The best of both worlds

Mike Hayes has a lot on his plate after stepping up from his Euro role to oversee Sega’s entire Western business. Colin Campbell asks him how he’s finding life in his new San Francisco office – and handling the tricky job of managing two territories…

Two years ago, Sega moved its US HQ from swanky downtown San Francisco, to the up-coming Potrero Hill neighbourhood; a blue-collar district best known as the home of Anchor Steam Beer. It’s a practical, unpretentious place, peppered with old warehouses from the dockland days, and with a good view of the Bay Bridge.

For Mike Hayes, head of Sega of America, Potrero Hill is also a sub-$30 ride to SFO airport, useful when he pops back to his other office – in Brentford, Middlesex. There, he’s also head of Sega Europe.

Phew! Stamina, and an ability to get stuck into some good old-fashioned hard work, is going to count for Hayes and for Sega in the months and years ahead.

Since the departure of former US boss Simon Jeffery and a management restructure, Hayes has been given responsibility for both Sega’s EMEA and American businesses, known informally as Sega West. His job is to run Sega’s operations in all major territories outside Japan.

This is cause for a rolling up of sleeves. Sega has much to do, including energising its key franchises to take advantage of both young/new consumers and retro-platforms like digital/iPhone as well as hauling itself into profitability. Parent company Sega Sammy dropped the best part of $100 million last year. With much of the loss Pachinko-based, and with a stagnant Japanese games market, the onus is on Hayes to deliver.

Although not at liberty to divulge details, he says that Sega West performs very well” within the group’s diverse operations, and is upbeat about the games industry as a whole and Sega’s place within the business, which he’s been working for 20-odd years.

Of course profitability is what we are all after. But it’s worth looking at where the business is right now. A few years ago we were providing games for PlayStation 2 and a GameBoy device. Now we have three viable home console platforms; for us, a vibrant PC market with Total War and Football Manager; two great handhelds, Apple iPhone, digital and casual games. We have so many different market outlets.”

UNITED  THINKING
Naturally, the availability of these potential revenue streams is no guarantee of success, but with its rich heritage and undoubted development abilities, Sega inhabits a unique place. We have to use our resources wisely and intelligently to make sure that we are getting those profits,” says Hayes. Now is a good time to be doing that as long as costs begin to stabilise and as long as the market remains buoyant.”

He is confident that, despite a quiet summer in the games industry, the packaged goods part of the business will match calendar 2008, not including digital and iPhone sales. For Sega, once a hardware company in its own right, the correct strategy is to embrace as many distribution platforms as possible. To think that we are going to get a big return on one format would be a fragile strategy,” says Hayes.

Hayes spent some time working the US market during his Codemasters days, when the company was bringing its biggest turn-of-the-Century franchises across the pond. But this is his first time intimately involved in the US.

He talks about some of the major differences between North America and Europe with the caveat that they share more similarities and, when you compare the US with the UK, the differences (scale aside) become most difficult to spot.

The most interesting difference is the retail market. In EMEA we sell to more countries than there are customers [retailers] in North America. There are a few customers in the US who dominate the games market which is different from many countries, but increasingly the way the UK is becoming.”

The US is ahead when it comes to how highly powerful, info-rich retailers run the business. There’s a shift towards what the consumer velocity of sale is going to be at an early period rather than ‘let’s take as much stock as we can and see what sells’,” he explains. The level of sophistication of information and tracking is advanced here compared to most of Europe. It’s all about hard data on what the consumer wants and what the consumer expects.”

Buzz, as measured by metrics, as well as pre-orders, ordain games. The marketing does the work, not the salesperson. Retail becomes so important to us because of the channel marketing that they can do and making sure that product is front and centre so that when we are ready to launch a game the consumer is there. It’s very much a marketing business in terms of getting sales success.”

Hayes acknowledges some of the oft-cited clichs about America and Europe, the former being slightly more hardcore and the latter a bit more family-centric. But he says these are over-simplifications that do not take into account real and very rapidly developing shifts in the market as defined by the consumer and by the way he or she is buying and playing the product.

Sonic is as good an example as any, of Sega’s attempts to grasp different consumers across different demographics and genres, while always keeping a global outlook and taking advantage of those all-important economies of scale.

Sonic’s role as an icon has taken it all over the place in terms of demographic placement – hip and happening to very young and cute right up to edgy and brash. Sega is taking a more moderate route now, following the Nintendo model of placing its icons into different gaming contexts in order to define them.

It’s interesting that when Sonic first came out, it’s what the core gamers were playing, while Mario was a bouncing, toy-orientated character. But the world has moved on. Mario has been consistent for the past 20 years, providing the same value that it always did. Sonic has changed and that’s why we have to make sure that Sonic is aimed at the right audience through particular games.”

RISKY  BUSINESS
Sega hit big with Mario and Sonic at the Olympic Games and a Winter follow-up is due this autumn. But it’s also mining the character through retro activities on iPhone, casual and digital as well as standalone games and vehicles such as sports and racing titles. It’s a well-worn path that’s proven to point in the right direction.

But people love Sega because it has a history of taking risks, not just rehashing past glories. This year we’ve seen the likes of MadWorld, which despite positive reviews failed at retail, and, more successful, teen Wii shooter The Conduit which Hayes says has shipped 300,000 units worldwide and sold more than half that number.

He says: Show me another new IP that has done those numbers, bearing in mind that the Wii market has been a little slow this summer. If you compare The Conduit with other core IP that’s been launched in the last two or three years it’s tracking well above.”

He says Sega will definitely return to tough-edged Wii games, despite MadWorld’s difficulties. I don’t know why it didn’t sell so well. Perhaps it was the black and white graphics or the violence, but to argue that mature games don’t sell well on Wii just because we launched one that didn’t hit right away, would be arrogant. So we have other Teen and M titles that we will be launching on the Wii platform.”

Sega’s upcoming line-up also includes that Winter Olympics follow-up to Mario and Sonic (I expect it to be top five this Holiday,” says Hayes.). There’s also Bourne-esque RPG Alpha Protocol, shooter Alien vs. Predator (both non-Japanese developments) and Bayonetta (from Japan), which has recently been moved from Q4 to Q1 2010.

Hayes says the line-up requires