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What's going to happen to Atlus, post-Sega?
by Christian Nutt on 09/20/13 03:28:00 pm   Editor Blog   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.


This week, Sega purchased the assets of Index Corporation, Atlus' bankrupt parent company. I was pretty vocal about the fact that I find this depressing. I chose the word "depressing" simply because I'm a curmudgeon -- I used to be a big Sega fan, and the Sega I was a fan of isn't the Sega of today. But I also think it's going to spell big changes for Atlus, and I fear those changes are not likely to be ones Atlus' fans like, by and large.

In Japan, Atlus is a notably successful niche game developer and publisher. In the West it represents something different: it's the best-loved publisher of high-quality Japanese niche games. It's a symbol of that idea, in fact. Notably, some of those games originate from Atlus Japan, and some originate with other publishers.

The Atlus games biz (in Japan and the U.S.) was the profitable part of Index (bad acquisitions tanked the company). So why do things have to change? I think change is inevitable simply because of the circumstances, and I'll explain why.

Sega West: Business

The most obvious reason that this is going to mark a big change is because this acquisition was obviously spearheaded by Sega of Japan for its own reasons; Sega in the West is not likely to have been involved in it. Now, almost certainly, it will have to be.

While many have expressed hope that Atlus U.S. could stay as it is and continue to operate profitably, the realities of business mean that it's likely that sooner or later that something will happen to the Atlus office in Irvine, California. One tenet of business is cost reduction. Sega already has publishing capabilities and localization workflows established in its San Francisco office, hundreds of miles away.

As far as Japanese games go, the signals we get out of San Francisco are mixed at best. While Sega of America recently released Hatsune Miku: Project Diva F, a niche game steeped in Japanese pop culture, it seems to have given up on the Yakuza franchise, Sega Japan's flagship.

It has also repeatedly passed up opportunities to localize the sorts of Sega games that are Atlus' bread and butter. Even as Atlus U.S. kept releasing PSP games, Sega skipped Valkyria Chronicles 3; it's also totally ignored the 7th Dragon series, a well-regarded niche RPG series for DS and PSP originally helmed by Kazuya Niinou, who was (at the time) best known as the director of Atlus' Etrian Odyssey franchise.

By the time those games hit the PSP and DS, Sega had exited those markets. But Atlus U.S. was still deep in them at the time. Why did they work for Atlus but not Sega? My guess is overhead. Sega, trimmed down, still has big costs -- it's a big publisher. Atlus U.S. is structured specifically to remain profitable while catering to a tiny niche market.

I don't know enough about Sega's finances to predict how many copies a game has to sell to be worth the bother, but I suspect that the 60 to 70k copies Shin Megami Tensei IV sold at retail in the U.S. -- according to NPD figures leaked on NeoGAF -- is below that threshold.

You can see the result of overheads in the business decisions large publishers make all the time. Mostly, their bets are big. Sega U.S. may be lean enough to make money on smaller games (unlike some others, it hasn't yet exited the console downloadable space, with Castle of Illusion having just released) but retail-packaged niche games are more demanding.

To be totally honest I'd need someone who knows more about the ins and outs of publishing to give me definitive cost breakdowns. But I know for a fact that it's tough to make a profit on games like this. Sega, as a company, does not give any external indications it's in the same "hard to make a profit" business Atlus U.S. is.

Sega West: Culture

Just as relevant, I think, is the culture of Sega in the West. This is not the company that gunned for success with the Dreamcast anymore (of course it isn't.) Over the last several years, the publisher has become increasingly westernized, and at one point had dreams of being a top-tier Western publisher on the backs of Western-developed games.

When Sega had to make a decision about continuing to fund Bayonetta 2 or Aliens Colonial Marines, it chose the latter -- despite positive rumblings out of Sega managemnet in the west about the franchise. It was Nintendo stepped in and saved Bayonetta 2. For that matter, when it had the choice between the incredibly troubled Aliens shooter or the Aliens RPG under development by Obsidian, Sega West chose the Aliens shooter.

