History of Sega in China

History of Sega in China
Official Sega distributor(s): Hiroshima Trading (198x-199x), WKK Industries China (1993-1995), Dynastar Technology Co., Ltd (1996-1998), Stone International Trading Co., Ltd (1997-1998), Culture and Entertainment Co., Ltd (1998-1999), Hong Kong Zhongxun Video Games Co., Ltd. (1999-2000), Matrix Interactive (2001-2002), AtGames (2005-2015), CE-Asia (2008-present)

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The history of Sega in Greater China could be seen in three perspectives - Taiwan, Hong Kong and presented in this article Mainland China.

Hiroshima Trading

Master System label from Hiroshima Trading

The Mainland China market was first open to video game consoles in 1988. Before that, gaming systems were known from imported and popular arcade machines, and a small number of second-generation consoles.

Sega Master System was the first documented console to be sold officially in China. It was distributed by Japanese-based company Hiroshima Trading (广岛交易株式会社) starting from late 1980s to early 1990s, but it was forgotten due to growing popularity of famiclones at the same time.

Until August 1992, 85% of Sega's hardware and software for export, were produced in Taiwan, China and Hong Kong.

WKK and Huahan Culture Entertainment

Mega Drive from WKK

Hong Kong's distributor of Sega - WKK began distribution of Master System II, starting from July 1993 by it's division called WKK Industries China, but sales were minimal. In October 1993, WKK began test market of Sega Mega Drive model I, hoping for better results.

In Christmas 1993, Sega signed an agreement with Huahan Culture Entertainment in Diaoyutai State Guesthouse, Beijing with a purpose of creating new company. On December 13, 1994, formed Sega Huahan Culture Entertainment to develop, produce and promote games for Chinese video arcade market, manage amusement facilities and sell professional equipment in China.

In November 1994, WKK organised special exhibition in Shanghai, where it presented many systems and games for Chinese audience including Mega Drive 2, Game Gear, Super 32X and Sega Saturn. These promotional activities were related to the Nintendo entering the market this year with the Game Boy and Super Famicom, distributed by Mani Limited from Hong Kong. Two more producers were invited on exhibition as a guests - Goldstar with 3DO and U.M.C with Super A'Can prototype, but these two systems enjoyed little attention from visitors compare to Sega products. WKK said that sell of 16-bit systems is still very small due to it's price (¥800 for console, ¥200-¥400 for games). In mid-1995, it was reported that the Mega Drive console had 30,000 - 40,000 users, in comparison, the Super Famicom had 5,000 - 7,000 users and the 3DO approximately 500 - 700. WKK had the most developed dealer network in Beijing, Shanghai and Guangzhou, and the biggest obstacle to its further development was piracy, although there were rumors that Sega already had plans to solve this problem. It also revealed plans about building factory of Sega games in China. It's unknown if any of Sega consoles promoted by WKK on Shanghai exhibition was distributed after that by them in China, because further information ​about company's fate are unknown.

Fight with piracy

SB-16C by Subor

Advert of New Star FDC-2000, one of the more advanced Sega clones at the time, released in 1995

The piracy of Mega Drive consoles and games was very strong in the region and started sometimes around 1992. From early 1990s to this day, countless clones have been produced in China and exact numbers are still unknown, because their production took place on a huge scale and apart from clones with changed names and packaging many of them are still simply called "Mega Drives", only with different manufacturers or components. It is also difficult to determine which ones were intended for export and which ones for the domestic market.

In mid-1990s the most popular producer of 16-bit Sega bootlegs was Tianjing Newstar Electronics., Ltd. with it's New Star clone series. Others included Shenchu Electronic, Shanghai Huze Electronics Co., Pride Sky Limited, Subor, BBK Electronics (called also BBG Electronics), Beijing Aipu Electromechanical Development Co. Ltd. and many more. Like clones, the number of producers and distributors dealing with it until present times, is impossible to determine. From 1994, Sega started suing numerous Mega Drive clone producers from China. The main goal was not only to reduce clones on the local market but also on the global one, because many products were sent abroad where they competed with the original systems. For example, in early 1995, Sega loose 70% of Hong Kong market, because of bootlegs from China.

