"But there's no rush," Takuya Nakayama said. "The manga will run for several more years. We'll only start when the plot is fully developed. I'm bringing this up now to get a head start on recruiting PR talent in China. When we co-produce with Japan and Korea, the departments and relationships involved will be incredibly complex. Terauchi's supply chain team alone won't be enough to handle it."
Yoshikawa fell silent for a moment.
"You're something else," he said, shaking his head. His tone was a mix of exasperation and grudging admiration. "Games, hardware, animation, film and television—what exactly do you want to turn Sega into?"
"A company where employees can earn more bonuses," Takuya Nakayama replied instantly.
Yoshikawa chuckled and cursed good-naturedly.
"Alright, I'll keep an eye out for someone in China for you," Yoshikawa said, standing up and slinging his briefcase back over his shoulder. "Things are developing rapidly there. Who knows what field you'll expand into next? Whether the film project goes through or not, it's always good to have someone who understands the local scene."
"Thank you, Uncle Yoshikawa," Takuya Nakayama said, rising to his feet and walking around the desk. "But you should really go home and rest. You haven't adjusted to the time difference yet. Running to the office like this—won't your wife scold you?"
"She's used to it," Yoshikawa said, straightening his askew tie. He stopped at the door and glanced back at Takuya Nakayama. "As for you, stop staying up so late. The workload you're handling is no longer appropriate for a Managing Director. Once your position is officially confirmed, you'll need to learn to delegate. Don't try to carry everything yourself."
"I'll keep that in mind," Takuya replied.
Yoshikawa nodded and pushed the door open, leaving the office.
The sound of his footsteps gradually faded down the corridor.
Takuya stood at the door for a moment, then turned back to his desk. He picked up the stack of documents Yoshikawa had left and flipped to the last page.
Meeting minutes between California state legislators and Los Angeles city council members, letters of intent from five universities to collaborate with volunteers, on-site security coordination plans, and frameworks for recruiting temporary staff—everything was meticulously organized, even including detailed notes in the margins.
He closed the file and slid it into his drawer.
Yoshikawa never made empty promises.
If he said it was handled, it was truly handled.
With this, Takuya had now met with all the directors and major shareholders in Japan.
From Okawa Isao at CSK Headquarters to Takahashi in his Arcade Lab, from Terauchi in the Supply Chain Office to Hattori at Sega Galaxy, and then to Hoshino and Sugiura in the Investment Department, and finally to Yoshikawa, who rushed back from his trip—each stop yielded a clear commitment of support.
The promises were made, the benefits promised, and the bottom lines laid bare.
A consensus among these directors and major shareholders was rapidly solidifying into a cohesive network.
The calendar turned to May 1995.
Director Hatano returned to Japan from Mexico.
As originally planned, Takuya Nakayama was preparing to visit Hatano to discuss the presidential succession in person.
Terauchi had warned him that Hatano was not easily swayed and would require substantial evidence to be convinced.
However, before Takuya Nakayama could even schedule the meeting, Hatano made his move.
On his third day back in Japan, he convened a supply chain-focused meeting, resurrecting an issue that had already been debated the previous year: the installation of a third production line at the Tijuana factory in Mexico, specifically for cartridge assembly.
This proposal was not new.
Last year, when Director Hatano first proposed it, his reasoning was solid.
Since the North American Free Trade Agreement took effect on January 1, 1994, tariff costs for Mexican factories supplying the U.S. and Canadian markets had plummeted, and logistics cycles had shortened by nearly a third.
After the first main console assembly line came online, Sega of North America's inventory turnover rate improved significantly, and stockout rates reached historic lows.
Recently, the second main console assembly line and the game disc pressing line had been completed. Production ramp-up was proceeding smoothly, with a stable yield rate of over 97%.
With these figures to back him up, Hatano felt confident in pushing for further expansion.
The problem lay with the cartridge format itself.
Last year's proposal was shelved not due to funding, space constraints, or local capacity in Mexico.
The real issue was Sega's uncertainty about the future of cartridges as a storage medium.
The Mega Drive's sales curve had already begun to decline in 1995.
This 16-bit console, which had carried Sega through its golden years, was gradually being superseded by its own Jupiter.
All of the Mega Drive's games were released on cartridges, while the Jupiter used CD-ROMs. This was a cost-driven decision: the manufacturing cost of a single CD-ROM was less than one-tenth the cost of a cartridge, yet its storage capacity was dozens of times greater.
The handheld console market also presented a dilemma.
The GamePocket had been on the market for over five years. While its installed base remained substantial and its peripheral ecosystem was still relatively healthy, many were uncertain about the future growth potential of the handheld market.
The opposition's logic was clear:
Optical discs were the inevitable future. Sony's PlayStation had fully adopted CD-ROMs, and even Nintendo was considering optical disc solutions for its next-generation console.
At this critical juncture, investing a large sum of money in building a cartridge assembly line in Mexico would be a risky gamble. If demand for cartridges plummeted within two or three years, the line would become obsolete.
The associated costs—equipment depreciation, workforce layoffs, and lease agreements—would all become sunk costs.
The supporters' arguments were also compelling:
The Mega Drive's cartridge game shipments remained surprisingly strong.
Moreover, the demand for cartridges in the handheld console market was irreplaceable.
Moreover, orders from third-party manufacturers for cartridges remained strong. Many small and medium-sized third-party developers continued to develop games for the Mega Drive and Game Pocket, all using Sega's contract manufacturing channels.
These external orders still yielded substantial profit margins.
With both sides holding firm to their positions, neither could convince the other.
The situation grew more complicated because the issue involved Sega's strategic decisions for its technological roadmap over the next three to five years.
Cartridges versus optical discs wasn't merely a question of production lines; it represented a fundamental choice about the company's overall hardware strategy.
No one wanted to make the wrong move. If they backed the losing side, they could end up as cautionary tales, making their lives on the Board of Directors considerably more difficult.
As a result, last year's discussions fizzled out.
No one voted against the proposal, and no one voted for it.
Everyone tacitly agreed to let the matter hang in the air, waiting for a clearer signal.
Director Hatano was extremely dissatisfied with this delay.
He had spent over half a year on the front lines in Mexico, witnessing firsthand the month-by-month surge in orders from the North American market. The cartridge inventory in warehouses often ran out, and the replenishment cycle, stretched across the Pacific, was excessively long.
Shipping cartridges from Shenzhen to the West Coast of North America incurred substantial tariffs.
Unless they moved production to Mexico, North America would continue to bear these costs.
These expenses directly impacted Hatano's performance metrics.
Therefore, upon returning, Hatano had no intention of pursuing a gentle approach this time.
He escalated the proposal to a formal motion, demanding a definitive answer from the Board of Directors within two weeks.
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