Friday, May 22, 2015

The Early History of Sega - Rosen Enterprises

For the last few posts, we've been looking at the history of one of Sega Enterprises' predecessors, Service Games. Today, we take a look at the other one - Rosen Enterprises. Before we do, however, a quick correction. Early, I think I said that Service Games did not start making slot machines until the 1960s. Actually, I believe the first machine they manufactured was the 777 - a.k.a. the "Sega Bell," which they began making in 1957. Allegedly, the first one was built when they found an old Mills machine in the rubble of a bar and recreated it. I am still investigating the issue, however, and may come back to it in my last Sega post, which will discuss what the first Sega game was.

One other thing I mentioned earlier was that Steven Kent's Ultimate History (henceforth "Kent 2001") was practically the only extensive source of information I had found on Rosen Enterprises. That actually wasn't true either. Another excellent source was an article that appeared in the July 1982 issue of RePlay. Anyway, on to Rosen enterprises.

David Rosen and his wife Masayo in 1982
David Rosen had served in the US Air Force in Japan during the Korean War from 1949 to 1952. At the time, the Japanese economy was in the doldrums, but Rosen was impressed by the industriousness of the Japanese people and loved the country. After the war, Rosen returned home and set up a new business. He would send photographs from America to Japan where local artists would turn them into portraits. The venture failed and in 1954, Rosen decided to return to Tokyo to set up an import/export firm called Rosen Enterprises. In addition to importing products, and exporting products like paintings, sculptures, and woodcrafts, the company also manufactured small souvenir items, like cigarette lighters and money clips, engraved with advertisements from American companies (RePlay 7/82). Seeing that the Japanese had income to spend and a pressing need for identification pictures for employment, rationing, travel, and other activities, Rosen started a two-minute photo booth company that quickly became a nationwide chain. Prior to Rosen’s company, IDs were costly and took a minimum of 2-3 days to produce. In America, Photomat booths had sprung up offering photo processing in minutes instead of days. The only problem was that the photos they produced lasted only one or two years before fading and the Japanese needed photos that lasted at least four or five. After investigating the issue, Rosen found the problem. The Photomat booths produced photos without using negatives and lacked the temperature control required to produce durable results. Having found the source of the problem, Rosen decided to import some Photomat equipment to Japan and set up facilities where employees could develop the photos while monitoring the temperature to produce long-lasting pictures. The business was called Ninfun Shashin and the brand name was Photorama. The idea was an instant success and before long Rosen had over 100 locations throughout Japan (RePlay 7/82; Kent 2001). Being a foreigner provided Rosen with some advantages. At the time (and for years after) the Yakuza was heavily involved in the Japanese coin-op industry. When Rosen opened a Photorama booth in Tokyo's entertainment district, he failed to pay his respects to the local boss. Because he was a foreigner, however, he was let off with an apology and had little trouble with the Yakuza after that. Business competitors were a different story. Rosen's Photoramas were so successful that local photographers complained to the U.S. Consulate in an effort to put him out of business. As a compromise, Rosen offered to license Photorama franchises (possibly the first franchising business in Japan). The deal allowed Rosen to open up another 100 locations but it also allowed copycats to move in and by the early 1960s, Rosen was forced to shut Photorama down. (Kent 2001)

By then, however, he had already found another potential source of income. The booming Japanese economy and reduced work hours left people with more money to spend and more leisure time in which to spend it. Rosen decided to try and fill both needs. Many of Rosen’s photo booths were located in theatres and department stores and Rosen decided to replace them with American coin-operated amusement games, which had thus far been found almost exclusively in US military bases.
[David Rosen] To fully understand this decision, you have to realize there weren't any coin amusement games in Japan then, period. The games were abundant in the States but not a single one was on location in Japan, except on military posts. The machines were almost exclusively made in Chicago, and were usually target galleries or sports type themes like baseballs or hockey games. It took me about a year to convince the Japanese authorities to let me import these games. Until that time, they concentrated on essential goods only. Games were luxury imports. (RePlay 7/82)
[NOTE - Rosen here is not talking about pachinko machines, which were considered more akin to slot machines. Pachinko actually exploded in popularity in Japan after World War II - though it had also been popular before the war. According to some sources, pachinko was especially popular after the war for two reasons: 1)  people could exchange pachinko balls for scarce necessities like food (many Japanese were too proud to accept aid or handouts) 2) some pachinko parlors awarded tobacco as prizes, allowing people to get around wartime restrictions. I don't know if these stories are accurate or not and there's more to the pachinko story. I may do a separate post on the history of pachinko, but I don't want to do too many non-video game posts.]

