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Shoichiro Irimajiri Speaks: A Conversation with the President of Sega
by Steven Kent for Gamers Today
Executives around Sega admit that they are in a tough spot. Company debts have reached an estimated $3 billion, their Dreamcast game console has not caught on well in Japan, and in recent weeks analysts have downgraded the ratings on their bonds.
If this situation sounds bleak, consider what's ahead. Dreamcast may have the same size processor as the next generation consoles coming out of Sony and Nintendo next year, but performance shows that the Nintendo and Sony consoles will be able to render 20x more polygons per second than the Sega machine. (It should be noted that performance reports are often misleading, and Nintendo has not given any specific information about their system's capabilities.)
Polygon- and particle-rendering aside, Sega has an excellent new game console on its hands. It also has a smartly orchestrated U.S. launch, with the strongest launch and first-year line-up in the history of video games. Sega also has a loyal following--though it has certainly diminished from its glory years of 1994-5--that considers it the final word in video games. Shoichiro Irimajiri, president of Sega Enterprises, Ltd., has heard the questions about Sega's woes so often that he no longer flinches when he hears them. He has got answers as to why Sega can win, even with a weaker console, and he doesn't back down when the press gets aggressive.
I met with Irimajiri in June, while on assignment in Japan with GameWeek Magazine. (Interestingly, Irimajiri was the only executive I met on the entire tour who interviewed without the safety net of an interpreter.) Here is a portion of that interview:
Gamers Today: NEC and Sega were the rival companies in the early nineties with PC Engine (released in the U.S. as TurboGrafx) and Genesis. It seems a bit odd that you selected a past competitor to provide the graphics chip, especially with 3dfx trying for your business.
Shoichiro Irimajiri: When we developed our new platform for consumer use, we select the best graphics technology very carefully. It's been nearly four years since we started looking for the best graphics chips and CPU's. There were lots of candidates and we met with lots of chip manufacturers or the developers. Finally we saw a chip that was developed by a British company. It had the most promising performance, and we decided to use it. That graphics chip was bought by NEC, so we consequentially had to go with NEC.
GT: You did not have enough Dreamcasts when you launched in Japan last November because of glitches with NEC. Considering the limitations imposed by the lack of chips, were you pleased with the Dreamcast launch?
SI: We set up the whole program, and it seemed perfect except the supply of the graphics chips. It was very sad to have the shortage of the graphics chips. We felt that 200,000 to 300,000 additional units could have been sold if we could have had enough supply. But it's over. We are receiving enough supply from NEC, so we have enough supplies for the U.S. and European launches.
GT: How many units have you sold in Japan?
SI: Until the end of the fiscal year, which was the end of February, we sold about 900,000 units and we expected to sell more than 1 million units.
GT: How many Dreamcast units does Sega have to sell over the next year in Japan to survive the launches of PlayStation 2 and Dolphin?
SI: Historically, if the installation base reaches around a couple million units, the business will stabilize because of software sales. So we are trying to sell 1.5 million to 2 million additional units into the Japanese market this year. If we can do that, the business will probably be very stable.
GT: Worldwide, how many do you think you have to sell?
SI: Four million units.
GT: Do you expect Dolphin and PlayStation 2 to make it by Christmas next year?
SI: We don't know what price point and what kind of performance the PlayStation 2 will have, but from the information we have already gotten, the PlayStation chip will be very, very nice and we expect that it will be out of the range of the consumer console price. As you know, the $199 price point is kind of a magic price point for selling consoles and home electronics all over the world--$199 in the United States, 199 pounds in England, 19,900 yen in Japan. We have already reached that point. We are going to price down the Dreamcast in Japan from the 24th of this month (June) to 19,900 yen, and we are going to launch the Dreamcast in the U.S. at $199 and in the UK at 199 pounds. So we have already reached that price point, but PlayStation 2 will probably take a couple of years to reach that price point. Sony's starting point may even be almost double, placing it in a completely different category.
Also, as you know, we are going to establish the game network systems in the U.S. Europe and Japan--the Heat Network. Until PlayStation 2 reaches our price point, we will get almost 3 million users who have their Dreamcast connected to the Heat Network systems.
GT: Dreamcast's GD-ROM drive seems like a mixed blessing. GD-ROM is a proprietary technology, so it protects against piracy and copying, but the DVD drives in the new consoles that Nintendo and Sony are designing will give them a much larger storage capacity. Is GD ROM big enough?
SI: Most of their games will not need the space on a DVD. When you make spectacular role playing games such as Final Fantasy or Shenmu, you need three or four GD-ROM's. Other than RPGs, more than 80 percent of the titles will need much less memory than a single GD-ROM. I think DVD will be an overkill medium for most of the developers except for specialty titles such as Final Fantasy games. I don't think DVD will be the best medium for standard game titles.
GT: I believe Nintendo has already talked about making a console that is able to play movies, and Sony's Ken Kutaragi (president of Sony Computer Entertainment) said "Sony will work towards playing movies.". Will consumers demand a console that can play movies?