Of course, these choices are hard to argue with on at least a superficial level  -- an Aliens shooter that wasn't a total disaster could easily have been a success that far outstripped Bayonetta 2, even back when Bayo 2 was a multiplatform release. And of course, there are factors I don't know -- for example, Sega also may have been trapped in a license contract that forced it to keep going down the Aliens road no matter what.

Still, the company acquired Relic from THQ and, before that, Creative Assembly. Nothing against these studios whatsoever; they're talented, and smart buys. But they say something about the culture of Sega West: hardcore PC, Western-focused management. If you go to Sega's website today, you're immediately confronted with a promotional image for Total War: Rome II.

In fact, these days, Sonic is Sega's only meaningful Japanese franchise in the West.

Sega Japan is moving toward mobile and F2P... and then there's Sammy

And we have some evidence that Sega Japan is less interested in these kinds of games (the Atlus kind, I mean) than it used to be, too. There's not much for the 3DS (or the Vita) on its schedule for 2013, and its biggest Vita game so far, Phantasy Star Online 2, is a port of a free-to-play PC game. So far, 3DS has been a bust for the company. Sega is also deeply involved in the Japanese smartphone market, and hopes to exploit Atlus IPs to this end, too.  

PSO2. Out in Japan -- but not in the West. 

All the same, I do think Sega Japan is interested in the Atlus portable lineup. The 7th Dragon series has had three entries for a reason. More reliable mid-tier hits would bring Sega more stability (it tends to have fairly volatile up-and-down financial results.) But see above on my opinion of those games continuing to get localized under a new regime.

And then there's Sammy. The above link also says that Sammy intends to use Atlus IP for its pachinko/pachislot business, and this makes sense. I haven't been to Japan for a couple of years, but the last time I was there, you'd had to be forgiven for thinking Evangelion was a pachinko IP, not an anime IP, if you didn't know better. Persona pachinko? Apparently it already exists. Sounds weird, but it's a non-trivial part of the appeal of this purchase.

There's an element of unpredictability here. Does Sega-Sammy really want to continue the Atlus franchises, or does it want to strip-mine IP? Time will tell.

What will happen to Atlus U.S.?

As I said earlier, I fully expect Atlus U.S. to get shut down or divested by Sega. Sega has the machinery it needs to localize and publish games. We recently saw this happen with the Koei Tecmo merger, we saw it with Bandai Namco, and we saw it with Square Enix. It's just business. 

But note that I said "divested." Atlus U.S. could pivot and become an independent publisher. XSEED and Aksys, the other two notable American niche publishers, are backed by Japanese companies, but they're not controlled by them, and they bid on Japanese games from a variety of publishers and release them in the West. As I noted, Atlus U.S. already does this, so it already has the contacts and expertise to build a business out of it.  

Though I have no really deep knowledge of how it operates, I could see Sega selling Atlus U.S. but keeping a stake in it, and letting it run freely. This would actually be a best-of-both-worlds scenario, because it might let Atlus keep going with "Atlus" games (i.e. Etrian Odyssey, Shin Megami Tensei) and open up Sega games, too (we could see a first Western release for 7th Dragon, or for Valkyria Chronicles again.) That would be wonderful.

We can dream, right?

What else might happen?

Of course, not every Atlus game is a total niche title. Persona 4 Golden is widely recognized to be the most popular Vita game in the world; globally, when you add in sales of the PS2 version, it has sold at the least multiple hundreds of thousands of copies. I have a really hard time imagining that Sega would pass over a theoretical Persona 5 for the West even if it completely shuts down Atlus U.S. It's just too successful a franchise.

There is another bright spot: Sega Japan is forming a subsidiary called Sega Dream Corporation to manage the Index acquisition. If Sega Dream is run as a separate company, and has its own profit and loss center, it might, essentially, stay Atlus -- have its own U.S. office, handle its own games. That would be great.

Given that Sega has gutted its San Francisco office already in the name of cost reduction, maybe it'll keep the Atlus team together to handle the influx of Atlus' games needing localization. But I think we've seen a lot more counterexamples (the mergers/acquisitions I listed above).