On March 9, 1995, Sega reached an agreement with Chinese government to took legal action in order to minimalize piracy of Sega systems.With this, the largest game console wholesaler in Beijing and other "Sega" games stores were seized. Very huge amounts of pirated consoles and cartridges were confiscated and eventually destroyed. These actions almost caused the collapse of the Chinese gaming market. The first reason was that economy was mainly based on piracy, because most people didn't had money to original video games and ridding of the bootlegs means shrinking of market size. The second one was long-term attack on gaming by two sides - the media and educational circles due to the bad nature of video games, which now had third side - the government who under reason of copyright protection decrease market. Despite the sharp start, further actions weren't as strong and piracy still continued, causing stabilization of this specific market. In mid-1995, the clones of first Mega Drive cost ¥580-¥620 and second MD cost ¥640-¥680.

In addition to piracy, parallel imports also existed and were a large part of the market. The origins are dated in 1988, immediately after China opened up to the console market and it functioned, due to the initial lack of official representatives of foreign producers on the Chinese market and later due to the weakness of the representing agencies. The consoles were imported from Japan and most of them were available immediately after their release in that country (including Sega, starting from Mega Drive's Japan release). However, the problem for importers was the high customs duty, which was one of the reasons for the beginnings of piracy in the late 1980s/early 1990s. In mid-1995, Mega Drive model I in PAL format cost ¥700-¥850, Mega Drive model II in NTSC format cost ¥950-¥1200, Game Gear cost ¥700-¥850, Mega Jet cost ¥800-¥850, Mega-CD II cost ¥1700-¥2200, Super 32X cost ¥1900-¥1950, Multi Mega cost ¥2450-¥2600 and Sega Saturn cost ¥4800-¥5300.

U.M.C, Stone Group and Tianli

Mega Drive 2 by Dynastar Technology

Saturn advert from Stone

One of the Tianli-Sega VCD players

With the end of 1995, Chinese market was dominated by 8-bit Famicom clones which sold 1.5 milion units, but this year stood under decline of it's sales. The growth was seen in 16-bit consoles which sold 1 milion units until this time. Nearly all of this systems were Mega Drive clones and rest was imported or officially sold MD consoles, Super Famicom and Super A'Can. The third power were 32-bit consoles, sold only from 1 year and had 30,000 users with Sega Saturn as dominate system (15,000 units), next was PlayStation (7,000 units) and others (8,000 units).

In order to stop Nintendo's growth in Asia, Sega signed in September 1996 an agreement with U.M.C from Taiwan to produce cheap Mega Drive systems for Asian markets. In China, UMC established the Dynastar Technology Co., Ltd (华星电子科技有限公司) in Shantou, to produce and sale Mega Drive 2 (for a price of ¥450) and distribute Game Gear consoles (promoted on the back of MD2 box). Before this deal, UMC distributed in China it's own systems - 8-bit portable Gamate and 16-bit Super A'Can console, which all competed with Sega.

When Sony announced in mid-1996, that they are creating distribution network in Asia for its console, Sega started in July 1996, looking for a partner in China. In January 1997, Stone International Trading Co., Ltd (四通集团) announced that they have a authorization from Sega to sell Sega Saturn and Sega Pico in China. They also announced that are looking for distributors and called existing importers of Saturn to contact the Stone for to authorization of the sales. The company said that they will do inspections across the country and those who will not cooperate will be classified as illegal sellers. It is worth noting that Stone Group is probably the first Chinese company to obtain authorization to sell any foreign console. Until then, the agents were companies not from the mainland (from Hong Kong or Taiwan) which delivered products directly to stores in China. Up to this point in China, the imported Saturn dominated the 32-bit gaming market, with 30,000 consoles sold, which was 75% of that market. Much of the credit went to disk piracy, which Stone Group promised to fight.

In March 1997, it started test sales from authorized retailers in Tianjin, Beijing and shipped nationwide for ¥2,400 with 4-disc included.Many titles were ship immediately or shortly after their Japanese release. Sonic Jam was the first game with Chinese instructions and was released same day as Japan.

