Recaps

Nakayama Eri safely gave birth to a healthy girl, Nakayama Miki, and the family welcomed her home. After settling Eri and Miki at the estate, Nakayama Takuya returned to Sega headquarters, where he reviewed reports showing Toy Story had sold over five million copies across North American and Japanese markets.

• A nurse told Nakayama Takuya and the family that Eri had safely delivered a healthy girl, and Kazuki celebrated having a little sister.
• Nakayama Takuya named the baby Nakayama Miki, and Kazuki promised to teach her to play games when she grew up.
• Nakayama Takuya and Keiko cared for Miki through the nights while Eri recovered in the hospital.
• In January 1996, Nakayama Takuya brought Eri and Miki home to the Nakayama estate, where the family welcomed them.
• Nakayama Takuya went to Sega headquarters and found that Toy Story had sold more than five million copies across North American and Japanese markets.

Nakayama Takuya celebrated Jupiter’s soaring sales and Sega’s advantage over Sony, then returned to work after his daughter Miki’s birth. After discussing upcoming releases and partnerships with Hisao Oguchi, he addressed his deputy in a new way.

• Nakayama Takuya reflected on Toy Story’s success, Jupiter’s nearly nine-million install base, and how Sega had transformed into a stronger game company.
• Nakayama Takuya opened the champagne Kalinske had sent and poured a glass for Hisao Oguchi, who reported strong demand for Jupiter and the Buzz Lightyear Limited Edition.
• Nakayama Takuya learned that Sony’s New Year promotion had produced only modest gains and toasted Hisao Oguchi, saying Sega had won half the battle.
• Hisao Oguchi congratulated Nakayama Takuya on Miki’s safe birth, and Nakayama said Eri was recovering well.
• Nakayama Takuya told Hisao Oguchi to reassure Konami about Suikoden’s February release, announced Sakura Wars 2 as Sega’s spring title, and scheduled a dinner with Capcom to discuss Resident Evil.
• Nakayama Takuya praised Hisao Oguchi’s growth and addressed him as “Oguchi-san.”

Nakayama Takuya prepared Hisao Oguchi to take over Sega’s gaming division while Sega expanded Jupiter production and promoted upcoming releases. Sony kept PlayStation’s funding after barely meeting its targets, and the chapter ended with Sony celebrating the unified DVD standard.

• Nakayama Takuya told Hisao Oguchi that he intended to hand him the gaming division’s chief steward role and urged him to prepare.
• Sega increased Jupiter production, promoted Sakura Wars and Resident Evil, and arranged release windows and publicity for third-party manufacturers.
• Sony’s finance chief reported that PlayStation had shipped 3.1 million units by December, allowing Ken Kutaragi’s division to retain its budget.
• Ken Kutaragi told Nobuyuki Idei that Sega’s year-end sales strategy had widened the gap between the consoles.
• Norio Ohga told Ken Kutaragi and Nobuyuki Idei that Sony and other companies had established the DVD Alliance and unified the format standard.

Ken Kutaragi secured stronger support inside Sony by tying the PlayStation to DVD hardware and film sales, then planned to spend aggressively to challenge Sega. At Sega headquarters, Hisao Oguchi brought Nakayama Takuya a North American briefing about Atari that signaled the former giant’s complete decline.

• Norio Ohga and Nobuyuki Idei told Ken Kutaragi that Sony’s home appliance division and Columbia Pictures wanted PlayStation support for DVD playback.
• Ken Kutaragi agreed to make DVD playback standard on the next-generation console and proposed an external VCD module for the current PS.
• At a Sony reception, Director Iwata promised Ken Kutaragi priority access to DVD decoding chips and help securing development funds.
• Ken Kutaragi told Nobuyuki Idei he would recruit struggling developers and pursue Enix and Dragon Quest to strengthen the PS lineup against Sega.
• Hisao Oguchi gave Nakayama Takuya a North American briefing about Atari that reported the company’s complete decline.

Nakayama Takuya discussed Atari's collapse and warned Hisao Oguchi that Sega had to keep respecting players and supporting its games. After learning that Ken Kutaragi was courting Enix, Nakayama decided to meet President Honda and use Jupiter's large installed base to compete for Enix.

