Recaps

Nakayama Takuya strengthened Sega’s internal controls by dividing responsibilities with Hisao Oguchi and establishing a board audit system with outside experts. The chapter ended with PwC and McKinsey beginning spot checks of Sega’s past accounts.

• Nakayama Takuya assigned Hisao Oguchi responsibility for game development and market expansion while he took charge of internal governance and restructuring.
• Nakayama Takuya urged Hisao Oguchi to release this year’s games before December to leave the Christmas and New Year period open.
• Nakayama Takuya introduced PwC and McKinsey experts to the Board Audit Committee and proposed independent reviews of major spending, overseas mergers, and executive performance.
• Director Suzuki supported the committee and asked that his two chosen trainees receive special attention from Richard.
• Richard’s team began spot-checking three years of Sega accounts, and the board approved overtime subsidies to ease employees’ resentment.

Nakayama Takuya and PricewaterhouseCoopers uncovered a pattern of questionable channel subsidies at Sega and presented the fund flows to the Audit Committee as a lesson in better oversight. He left the meeting focused on whether such spending produced clear business value, rather than immediately pursuing individual blame.

• Richard told Nakayama Takuya that a ten-million-yen Kansai marketing subsidy had flowed through several accounts to a shell company linked to a Sales Department manager’s relative.
• Nakayama Takuya asked Hoshino to call an Audit Committee meeting and told Richard to explain the fund-handling methods without revealing sensitive names.
• Richard showed the committee anonymized diagrams tracing the subsidy through several accounts to a consulting company controlled by a manager’s relative.
• Yoshimura reacted tensely as the committee recognized the scheme, and Nakayama Takuya said the meeting would address business logic rather than assign blame.
• Nakayama Takuya argued that relationship-building expenses could be unavoidable but insisted Sega needed to know what the ten million yen had brought back in sales or agreements.

Nakayama Takuya used an Audit Committee meeting to explain how transparent accounting could improve Sega’s management and rein in improper spending. As Sega began its internal reforms, Nintendo completed final testing of its next-generation Project Reality console, and Yamauchi Hiroshi arrived at the laboratory.

• Nakayama Takuya explained that Sega should document public-relations spending and use clear accounts to evaluate both results and staff.
• Richard presented another audit case on inventory backlog and premature revenue recognition, prompting the Audit Committee to take the review seriously.
• Minister Yoshimura promised Nakayama Takuya that the Sales Department would inspect its accounts and report irregularities.
• Nakayama Takuya told Director Hoshino to train Audit Committee members to identify hidden problems in financial statements within six months.
• Genyo Takeda completed full-machine testing of Nintendo’s Project Reality console after extensive work with Silicon Graphics.
• Yamauchi Hiroshi visited Nintendo’s Hardware Laboratory, where the completed prototype sat on the workbench.

Nintendo finalized the N64’s hardware and redesigned its controller, then Shigeru Miyamoto returned to work and proposed Super Mario 64 as the system’s flagship game. Nintendo shifted its resources toward Miyamoto’s team to establish a new standard for 3D platformers.

• Genyo Takeda and Masayuki Uemura presented the finalized N64 hardware, including its 64-bit processor, SGI graphics coprocessor, and expandable memory.
• Yokoi Gunpei explained Nintendo’s decision to use cartridges, and Genyo Takeda showed Yamauchi Hiroshi the redesigned controller with an analog stick and built-in vibration.
• Yamauchi Hiroshi approved the controller and confirmed the console’s external name as N64, or Nintendo 64.
• Shigeru Miyamoto returned after recovering, tested the controller, and proposed Super Mario 64 as the game that would introduce players to 3D movement.
• Yamauchi Hiroshi directed Shigeru Miyamoto to prove Nintendo’s strength, and Nintendo redirected funds and staff to his development teams.

In October 1995, Sega’s announcement that it would leave December open for third-party releases prompted Konami, Capcom, and Hudson’s presidents to assess the apparent opportunity. Kozuki Kagemasa concluded Sega planned to launch Toy Story in late November and use its long sales tail to dominate the year-end market, so Konami and Hudson adjusted their release schedules to avoid a direct clash.

• Sega announced it would release no major first-party title during December and the New Year holiday period, stirring debate across the game industry.
• Kudo Hiroshi and Tsujimoto Kenzo worried that Sega’s open release window pressured third parties to produce hits or risk losing distributor support.
• Kozuki Kagemasa reasoned that Sega would release its Toy Story game alongside the film in late November, letting it capture sales throughout December and the New Year holiday.
• Kudo Hiroshi recognized that Sega’s apparent concession could let it collect royalties while third parties competed against one another.
• Kozuki Kagemasa moved Konami’s Suikoden and Live Crazy Shooting releases to before mid-November or after Christmas to avoid the fiercest competition.
• Kudo Hiroshi said Hudson would push Bomberman Blocks until after the New Year holiday and market it as a family game.