We also have to think critically about what Western-focused management will think of Atlus' titles ("What the hell is a Shin Megami Tensei? What did it sell, again?") to assume that this is going to be the case, or even hope for it. The fact of the matter is that the games Atlus releases in the West, for most publishers, may as well not even exist. And Sega (in the West) hasn't reliably shown us that its attitude is different.

On Facebook, a guy I know responded to my "depressing" comment with a "isn't it great that Atlus gets to live to fight another day?" Of course it is. Anything is better than the death of a great studio. But I think for Western fans of the company and the kind of games it publishes, the future is anything but certain.

Some people asked me who I'd rather see acquire Atlus. Personally, I'd hoped that Nintendo would purchase the company. Atlus has been a great supporter of the 3DS and is working together with the company on a Fire Emblem/Shin Megami Tensei crossover game for the Wii U.

Namco Bandai, meanwhile, has put increasing emphasis on its Tales of RPG franchise, so from a Western fan's perspective, it seemed like a safer home. And I saw GungHo as a dark horse candidate, since it has the capital to buy studios (and already owns another portable RPG-focused studio, Game Arts.) But obviously these were not to be.

The truth of the matter is that it's too early to predict what will happen. I'm trying not to be cynical here, just realistic.

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Robert Boyd
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"In the West it represents something different: it's the best-loved publisher of high-quality Japanese niche games."

That's awfully debatable. XSeed Games has really taken over the high-quality Japanese niche game mantle in the past few years.

I really don't see Atlus USA spining-off into its own thing. These days, Atlus USA primarily localizes games that were developed or published by Atlus Japan and publishes low budget Western-developed PC games. Take away their connection to Atlus Japan and they'd lose access to all of the franchises that people associate Atlus USA with.

Christian Nutt
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I have to admit that when I went to Atlus US' site and removed the Atlus games, mentally, what was left over was sort of surprising. Code of Princess and AquaPazza were the two Japanese 2013 releases.

Robert Boyd
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Yeah, their non-Atlus Japan/non-Western output has really dropped drastically the past few years.

Christian Nutt
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My real concern is just that if Sega takes things over, I'm not expecting the Atlus stuff that's smaller than Persona to come over -- and since nobody's been able to license 7th Dragon, or VC3, I'm concerned Sega is no longer licensing out its games (though I don't know if that's the case.) Atlus, actually, published the Shining Soul games in the US -- also Shining Force for GBA, but that was a long time ago. So I don't know, really.

Robert Boyd
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Well, I see it basically going down two ways.

1 - Atlus USA gets disbanded. Persona keeps coming out in the West but stuff like Etrian Odyssey & Dragon's Crown does not.

2 - Atlus USA gets integrated into Sega. Not only do we still get niche Atlus games, but we start to get more niche Sega games as well. And since Sega has a strong European branch, Europe starts to get Atlus games more regularly and promptly than they do now.

I'm hoping for 2 but fearing 1.

Keith Thomson
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These are my concerns as well. I'm not concerned about the third party stuff Atlus USA brings over here, Xseed, NISA, Aksys, and others will pick those up. I'm concerned about the smaller IPs that Atlus owns. Sega is one of those publishers that won't let another company bring over their IP, even if they don't plan on bringing it over themselves. If Atlus USA isn't kept going in some way, then that means another bunch of good games will never reach the US.

Of course, Nintendo used to be one of those companies as well, and they let Xseed bring over 2 of their IPs because of operation rainfall, so maybe there could be some hope...

Michael Stevens
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Atlus USA has the numbers and the audience to justify being it's own entity within Sega. Looking at new ips, It seems like Catherine outsold Binary Domain and Max Anarchy combined, and did most of that in the west and despite it being a totally unfamiliar sort of product. Sega needs to welcome them as "the people who could have another 300k copies of Resonance of Fate."

I'm not sure how Atlus and Sega USA currently obtain their parent's games, but it would be a giant mistake to make them bid against each other. Bandai did that with their anime division, even though they'd never handoff their main series to anyone else, and that's why they don't have an American branch anymore. It would be the quickest way to make sure *nobody* made money on Persona 5. I don't see Atlus USA working out as an independent entity if it means they have to get past a deep-pocketed older brother in order to access the "sure thing" games.

