Here’s Why Sega is Withdrawing From Arcades Management Business

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Due to the Covid-19 pandemic, SEGA is selling its arcades on December 30, 2020, and will quit the Amusement Center Operations business.

On November 4, Sega Sammy Holdings announced that the Sega Group subsidiary company, Sega Entertainment, will sell 85.1% of its shares to Genda. With this, Sega Entertainment will not be owned by Sega Sammy Holdings anymore. Sega will sell pretty much all of its Game Centers, Amusement Centers, around 200 all over Japan, and will leave the arcades management business 0n December 30, 2020. This is mainly due to the Coronavirus pandemic.

Sega Sammy Holdings did not make public how much the shares were sold for.

Sega Entertainment is the Sega Group subsidiary managing its Amusement facilities, as in game centers, arcades, but also cafés, etc. It’s the third largest Amusement Centers manager in Japan. Famitsu explained how a few years ago, Sega Entertainment started selling taiyaki in cafés near its game centers. Expanding its business possibilities. However, with the Covid-19 pandemic, Sega Entertainment reported heavy losses.

When the 2020 fiscal year ended in March 2020, Sega Entertainment reported 900 million Yen in losses. Compared to a 600 million Yen gain the previous year. Due to the temporary shutdown of its facilities with the Coronavirus state of emergency, and the sanitary regulations with less people going out. Sega Sammy Holdings considered various options, and ultimately decided on selling the shares of Sega Entertainment to Genda, which has expressed desire to expand its Amusement facility management business.

Genda is a company who rents Amusement machines to game centers, such as those owned by Sega Entertainment. Genda also operate multiple online crane games. As in, crane games playable through your smartphone or PC, with a camera filming the machine live.

Genda stated that with Sega Entertainment, it hopes to revitalize the industry and make Amusement a more enjoyable industry for all party involved, the makers, the operators, and the players.

Obviously that’s all business talk though, and no one knows what will happen, except Genda. At the moment, we do not know how many arcades and shops Genda will keep open. We don’t know either if brands such as Club Sega will still be a thing. While it’s unlikely that all these game centers, Club Sega etc, will all be disappearing, this sale is happening because many of these arcades, cafés etc are already in a precarious situation. Japanese games history specialist Florent Gorges mentioned Genda will certainly be closing down all the arcades which can’t be saved. This is a huge shock for video games fans and Sega lovers around the world. And right after the closure back in August of the SEGA Akihabara Building 2. Turns out that shutdown was only the beginning of the end for Sega owned arcades.

Sega owning arcades is an intrinsic part of Sega and video game history, and a cultural element used in Sega’s biggest IPs nowadays such as Yakuza. While Sega is selling ownership of its arcades, it’s not like it’s selling any arcades games IPs it owns. So worry not, we’ll still be able to play Virtual On and Virtua Fighter in future Yakuza games. But probably not at “Club Sega” anymore.

Sega Entertainment doesn’t participate in the development of games or arcade games either. Console, mobile and arcade games are developed by Sega Interactive and Sega Games. Which both merged in April 2020 to form “Sega”.

Speaking of Virtua Fighter, there’s the recently announced Virtua Fighter x Esports project, revealed at TGS 2020. This might turn out to be a fully online oriented project seeing how far arcades are declining. And Sega owned arcades aren’t a thing anymore.

I’m sure anyone else following Japanese games for a long time must have heard the same thing for decades now:”Arcades in Japan are dying”. Arcades have been in a difficult position for years now, with hundreds of shops closing. MajinObama mentioned in a 2016 interview that it was happening for a while already. The Coronavirus pandemic only (viciously) exposed that. Arcades such as Mikado in Takadanobaba launched crowdfundings in early 2020. But the resonating success of the campaign also made me feel like these alternate ways of survival should have been further explored years ago by now. They shouldn’t have waited for a pandemic.

However, since the mid 2010s, plenty of pretty popular arcade games have launched in Japan. While traditional fighting games have kinda declined after the new boom born from Street Fighter IV in late 2000s, you’ve got other genres and series that seem to fare pretty well. Such as the Gundam EXVS series by Bandai Namco which is celebrating its tenth anniversary with a new game. We had new entries for Initial D, the JoJo Batte Royale, FGO Arcade, Starwing Paradox and Gunslinger Stratos by Square enix. Etc.

Rhythm games and idol themed games were all huge as well. With the Aikatsu series by Bandai Namco. And Pretty Series by TakaraTomy and SynSophia, with its PriPara series being one of the most popular arcade games of  the 2010s.  Sega’s own arcade games such as the Project Diva Hatsune Miku games in particular are pretty popular too.

However, added to that, you have all the other things that probably make the most money: all the Amusement games not directly linked to video games; The aforementioned crane games for example, or the darts games such as DartsLive featured in Persona 5 The Royal, etc. It’s very possible Genda will be focusing even more on those from now on, dealing a huge blow to video games arcades. I think at this point the only big arcades chain left would be Taito Station.

Note that Sega Sammy Holdings is keeping its pachislot and casino-like operations. Dr Serkan Toto specified on Twitter.

One of the first Japanese Twitter accounts who picked up Sega’s announcement and shared it was @exvsdb, an account dedicated to news on the Gundam EXVS series:

A few dozens of Japanese Twitter users have first reacted through quote replies to this tweet, with most noting Sega exiting the arcades business is the end of an era. And how the future of arcades is worrying when even Sega decided to throw in the towel.

A few hours later, Yahoo Japan and Livedoor News started reporting the news as well, followed by Famitsu. Which triggered more and more reactions flooding in, including from international fans. Sega is trending on Twitter as I’m writing this. Most fans are dumbfounded, myself included. We’ve all seen the damage the Coronavirus pandemic is causing to the world, and we were all lucky enough to still be able to witness it, but this is all unbelievable. Pretty crazy this is happening on Sega’s 60th anniversary, but that’s 2020 for you.

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