History of Sega/Jukeboxes
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For much of the 1950s, 60s and 70s, Sega was responsible for the distribution and later manufacturing of jukeboxes for sale in Japan. Until it began creating its own electro-mechanical arcade games (starting with Periscope in 1966), this was a core part of the business, alongside similar endeavours involving slot machines, bowling alleys and electro-mechanical machines from across the Pacific.
While the invention of the jukebox can be traced to the 1890s, it was not until the late 1920s when coin-operated, mass produced jukebox systems began to hit the market. Like much of the amusement industry at the time, jukebox production was centred mainly in Chicago in the US state of Illinois. Licensed distributors would then sell these products to customers in clubs, bars, or wherever they may be required. Jukeboxes reached their peak between the 1940s and 1960s, and were a means for people to hear high-fidelity, new music in a time before home music players were affordable.
By the 1950s three big players in the jukebox industry had emerged; Rock-Ola, Seeburg and Wurlitzer, but their home market in the US was beginning to shrink thanks to inventions such the portable radio, and the ever decreasing cost of home vinyl record players. However, other countries weren't so fortunate - Japan in particular, had been devistated by the second world war, and disposable income among the Japanese populace was low. A market was identified, and Japanese companies signed up for distribution rights - V&V signed up with Wurlitzer, Taito sold Seeburg machines, and Nihon Goraku Bussan paired with Rock-Ola.
The Japanese were very receptive of jukeboxes. Despite import costs pushing up the prices far beyond their US prices, jukeboxes became big business, and the distributors helping the market grow capitalised on this growth. Due to the reliable nature of Rock-Ola machines, Nihon Goraku Bussan (trading as Sega) became one of the largest jukebox companies in Japan through this deal. Nihon Goraku Bussan also mitigated some of the costs by constructing jukeboxes in its home country, the parts being imported at a lower cost.
However, much as it would do with electro-mechanical arcade games, Sega made a name for itself by producing jukeboxes in Japan, reducing distribution costs and avoiding import duty. The Sega 1000 jukebox - the first entirely original product to bear the "Sega" name was released in 1960. While no match for the Rock-Ola machines in terms of capability, its budget price meant it sold well.
Due to Nihon Goraku Bussan, Rock-Ola claimed to be the biggest player in the Japanese jukebox market in 1965[1], and would continue their dominance after the formation of Sega Enterprises Ltd. later in the year. So important was the Japanese business, Rock-Ola vice-president Edward Doris was there when the merger was signed off[2].
Sega had sold thousands of jukebox machines by 1968.[3]
As had been the case in the US, Japanese record producers targeted the jukebox market. Records were produced with jukeboxes in mind, which meant Sega had some initial leverage over the Japanese music industry. Japanese music was traditionally longer than singles released in the US or Europe - 1970 would see Sega lobby for for similar 2-2½ minute lengths for singles[4], presumably so that more people would able to put money in their machines. As the then-largest distributor of jukeboxes in Asia, Sega had no qualms in rejecting a single for being too long[4] (which, by extension, meant it wouldn't be heard, wouldn't be popular and wouldn't bring the artist fame or fortune).
One of the logical extensions of the jukebox craze was to add a microphone to let users sing along. Sega location tested the concept of a "sing-along jukebox" in early 1971, wherein hostesses would sing and pass the microphone to customers to join in[5]. This style of entertainment is a forerunner to karaoke, which is usually credited as having been invented by Daisuke Inoue in 1971 (though did not patent the idea). While Sega would back away from the jukebox industry as the 1970s progressed, it has invested in karaoke on-and-off ever since.