SEGA CORPORATION

MAKING

The Game Making Process

Venturing into New Territory with
Web3 and the Metaverse

MEMBER PROFILE

President and COO, Representative Director Shuji Utsumi

Worked in various parts of the entertainment industry and joined SEGA SAMMY Holdings in 2019.
Has held his current position since April 2021

Investment Management Department, Manager Etsuko Horie

Joined in 2015. Initially responsible for strategic investments related to mobile games, and currently serves in the CVC Department of SEGA SAMMY Holdings and Tech Development Department of SEGA's Business Development Division.
Conducts investment activities based on SEGA's business strategy.

Marketing Department, Vice Manager Daichi Mukai

Joined in 2018. Former product manager for smartphone and console games. Established a community-oriented team specialized in robust video content creation, by producing/managing content on YouTube and TikTok as well as collaborating with influencers.
Currently, works on new marketing fields beyond video content.

Including the "Sonic" series and the "Like a Dragon" series, SEGA has created countless titles that aren't just widely-beloved in Japan, but around the world. Their work doesn't just stop at games; they have a wide breadth of work across parts of the entertainment industry, and have created many products that are generational icons.

This company has recently been focusing its efforts on new fields: Metaverse and Web3. With their IPs (Intellectual Properties), assembly of technical skills, and knowledge related to games, SEGA aims to make moving experiences that have never been made before and is launching a new, fully-fledged business project.

Investing into start-ups researching Metaverse and Web3

First, could you please tell us about your background, Ms. Horie?

Horie

In my twenties, I was working in America. When I returned to Japan, I worked in corporate planning for the mobile content industry, and was involved in overseas expansion and strategic investments. I joined SEGA roughly 8 years ago. Just as the world began to shift from flip phones to smartphones, the market began to shift towards game applications designed for smartphones. At that time, I joined SEGA Networks Inc. (now SEGA Corporation), which developed and operated smartphone games. There, my chief responsibility was making strategic investments related to mobile games.

I currently serve SEGA SAMMY Holdings's Investment Management Department under the Business Planning Division and Tech Development Department of SEGA's Business Development division. At SEGA SAMMY Holdings, it is my role to promote open innovation, and I manage our CVC (corporate venture capital) in line with that role. Through my work, I search for opportunities and information to grow and expand SEGA SAMMY Holdings' general entertainment business group by establishing new technologies and new ecosystems. I expand our business reach for things that affect our current and new business projects from a mid- to long-term perspective, build our knowledge through networking activities, and conduct investment activities based on our business strategy.

What kind of investment activities are you doing?

Horie

From a broad perspective, I am working to expand the SEGA SAMMY Group on a global level. In the midst of this, I focus on our efforts within the field of Metaverse and Web3. In the future, entertainment based around gaming will play a leading role in this area, and I believe it will become a driving force for our growth. I feel that through my concurrent posts at SEGA SAMMY Holdings and SEGA, I can create mutual benefits that one side of the company cannot achieve on its own. I carry out investment activities based on each company's needs, and act as a bridge between them, providing information and connections.

Interweaving SEGA's IPs and blockchain gaming is unknown territory for us to explore

Within the field of Metaverse and Web3, what direction is SEGA headed in?

Horie

Metaverse will eventually become one of our business fields. "Super Games" that SEGA aims that make will become a Metaverse, and to make the "Supere Game" a reality, we are considering the implementation of Web3. We'd like to assemble a wide range of Metaverse/Web3 technologies and systems. While corresponding with our project companies and our partners, we'll puzzle together and choose the best options to make the most fun entertainment experience. It wouldn't exactly be the best course of action to handle all development internally. Through open innovation, we'd like to partner with other companies inside and outside of our industry and approach our operations through trial and error.

Could you let us know what you're working on now?

Horie

As an example, I'm involved with licensing out our properties to the partner companies that we begin investing in. We're using our IPs to develop blockchain games, and exploring this new territory is serving as a learning process for us. Our start-ups are in the process of developing various blockchain games, but there aren't many cases where we are using a well-known IP. At SEGA, we have both current titles that are hits and past titles that are recognized worldwide. We choose IPs that are appropriate for our learning process, and after testing out ways to weave in our new technology, we check what kind of reaction the results elicit. Based on the response, we'd like to work with our investee companies.

Play-to-earn games dominate the current blockchain game market and expand the market further, but as mass adoption happens, there's a high possibility that we'll see different playstyles in future blockchain games. We, as a game company, would like to discover the kind of thrill that isn't tied to "earning" money. Ultimately, there may be some kind of "earning" aspect in what we produce. However, we don't want to lose sight of our vision to make a fun experience that is a game first and foremost.

