Recaps

Nakayama Takuya assigned teams to develop an online RPG project codenamed D, while Hoshino and Sugiura refined Sega’s investment targets amid Silicon Valley Online’s soaring valuation. The chapter left the company preparing to expand from social networking into a virtual world and invest in internet infrastructure.

• Nakayama Takuya directed Frank to hire protocol specialists, assess billing with analysts and actuaries, and pursue a TSR license for the RPG.
• Nakayama Takuya assigned game development to Sega North America and told Tom to ensure the project could run on mid-range computers expected within four years.
• Tom agreed to gather Sega’s RPG veterans, while Nakayama Takuya designated the game project D until the development team evaluated its scale.
• Nakayama Takuya asked Hoshino and Sugiura to reassess investment targets as Silicon Valley Online’s stock surged.
• Hoshino recommended Cisco and leading ISP operators, while Sugiura argued that AOL’s costly expansion warranted placing it on a watch list pending its next quarterly report.
• Nakayama Takuya praised Hoshino and Sugiura’s investment judgment and said their acquisitions and investments had built Sega’s industry ecosystem and barriers.

Nakayama Takuya visited Blizzard to review Black Tide's progress and reassure Mike Morhaime that he would shield the team from outside pressure. He approved unusual creative-material expenses and left Blizzard's development work in Mike's hands.

• Nakayama Takuya declined Hoshino's suggestion that he return to Tokyo for a strategy meeting and asked Hoshino and Sugiura to coordinate Silicon Valley Online's follow-up work with Tom Kalinske.
• Nakayama Takuya visited Blizzard, praised Mason's worldbuilding work, and told Mike Morhaime that Black Tide's progress could follow its own rhythm.
• Nakayama Takuya asked Mike Morhaime to make three employees shower before the end of the workday, then urged Mike to take care of the team's health.
• Grant reported several hard-to-classify purchases, and Nakayama Takuya approved them as creative materials while telling Grant to report unusual matters to Tom Kalinske.

Nakayama Takuya visited NVIDIA and urged Jensen Huang to begin researching triangle-rendering graphics alongside NV1, offering Sega as a potential future customer. Jensen agreed to arrange a preliminary feasibility study, while NV1’s fate remained uncertain as its test results came in.

• After visiting Blizzard, Nakayama Takuya traveled to Santa Clara and met with Jensen Huang at NVIDIA.
• Nakayama Takuya asked when NV1 would launch, and Jensen Huang said it was scheduled for May with testing and production preparations underway.
• Nakayama Takuya urged Jensen Huang to continue NV1 while starting preliminary research on triangle rendering, since Microsoft and Silicon Graphics were moving toward that standard.
• Nakayama Takuya offered the prospect of phased research and procurement agreements with Sega if NVIDIA developed technical reserves for future graphics chips.
• Jensen Huang agreed to hire two people to study triangle-rendering architecture, while postponing a formal project decision until after NV1 launched.
• As Nakayama Takuya left, he saw two engineers carrying an NV1 test board to report its latest data.

Netscape’s reported $7 million profit sparked a rush among investment banks to secure its IPO underwriting, while Nakayama Takuya followed the news on his way to inspect E3 preparations in Los Angeles. He reviewed the convention center’s layout and pressed IDSA coordinator Kevin to prioritize crowd flow and exhibition logistics, then asked about the space reserved in the West Hall.

• Netscape announced that its cumulative profit had exceeded $7 million, drawing investment bankers to its Mountain View office and intensifying interest in its IPO.
• Nakayama Takuya heard reports of the underwriting scramble and George Fisher’s visit while traveling to Los Angeles.
• Nakayama Takuya toured the E3 central hall and told Kevin that the main aisle needed to support the audience’s movement between press conferences and the south hall.
• Nakayama Takuya inspected the south hall, noting the positions of Sony, Sega, Nintendo, Atari, and 3DO, then continued to the west hall.
• Nakayama Takuya pointed to an area in the west hall and asked Kevin how much space had been left around it.

