Sega's Nagoshi on next-gen, Relic purchase and keeping consoles relevant

Toshihiro Nagoshi is chiefly known as the top creative mind behind Yakuza, a series that arguably does more to keep Sega's name in Japan's limelight than Sonic the Hedgehog at this point. As of a year ago, he's also chief creative officer of Sega, overseeing software development around the world. He's manned the helm through some fairly stormy waters, but his work has sown results. Sega is back to being profitable so far this fiscal year, despite weaker earnings.

"Through all the difficult circumstances we've gone through, we've been able to invest more into our mid and far future while still retaining our identity as Sega," Nagoshi told Famitsu magazine this week. "To be honest, we still need to solidify our footing and our performance as a company, but given the frenetic cycles we deal with nowadays, if we worried solely about that right now, we wouldn't have a stable future in three or five years. I think we'll need to take some new measures to deal with that."

A lot of Sega's success this year has had to do with the launch of Phantasy Star Online 2 in Japan. The latest in one of their best-known franchises, PSO2 surprised many by both adopting a free-to-play scheme and using the PC as its lead platform-something that must have generated a lot of debate within the company.

"If it looks that way from an outside perspective, then you can imagine how it was even more heated within the company," Nagoshi replied. "I think it comes down to the talents of the PSO2 team, and how they convinced the company to go that way. I see possibilities with F2P across the industry; it all depends on what you do with it, but it took this team to show us what we could accomplish with this property. No company is ever unanimous when it makes decisions; there's always doubt over how much you can trust someone who swears to you that they have a vision and they can make it happen. Launching Yakuza may have been a bit like that, but this is a large-scale online game, so the longer you run it, the more money it'll cost us. PSO2 certainly taught Sega how hard it is to establish an online game and run it as a stable business, and I think Sega's gained some major assets through that experience over the past year."

PSO2 has 1.7 million user accounts in Japan alone and is set to launch worldwide on the PC and mobile devices this year. But that's not the end of Sega's overseas strategy, as demonstrated by their purchase of Relic Entertainment last month as part of THQ's bankruptcy proceedings.

"[The purchase] is based around our objective of getting products locally developed by local studios," commented Nagoshi, "but it's also due to the heavy-hitting RTS titles Relic has. Sega already has The Creative Assembly, which is great at making RTS', and so we're becoming one of the best in the world at this genre now. So this purchase was part of our strategy for tackling this genre as well. It's a well-established one, especially overseas, and having this wealth of experience under our belts makes me really look forward to seeing how the chemistry between the two studios works out. If we have the opportunity to make further purchases that emphasize high creativity, I think you'll see us aiming for that."

When asked about what the next generation, Nagoshi sees an even more intense competition than in previous cycles, although it won't come down to hardware speed. "They'll be better-performing systems," he said, "but I think they'll start being closer and closer to each other on the inside. The Wii and Wii U are differentiating themselves on the hardware level, but the other two systems are going to wage an all-out war of services, one that'll involve the entire Sony group and the entire Microsoft group. It'll be a battle to see which group can leverage its scale to best benefit developers and gamers."

As he prepares to join this battle, Nagoshi doesn't seem particularly concerned about rising development costs in the next gen. "It depends on the title, but we don't picture development costs as massively expanding any longer," he said. "As hardware grows more powerful, you can have that hardware cover more of the labor of running the game. There'll always be room for polish, but after a certain point, you're always running into limits in terms of the size of the media. I think pretty much all the AAA titles people know use up nearly all of the media space they're given. In terms of selling price, in terms of the cost of things like multiple disc layers and the tempo of play, I don't see development costs changing massively. They'll be expensive, sure, and that is a concern to me, but even if the hardware gets ten times as powerful, games won't suddenly get ten times costlier to make. I don't think they'd even be twice as costly."

Given that Yakuza spearheads Sega's console lineup in Japan, Nagoshi sees himself as playing a necessary role in keeping console gaming relevant worldwide. It's not a trivial task, given all the headlines social-game outfits are grabbing these days.

"I'd like to ensure that console games don't lose their luster," he declared. "Behind that, I suppose, is the concern that they will, indeed, become a thing of the past if we don't do something. This isn't new, but in a lot of different ways, the 'social' keyword is seeping into all parts of the console business. So part of me sees the console scene as endangered, something we have to act to support. I feel the need to keep that scene active so it doesn't get shunted to the side, and even at this moment, I'm busy thinking of how we'll keep titles like Yakuza going."

When asked about future goals for the company, Nagoshi brought up Sega's traditional image; He describes it as the young upstart that produces wildly out-there titles and doesn't seem too pre-occupied with bottom-line profits. "I want to think about things from ground zero one more time," he said. "That's tough for our younger staff, but it's also fun and exciting. That's what you want the Sega logo to represent: things that seem crazy at first, but really surprise you when they take form. Even if people say 'Oh, now they've done it' at us sometimes, I don't want to do away with the expectations that people have had for us since way back. It wouldn't seem right if Sega acted all firm and conservative, would it? I think I'd like to keep that."