At the end of 1996, the Virtua Fighter 2 championship was held, but the event was poorly promoted. In the following year, more advertised Beijing 97 Spring VR Fighter Conference was held in three arcade showrooms in Beijing, sponsored by Stone Group and Sega Huahan Culture Entertainment. The final took place on May 25, 1997 and the main prize was a Sega Saturn with the game Virtua Fighter 2.

On July 3, 1997, the trial sales period ended and Sega launched the Saturn in locations nationwide. Show rooms have been created in major cities to present their products. The plan was to sell 40,000 Saturns in the first year and the company's goal was annual sales of 70,000–80,000 units.

By the end of the year, Sega was not satisfied with Stone Group's performance, although the console was, seen as a prize by Coca-Cola and in one of the television programs, which was unique for the consoles in that market. They choose a second partner called Culture and Entertainment Co., Ltd (文化娱乐公司) associated with Shanghai Cultural Bureau Co., Ltd (上海文化局), which released the Saturn with a VCD player in January 1998 for ¥1500.

The idea of VCD player stick with Sega, which wanted to return on still growing 16-bit market of China. After Mega Drive discontinue in Asia, Chinese players complain about no new software available for system, even bootleg games released by pirates were few in numbers, and the demand for MD still did not decline. In October 1998, Sega formed a strategic alliance with Tianli to distribute Mega Drive VCD and DVD Players produced by U.M.C. The video games were distributed on discs with one containing multiple games in it. The system was well-known and recognizable, but the price of device was high (¥1799) and quickly pirated.

Ban of consoles

One of the Li Cheng translation releases

The Hong Kong Zhongxun Video Games Co., Ltd. (香港中讯电玩有限公司) was a distributor of Sega Dreamcast from around 1999 until June 2000 when consoles were banned in China. Sega.com Asia planned to launch localized internet service for Dreamcast, which was suppose to be available in Beijing, Shanghai and Guangzhou until early 2001 but it's fate is unknown.

After June 2000, Mega Drive clones were remodeled as educational computers with learning programmes in Chinese similary to famiclones (first Sega system with keyboard was New Star FDC-2000 released in China in early 1995 by Tianjing Newstar Electronics), because computers were still allowed. Another option were a clones disguised as VCD/DVD players. The more common thing of early 2000s was translation of MD games into Chinese language and Li Cheng was one of the companies dealing with it.

From mid-2000s, due to the development of new technologies and portable consoles being allowed by law, MD clones appeared as handhelds like Mega Drive Portable, HG-806 and others. Sega also tried to use that law earlier, in Spring 2002, when Sega Toys announced that will began selling Pico in China, but the results are unknown.

Present days

Arcade Portable, clone on a chip by AtGames

On June 6, 2001, Sega announced that it would enter the Chinese market with Matrix Interactive. Distribution of the games was to begin on June 15, 2001. Planned to release more than 13 games this year alone and sell 1.5 million games by June 2002 and own 10% of the Chinese games market.

In May 2002, Sega established Sega of China called at the beginning "Sega (Shanghai) Software Co., Ltd". Despite that, Chinese division began real operations on August 3, 2004. In the same day, Sega announced that it would enter the Chinese online gaming market. The IT service for Phantasy Star Online Blue Burst was to be provided by Zarva Digital Entertainment, for CTRace by Joyzone Networks, and for Shenmue Online by T2 Technology Holdings. They also established Sega (China) Network Technology Co., Ltd which operated from October 2005 to May 2007.

In January 2005, Sega began to work with AtGames not only to distributed PC games, but also produce consoles to compete with pirates. This was possible, due to the fact that plug & play video games were another group of systems allowed by law. The AtGames machines were later distribute worldwide with approval of Sega. The ban of the consoles was lifted in 2015. In the same year, AtGames ended distribution of Sega PC titles, but still produced consoles under license.

In 2008, Sega entered into an agreement with CE-Asia for the distribution of games in the Chinese market. Empire: Total War and Total War: Shogun 2 have been included in the top 10 most popular PC games in China. After AtGames era, they took over all of the work and are still active in distribution of Sega games.

From 2009 to 2014, Sega used a joint venture company called Sega Jinwin to distribute arcade machines across country.

In 2013, Shanda Games released Chain Chronicle.

In 2010s, Sega created Sega Asia which handle regional releases of games, but not physical distribution.