• Hisao Oguchi reported that Atari would halt Jaguar production and sales and liquidate its remaining 100,000 consoles.
• Nakayama Takuya explained that Atari had failed through arrogance toward players and told Hisao Oguchi that good games were essential to Sega's survival.
• Hisao Oguchi reported that Sony was offering development and marketing support to secure PlayStation exclusives and that Ken Kutaragi had met Enix president Yasuhiro Fukushima.
• Nakayama Takuya decided Sega would approach Enix, citing Jupiter's nearly nine million installed units as leverage, and arranged to visit President Honda the following week.

Nakayama Takuya met with Enix President Honda Keiji to persuade him to release the next mainline Dragon Quest on Sega’s Jupiter platform instead of Nintendo’s N64. He argued that Jupiter’s discs and development environment better suited Enix, while Honda listened and raised concerns about disc loading.

• Nakayama Takuya arrived at Enix headquarters and met President Honda Keiji in his office.
• Nakayama Takuya invited Enix to bring the newest mainline Dragon Quest sequel to Jupiter, and Honda Keiji stressed that changing platforms required cautious consideration.
• Nakayama Takuya argued that Nintendo’s slow N64 launch and cartridge capacity limits could weaken Dragon Quest’s reach and restrict its audiovisual scale.
• Honda Keiji objected that disc loading could disrupt RPG players’ immersion, and Nakayama Takuya cited Jupiter’s caching and other disc-based RPGs as evidence that load times were acceptable.
• Nakayama Takuya argued that expensive, slow-to-produce N64 cartridges posed financial risks and conflicted with Enix’s asset-light publishing model.
• Nakayama Takuya criticized the N64’s complex development environment and began contrasting Enix’s development-system mismatch with Square’s approach of building large in-house teams.

Nakayama Takuya explained Enix’s shortage of capable N64 development partners and reassured Honda Keiji that Sega wanted business cooperation, not control of Enix. He presented a vetted list of studios trained on Sega’s development kit, giving Honda a possible way to restore Enix’s core-plus-outsourcing model.

• Nakayama Takuya argued that N64’s technical demands had left Enix without enough capable outsourcing teams to develop Dragon Quest.
• Honda Keiji rejected rumors that Enix was short of money and said its real problems were choosing a direction and finding core development resources.
• Nakayama Takuya assured Honda that Sega sought neither Enix’s equity nor control of its other businesses, only cross-platform game cooperation.
• Nakayama Takuya showed Honda a list of studios Sega had assessed and helped train for 3D development.
• Nakayama Takuya explained that the studios had used Jupiter’s development kit, and Honda recognized them as the missing partners Enix needed.

Nakayama Takuya offered Enix development support, promotion, and favorable royalties to secure Dragon Quest for Sega’s Jupiter, but Honda Keiji deferred a decision until the board and technical teams could review the proposal. Sony then rushed to counter Sega, and Nobuyuki Idei presented Enix with a funding and investment offer.

• Nakayama Takuya offered Honda Keiji Jupiter’s development tools, outsourcing network, promotional support, and a special royalty plan for Dragon Quest.
• Honda Keiji said Enix would consult its board and shareholders and evaluate Jupiter, while noting that Ken Kutaragi would visit the following week.
• At Sony headquarters, Norio Ohga, Ken Kutaragi, and Nobuyuki Idei discussed Sega’s approach and agreed Sony needed to move quickly with a counteroffer.
• Norio Ohga authorized a larger budget and told Sony to offer its distribution channels and Columbia Pictures’ resources alongside a bid for influence in Enix.
• Nobuyuki Idei met Honda Keiji and offered Sony funding for Enix projects on PlayStation, covering seventy percent of initial development costs, plus a plan to buy fifteen percent of Enix at a thirty percent premium.

Sony offered Enix a premium equity investment, funding, and extensive marketing support in an effort to secure Dragon Quest for PlayStation, but Honda Keiji questioned whether Sony could provide reliable development assistance and worried about losing Enix’s independence. Enix’s leaders began weighing Sony’s offer against Sega’s cooperation plan, with no decision yet reached.

