Disclaimer: The views in this piece may not reflect the views of TSS or other writers on the staff team. The intention of The Spin is to promote debate and discussion of an issue or something that’s happening in the fandom or the world of Sonic & Sega.
I have seen a number of comments, both on and off TSS as well as articles and forum posts both on and off TSS lately regarding the health of a certain company and a certain videogame icon. This has since increased following news regarding Sonic Booms sales figures. There seems to be an interesting if not unexpected reaction going on, it seems that if you are a member of a website or a commentator on a news site, or even a hired writer, everybody seems to have or be giving ‘their say’ on what’s going on and why it’s happening.
Well… I can do this too. But how should I do it?
Should I be like the alarmists? Write an article that says Sega is dead? That Sonic is dead? Should I do like some other websites are doing? That’s easy, just latch onto the popular opinion, say the same thing, watch how popular belief promotes the subject?
Or should I do it like those places which have an editor who hires a writer and says “Sega announces downsizing, I know you have no experience with them or their games, but write an article which somehow links one poor game to their downsizing.” Because that does happen, not just in the world of video games, but also in other journalism, editors hire freelance writers or house writers to write a story on something with a certain angle. Do they really look into the subject matter? Not really.
I could do that, it would be very easy, just take two things, link them together, make a snappy catching headline, watch the clicks come in.
Not sure that is the best way to go about it.
There have been two news stories in under a month which some people are mixing together, or somehow thinking they can explain one by the other. I’m not sure that’s quite how it works.
Boom is the Reason why Sega is downsizing?
Shall we get the obvious out of the way? Boom the game is terrible, it is, it’s terrible, if you think it’s not, you are wrong, don’t even bother challenging this in the comments, you are wrong even the executive producer has more or less admitted the game has problems.
On top of that. Sega predicted 600,000 units sold, it halved those predictions to 300,000 to one month before release. Based on North American NDP data and Sega’s own financial statements, we know that a conservative estimate for the Wii U version would be somewhere around a low 200k, if even that.
So… that’s the reason why Sega of America is downsizing?
I get it, I understand how some people think it works. They think that somewhere at Sega, there is a man, or a machine which prints out how well something did, this is then taken to the CEO or someone who has absolute power and suddenly something happens.
That’s not how it works, nor has it ever worked like that. Maybe if you are an indie or small developer and this is your first game, all your money is invested into it, then this happens, but for a company like Sega, that is not how it works.
How does it work?
This is a very rough example, my numbers might not be completely accurate and the description may vary, but in any organisation, you have a structure which looks like this.
- Board Members = people who are thinking 5-10 years ahead.
- Upper Management = People who are thinking 3-5 years ahead.
- Management = People who are thinking 1-3 years ahead (if even that).
So you have guys who are making decisions and plans to affect the business 5-10 years ahead. guys making plans for 3-5 years and the rest. In an ideal business which is making money and doing well, this all works and a company can go for a long time.
Here is the problem with the thinking ‘Boom caused this.’
Boom came out in November. The downsizing announcement came end of January… barely 2 months.
Take the belief for a moment, “Booms poor reception caused Sega to downsize”
Think of this logistically, not if it’s true, but as a logistical thing… here are the steps you need to go through.
- Collect Boom sales data.
- Process Boom sales data.
- Analyse/evaluate Boom sales data.
- Estimate/evaluate future sales data
- Draw plans based on that prediction/future sal…
Ok stop it right there. How long do you think that takes? You need to collect data, process it, then analyse it and work out what it means. You can’t do this in a day, this process takes a while. Depending on your data collect range, it can vary greatly.
So let’s do something else now, let’s say, Sega have in place a plan which they bring into effect if something happens, be it a really bad few years, a dramatic shift in consumer demand or… something, anything which would impact a company like Sega which means they need to downsize.
Whatever event that is has just happened… initiate the plan… Wait… Who seriously thinks that this would be completed in just a day?
From my understanding, if Boom is the sole reason, then this is how it works.
- Sega Boom is released worldwide
- Sales data is collected, processed and analysed, Boom bombs (this is your major event)
- Sega arrange and hold several (no way is it done in one) extremely top level meetings.
- A decision is made to cut jobs/close parts of Sega Sammy.
- A decision is made to close SOA
- A decision is made to re-locate SOA.
- A decision is made on the new location for SOA
- A decision is made on the new building for SOA
And according to some people, all this happened in two months?
All of this requires a lot of data processing, it requires a lot of business analysis, there is no way you can do all of this in two months.
Let’s just look at one part of that, Sega is going to relocate to a new premises. How long does this take just to find and pick a site. From my understanding this is probably an accurate series of events.
- A list of sites is drafted up a based on a number of factors.
- That list is shortened.
- A visit to each site is conducted.
- A that list of sites is shortened.
- A second visit is done.
