for Company X. Now, with a business alliance, Sega can throw in 5 dollars and EA can throw in 5 dollars to get 66% of the market. Or, if we want to get nuts, both companies can throw in 8 dollars and use some of the excess for advertising in order to get a bigger chunk of the pie. Sega can spend less on development and get more profit by this alliance BECAUSE even if they get a smaller chunk, they can spend less money due to the alliance.

At least that's my guess - although I'm not any kind of MBA so I could be wrong and will be replied to as such, I am sure.

Understandable from EA's point of view

[Kethinov]

Seeing as how EA has been getting a record number of people complaining and quitting from their recent Ultima Online rate hike, I can see why EA is looking for a corporate partner to lean on.