Nakayama Takuya inspected the Los Angeles Convention Center and finalized preparations for the upcoming exhibition before flying back to Tokyo. After reaching home, he went to the Haneda main house and found Kazuki and Nakayama Hayao building an Ultraman secret base out of sofa cushions.

• Nakayama Takuya reviewed the convention center’s exhibition areas and told Kevin to manage EA’s booth boundaries, merchandise foot traffic, and coordination with exhibitors.
• Nakayama Takuya praised Kevin’s venue planning, then chose the earliest flight back to Tokyo after finishing his U.S. business.
• Nakayama Takuya arrived home early, learned from Nakayama Miyuki that Eri and Kazuki were at the Haneda main house, and headed there.
• Nakayama Takuya found Kazuki and Nakayama Hayao building a fortress from sofa cushions while Kazuki held his limited-edition Ultraman Taro figure.

Nakayama Hayao praised Nakayama Takuya’s leadership of Sega and announced his plan to hand over authority and make him the next president. Nakayama Takuya worried about the timing, but Nakayama Hayao insisted he was the better person to steer the company.

• Nakayama Takuya returned from the United States and joined his family for breakfast after playing with Kazuki.
• Nakayama Hayao invited Nakayama Takuya to the study to discuss Sega’s strategy and Silicon Valley Online’s strong first day of trading.
• Nakayama Hayao credited Nakayama Takuya with improving Sega’s finances, coordinating its departments, and building successful partnerships.
• Nakayama Hayao said he was sixty-three and planned to transfer front-line business and personnel authority to Nakayama Takuya over the next one to two years.
• Nakayama Takuya questioned whether a leadership change would be too rushed, but Nakayama Hayao declared that he would become Sega’s next president.

Nakayama Takuya agreed to Nakayama Hayao’s gradual retirement from Sega and watched Wall Street rush to underwrite Netscape’s IPO. As Sega prepared for E3 and pursued DND licensing, Takuya began handing Hisao Oguchi more responsibility and headed to CSK Group.

• Nakayama Hayao told Nakayama Takuya he was willing to give up power, and Takuya agreed to a one- or two-year handover while keeping Hayao involved in major strategic decisions.
• Nakayama Takuya reviewed a fax about Netscape’s IPO and learned that Morgan Stanley and Hambrecht & Quist had assembled a 26-bank underwriting syndicate with preliminary pricing of $12 to $14 per share.
• Nakayama Takuya told Frank that Netscape’s valuation was too conservative and warned that Microsoft could threaten its browser business, while Silicon Valley Online had stronger cash flow from its social features and item sales.
• Hisao Oguchi reported that the ventilation upgrade for Kentia Hall at the Los Angeles Convention Center was 11 percent over budget, and Nakayama Takuya approved the expense for the E3 event.
• Hisao Oguchi told Nakayama Takuya that Sega of America had begun DND licensing talks with TSR, and Takuya instructed Tom to seek an extended exclusive term or a buyout.
• Nakayama Takuya told Hisao Oguchi to delegate non-core work and take over some of his cross-department coordination duties, then left for CSK Group.

Nakayama Takuya met with CSK Group founder and Sega shareholder Okawa Isao to make the case for his succession as Sega’s next president. Okawa approved the transfer of power, while Takuya framed content and market share as Sega’s defenses against Sony.

• Nakayama Hayao told Nakayama Takuya that Okawa Isao wanted to judge whether he could lead Sega, and they went to CSK Group headquarters.
• Nakayama Takuya defended Sega’s broad strategy, including its cooperation with Bandai, overseas promotion, and internet investments, to Okawa Isao.
• Nakayama Takuya said Sega would use exclusive games and third-party partnerships to compete with Sony, and Okawa Isao raised no objection to his becoming president.
• After the meeting, Nakayama Hayao said Okawa Isao’s approval would prevent other shareholders from obstructing the succession.
• Nakayama Takuya’s rise within Sega had already reshaped its internal power structure and prevented the company from bringing in outside executives to direct its transition.