Nakayama Takuya reviewed Mercury Electronic Technology’s proposed December release for Investiture of the Gods: Yang Jian's Tale and assessed its technical and commercial risks. He praised the team’s design and engineering but raised concerns about the dangerous release window and Japanese localization.

• Tsujimoto Kenzo said Capcom would stick to its release plan and bring Mega Man X1 and Armored Warriors out before the end of the year.
• Fu Zan reported that Investiture of the Gods: Yang Jian's Tale had entered final bug testing and proposed releasing it during December’s year-end commercial battle.
• Nakayama Takuya and Hisao Oguchi discussed the risk of placing Mercury’s first Japanese-market game against major holiday releases, including Toy Story.
• Hisao Oguchi described how Mercury had built the game around a stable 2D ARPG approach, with rapid transformations, magic treasure combinations, and visual effects designed for the 32-bit hardware.
• Hisao Oguchi praised the game’s distinctive music but warned that its translation of Chinese cultural terms, including “Interception Sect cultivators,” would confuse Japanese players.

Nakayama Takuya set Sega’s release, localization, pricing, and marketing strategy for Mercury Electronic Technology’s Investiture of the Gods: Yang Jian's Tale. After Hisao Oguchi left with the guidance to send to Fuzhou, Nakayama returned home in mid-October 1995.

• Nakayama Takuya told Hisao Oguchi to schedule Mercury’s first game for the eve of spring break and have experienced writers refine its Japanese dialogue.
• Nakayama Takuya required a switchable Traditional Chinese version and proposed using Nine-Tattoo Dragon’s distribution network across Chinese-speaking markets.
• Nakayama Takuya set an initial shipment of 80,000 to 100,000 copies at 5,800 yen, with distribution in batches and marketing focused on transformations and Phantasy Star technology.
• Nakayama Takuya considered the game’s transformation-based combat and tragic story promising, provided the Japanese localization conveyed its sorrow effectively.
• After Hisao Oguchi left, Nakayama Takuya returned to his home in Meguro Ward amid the autumn chill.

Nakayama Takuya watched the debut of Super Home Makeover King with his family, as its story of a struggling household finding hope moved Nakayama Hayao. Hayao gave Takuya full authority to pursue audits and restructuring at Sega.

• At dinner, Nakayama Hayao discussed shrinking infrastructure spending and rising construction-industry bankruptcies with Nakayama Takuya.
• The family watched Super Home Makeover King, which followed an architect rebuilding a cramped, dangerous home for a three-generation household.
• The renovated home moved the family and viewers, and Hayao told his grandson Kazuki that the grandmother was crying because she had found her home again.
• Hayao told Takuya to proceed with whatever audits and restructuring Sega needed, granting him full authorization.

Nakayama Takuya’s home-renovation program became a hit, drawing an 18.4% rating and a flood of advertising interest. Its popularity also brought renovation work to architects and construction crews, leaving the industry with more demand than it could handle.

• Nakayama Miyuki praised the program, and Eri asked Nakayama Takuya to make more room for their child at home.
• Nakagawa Jun received the preliminary 18.4% rating and called Nakayama Hayao to celebrate the program’s success.
• Nakagawa Jun told Nakayama Hayao that viewers were asking how to contact the architect featured on the show.
• A TV Tokyo report showed Endo’s architectural office overwhelmed by renovation inquiries from across Japan.
• Endo said renovation projects had filled the schedules of five construction crews through the following spring.
• The head of Matsumoto Construction said Endo’s projects had restored work and wages for his crew.

Nakayama Takuya’s renovation program sparked government praise, a building-material stock surge, and a rush of sponsor and overseas licensing offers. The chapter left TV Tokyo’s fortunes rising as Nakayama urged the team to protect the program’s focus on families and their homes.

• An official from the Ministry of Health, Labour and Welfare framed the old-house renovation craze as a response to earthquake fears, unemployment, and family needs without naming Super Home Makeover King.
• TOTO, Panasonic Electric Works, and YKK AP shares rose as investors pursued companies featured on the program.
• Nakayama Takuya told Nakagawa Jun that sponsors wanted larger deals, while insisting product placements must not overshadow the families and houses.
• Nakagawa Jun reported that broadcasters in Taiwan and Hong Kong had asked to license the program format and that negotiations were advancing.
• Nakagawa Jun celebrated the program’s ratings and commercial success as TV Tokyo gained leverage with sponsors and advertisers.