• Nobuyuki Idei offered Honda Keiji a thirty percent premium investment and access to Sony’s marketing and distribution channels, while promising to coordinate PlayStation developers and technical support for Enix’s outsourced development.
• Honda Keiji questioned Sony’s ability to support Enix’s move to 3D development and judged Sony’s promise to coordinate outside developers less concrete than Sega’s prepared teams and libraries.
• Honda Keiji told Nobuyuki Idei that Enix’s board would discuss the proposal, and Idei left the letter of intent with Enix.
• Nobuyuki Idei reported to Norio Ohga and Ken Kutaragi that Honda Keiji seemed dissatisfied with Sony’s outsourcing plan, and Ohga ordered closer monitoring and outreach to Enix executives.
• Three days later, Honda Keiji presented Sega’s cooperation memorandum and Sony’s investment letter at a closed-door Enix meeting, where Chida Yukinobu warned that Sony’s stake could give it influence over company decisions.

Enix chose a multi-platform strategy while prioritizing Dragon Quest’s development for Sega’s Jupiter, and Sega prepared to support the project with development kits and outsourcing teams. As Sony sought other RPG partners, Nakayama Takuya received the final audit report on Sega’s old accounts.

• Enix rejected Sony’s investment proposal and arranged for its technical team to inspect Sega’s development resources.
• Nakayama Takuya explained to Hisao Oguchi that Jupiter’s larger install base and Sega’s development ecosystem would benefit the first-release version without requiring exclusivity.
• Nobuyuki Idei and Norio Ohga discussed Enix’s decision and directed Sony to pressure Sega with hardware price cuts and recruit other game makers.
• Enix’s technical team spent a week at Sega, approved its development resources, and planned to begin building Dragon Quest’s Jupiter architecture.
• Nakayama Takuya signed off on the financial investigation, and Director Hoshino delivered PricewaterhouseCoopers’ final audit report and internal-control proposal.

Enix debated investment and development proposals from Sony and Sega before Chida Yukinobu proposed a multiplatform strategy that would avoid giving up equity. The executives agreed to prioritize a Jupiter version of Dragon Quest while keeping the option to port it to PlayStation and N64.

• Yasuhiro Fukushima argued that Enix's finances were healthy and opposed selling shares to Sony, while Honda Keiji presented Sega's development tools and outsourcing resources.
• Yuji Horii favored Sega's platform because its disc medium and tools would make developing the next Dragon Quest easier than developing for Nintendo's N64.
• Honda Keiji rejected a proposal to use Sony's offer to demand equivalent funding from Sega, warning that Sega had already made substantial concessions.
• Chida Yukinobu pointed out that Sega's memorandum did not require exclusivity, and Yasuhiro Fukushima concluded that Sega trusted Jupiter's strengths and was offering open cooperation.
• Yuji Horii proposed launching Dragon Quest on Jupiter first, then porting it to PlayStation and potentially N64, and the executives supported the multiplatform approach.
• Yasuhiro Fukushima directed Enix to finalize Jupiter development cooperation with Sega while maintaining contact with Sony, and Honda Keiji called for a vote.

Nakayama Takuya reported that Sega’s financial cleanup had established a dual-track audit system, then outlined gradual operational reforms to Nakayama Hayao. The chapter ended with Takuya proposing skills-rebuilding support for older employees who could not keep pace with new technology.

• Director Hoshino told Nakayama Takuya that Sega’s financial health had improved, overseas accounts were under monitoring, and improper early revenue recognition had been reversed.
• Nakayama Takuya told Hoshino he would report to Nakayama Hayao and set the direction for reforms after the audit cleanup.
• Nakayama Takuya explained to Nakayama Hayao that he would test reforms in a peripheral department before extending them to core departments, avoiding large-scale layoffs and pay cuts.
• Nakayama Takuya described how outdated work habits wasted time and labor, while Nakayama Hayao asked how he would handle employees who struggled to adapt.
• Nakayama Takuya said he would preserve lifetime employment and create a skills-rebuilding allowance in Human Resources for older employees who could not keep up with new methods.