From the perspective of the Investment Management Department, what do you see in the future for your new businesses?

Horie

SEGA has a global presence in terms of its business scale. We consciously think about how to empower our new businesses on a global level, so that we can make big waves in the industry. We aren't chasing after short-term profits. We are thinking about how to create a sensation in the entertainment industry in the mid- to long-term; thinking about the global scale is a must.

Five to ten years from now, SEGA would like to be a company that commands its cutting-edge technology to pursue interesting ideas. From that perspective, I carry out our investment activities. From the CVC Investment Management division's point-of-view as the driving force behind open innovation, SEGA doesn't necessarily have to be a future key player in our projects. For example, it could be the case that SEGA will focus on making interesting content, while its partners focus on spreading the content. As we test different hypotheses now, we'd like to flexibly decide things like "Let's do this in-house" or "Let's do this with our partners." We'd rather not stiffly commit to a particular stance.

Additionally, games aren't the only kind of output we can produce from our IPs. SEGA is obviously most skilled at making games, but there are other things it can craft too. However, especially when it comes to new projects, we don't need to decide what kind of output we're aiming for in advance. Getting caught up in preconceived notions may only stifle our options.

How will the entertainment industry change once Web3 becomes mainstream

Once we shift from Web2.0 to Web3, how do you think the entertainment industry will change?

Horie

Web2.0 is thought of as centralized, while Web3 is thought of as bringing about the age of the individual. Until now, information has been in the hands of large companies, while some features protect the individual. When things switch to Web3.0, the amount of things left to personal discretion will increase alongside the risks. As a result, it's hard to imagine that things will switch from Web2.0 to Web3 overnight. Web3 will become fleshed out, as regulations are established to prevent minimal economic losses and prevent personal information from being leaked.

So, how about things in the entertainment industry?

Horie

Until now, creators haven't had the opportunity to earn royalties from secondary or tertiary sales. It's a good thing that Web3 will give back to creators. The term "creator economy" is often thrown around to describe this, and I see it as a post-Web2.0 world that enables many people to take creative endeavors. As entertainment shifts towards a more participatory model, the gap between creators and their audiences will shrink. Game companies and online platforms will not need to attract viewers or centrally manage their operations, and I look forward to seeing the way that communities will emerge as the landscape changes.

Does this mean that creative work will no longer be centralized around creators and those who buy their work?

Horie

I suppose so. However, not everyone can produce creative works from scratch, so I like the idea of setting up a platform that provides the essentials for creators. For example, perhaps we could have the platform provide the basic materials for creating characters, and users could use those parts to make original items. I'd love to get involved in something like that.

However, IP holders have traditionally protected the rights to things like their characters and games, so it's hard to determine to what extent these properties should be made accessible. On the other hand, the way future generations think will rapidly change over time, so the way rights are controlled may be different too. In order to increase the number of fans, it would be a good idea for SEGA to shift to a style that encourages audience engagement, rather than one-sidedly dropping information to its audience.

The chance to challenge yourself in uncharted territory

What is the appeal of working in a global company?

Horie

As we transition from Web2.0, where American Big Tech was the dominant player, to Web3, the change will ignite another "race to the top." When competing at a global level in the Web3 era, having IPs is a tremendous boon. Even if other companies try to employ similar business strategies, we'll be able to differentiate ourselves from them.

In addition, SEGA may be a Japanese business, but we are a high-profile company overseas. When SEGA displays its technical capabilities and creativity to the world, our brand recognition is a huge advantage.

IP holders of Japanese properties have the potential to become famous worldwide, huh?

Horie

In Japan, there are of course games, as well as many amazing anime and manga IPs. If I were to mention "Sonic," there are some people overseas who don't realize that it's a Japanese company's IP. Situations like that may be a blessing too. I believe that it's important for us to create IPs that audiences around the world can enjoy regardless of where the games or characters were created.

Finally, for those applying to the new business projects you're recruiting for, what's the appeal or the interesting parts about working at SEGA?

Horie

It's got to be the fact that you can confidently take on challenges in unprecedented territory. Our working culture embraces the spirit of "Even if you fail, it'll be a good experience"—that's a huge part of our appeal. In addition, SEGA has a global presence, and commands the financial resources to make as many investments as necessary. I personally find it interesting to get involved with our various external partners. For anyone who is looking for a new challenge, it is a huge, one-of-a-kind chance: these jobs are only now possible because of the advent and rise of the Metaverse and Web3.


* This article contains content from an interview conducted in February 2023.