Nakayama Takuya advised Nakagawa Jun on pricing sponsorship slots for Toy Story, then continued reviewing Sega's financial records as the North American campaign ramped up. Sega expanded production while Steve Jobs praised the game's faithfulness to Pixar's film, leaving him preparing its core marketing strategy.

• Nakayama Takuya suggested that Nakagawa Jun divide Toy Story's sponsorship slots into tiers and put the top spot up for bidding.
• Nakagawa Jun told Nakayama Takuya that Eri's family treasured him and said the station would transfer the planning fee to his personal account.
• In November, Sega North America president Tom Kalinske ordered the Tijuana factory to run three shifts to build inventory before Thanksgiving.
• Bernard reviewed Pixar's promotional materials and handled detailed revision requests from its liaison.
• Steve Jobs questioned John Lasseter about how long a story-driven work could endure, and Lasseter answered that it could be passed down forever.
• Steve Jobs praised Sega's Toy Story game for capturing the film's core and artistic style, then wrote the core marketing strategy on a whiteboard.

Pixar, Disney, and Sega coordinated Toy Story’s premiere and simultaneous game launch, using theater promotions to drive sales of the movie and Jupiter console. As sales data came in, Kalinske saw the Buzz Lightyear bundle leading the counters and recalled Nakayama Takuya had increased production from thirty thousand to one hundred thousand units.

• Jobs promoted Pixar’s Toy Story and arranged a San Francisco premiere that brought Silicon Valley executives together to watch the film.
• Tom Kalinske and Bernard attended the Los Angeles premiere, where Disney built an elaborate playhouse based on Andy’s room.
• Toy Story opened across America on November 22, and Sega set up game demos and sales counters in major theaters.
• A father bought his son a Buzz Lightyear Jupiter-and-game bundle after the boy tried the game at a theater.
• Kalinske reviewed sales data showing the collaborative bundle was the top seller and remembered Nakayama Takuya had expanded its production run to one hundred thousand units.

Toy Story and its Sega tie-in game became major Thanksgiving hits, selling out Jupiter consoles and driving strong film and game sales. Nakayama Takuya and Tom Kalinske focused on expanding production before Christmas while watching for Sony’s response.

• Nakayama Takuya ordered 100,000 limited-edition Jupiter consoles for North America and arranged for factories in Mexico and China to support production.
• Toy Story broke the Thanksgiving weekend box-office record, while the Jupiter tie-in game sold over 1.1 million copies and all 100,000 limited-edition consoles sold out.
• John Lasseter, Ed Catmull, and Steve Jobs discussed the film’s glowing reviews and Sega’s sales report at Pixar Studios.
• Tom Kalinske told Bernard that retailers wanted more copies of the game and arranged for them to preorder because Sega had no stock.
• Nakayama Takuya promised Kalinske 100,000 standard Jupiter consoles arriving from China and another 200,000 before Christmas, and warned him to watch Sony’s North American plans.

Toy Story’s box-office and game success boosted Pixar’s profile and strengthened its IPO prospects. On the eve of the listing, Jobs demanded an offering price of at least twenty-two dollars, or he would postpone it.

• Nakayama Takuya and Yuji Naka discussed the Sega-Pixar game’s acclaim and the lessons its engine work had provided Sega.
• Toy Story’s success spread through American popular culture, while Disney executives worried that Pixar was gaining the credit and sought better terms in future negotiations.
• Lawrence Levy used a live demonstration of the Sega game during Pixar’s roadshow to persuade investors that Pixar could build valuable cross-media intellectual property.
• On November 28, Lawrence Levy presented strong film and game sales at the final IPO pricing meeting, and Jobs rejected an eighteen-dollar offer in favor of at least twenty-two dollars.

Pixar’s IPO surged far above its offering price, raising $132 million and giving Steve Jobs new leverage in Hollywood. Disney reconsidered its partnership with Pixar and Sega, while Sega expected Pixar’s need for profitable growth to deepen their cooperation.

• PIXR opened at $47 and closed at $39 on its first day of trading, up 77 percent from its $22 offering price.
• Jobs and Lawrence Levy reviewed Pixar’s strong debut as Jobs’s paper wealth passed one billion dollars.
• Michael Eisner concluded that Pixar’s new funding weakened Disney’s bargaining power and ordered executives to reassess cooperation with Sega.
• Nakayama Takuya told Yuji Naka that Pixar’s IPO strengthened the prospects for future Sega partnerships and would push Pixar to expand its game business.
• Nakayama Takuya marked the changing relationship between Pixar and Disney on Sega’s three-year roadmap.