Nakayama Takuya proposed retraining and transferring employees who struggled to meet new efficiency demands, preserving morale while freeing core roles for younger staff. At Sega’s board meeting, he presented a five-month audit documenting wasted costs and outlined the same personnel plan, leaving the directors to consider his approach to corporate reform.

• Nakayama Takuya explained to Nakayama Hayao how retraining subsidies and transfers could move struggling employees into suitable support roles while opening core positions to younger workers.
• Nakayama Takuya gave the example of transferring a veteran Planning Department leader to organize Sega’s archives, which improved project progress and placed the employee in a role he could manage.
• Nakayama Hayao approved Nakayama Takuya’s reform plan and said Sega could support him in trying it.
• At a meeting of Sega’s directors, Nakayama Takuya presented the results of a five-month internal audit that identified wasted marketing expenses and inefficient work processes.
• Nakayama Takuya proposed subsidies and transfers for employees who could not meet new efficiency requirements, prompting discussion among the directors.

Nakayama Takuya won unanimous board approval for Sega’s subsidy and internal transfer reform, strengthening directors’ confidence in him as a successor. He then reviewed Sega’s preliminary E3 lineup with Hisao Oguchi, which featured Virtua Fighter 3, Sakura Wars 2, and Ghost in the Shell.

• Nakayama Takuya presented a cost-neutral personnel optimization plan that replaced forced ranking with training subsidies and internal transfers.
• The directors unanimously approved the Skills Reconstruction Subsidy and Internal Transfer Optimization Plan, and their confidence in Nakayama Takuya grew.
• Nakayama Takuya told Director Hoshino that Sega’s reforms would need to be implemented gradually.
• Hisao Oguchi brought Nakayama Takuya the preliminary E3 exhibition plan and reported that Virtua Fighter 3 would lead Sega’s arcade lineup.
• Hisao Oguchi reported that Sakura Wars 2 was past halfway through development and that Naka was leading optimization on Ghost in the Shell, which Mamoru Oshii had reviewed with the team.

Nakayama Takuya reviewed Sega’s E3 lineup and directed the company to give major promotional support to Final Fantasy VII and Tomb Raider to strengthen Jupiter’s third-party ecosystem. He also delegated routine game-development decisions to Sega’s department heads, turning his focus toward the company’s broader business and industry relationships.

• Hisao Oguchi reported that Pokémon Adventure had become a 3D action platformer, and Nakayama Takuya urged Satoshi Tajiri’s team to make its environments more interactive.
• Hisao Oguchi outlined Sega’s other upcoming games, including Pro Soccer World PSW 1996, The Second Super Robot Wars, Metal Slug 4, Harvest Moon, and Kirby.
• Nakayama Takuya ordered Sega to devote forty percent of its marketing budget and prominent Game Gear signs at E3 to Square’s Final Fantasy VII and Core Design’s Tomb Raider.
• Nakayama Takuya explained that promoting third-party hits would demonstrate Jupiter’s commercial strength and attract more developers to Sega’s platform.
• Nakayama Takuya told Hisao Oguchi that department heads could approve routine sequels and genre expansions without his review, reserving his attention for Sega’s finances, partnerships, and wider industry strategy.

Nakayama Takuya declined IDSA’s offer to give the E3 keynote while preparing for the UE Engine Foundation’s unveiling at E3. The chapter then showed Toy Story’s release driving a surge in Jupiter console sales across Europe and Japan, leaving Hisao Oguchi reporting the spring sales frenzy to Nakayama.

• Hisao Oguchi told Nakayama Takuya that IDSA had invited him to give the E3 keynote, but Nakayama turned it down and chose to focus on Sega’s exhibition and sales.
• Mark Cerny told John Carmack that the UE Engine Foundation was registered, its initial funding was ready, NVIDIA engineers and Sega’s rendering and physics modules were being assembled, and a separate E3 hall had been secured.
• John Carmack refused to prepare a speech and said he would explain the UE Engine’s architecture and uses at E3.
• Nakayama Takuya received Mark Cerny’s update and regarded the UE Engine’s release as Sega’s decisive move at E3.
• Hisao Oguchi reported that Toy Story’s overseas release had sparked strong Jupiter sales, with London’s demo booths selling out their consoles and bundles within two hours.

