Sega's Ambitious Plans

Sega of America's president and COO Simon Jeffery believes his company might finally start seeing the pay-off of its strategic moves in the last several years this holiday season. Could be. Sega's timing is perfect.
Olga Kharif

I just talked with Simon Jeffery, president and COO of Sega of America, the company that, four years ago, abandoned its gaming hardware to concentrate on gaming software. For Sega, it's been a long a torturous path (Jeffery calls it "teething troubles"). But Sega believes it might finally start seeing the pay-off of its many strategic moves over the past couple of years this holiday season.

Sega, which has long specialized in family and children's titles (Sonic and Super Monkey come to mind), is about to go after the hardcore gamer market. Now is certainly the right time to do that, as next-generation gaming consoles are about to come out. Microsoft's Xbox 360 is coming out next week, and Sony's new PlayStation should be released in 2006. Sega is hoping to take advantage of this hardware transition to expand into a new market -- and become a top-5 video games publisher in the U.S.

Already, this week, the company is coming out with a new psychological thriller game, "Condemned: Criminal Origins," for the Xbox 360. Based on the screenshots and what Jeffery tells me about the game, it should be really neat. Characters not operated by the player are equipped with artificial intelligence, so they may act differently every time you play a level. Say, you enter a room carrying a gun. The enemy character found within might then run out of the room screaming for help. If you had entered the room unarmed, that characted might have attacked you, instead.

It's this kind of neat capabilities that Sega hopes will catapult it from its current position -- it's not even among the top-10 game publishers in the U.S. -- to a top-5 position within two to three years, says Jeffery. That's certainly an ambitious goal.

But then, why not? Lots of other publishers targeting hardcore gamers are suffering from a severe case of sequelitis. Most of the titles out there are sequels or remakes. And retail sales figures show that hardcore gamers have cooled off on those. And, as Jeffery points out, "the current gaming audience has grown up with Sega games, we see almost an emotional connection to our games that we want to capitalize on." Sega plans to come out with two more games for the Xbox 360 games in the first half of 2006.

But the company could start moving up the charts this Christmas. Electronic Arts, Activision and other gaming champs should beware.

Before it's here, it's on the Bloomberg Terminal.