Sega Namco...hell no.

[Baroque]

This is a bad deal.

What we have here are two companies who can?t seem to get their cash flow sorted, one of them who now thinks it to be a good idea if Sega performs a leveraged buyout. You don?t end up with a single strong company in that case; you end up with a massive mess.

Both Namco and Sega would have to fire at least half the staff of "the new Sega" in order to bring their costs in line, and fold significant portions of their arcade business to eliminate overlap. And when all is said and done, the new Sega still ends up as a dwarf when compared with its larger competitors.

Square Enix was different as Enix effectively picked up Squaresoft for a bargain price and dipped into their cash reserves to eliminate Square?s outstanding debt.

A Sega Namco deal would involve an already struggling Sega taking Namco on board, and such an action carrys a massive risk of sinking Sega completely.

Sammy is a better fit because it?s another Square Enix, with the cash rich Sammy absorbing Sega, using it?s reserves to eliminate Sega?s debt and streamlining the operation so it can continue on, this time with a profitable arcade financial base, and growth opportunities in the console market.

Sega Namco would be the equivalent of two drowning men clinging to each other instead of trying to swim, or having someone throw them a life jacket.

This is it my friends, in my ?Chill wind? thread I asked if we are entering a recession in the gaming industry, and such insane ideas of consolidation is always a sign of nasty things to come.

Namco?s public declaration of intent is the wrong way to approach a merger, the stock may have shot up but if the deal went through you?ll watch it fall later, as after talking the deal up institutional investors short it, and then dump the stock, earning a tidy profit but screwing the smaller investor.

This is a very bad idea.

You don?t merge or look to be acquired by a company which is only doing slightly better than you are, you want to be picked up by someone who is doing a lot better than you are.

This changes the game inside Sega slightly though, where factions inside Sega might have been looking towards MS or EA to step in and pick them up, the idea of going it with another Japanese company may be very appealing.

Even if we hear or it or not, I?m guessing one of the side effects of Namco?s public courtship will be a rise in interest in picking up Sega.

No matter, in order for Sega to be in any real way attractive would be if you could just pick up the development teams, the rest of the company is just dead weight.

[Concept]

Sorry the idea of Sega cutting itself up and its development teams going here, there and everywhere doesn't appeal to me. It'd be like vultures picking up the prettest bones on a dead corpse.

[Baroque]

Sorry the idea of Sega cutting itself up and its development teams going here, there and everywhere doesn't appeal to me. It'd be like vultures picking up the prettest bones on a dead corpse.

Sega is on it's way to being a dead corpse unless they do something very smart, very very quickly. The arcade business, which is a core revenue driver for Sega is currently in a coma and their well-hyped console offerings have been under performing.

After two years of shopping the company around to anyone with deep enough pockets it's time that they either put up or fade out. Sega has proven time and again over the past decade that it is either incapable or unwilling of turning itself around. They had Dreamcast, Isao's stock investment, the spin off from CSK and a move to multi-platform and they ****ed everyone of those up.

Sega can be turned around, it always could have there just isn't anyone with enough balls running the show to take the drastic steps it would require. They are only slightly in the red so it?s not like they really need the money.

Sega don't even have a brand any more, the guy in the street draws a blank these days when they hear the word Sega. This was the company with the Sega scream, and 'To be this good takes ages', now what they hell are they? Nothing.

Trying to shop the company to someone else is a cop out of the highest order. They choice is change or have someone else change you, Sega want someone else to change them, and it's pathetic.

[snowman]

well i'm sure most people would knwo who sega where if you wen't upto them and asked.
I would bet a honest pound of my money a good 70% of them would tbh!!!!!

[Popo]

They had Dreamcast, Isao's stock investment, the spin off from CSK and a move to multi-platform and they ****ed everyone of those up

what do you mean here? It seems to me like Sega release, year in year out, some of the best games on the shelves, but people don't buy them. I don't really think that's Sega's fault.

Is this about advertising again?

You're saying that Sega needs to "turn itself around" through "drastic steps" - what are these steps? If you're not saying what needs to change and how, you're just quoting rhetoric.

I'm no financial analyst, but you've not stated the facts in your first post about the how and why both Sega and Namco are currently in financial bad shape - again, to me, this just seems like unsubstantiated rhetoric.

Either that, or you're just assuming we're all privvy to the necessary detailed information required to draw such circumstances, which we're not. I don't think it would be fair to judge a possible merge between the two either way at the moment, especially considering that the details of such a plan have not been revealed yet.