Nakayama Takuya aligned Sega’s arcade and console R&D funding, arguing that arcade experiments should help advance the company’s home systems. He won Takahashi’s support for his coming presidency by promising to resolve technical staff’s concerns and curb internal conflict.

• Nakayama Takuya discussed Sega’s management changes with Nakayama Hayao, who agreed to speak with David Rosen after Takuya consulted the other shareholders and directors.
• Nakayama Takuya met Takahashi at the arcade testing laboratory and presented a plan for the home console and handheld divisions to cover 40 percent of arcade platform experimentation costs.
• Nakayama Takuya argued that arcade R&D produced technology and games that supported Sega’s consoles, and proposed making the arcade division the company’s technological front line.
• Takahashi asked whether Nakayama Takuya was preparing to become president, and Takuya confirmed that he had settled the matter with Chairman Okawa Isao.
• Takahashi agreed to support Nakayama Takuya if he resolved Yu Suzuki’s complaints about rendering efficiency and prevented internal wrangling from disrupting technical work.

Nakayama Takuya proposed adding a custom NVIDIA graphics chip to Sega's Model 2 board to solve the performance problems delaying Virtua Fighter 3, and Yu Suzuki agreed to begin toolchain changes. The chapter ended with Nakayama directing Sega's DND licensing negotiations and E3 preparations.

• Nakayama Takuya found Yu Suzuki struggling with Model 2's inability to handle Virtua Fighter 3's terrain physics and graphics at a stable frame rate.
• Nakayama Takuya rejected adding a coprocessor and proposed an independent graphics chip for rendering.
• Nakayama Takuya told Yu Suzuki that NVIDIA, led by Jensen Huang, was researching a triangle-rendering chip for Sega's boards and next-generation console.
• Yu Suzuki accepted the plan, agreed to start modifying the toolchain, and learned NVIDIA engineers would arrive in Tokyo the following month.
• Hisao Oguchi told Nakayama Takuya that TSR wanted electronic-game derivative rights in the DND negotiations, and Nakayama ordered Tom to hold firm on exclusive authorization.
• Nakayama Takuya instructed Hisao Oguchi to recheck the E3 promotional videos for errors.

Nakayama Takuya proposed that Sega move beyond low-cost manufacturing and secure upstream chip and memory supply. Terauchi agreed that investing in TSMC made sense, while Nakayama left potential Korean memory investments for Director Hoshino to explore.

• Terauchi met with Nakayama Takuya after inspecting semiconductor capacity in Taipei and praised his past supply-chain strategy.
• Nakayama Takuya argued that Sega should move upstream into chips and memory as the benefits of low-cost manufacturing diminished.
• Nakayama Takuya proposed gaining a stake in TSMC by leveraging Sega’s and NVIDIA’s future orders during TSMC’s planned expansion.
• Terauchi warned that building a fab would be risky, and Nakayama Takuya said Sega should seek an investment rather than take on the burden of jointly constructing one.
• Nakayama Takuya rejected investing in struggling Japanese DRAM makers and said he would ask Director Hoshino to watch for opportunities with Samsung or SK.

Nakayama Takuya secured Terauchi’s support for Sega’s potential investment in TSMC, then shifted his attention to preparing for the first E3 expo. As the exhibition approached, he reviewed the event plans and the participating manufacturers’ representatives before turning to Sega’s own lineup.

• Nakayama Takuya explained that Sega would have to wait for new storage technology, since flash memory was costly and the available suppliers were inaccessible.
• Nakayama Takuya promised Terauchi a seat on TSMC’s board, and Terauchi agreed to cast his supply-chain vote for him while warning that he still needed to persuade Hatano.
• Nakayama Takuya set aside meetings with other directors and focused on preparations for the first E3, less than two months away.
• Hisao Oguchi presented the IDSA handbook, exhibitor list, and Sega’s booth plans, and Nakayama Takuya checked that Sega’s placement and promotion were on track.
• Nakayama Takuya reviewed the manufacturers’ representatives, including Shigeru Miyamoto, Ken Kutaragi, and Yoshiki Okamoto, then turned his attention to Sega’s own offerings.