Sega’s Toy Story promotion brought families into the Jupiter market, while Investiture of the Gods: Yang Jian’s Tale quietly launched in Japan. A high school student tried the game and discovered its responsive combat and seamless Seventy-Two Transformations mechanic.

• Nakayama Takuya and Hisao Oguchi discussed the strong international demand for Toy Story games and the strain on production capacity.
• A father bought a Jupiter console and Toy Story bundle for his son after seeing the game displayed in a Shinjuku department store.
• Families across major Japanese cities bought Jupiter consoles and additional games, boosting Sega’s installed base.
• A Shinjuku store manager stocked thirty copies of Investiture of the Gods: Yang Jian’s Tale, and a graduating high school student bought one.
• The student played the game that night, tested Yang Jian’s responsive weapon attacks, and transformed him into a hound to enter a cave.

Legend of Yang Jian sold out its first 50,000-copy Japanese batch and quickly sold out in Chinese-speaking markets, prompting a second production run. Mercury received its first major remittance from Sega, and its staff gathered to hear the amount.

• Japanese players praised Legend of Yang Jian, and the first 50,000 copies sold out within two weeks.
• Fu Zan told Mercury’s staff that the Japanese batch had sold out and that Sega had started producing another 50,000 copies.
• Sega and Nine-Tattoo Dragon promoted the Traditional Chinese version across Chinese-speaking regions, where the stock sold out in under a month.
• Kobayashi presented a Sega remittance slip for 86.2 million yen, and Fu Zan calculated that it came to about 6.465 million yuan at the official exchange rate.
• Old Zhang asked Fu Zan how much money the company had received.

Mercury Technology’s game sales in Japan brought in more than six million RMB in foreign exchange, prompting municipal officials to visit and inspect the company. Fu Zan prepared his staff and office for their arrival, and the chapter ended as he welcomed the officials and explained the company’s earnings.

• Fu Zan reviewed the proceeds from the first Japanese shipment and learned that more sales were underway in Japan, Hong Kong, and Taiwan.
• Fu Zan told Kobayashi to prepare financial statements and learned that Director Wang and Deputy Director Liu would visit after the Foreign Exchange Administration reported Mercury Technology’s payment.
• Fu Zan ordered the staff to clean the office, hide their bedding and posters, and dress appropriately for the inspection.
• Fu Zan welcomed Director Wang, Deputy Director Liu, and Secretary Chen, and Director Wang praised Mercury Technology for earning more than six million RMB in foreign exchange.

Fu Zan demonstrated Mercury Technology’s game to visiting officials, who praised its cultural and commercial success and promised support. Secretary Chen advised him to establish a Party branch at Mercury, leaving Fu Zan ready to strengthen the company’s political ties as it expanded.

• Fu Zan showed Director Wang, Deputy Director Liu, and other officials the game’s combat and transformation features, and they praised its cultural export potential.
• Fu Zan reported strong sales in Japan and Chinese-speaking markets and plans to expand Mercury’s team and develop another product or a series.
• Director Wang instructed Secretary Chen to prepare a proposal for priority support, including tax incentives and expanded office space.
• Secretary Chen urged Fu Zan to recruit Party members and apply to establish a Party branch at Mercury, and Fu Zan agreed to pursue the process.
• Director Wang encouraged Mercury to keep developing technology and culture, while Deputy Director Liu suggested exploring Fujian’s Mazu culture for a future game.

After Mercury Technology secured support from Fuzhou officials, Fu Zan celebrated with the team and asked legal supervisor Lin Yaonan about the risks of making a Mazu-themed game. Lin warned that although copyright posed no problem, political backlash in Taiwan could jeopardize the game’s release there.

• Fu Zan watched the city leaders leave and considered their advice to establish a Party branch and develop staff as members.
• Fu Zan invited the team to a seafood dinner to celebrate Mercury Technology’s progress.
• Fu Zan thanked Lin Yaonan for helping the company avoid copyright trouble with The Legend of Yang Jian.
• Fu Zan asked Lin Yaonan whether a Mazu-themed game would create legal risks, and Lin said Mazu was in the public domain if the game’s materials were original.
• Lin Yaonan warned that Taiwanese media could portray the mainland-developed game as political propaganda, pressuring distributors and Sega’s Taiwan branch to pull it from shelves.
• Fu Zan realized he had overlooked the political risks involved in selling the game in Taiwan.