- That list is shortened/a site is picked (depends on the business/location).
- Dialogue opens between business and the building owner/landlord.
- Dialogue opens with the intent to buy/rent the building.
- Details of dialogue fed back to board/upper levels of the company.
- Contract/agreements are drawn up.
- Both the landlord and company send contracts/agreements to legal team.
- Company board agrees to the terms/authorises the money to buy building/agree to the rental contract.
- Landlords legal team agrees to the terms.
I’ll stop there shall I?
How long do you think that takes? Months is the answer, not weeks, months. Remember about two years ago when Aaron Webber and Kellie Parker went on that roadtrip and were posting tweets of Sonic in different cities in America? And everybody thought it was a game announcement? Only it turned out to be scouting for a venue for the Sonic Boom Event? That trip took a week, then the announcement came a few months later.
Think about how long it takes to find a new headquarters for a global office… that is going to take a while.
But the main delay is the negotiation with the landlord and the scrutinising of the contracts with the legal team, this process can take weeks if not months depending on the detail.
Yet some people believe that it took 2 months and Boom is responsible? And that’s without factoring in rival parties also interested in the building?
Do you start to see the point here? Do you see the problem? How can Boom be the reason when from a pure logistically standpoint, it couldn’t have been the reason. This decision was not made in two months, this decision was made long before Boom came out.
“Well they knew Boom would Bomb so…”
You now might be thinking “Well they knew Boom would be bad, so they pre-empted their losses and made the decision then.”
Your right, they did know Boom would bomb, hence the sales prediction reduction, however if that were the case for the downsizing, how do you explain the following huge purchases being made.
- 1: Sonic movie deal.
- 2: TV Show/movie deal.
- 3: Acquisition of Atlus.
- 4: Sonic Boom.
- 5: Plans to have an online store for Football manager merchandise
- 6: Plans to stock that Football Manager store with merchandise specially commissioned.
- 7: Football manager movie/documentary.
- 8: That theme park thing which some thought was a new console.
- 9: Acquisition of Relic.
Some of those are very recent, all of them are expensive with some being several million.
Does this sound like a company who is in financial trouble?
On the one hand, “We have no money so must downsize” on the other “Let’s spend millions and invest into television and the film industry.” This makes absolutely no sense. You would not buy Relic, you would not be making movies/documentaries and you certainly wouldn’t be getting involved with a theme park.
So why are they downsizing?
Because the videogame industry is changing, like it or not, the industry is changed, it’s happened quite rapid and radically, but it’s changing and if you don’t think it’s time for a wakeup call.
Compare the industry today to how it was when the PS3 and Xbox 360 came out. it’s so different, most people wouldn’t believe it. We now live in a time where the mobile market has overtook the console and won’t be touched for a very long time.
How do you get games on mobiles? Digitally.
The PC era was once considered dead by the high street retailer, now there isn’t a single one which doesn’t sell Steam vouchers.
Playstation Plus subscriptions continue to expand, it’s popularity has more than shown people are more than open to digital games.
Microsoft’s Games With Gold effectively tried to copy PS+, a move unthinkable 2 years ago.
And Nintendo… … … well they’re taking the Skylanders route for now. But you can bet they’ll have some kind of digital subscription service soon, especially with the closure of their loyalty thing.
The physical retailer isn’t dead, but it’s not going to last in its current form, or it’s going to radically change.
You want proof of this? Ok. Go into any GAME, or if you live in America, whatever your major video game retailer is and just look at it. Look at what they now sell. My local store is considered a ‘flagship store’ it has huge statues of characters from Skyrim, Sonic, Fallout and Lara Croft, all positioned next to… toys. My local store, a flagship store is now full of toys and merchandise, Skylanders toys have their own huge section, videogame merch is vast, Amiibos now have double the store space of the entire Wii U game section. And digital codes have their own section too. Actual games… that floor space has shrunk, it’s still the dominant, but it has noticeably shrunk.
Think I’m wrong? Here are some stills from a random youtube video from 2013 showing a typical GAME store in the UK.
We start by entering the store. Notice the PS4 section on your left, the Xbox 360/One section on the right… the middle two isles? Well…
Skylanders & Disney Infinity… Those two isles are full of toys, not videogames… but wait, what’s that slightly further down the middle isle?
Even more Skylanders toys, with movies above them. You can just make out the video games along the left and right wall.
This is supposed to be a computer game shop, yet it’s full of toys and accessories, they take the prime space, not the games. This was late 2013, since then, we have a new Disney Infinity and I’m pretty sure Skylanders have expanded and now we have a potential amiibo space in that store too.
Who still thinks game stores only sell games? Who still think that games are given the main focal points of the store?
What does this have to do with Sega?
Let me ask you a really simple question. A question which should be very simple to answer.
What does Sega of America actually do?
They make games?