Nakayama Takuya and Hisao Oguchi finalized Sega’s preparations for E3, then Takuya met with Hoshino and Sugiura after their successful work on Silicon Valley Online’s Nasdaq listing. Hoshino and Sugiura pledged the investment department’s support as rumors spread that Takuya would join Sega’s board and possibly become president.

• Hisao Oguchi briefed Nakayama Takuya on the MGS2 demo, game trailers, endorsements, and exhibition merchandise, and Takuya approved the plans.
• Nakayama Takuya ordered a final internal acceptance review, directing Sega to cut any games that still failed after an additional half month.
• Nakayama Takuya and Hisao Oguchi spent seven days completing E3 preparations, after which Takuya added visits to Sega’s major directors to his schedule.
• Hoshino and Sugiura returned from New York after helping complete Silicon Valley Online’s Nasdaq listing and reviewed the resulting financial reports.
• Hoshino and Sugiura told Nakayama Takuya they would support him in the boardroom and back his rise to leadership.

Nakayama Takuya assigned Hoshino and Sugiura to investigate Southeast Asian economies and pursue a stake in TSMC. He then visited Sega Galaxy, whose licensing operations Hattori had successfully developed.

• Nakayama Takuya told Hoshino and Sugiura to research Thailand, Malaysia, the Philippines, and Indonesia for signs of financial vulnerability and potential investment opportunities.
• Hoshino agreed to assemble a team to gather detailed economic and foreign-exchange data on the four countries.
• Nakayama Takuya instructed Hoshino and Sugiura to seek an equity stake in TSMC, using Sega's orders and TSMC's need for funding and long-term clients as leverage.
• Nakayama Takuya assigned Director Terauchi to provide business leverage and Hoshino to handle funding and equity-transfer arrangements.
• Nakayama Takuya visited Sega Galaxy and reflected on how Hattori had managed its core and secondary character licensing without oversaturating the market.

Nakayama Takuya visited Hattori to thank him for supporting his appointment as president and presented agreements involving NEON GENESIS EVANGELION and Rurouni Kenshin. Hattori learned how Nakayama had secured the deals, while the conversation ended with Nakayama explaining Watsuki’s unusual idea for a live-action adaptation.

• Hattori told Nakayama Takuya that he supported his becoming president and believed the promotion should have happened sooner.
• Nakayama gave Hattori an agreement covering Gainax equity cooperation, copyright development priorities, and the NEON GENESIS EVANGELION production committee.
• Nakayama explained that Hideaki Anno had asked him to help protect Anno’s control over EVA’s core copyright amid disagreements with Gainax management.
• Nakayama showed Hattori agreements for Rurouni Kenshin game and live-action adaptation rights.
• Nakayama told Hattori that Nobuhiro Watsuki had proposed filming Kenshin with the feel of a China wuxia drama rather than a traditional Japanese sword-fighting film.

Nakayama Takuya arranged for Sega Galaxy to support a Gainax agreement and archive the Rurouni Kenshin license while he remained responsible for its international partnerships and creative development. Director Yoshikawa returned from Los Angeles with E3 preparations completed through help from Tom, Howard Lincoln, and Kazuo Hirai.

• Nakayama Takuya explained his China-Japan-South Korea co-production idea for Rurouni Kenshin, and Hattori agreed Sega Galaxy could provide administrative support while Takuya oversaw the project.
• Hattori agreed to have legal review the Gainax agreement and to archive the Rurouni Kenshin license until Takuya secured a Chinese partner.
• Hattori asked about Hideaki Anno's new project, and Nakayama Takuya described it as a novel giant-robot story unlike Gundam.
• Director Yoshikawa returned from Los Angeles and told Nakayama Takuya that the E3 public-services and security arrangements were complete.
• Yoshikawa explained that Tom, Howard Lincoln, and Kazuo Hirai had helped coordinate California government relations and arrange volunteer support with five universities.