Scott Lavigne
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Not to shoot it down, but Catherine had an abnormally successful marketing campaign. I remember hearing a lot about it even before seeing any gameplay (or even catching whispers of what the gameplay was).

Hayden Dawson
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Might be going against the flow here, but I think a lot of the hate against the 'new' Sega is a bit overblown. They have given the West more chances than most, and the results have not been that positive for them.

We received Yakuza 1-4 and the zombie shooter. The first samurai era spinoff had what would have been serious content concerns stateside with that games' Haruka attempting to sell herself to a brothel. Yes, the removal of the hostesses from 3 was in retrospect a questionable call, but the series had already lost some of its PS2 audience by then. Phantasy Star was tried twice on the PSP and the only thing earned from that was to be the poster child for the out of control piracy concerns that plagued that system. One can't realistically fault the decision to stay away from VC3 or the later 7th Dragon. The DS 7th Dragon fell right in that after the manga crash period where even the niche publishers were backing off on things broadcasting an 'anime feel'.

As others have noted, Code of Princess and a few odd PSP releases are about all we have seen recently from the days of the Atlus faithful. Persona certainly is in no danger and even the 70k numbers for SMT4 seems to be looking for an argument or excuse that isn't there. Project Diva could not have been released with an expectations of multiple hundreds of thousands in sales.

Dave Endresak
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I think that people are missing the point of what is happening with Hatsune Miku and Sega's involvement (as well as Sony's, for that matter, and Crypton Future Media as the ultimate decider). Sega released PJD:F in the West because they asked people what they wanted and people responded. The release of Project Diva F was set to coincide with the release of Miku's V3 upgrade and English voice bank, thus beginning the official promotion of setting her on the world stage. We saw the same sort of effort with her most recent major event, the Magical Mirai festival held for her 6th birthday. Of course, she is already on the world stage, anyway, as I have posted here previously. I think that the idea that PJD:F is "steeped in Japanese pop culture" is not accurate because Miku has fans across the world and pretty much all demographic categories. Shin Megami Tensei and Persona are niche products that appeal to certain tastes, but Miku's successful appeal to a vast variety of people puts others to shame. The question, of course, is why she has such appeal, and that's one question I am trying to answer with my research.

The refusal of businesses to pay attention to what people actually want is the problem and always has been, at least always since market changes happen too quickly to attempt to predict with marketing efforts. Sega avoided this with PJD:F but it is still far too common. I dealt with this back in the 1990s with shoujo and bishoujo works, particularly Sailor Moon (i.e., the attitude was "it won't work in Western markets" but the markets showed otherwise). The claim of "differences between cultures" is interpreted as "we have to make this a certain way to appeal to this culture or that culture" but that is untrue. There are differences, but you do not change what people have already demonstrated they want and like, or you court failure. The typical view of "this past title only sold X units so let's not release something like it in the future" fails to recognize that the past market isn't the present or future market and market changes happen far too quickly to rely on such stats (unless you want to simply try to play safe, but that usually isn't a recipe for success in business).

The gaming industry has begun taking the view that the East and West are separate and distinct. For some consumers, the same attitude applies. For some players, gaming forums and social media sites have become very divisive rather than inclusive. However, if you look at what many people actually do/play, you see that this divisiveness is untrue. For example, you do not see many people only playing "photorealistic" games (West or East development aside). Likewise, you do not see many people playing only games with moe characters or other styles of games. The idea that "anime style" even exists is inaccurate, anyway, as any brief review of the vast variety of Japanese visual styles will attest... Persona and Shin Megami Tensei certainly do not look like Ys, for example, nor does Evangelion look like Sailor Moon... or any of Miyazaki's works, for that matter.

Anyway, the same concerns were raised when Working Designs went under. Sega is far more stable than WD ever was, so I don't think there's any concern, really. Even if Atlus totally vanishes, there are other companies, as was mentioned, and even if those companies vanish, there will be others that form. Today's entertainment market is global, not local, and companies need to understand that fact or fail.