[Molloy]

Sega's management is and always has been an utter mess. A buyout by Nintendo, Sony or Microsoft would do them the power of good. They're only heading for a horrible mess the way things are going.

I get the impression Sega are going to have a big push this year with a multiformat Sonic Hero and 16-bit franchises. Probably won't do much good though.

[Baroque]

[quote="Popo"]The "rehetoric" as you call it was for brevity, and no one doubts Sega's talent for designing quality games. what's questionable is Sega's complete inability to actually sell them properly, and their inability to grasp the nettle and solve their own problems.

Not being so brief now, if I was appointed CEO of Sega right now. I'd spend sometime evaluating the current and future product line up and the profitability of their current assets.

Audit:
Everything would fall into one of the following categories. Profitable, Not Profitable or Not Profitable but Strategic. Profitable speaks for itself, Not Profitable items would be put to the sword, and Not Profitable but Strategic would still receive funding but only under the circumstances that they have a significant upside for the company in other areas.

Development:
This spin off development house idea (Sonic Team, AM2, Smilebit, Amusement Vision, WOW, and so on and so on), all with their own budgets and project approval is a load of nonsense. All of these devco's should be clawed back inside Sega and someone should be appointed director of software. We've seen good titles from Sega come to market and flop at retail, then through some insane logic the title gets a sequel and it flops again, losing the company even more money. That's just stupid and shows a lack of control on the company's part.

I'd also reduce the volume of titles developed per year, there is no reason Sega should spend so much money developing a raft of titles which gamers don't appear to be buying. Find the gems and promote the hell out of them, you can always get to the others next year.

Sega have also developed the nasty habit of supporting almost every conceivable platform, before it's even been proven there is a market for that platform, and then getting shafted when it either fails or in the case of the Motorola smart phone, doesn't even make it to market. That practice has to stop. Sega have mistaken the idea of third party for the role of platform whore, and it isn't working.

Right now the only platforms Sega should even consider supporting are PS2, GBA, and one other current console. PS2 & GBA should the company's primary focus if they can make money hocking games on another next gen console then go for it, but only support it to the level of it's user base.

Arcade:
Sega's entire method of doing business in the arcade market would have to be changed, after getting the rest of the company in a working fashion I'd be looking for Sega amusements to globally set the standard for the arcade business, slowly opening arcades inside territories which due diligence says can support them.

This would involve initially opening a few Sega arcades in prime locations in the US & Europe and establishing them as the de-facto arcade standard. They'd have to provide better experiences than any other arcades westerners have ever frequented. I'd be looking at New York, San Francisco & London initially with a larger presence slowly creeping into the US, but not many in total.

These mega-arcades would be wired to each other, have projection facilities for press conferences, product launches & demo's and each arcade would have it's very own Sega store where customers could pick up copies of Sega's games, and the top games from other vendors, for the duration of the opening hours of the arcade.

What I'm thinking is that you could perform global product launches in these places, broadcast from one and display on the others. Imagine showing up at midnight, watching Yu Suzuki discuss the latest Virtua Fighter live (or taped earlier) direct from Japan and then actually getting your hands on the first units available in the territory. Throw the gaming press in there and you got yourself a party, where the customers are footing the bill.

Or how about tips from gaming experts on a particular games available to play in the arcade. If you're getting creamed at F-Zero by your friends, show up to the session on a weeknight and then have a hardcore F-Zero instructor give you tips on how to better your lap-time as you play the game in the arcade. Next week it could be a dance game, or a fighter or whatever. This helps add a social & learning element to what usually is a get em in, push em out business. and the best thing is that the customer is paying for every game the instructor is leading them through.

Sega are one of the few company's who can re-invent the arcade business, but they have to do so from a leading position. The arcade has to become more than what it is right now in order to survive, and anyone who's willing to spend the money and be smart about what they are doing, can tap into a massive demand which to date is undernourished.

Sega has everything it needs internally to turn itself around, except a CEO with the sheer force of will to make it happen. Everything up until now has been half hearted measures and excuses followed by two years of trying to sell the company and pass the buck to another company, make it their problem. Namco are in the same boat and I'd bet anyone that just like Sega, Namco tried to pass itself off to Nintendo but Nintendo balked for the same reason it balked on Sega, too much exposure to a withering arcade market.

Advertising
What advertising?
Sega devalued their brand during the Dreamcast era by pushing the name of the console over the name of the company. It was Dreamcast this and Dreamcast that when in the end the name Sega was all that was to survive. Sega need to go back to their roots and find their MegaDrive/Genesis edge. Advertising which trigger memory's of the MD/Genesis days would help Sega immensely. Advertising their games would also help, if a Sega game is overlooked or ignored it's usually because Sega didn't o a very good job plugging it to people. Look at Rez, if someone actually picked up the box they probably put it down very quickly judging by the sales numbers.