Sega’s Toy Story game became a major hit in Japan and helped Jupiter sell out in North America, putting pressure on Sony and rival game publishers. The chapter ended with industry leaders reconsidering their release schedules as Sega’s success reshaped the year-end market.

• Toy Story launched in Japan, drew long lines in Akihabara, and sold one million copies within five days.
• The game’s quality and Jupiter’s visuals drew players and increased Japanese audiences’ interest in the upcoming film.
• Ken Kutaragi learned that Jupiter bundles had sold out in North America over Thanksgiving and ordered Sony to boost promotion for Ridge Racer: Revolution and retailer rebates.
• Kozuki Kagemasa, Kudo Hiroshi, and Tsujimoto Kenzo discussed how Toy Story had diverted retail space and predicted another sales surge when the film reached Japan.
• Tsujimoto Kenzo said Capcom would reassess its next-year release windows, while Kozuki Kagemasa praised Konami’s early release of Suikoden.

Nakayama Takuya learned that Ghost in the Shell had opened to poor Japanese box-office results, but he decided Sega would continue developing and promoting its game adaptation. He invited Mamoru Oshii to dinner, where they began discussing the pressure from Shochiku Films.

• Hisao Oguchi reported that the Ghost in the Shell game was more than halfway complete while the film received weak box-office results and mixed audience reactions.
• Nakayama Takuya told Hisao Oguchi to continue the game and its publicity plans, noting that Manga Entertainment had secured European and American distribution rights for the film.
• Nakayama Takuya called Mamoru Oshii, praised the film, and invited him to an izakaya for drinks.
• Mamoru Oshii arrived at the izakaya with his basset hound Gabriel and joined Nakayama Takuya for sake and food.
• Nakayama Takuya told Mamoru Oshii that Shochiku Films' marketing chief had called, seeking someone to share the pressure over the film's poor performance.

Nakayama Takuya told Mamoru Oshii that games could give Ghost in the Shell’s dense ideas room to breathe, then suggested Hideo Kojima as a collaborator. Mamoru Oshii grew curious about Kojima and his game-making approach.

• Mamoru Oshii explained that Ghost in the Shell’s information overload had made audiences sleepy, but he had refused to simplify the film into an action story.
• Nakayama Takuya argued that the film’s North American videotape release could still find an audience and that games could overcome the limits of a two-hour runtime through interaction.
• Nakayama Takuya told Mamoru Oshii that Sega’s game had technical shortcomings but could let players explore New Port City and absorb its story at their own pace.
• Mamoru Oshii said he did not understand game level design, and Nakayama Takuya named Hideo Kojima as someone who could combine cinematic and game storytelling.
• Nakayama Takuya described Kojima’s MGS2 sales and cinematic ambitions, prompting Mamoru Oshii to listen with growing interest.

Nakayama Takuya persuaded Mamoru Oshii to contact Kojima about the game version of Ghost in the Shell, then the chapter examined how Sega’s decision to leave December’s release window to partners shaped the market. It left the industry’s older consoles and handhelds thriving alongside the newer 32-bit systems.

• Nakayama Takuya praised Kojima’s use of game interactivity and suggested that Mamoru Oshii seek his advice on Ghost in the Shell.
• Mamoru Oshii accepted Kojima’s number, and he and Nakayama Takuya returned to chatting over food and sake with Gabriel nearby.
• The chapter described how Sega’s decision to yield December’s release window prompted competitors to adapt their release strategies.
• November sales showed that developers who released games early and focused on 16-bit and handheld platforms achieved strong results.
• The chapter explained that handhelds retained players through portability and that the large installed base of Mega Drive and Super Famicom remained a valuable market.

Sega used Toy Story’s success and a New Year clearance campaign with reduced royalties to support Jupiter sales and third-party developers while older platforms remained profitable. At TV Tokyo, station director Nakagawa Jun reviewed rising Game Gear advertising revenue and recalled how Nakayama Takuya’s proposal had led to a record-breaking report on the game industry.

