The Mega Drive struggled against competition in Japan, but the Genesis found success overseas after the release of Sonic the Hedgehog in 1991 and briefly outsold its main competitor, the Super Nintendo Entertainment System, in the US.

[10] Around the same time, David Rosen, an American officer in the United States Air Force stationed in Japan, launched a photo booth business in Tokyo in 1954.

During this period, Sega acquired Gremlin Industries, which manufactured microprocessor-based arcade games,[20] and Esco Boueki, a coin-op distributor founded and owned by Hayao Nakayama.

[67] Sonic's color was chosen to match Sega's cobalt blue logo; his shoes were inspired by Michael Jackson's boots, and his personality by Bill Clinton's "can-do" attitude.

"[56] In large part due to the popularity of Sonic the Hedgehog,[62] the Genesis outsold its main competitor, the Super Nintendo Entertainment System (SNES), in the United States nearly two to one during the 1991 holiday season.

[71] Sega outsold Nintendo for four consecutive Christmas seasons[72] due to the Genesis' head start, lower price, and a larger library compared to the SNES at release.

[94] In 1993, the American media began to focus on the mature content of certain video games, such as Night Trap for the Sega CD and the Genesis version of Midway's Mortal Kombat.

[96] Executive vice president of Nintendo of America Howard Lincoln was quick to point out in the United States congressional hearings in 1993 that Night Trap was not rated at all.

[102] Virtua Fighter, a port of the popular arcade game, sold at a nearly one-to-one ratio with the Saturn at launch and was crucial to the system's early success in Japan.

[134][135] Following on from difficulties faced in setting up theme parks in the United States, Sega established the GameWorks chain of urban entertainment centers in a joint venture with DreamWorks SKG and Universal Studios during March 1997.

[138][139] Atlus and Sega introduced Purikura in February 1995, initially at game arcades, before expanding to other popular culture locations such as fast food shops, train stations, karaoke establishments and bowling alleys.

[94] Shortly before the announcement of the losses, Sega discontinued the Saturn in North America to prepare for the launch of its successor, the Dreamcast, releasing remaining games in low quantities.

[120][125] The decision to discontinue the Saturn effectively left the North American home console market without Sega games for over a year, with most of its activity in the country coming from arcade divisions.

[121] Nonetheless, Irimajiri confirmed in an interview with Japanese newspaper Daily Yomiuri that Saturn development would stop at the end of 1998 and games would continue to be produced until mid-1999.

[165] Sega suffered a further ¥42.881 billion consolidated net loss in the fiscal year ending March 1999, and announced plans to eliminate 1,000 jobs, nearly a quarter of its workforce.

[221] Moore left Sega in January 2003, feeling that the Japanese executives were refusing to adapt to industry changes, such as the demand for mature games such as Grand Theft Auto III.

[226] Successful console games during this period include entries in the Sonic the Hedgehog, Virtua Fighter, Super Monkey Ball, Phantasy Star Online and Sakura Wars franchises.

Satomi said Sega had been operating at a loss for nearly ten years,[229] while Sammy feared stagnation and over-reliance of its highly profitable pachislot and pachinko machine business and wanted to diversify.

[255] Due in part to the decline of packaged game sales worldwide in the 2010s,[256] Sega began layoffs and closed five offices based in Europe and Australia on July 1, 2012.

[274] Sega Sammy Holdings announced in April 2017 that it would relocate its head office functions and domestic subsidiaries located in the Tokyo metropolitan area to Shinagawa-ku by January 2018.

AEGIS represents workers from departments including marketing, quality assurance, development and localization, making it the first of its kind in the game industry in the United States.

[313] Sonic X Shadow Generations, Like a Dragon: Infinite Wealth and Persona 3 Reload reached a million sales within a week, a record for each of the respective franchises.

[314][315][316] In December 2024, musician Johnny Gioeli sued Sega, seeking $1 million in damages and restitution for unauthorized usage of "Live and Learn," the theme song of Sonic Adventure 2.

As of 2024, the song had appeared in more than two dozen subsequent games and the Japanese version of the anime Sonic X. Gioeli said he hoped to settle the lawsuit amicably and maintain his "long standing beautiful relationship with Sega.

[336] In what has been called "a brief moment of remarkable creativity",[152] in 2000, Sega restructured its arcade and console development teams into nine semi-autonomous studios headed by the company's top designers.

[340] Toshihiro Nagoshi, formerly the head of Amusement Vision, recalls this period as "in many ways a labour of love" from Sega, teaching the creatives the experience of managing a business.

[355] Kalinske felt Sega had innovated by developing games for an older demographic and pioneering the "street date" concept with the simultaneous North American and European release of Sonic the Hedgehog 2.

[7] Edge wrote that "hardened loyalists continue to reminisce about the console that brought forth games like Burning Rangers, Guardian Heroes, Dragon Force, and Panzer Dragoon Saga.

[57] Travis Fahs of IGN noted that since the Sammy takeover Sega had developed fewer games and outsourced to more western studios, and that its arcade operations had been significantly reduced.

He argued that its most serious problems came from the loss of its creative talent, particularly Yuji Naka and Yu Suzuki, after the Sammy takeover, but concluded that "as of this writing, Sega is in its best financial shape of the past two decades.