The black car drove along the road to Aoyama.
Nakayama Hayao sat in the back, eyes closed, resting.
Takuya Nakayama sat beside him, flipping through the latest financial reports of the CSK Group.
Okawa Isao, founder of the CSK Group and largest shareholder of Sega.
"Okawa Isao started in technology, but at his core, he's a true businessman," Hayao said, breaking the silence. "He invested in Sega for its cash flow and market share. He's been watching your strategic alliances. Today isn't about reporting progress; it's about showing him our hand."
"The trump card for the power transfer," Takuya said, closing the report.
"Exactly," Hayao replied, adjusting his tie. "I hinted at this to him on the phone. The old man didn't commit, but he insisted on meeting you. He wants to gauge whether you can truly control the Sega game."
The car entered the underground parking garage of CSK Group Headquarters.
Top-floor conference room.
Okawa Isao sat at the head of the long conference table, looking vigorous and sharp.
A cup of clear tea sat before him.
Nakayama Hayao and Takuya Nakayama sat opposite them.
There were no unnecessary pleasantries.
"Silicon Valley Online's investment has yielded impressive returns," Okawa Isao began, his gaze fixed on Takuya Nakayama. "Wall Street funds are hard to come by, yet you managed to extract real money from their pockets."
"Pure luck, I suppose. We caught the right trend at the right time," Takuya Nakayama replied.
"Business can't rely solely on luck," Okawa Isao said, picking up his teacup. "Sega's current operations are spread too thin—hardware, software, animation and manga merchandise, overseas markets, and the Internet. The longer the front lines, the higher the risk to our cash flow."
"That's why we need to consolidate," Takuya Nakayama met his gaze. "Jupiter's overseas promotion is the core of our hardware strategy, and E3 serves as the showcase for our software ecosystem. The projected revenue from these two ventures alone will cover the initial sunk costs. It's worth noting that our Internet investments are snowballing using profits, without touching Sega's core capital. That's our safety net."
Okawa Isao set down his teacup.
"News of the Bandai-Sega collaboration is already circulating, and public opinion is divided. Some call it a powerful alliance of strengths, while others claim Sega is essentially giving away its channels to make someone else look good."
"The value of a channel lies in its circulation. Bandai's IPs need Sega's hardware platform to generate revenue, while Sega needs Bandai's audience to expand its installed base and leverage the peripheral product ecosystem to diversify its revenue streams. This is a resource exchange. Exploiting the law of diminishing marginal returns, we must boost software and peripheral profits before hardware margins hit rock bottom. We're not charging tolls; we want the entire street to prosper."
"Who will maintain a street without tolls?" Okawa Isao pressed.
"The neighbors will maintain it together. Square, Blizzard, Sunrise Animation—these are the merchants we've brought in. Our interests are intertwined, and anyone who tries to cause trouble will have to answer to the entire street first." Takuya Nakayama spoke calmly and methodically.
"Sony is building a new mall across the street."
"Then we'll compete on who offers a more comprehensive selection and attracts more customers. In this sector, Sony's overall coverage in the industries we operate in is far less comprehensive than Sega's, and our distribution channels are just as strong. As for technology, Sony's only advantage is the optical disc standard. But the CD-ROM file system was jointly developed by Sony and Sega—they can't strangle Sega with it."
After listening, Okawa Isao tapped his fingers lightly on the table.
"Your father said you're to take over from him."
"He's pushing me to take the reins," Takuya Nakayama said with a smile. "He's become addicted to babysitting his grandson at home and resents company matters keeping him from spending time with the little one."
The tension in the conference room eased slightly.
Nakayama Hayao shot his son a glare but didn't contradict him.
Okawa Isao chuckled.
"Hayao, your son is much more eloquent than you were at his age. When you were young, you just slammed tables and yelled."
"If slamming tables solves problems, then I'll do it," Nakayama Hayao said, leaning forward. "Isao, let's be frank. Takuya is next in line to be Sega's President. Any objections from your side?"
Okawa Isao's smile faded.
"CSK's position is simple: whoever can increase Sega's stock price and deliver dividends to shareholders deserves the position. The Board of Directors has taken notice of Takuya's achievements over the past few years. I have no objections."
He paused, then turned to Takuya Nakayama.
"However, Sony is making bold moves in the console market. While our Jupiter's sales growth isn't as rapid as the PlayStation's, it's still significant. After you take over, how do you plan to counter them?"
"We'll build our barrier with content," Takuya Nakayama replied. "At the E3 Exhibition, Sega will announce a series of exclusive blockbusters and third-party partnerships. The hardware gap between us and Sony is negligible. Ultimately, players buy consoles to play games. As long as we have enough strong cards in hand, even if Sony's hardware sells well, it will just end up being a glorified media player."
Okawa Isao remained noncommittal.
"Let's hope your cards are as good as you say."
Okawa Isao's stance set the tone for this power transition. As Sega's largest external shareholder, the CSK Group's approval meant the most crucial obstacle had been cleared.
After leaving the CSK Headquarters Building and settling into the back of a sedan, Nakayama Hayao loosened his tie slightly.
"That old dog Okawa values your ability to make money," Nakayama Hayao said, leaning back against the seat. "Now that he's agreed, those shareholders on the Board who just follow the crowd won't be able to cause any trouble."
"Making money is just a means to an end. Market share is the real barrier," Takuya Nakayama replied, placing his briefing documents back into his briefcase. "They want dividends; we want control of Sega. We each get what we need."
It's worth noting that Sega's internal power structure had undergone a substantial reshaping in recent years. Takuya Nakayama had joined Sega in 1985 and steadily climbed the ranks to become Executive Managing Director.
During the transition from the 16-bit Mega Drive to the 32-bit Jupiter, he established his core business by leveraging sales data and hit games.
In the traditional Japanese corporate management model, when faced with technological bottlenecks, those in power often tend to bring in external executives.
Shoichiro Irijiri of Honda Motor Co., Ltd. was once considered a potential candidate to lead the R&D department.
Applying assembly line management principles from the automotive industry to game development was a cross-disciplinary endeavor with inherently high trial-and-error costs.
Having outsiders guide experts could easily lead to a rift between hardware development and software content divisions. Furthermore, communication breakdowns between newly appointed executives and their original subordinates could escalate into factional struggles.
The tendency for established companies to rely on manufacturing-centric thinking when applied to the creative content industry is often the root cause of their decline.
However, Takuya Nakayama's meteoric rise directly severed this path of trial and error.
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