Do they? Can you name me one game that Sega of America has made? I can’t. Maybe if I went through their entire catalogue I could find one game which Sega of America have made, not published, made.
Think about those random cancelled Sega games which pop up every year, the Streets of Rage remakes, the Golden Axe reboot, even Castle of Illusion, none of them were made by SOA.
So what do they do?
If you put aside marketing for North America, they act as a publisher for physical retail titles… and that’s about it. Ok if anyone from Sega of America reads this, I don’t mean to be insulting with that, I know that there is some Q&A which goes on and lots of community work (though technically this is promotional). But if you are an outsider looking in, this does look like it’s the only thing that SOA does, publish and promote… within North America only.
They’re not making content, they’re promoting and distributing it.
Spot the problem yet?
Here we have an industry which is more focused on digital titles and distribution, which retailers are giving less and less space to physical products, yet we still have a main HQ who deals in the distribution of physical products and promotion?
This can’t last. So long as the industry is moving more and more towards digital distribution, as well as console gaming becoming less dominant, a company whose primary focus is physical distribution and promotion in one region will have to radically adapt.
In fact, have you taken a look at who is affected by the downsizing?
120 people from Sega of America, primarily publishing (not the full 300 as many people are claiming).
180 from Sega of Japan (primarily the arcade side of the business).
It is not as many believe “300 people from SOA lost their job” It’s split between SOA and SOJ. What do these jobs/roles have in common? They are positions which are hard if not impossible to transfer over to a digital focused future. Why would they remain?
Think about this for a moment, Boom bombs, a SOA project… so why is the Japan side affected by this? Really isn’t a good business practice if your SOA project fails so the SOJ branch takes the bulk of the damage. Boom is never the sole or primary reason for the downsizing.
In fact, the title of this article is wrong, drop the ‘America’ from the title, focus it on just Sega, but low and behold, given fan and media reaction and ‘spinning’ of the news, everybody forgets the Japanese arcade branch, we all think those 300 jobs are from the US and due to a certain Blue Hedgehog who wears a scarf.
Have you heard the phrase “It’s nothing personal, just business?” This is it in action, if Sega was your business, you have to keep it running, you have to adapt as well as compromise as your market changes, this is that in action. Sega is changing to meet the market, a digital one, a market which goes to the game store to buy special physical editions and toys.
“But Boom is a failure!”
So maybe this should be its own edition of ‘The Spin’ but I keep seeing this being brought up when people discuss Sega’s downsizing. Boom is often being used as a scapegoat for Sega’s decision to downsize and some have said it should be completely scrapped altogether, as if that will make things all better again.
Here is my problem with that, I’ve already explained that Boom was unlikely the reason for Sega’s decision to downsize, though I suspect it didn’t help their bottom line, take away the fact that Sonic Boom is the worst selling Sonic game ever, because shock horror, people don’t buy terrible games. You are left with the following.
- Comic Book.
- TV Show.
Something strange is happening… the Comic Book is apparently selling really well and getting a lot of good feedback. The TV shows is doing remarkably well, it’s continuing to get very good ratings and viewer numbers, the drop-off is far below what is expected for a show, even the fan reaction for each episode is overwhelmingly positive, this is unheard of for a Sonic cartoon.
As for the merchandise, it’s a bit too early to say, but as a litmus test, if you take the TSS reports/tweets on stuff spotted at toy fair, again it’s positive.
Boom the game/s = Horrible in all areas.
Boom the idea/everything else = surprisingly positive/good/decent.
I would not like to be the one who tries to pitch Sonic Boom 2, especially due to the fact as a game the brand ID is poison, but as a brand, Boom is actually doing a lot better than it should be given how terrible the game was.
Why would they cancel it when based on all reception, the show, the comic and the merch, the main pillars of the franchise are actually doing pretty good?
Edit: In order to be as up to date as possible. The time between finishing this article, formatting it for the web and posting it, new data was released which does in fact show the comics have had an audience drop off.
Make of that information what you will, though they might see a slight increase if the megaman cross over event is successful.
And what of Sonic?
I don’t understand the following…
Sega said, “We are reinforcing Sonic to generate stable profits” in other words, Sonic is getting more focus and attention in order to generate a good revenue.
So why are so many people saying “Sonic is dead” and to another extent, “No more Sonic games.” Erm… they just said the exact opposite. Sonic isn’t going anywhere, there’s nothing to suggest there won’t be any more console games or Sonic games for that matter. What that digital/PC thing is freaking out some people? Well guess what, that’s the direction this industry is going, odds are if we still have a console industry in 10 years time, the only reason you’ll go to a retailer is for a special limited edition game, or a physical toy to use Skylanders/Disney Infinity/Amiibo style with your game.
You either adapt, or you decline, Sega are starting to adapt, let’s just hope they actually follow through with their adaptations.