Yoshikawa discussed Sega’s expanding public-relations needs with Nakayama Takuya and voiced his support for Takuya becoming president. Takuya asked Yoshikawa to watch for opportunities in Greater China for a planned Rurouni Kenshin film and television project.

• Yoshikawa told Nakayama Takuya that Sega of America needed a dedicated public-relations director to handle government relations and public affairs.
• Yoshikawa praised Takuya’s projects for improving Sega’s reputation with governments and said the Public Relations Department needed deputies to train.
• Yoshikawa revealed that Sega’s old shareholders supported Takuya becoming president, citing his success in overtaking Nintendo and avenging the humiliation of 1982.
• Nakayama Takuya thanked Yoshikawa and asked him to keep an eye on Greater China for a possible China-Japan-Korea film and television project.
• Nakayama Takuya explained that Nobuhiro Watsuki had proposed a live-action adaptation of Rurouni Kenshin, leading them to sign the film and television rights while negotiating the game rights.

Nakayama Takuya finished securing support from Sega’s directors and major shareholders as he prepared for a leadership transition. After returning from Mexico, Hatano formally demanded a board decision on building a third production line at the Tijuana plant to assemble cartridges, reviving a debate over cartridges versus discs.

• Yoshikawa agreed to look for China-side public-relations talent and warned Nakayama Takuya to delegate more of his workload.
• Nakayama Takuya reviewed Yoshikawa’s completed meeting and cooperation documents and concluded his visits to Japan’s directors and major shareholders with their support secured.
• Hatano returned from Mexico and called a special supply-chain meeting to revive the proposal for a third Tijuana production line dedicated to cartridge assembly.
• Sega’s executives remained divided over the proposal because cartridge demand was still substantial, but discs appeared to be the future of console storage.
• Hatano upgraded the proposal into a formal motion and demanded that the board give a clear answer within two weeks.

Nakayama Takuya decided to support Hatano’s proposal for a third cartridge production line in Mexico by securing South American market data. Nakayama Hayao agreed to have the Sales Department request a rapid report from TecToy, leaving Nakayama Takuya to arrange the contact and help Hatano make his case.

• Nakayama Takuya told Nakayama Hayao he believed Hatano’s Mexico production line should be approved because it would lower costs and strengthen Sega’s North American supply chain.
• Nakayama Takuya proposed asking TecToy for a report on cartridge demand across South America to persuade board members who remained unconvinced.
• Nakayama Takuya explained that TecToy already had sales and dealer data that could be assembled into a rough report within three days.
• Nakayama Hayao agreed to arrange the request through the Sales Department and told Nakayama Takuya to give Oguchi TecToy’s contact details.
• Nakayama Takuya said he did not need Hatano to thank him as long as the new line improved cartridge supply in North America.

Hatano presented the case for a cartridge production line at the Tijuana factory, but directors questioned whether cartridges had a long enough future to justify the cost. Nakayama Hayao and Nakayama Takuya answered with evidence of Latin American demand and the continued need for cartridges in handhelds, then proposed moving underused Japanese equipment to Tijuana to reduce investment.

• Hatano presented Tijuana's operating data and argued that a local cartridge line would address North American supply-chain costs.
• Yamamoto and another director questioned whether cartridge demand would last long enough to justify building the line.
• Nakayama Hayao distributed TecToy's report showing strong unmet demand for Sega products in Spanish-speaking South American markets and explained how Tijuana could supply the region.
• Nakayama Takuya argued that handhelds would continue using cartridges for years because optical drives were impractical and flash memory remained too expensive.
• Terauchi explained that Japanese cartridge assembly lines were underused, and Nakayama Takuya proposed dismantling their equipment and shipping it to Tijuana.

The board approved relocating an old production line to Tijuana to supply cartridge markets across North and South America. Hatano recognized Nakayama Takuya’s role in preparing the proposal’s supporting evidence, expressed support for his becoming president, and was asked about operational difficulties in Mexico.