SI: Technically it's very easy to put a DVD-ROM on Dreamcast instead of a GD-ROM drive, put some chips in it, and play CD-ROM or GD-ROM, and DVD discs for movie playing. It's very very simple. We have been thinking about that, but we haven't yet decided when to release that Dreamcast deluxe. From the business viewpoint, that is a very attractive machine--you can play music CDs, you can play Dreamcast games, and you can play movies.
GT: Are you talking about making a peripheral?
SI: No, no, no, no, no. That's the assumption of a technical person. We have been thinking about [making a Dreamcast with DVD], but we haven't yet decided when and where we'll launch that kind of Dreamcast Deluxe. From a business standpoint, I think it's a very attractive machine. It will be able to play music CD's, Dreamcast games, which will be on GD-ROM, and also movies on DVD, but we still don't know how attractive that kind of console might be [to consumers].
GT: The arcade business is shrinking in the United States and now it's in some trouble in Japan as well. Sega has always specialized in translating arcade hits to home use. If the arcade business collapses, will that hurt Sega more than Sony or Nintendo?
SI: The shrinking of the arcade market is kind of a worldwide phenomenon right now. It's still a very profitable market and I think that by adjusting to the market size, our arcade business will still be very healthy and profitable. The next question is how to revitalize that market. I think only Sega can do that. One thing that is clear is that because of the advance of the home console, the game center has become much less attractive. We need to provide customers more special experiences which they cannot have in their home. Ferrari F55 is our response to the market. It's the kind of the simulation game you can only find in game centers. (Ferrari F55 has three monitors giving players a sort of wrap-around view.) We will provide these kinds of special machines to the game centers.
GT: Now I haven't gotten to play the game yet, but it looks like that's going to be a $25,000 arcade machine.
SI: $25,000, that's right. That's right.
GT: Won't that, at $25,000, mean that arcade owners are going to end up having to charge $2 to $3 per game to make it pay for itself? Doesn't that become a very expensive form of entertainment?
SI: Yes. So what we are trying to achieve is to provide a very special experience for consumers. It will be a little more expensive than before, so small amusement centers will have difficulty surviving because they cannot afford such expensive machines.
GT: So only big guys survive--Gameworks, Sega Cities, maybe Aladdins?
SI: These kinds of centers, yes. Even small game centers which are located in very crowded areas can survive.
GT: So you're talking about pretty limited productions then, maybe $5,000 to $10,000 machines, tops?
SI: No, no, no. Ferrari F55 is kind of a high budget [game], but we are trying to provide much more inexpensive machines to game centers as well. You will see those machines within a couple of years.
GT: I've read reports that you have stated that PlayStation 2 is twice as powerful as Dreamcast. Is that true?
SI: We haven't yet had the opportunity to use their console, but from the specifications I assume so. When you look at games like Shenmue and Soul Calibur, you start to wonder what kind of graphics you can expect from the PlayStation 2. Their technology is so advanced, probably the cost/performance... You can spend much more money for the graphics chips and CPU's and you can get much more powerful capabilities; but from the consumer's viewpoint, the difference is becoming smaller and smaller relative to the investment. As I told you earlier, their price point is different. It's a completely different category.
GT: With the exception of Saturn, Sega consoles have never done as well in Japan. Why has the Japanese market been so tough for Sega?
SI: Good question. The Japanese consumer market is a very special market. The most popular games are role-playing games. In the U.S., sports and action games. In Europe, it's driving games and soccer games. Traditionally, Sega didn't have a very strong grasp of the role-playing games. To launch the Dreamcast, we decided to develop a spectacular role-playing game by ourselves. That's Shenmue.
GT: Why did Saturn fall behind PlayStation and Nintendo 64 in the United States and Europe?
SI: Several reasons. One is that Saturn wasn't supported by the third-party publishers, and the second is that programming for Saturn is very difficult. Mostly for those two major reasons.
GT: Why didn't third-party companies support Saturn?
SI: There were 2 reasons. One is first that we suggested that publishers and developers should develop titles for 32X, not Saturn. At the time, Sega of America thought that Saturn was too expensive for the consumer base and decided, until the price point of the Saturn was reduce to $199 (it started at $399), consumers would want the 32X peripheral for the Genesis. Lots of third-party developers invested a huge amount of money into developing titles for 32X, and it was a disaster. They spent almost a year developing 32X titles, so when Sega of America announced that 32X failed, the third-party developers said, "No, we don't want to develop Sega games." They lost lots of money on the 32X. That's one reason. The second reason is the complexity of the Saturn architecture. We couldn't provide easy tools to developers, so only very skillful programmers could develop for Saturn. So-so engineers had lots of difficulty understanding the architecture and how to use the dual CPUs.
GT: Is any market especially important to Sega?
SI: Everywhere.
GT: But hasn't Sega traditionally done best in the U..S.?
SI: I think the U.S. market is the largest market in the world, so if we will be successful in the U.S. market, it's easy to survive. But all territories (U.S., Japan, Europe) are very, very important.