• Sega released Toy Story on Jupiter, whose popularity expanded the market without seriously hurting 16-bit and handheld sales.
• Channel merchants paired Toy Story displays with 16-bit games, while developers continued earning returns from polished titles on mature platforms.
• Sega announced a New Year clearance campaign that let third-party companies discount older games and pay reduced royalties.
• Third-party publishers prepared old cartridge stock for discounted sales, and retailers rearranged their shelves for the New Year.
• Nakagawa Jun reviewed a report showing game companies had bought a third of Game Gear’s evening prime-time advertising since December began.
• Nakagawa Jun recalled that Nakayama Takuya had suggested a World Business Satellite report that set a ratings record and drew public attention to the game industry.

TV Tokyo’s World Business Satellite presented Japan’s game industry as a major cultural and technological pillar, prompting public discussion and coverage from other media. NHK then examined the risks facing small developers and interviewed Pixel Workshop president Watanabe Kenta, who explained why his company avoided competing in 3D games.

• Nakagawa Jun reviewed the World Business Satellite proposal and directed the team to highlight the game industry’s economic scale and technological contributions.
• TV Tokyo broadcast a feature showing the game industry’s growth and guests’ arguments that it was advancing software engineering and becoming a pillar of Japan’s cultural industry.
• Gohara Tadashi watched the program and reflected on his work as a game programmer and the changing public view of his profession.
• After TV Tokyo’s feature sparked discussion, NHK assigned reporters to investigate small and medium-sized game companies and their survival prospects.
• NHK aired a report showing a failed developer’s liquidation and visited Pixel Workshop, where Watanabe Kenta said small companies risked ruin by chasing 3D games.

The Japanese game industry gained public and political recognition as Sega prepared for the year-end sales season. While Hisao Oguchi managed Sega’s operations, Nakayama Takuya stayed with Eri at the hospital as they awaited the birth of their child.

• Watanabe Kenta explained how Pixel Workshop used niche games, low development costs, and Sega’s distribution discounts to turn a profit.
• Media coverage, government support, and investor interest reflected the growing reach of Japan’s game industry, while retailers drew a broad range of customers.
• Hisao Oguchi complained that Nakayama Takuya had left him to coordinate Sega’s year-end campaign and respond to competitors’ promotions and inquiries.
• Yuji Naka reminded Hisao Oguchi that Nakayama Takuya had delegated distribution authority to him and resource allocation authority to Yuji Naka.
• Nakayama Takuya stayed beside Eri in the hospital, and she teased him about prioritizing her pregnancy over his work.

Eri waited in the hospital for her baby while Nakayama Takuya and their family visited, joked with Kazuki, and discussed Sega’s business. The chapter left Kazuki bargaining for more Gamepocket time under his father’s strict rules.

• Nakayama Takuya reassured Eri about the gossip and said he had rushed back from Nasdaq because he worried about her pregnancy.
• Nakayama Kazuki visited Eri and gently asked whether the baby had kicked her.
• Nakayama Hayao and Nakayama Miyuki brought soup and supplements, and Nakayama Hayao discussed Sega’s campaign and competitors with Nakayama Takuya.
• Kazuki asked how the baby got inside Eri, and Nakayama Takuya humorously explained it with a Sonic the Hedgehog comparison.
• Kazuki offered to lend the baby his Gamepocket, and Nakayama Takuya upheld the half-hour limit while offering more time if Kazuki recited the nine-times table.

Eri’s water broke while she was staying at Sugiyama Obstetrics and Gynecology Hospital, and Nakayama Takuya accompanied her to the labor room. The doctor ordered bed rest and observation, while Takuya called home to alert his family; Keiko went to wake Nakayama Hayao and Miyuki.

• Nakayama Hayao and Miyuki visited Eri and later took Kazuki home, promising to build a snowman with him.
• On December 29, Eri’s water broke, and Takuya called a nurse to help move her to the labor room.
• The doctor found that Eri’s cervix had not dilated and ordered strict bed rest and observation, with oxytocin if contractions did not begin before dawn.
• Eri asked Takuya to notify his parents, and he called Keiko at the Nakayama residence.
• Keiko put on a coat and went to wake Hayao and Miyuki.

Nakayama Eri went into labor while both families waited anxiously at the hospital. At dawn, a newborn’s powerful cry came from the delivery room, but the baby’s details were not yet revealed.

• Nakayama Hayao and Nakayama Miyuki took Kazuki to the hospital after Nakayama Eri’s water broke.
• Nakagawa Jun and Nakagawa Takako arrived, and the two families waited together as Nakayama Takuya reported that labor was progressing normally.
• As Eri’s contractions intensified, Takuya stayed beside her while Kazuki worried that she was in pain.
• At four-thirty, doctors found Eri fully dilated and wheeled her into the delivery room.
• At 5:20, an infant cried from inside the delivery room, stopping everyone in the corridor.