• The directors approved the Tijuana third line, assigning Hatano to oversee it and Terauchi to coordinate the domestic line’s relocation.
• Hatano visited Nakayama Takuya and deduced that he had arranged the South America report to support the cartridge proposal.
• Hatano noted that TecToy’s data revealed a substantial Spanish-language market and suggested extending sales to Spain through Mexican localization.
• Hatano told Nakayama Takuya he supported his taking over as president, praising his approach of expanding the business before dividing its gains.
• Nakayama Takuya thanked Hatano for his trust and asked whether Mexico’s operations faced any difficulties.

Nakayama Takuya promised Hatano support for the challenges facing Sega’s Mexico factory, and Hatano agreed to take charge of its third production line. Sega’s exhibition materials passed final review and were sent to Los Angeles, before Nakayama Takuya returned home to his family.

• Hatano described Mexico’s unreliable power, labor turnover, union disputes, and security problems to Nakayama Takuya.
• Nakayama Takuya offered to find local consultants and help Hatano formally report the factory’s expenses for handling local affairs.
• Hatano accepted responsibility for the Tijuana factory’s third line and took the South America report to study Spanish-language markets.
• Hisao Oguchi and the Planning Department reviewed and corrected the seven trailers, and the final materials passed without cuts before being sent to Los Angeles on May 25.
• On May 31, Nakayama Takuya returned to Nakayama Hayao’s residence, greeted Kazuki, and joined Eri and the family for dinner.

At dinner, Nakayama Miyuki and Nakayama Hayao urged Nakayama Takuya to balance work with family as he prepared to leave for E3 in Los Angeles. On June 1, Takuya handled urgent Sega business and departed from Narita Airport with the exhibition team.

• Miyuki questioned Takuya about another business trip while Eri was pregnant, and Hayao told him to delegate more work to his staff.
• Kazuki offered Takuya a piece of tonkatsu for the plane, and Eri defended Takuya by describing how much time and care he gave his family.
• Hayao told Takuya to return as soon as E3 ended and to leave matters that did not require his presence to Oguchi and the others.
• Takuya played with Kazuki and Hayao after dinner, while Miyuki kept Eri seated instead of helping clear the table.
• On June 1, Takuya signed urgent approval forms at Sega Headquarters, confirmed Los Angeles arrangements with Hisao Oguchi, and left for Narita Airport with Sega's exhibition team.

Nakayama Takuya arrived in Los Angeles ahead of the first E3 and checked on Sega’s preparations with Hisao Oguchi. As setup began at the convention center, exhibitors’ trucks crowded the entrance, and the event was about to come alive.

• Nakayama Takuya called Eri before boarding his flight to Los Angeles.
• After arriving, Nakayama Takuya met Hisao Oguchi at IDSA’s temporary office and confirmed that Sega’s materials and booth preparations were on schedule.
• Hisao Oguchi reported that Sony and Nintendo had sent staff early, Atari’s equipment was expected soon, and 3DO had not replied to IDSA’s inquiry.
• Nakayama Takuya passed Nintendo’s engineers in the office corridor as exhibitors prepared for the convention-center setup.
• On June 5, Sega, Nintendo, Sony, Atari, and other exhibitors’ trucks gathered outside the Los Angeles Convention Center as the side door opened.

Nakayama Takuya inspected E3 booth construction across the venue as Sega’s setup progressed smoothly while Nintendo, 3DO, and Sony prepared their own displays. After Sega completed its booth, IDSA sent the press conference schedule, placing Sega at 3:15 p.m.; Nakayama Takuya judged the timing favorable for the company’s extensive game announcements.

• Nakayama Takuya confirmed Sega’s materials and surveyed construction, while Hisao Oguchi checked the booth against its design.
• Nakayama Takuya observed construction problems at Nintendo and 3DO and saw Sony’s booth taking shape.
• On June 8, Nakayama Takuya inspected the nearly finished booths and saw that Sega’s display was complete and signed off.
• Hisao Oguchi showed Nakayama Takuya IDSA’s final press conference schedule, which placed Sega at 3:15 p.m. after Nintendo, Sony, and Atari.
• Nakayama Takuya said the late slot could work in Sega’s favor if earlier announcements raised the audience’s excitement.