Fu Zan rejected the Mazu game proposal after Lin Yaonan warned him that it could expose Mercury Technology to political risk. At the next morning’s meeting, he shelved the project and told the staff that the city’s support required Mercury Technology to establish a Party branch.

• Lin Yaonan warned Fu Zan that a Mazu-themed game could provoke controversy in Taiwan and damage Mercury Technology, so Fu Zan wrote down plans to suspend the project and organize a meeting.
• Fu Zan announced at the celebration banquet that the team would meet the next morning to discuss an important matter.
• At the meeting, Fu Zan explained the risks of the Mazu theme and shelved it indefinitely; the staff accepted his decision.
• Fu Zan told the core staff that Secretary Chen had said city support depended on Mercury Technology setting up a Party branch.
• Kobayashi agreed to establish a branch, while Old Zhang wondered how they could do so when the company had no Party members.

Fu Zan set Mercury Technology’s next game, Investiture of the Gods: Legend of Nezha, on a demanding 2.5D action-game development path and assigned the team its first tasks. Meanwhile, Hoshino reported that Sega was reorganizing its neglected game assets for internal development and third-party licensing.

• Fu Zan ordered Mercury Technology staff to submit Party membership applications and announced Legend of Nezha as the company’s next project.
• Fu Zan chose a fixed-view 2.5D design with pre-rendered backgrounds, animated character frames, and detailed combat built around Nezha’s magical treasures.
• Fu Zan assigned Xiao Li to prototype Nezha’s combos and told Old Zhang to recruit artists, while the lead programmer planned to optimize performance.
• Hoshino presented Sega’s copyright-asset audit, proposing central allocation for Grade A assets and licensing Grade B and Grade C assets to smaller developers.

Nakayama Takuya and Hoshino uncovered how Southeast Asia’s debt, property bubbles, and unstable politics could trigger a regional financial crisis that would also damage Japanese banks. Nakayama Takuya instructed Hoshino to look deeper into the crisis and said Sega should reinforce its cash flow before the fallout reached Japan.

• Nakayama Takuya approved turning Sega’s old intellectual property into licensed products but required Sega to retain first refusal on third-party creations.
• Nakayama Takuya asked Hoshino about Southeast Asia’s economy, and Hoshino described its rapid growth and troubling inflows of foreign capital.
• Hoshino examined Thailand’s deficits, short-term foreign borrowing, and real estate bubble, then identified similar risks in Indonesia, Malaysia, and the Philippines.
• Hoshino reported that political instability could prevent the Southeast Asian governments from defending their currencies against a regional financial crisis.
• Nakayama Takuya pointed out that Japanese banks had lent heavily to Southeast Asia and warned that defaults could spread bad debts back into Japan.
• Nakayama Takuya told Hoshino to investigate the crisis further and said Sega should strengthen its cash flow and reduce businesses overly dependent on bank loans.

Nakayama Takuya set Sega’s preparations for a possible Asian financial crisis in motion while Nintendo pushed the N64 toward launch, testing Super Mario 64 and building up console inventory. Nintendo’s executives reviewed the launch lineup, which included Super Mario 64 and Pilotwings 64.

• Hoshino left to brief Director Sugiura and the Finance Department on Southeast Asia, currency operations, and risks to Sega’s bank deposits.
• Nakayama Takuya planned to profit from currency fluctuations after Wall Street opened the Asian crisis, rather than trying to trigger the crisis himself.
• Shigeru Miyamoto and Yoshiaki Koizumi refined Super Mario 64’s jumps and camera behavior, with its code freeze and factory deadline approaching.
• Yokoi Gunpei and Genyo Takeda reported that Nintendo had over five hundred thousand N64 units in stock and planned to raise production before launch.
• Yamauchi Hiroshi questioned whether the N64 had enough launch software, and Genyo Takeda presented Pilotwings 64 as a second major title alongside Super Mario 64.