Sega should be targeting the publications former MD/Genesis lapsed gamers now read, not necessarily lads mags either. Sega needs to associate it's name with the illusion of a better time in gaming, dusting off "To be this good takes AGES" and the Sega scream wouldn't be a bad thing either.

Money!
As of their last publicly available set of numbers in 2002 Sega turned a profit of just over $0.6M dollars on declining revenue, and was carrying just under half a million in debt. Now lets remember that Isao's gift of stock to Sega shortly before he passed away eliminated the bulk of Sega's debt and contributed to that $0.6M, so even though Sega's position may not appear to be a bad one, it isn't representative of how the company was actually doing.

Namco according to it's numbers in 2002 lost about $16K but has not turned a profit since early 1999, is carrying some substantial debt as well as facing a large decline in sales since 2000.

So we can't judge the health of Sega, but their comments after NFL2K didn't fly off the shelves lead me to suspect that things could be much better, and we know Namco has been ill for at least the past three years. The situation we have now is Namco want's Sega to buy Namco, while Sega want's someone else to buy Sega.

How does putting two companies who are looking for someone else to pick up the tab make decent business sense unless one of them is quickly willing to cannibalise the other? It doesn't.

If Sega bought Namco, they'd have to rip the guts out of both Namco and themselves in order to make the new venture work. In this equation 1 + 1 = .65
If Sammy were to buy Sega, Sega would remain largely intact as Sammy's exposure to arcade video games is limited while they have a tiny console development operation, all that and Sammy is flush with cash.

If it could be done, I'd be very interested in seeing a three way merger. Namco merges with Sega, Sega then merges with someone else.

The problem is that in the current economy I don't think anyone who has the cash would be willing to stump up the money required to pull off such a deal.

I still don't like the idea of a Namco Sega deal, both of them have serious issues as companies, and I don't think Sega has the money nor the balls to pull it off correctly. I think it'll only serve to create a single company which will go under faster than the two alone.

If Sega had the balls they'd have buckled down to getting their on business running properly years ago, instead of spending so much time trying to pawn the company off on someone else. They've shopped Sega around to anyone with a large bank balance over the past three years, and every single person they've offered the firm to has passed, except Sammy.

Microsoft passed on Sega -twice-, what does that tell you about Sega?

It tells me that only Sega can pull itself out of the ****, but they just won't.
That's weakness, and the weak are acquired and devoured, it's the strong who find the will to go it alone and later find themselves in the position of the buyer, not the seller.

[Chadruharazzeb]

Can you imagine what a force Sega Namco would be in the arcades though? Arguably the two most important arcade game makers of the last 10~15 years would be immense. Granted the arcade scene ain't exactly huge outside Japan, but they'd make a killing there. Some of the potential franchise cross-overs would rake in a penny or too also - VF and Tekken springs to mind as once such example

Both companies have made pretty much duplicate games for the home and arcade market for ages now (VF/ Tekken, Virtual Cop/ Time Crisis, Initial D/ Ridge Racer, Air Force Delta/ Ace Combat etc), if they pooled their resources and ideas the games could show a marked improvement, not that quality has ever been an issue from these two anyway.

I'm suprised Sony haven't made a move to go for Sega tbh, and if they don't go for Sega Namco to gain a decent starting line up for the PS3 then they are fools.

[Neon Ignition]

What about taking the best of all worlds?

In October Sega could merge with Sammy. By next April they could then also merge with Namco. The new Sega could then sell some of its valuable shares to EA who according to rumours are interested in marketing Sega's games for them. Sega would be Japan's number 1 games company and with EA marketing for them it could work out nicely.

That probably won't happen but it seems quite nice in theory.

[JU!]

Judging by all the stuff i have been hearing, Sega are definetly gonna merge or be bought by somone. Are they really that badly off?

[Baroque]

Judging by all the stuff i have been hearing, Sega are definetly gonna merge or be bought by somone. Are they really that badly off?

No they are not, they have been in dire shape before but always came through. It's like the board have just given up and want to hock the company so they can turn a quick profit for the shareholders.

If Sega were bought by anyone, it's Sega which will suffer when they start ripping it's limbs off as the buyer digests the company.

Sega have the talent and the ability to go it alone and to thrive, they just don't have the will and as such the entire outfit is in freefall.