In 1956, Rosen convinced the Ministry of International Trade and Industry to allow him to import $100,000 worth of machines. To stretch that allowance as far as he could, Rosen initially imported older, cheaper games. Two of the companies early hits were Seeburg’s Shoot the Bear and Coon Hunt rifle games.

[David Rosen] We set them up in stores, which became known as ‘gun corners." At that time in Japan, it was absolutely illegal for anyone other than the authorities to own or use firearms, so it gave the people the chance to take target practice, even though it was only a simulation. The went for it in a big way, especially after we set the games up in jungle or forest backgrounds by taking the cabinets off and letting the targets run around free. It was a free form shooting gallery. (RePlay 7/82)

Within a year, Rosen got authorization to purchase another $200,000 worth of games and continued to buy more games in the future. Rosen estimates that the number of used games he was buying exceeded the number of new games being produced in Chicago (RePlay 7/82). Eventually, over 1,000 gun corners were in operation throughout the country (RePlay 7/82).

[David Rosen] The Japanese, certainly at that time, were very possessive about their real estate…even when it came down to taking a few square feet of space in a store. But we were lucky at the start to make an arrangement with Toho Films to put games in their theater lobbies, which proved to be very successful (RePlay 7/82)

While Rosen had the market to himself for a year and a half, his success eventually drew in competitors. While the competition mostly concentrated on street locations, however, Rosen focused on arcades (RePlay 7/82) Within a few years Rosen Enterprises Ltd. owned a chain of 200 arcades throughout Japan (Kent 2001).

Meanwhile, flushed with successs, Rosen had begun to expan. He tried his hand at a chain of indoor golf centers, but the idea failed to catch on with the Japanese public, who considered golf an outdoor game. His next venture, a line of businesses built around slot cars, sparked a brief fad, but also eventually failed. With two strikes against him, Rosen set out again, and this time he met with unqualified success. Around 1963, AMF (American Machine and Foundry) and Brunswick had come to Japan to try and establish bowling as an entertainment option in the country. At the time, bowling alleys in Japan were found almost exclusively on US military bases. There was one alley in Tokyo, but it was mostly frequented by American GIs. Noting the new lanes being built by AMF and Brunswick, Rosen decided to give it a try.

[David Rosen] They got one or two centers opened, so we decided to take a try at it. But, to really do it right, we wanted a 'showcase' center, so we went to Tokyo's busiest entertainment area, which is called Shinjuku. This area had bar after movie house after restaurant. It was an 'adult Disneyland.’ Now, land was not only extremely expensive, it was virtually unattainable. So, we went to one of our movie friends and asked if we could build a bowling center on top of one of their theaters…To make a long story short, we installed 14 lanes on what amounted to the seventh story of this theater, with this huge six-story-tall movie house below it. The management was terrified about the possible noise and vibrations ... and, of course, we were all worried about the stress on the building. I was pretty nervous until we rolled that first ball. Guess what? Not a sound could be heard underneath. (RePlay 7/82)

Rosen also added an American style steakhouse overlooking the lanes. Before long, customers were waiting four or five hours to bowl and the center was staying open 22 hours a day, from seven a.m. to five a.m. (RePlay 7/82) While Rosen never opened another lane, Brunswick and other companies began opening them all over Japan, often with Sega or Taito arcade games in the lobby (RePlay 7/82; Kent 2001).

Monday, May 18, 2015

The Early History of Sega - Service Games Part 3 - Running Afoul of the Government

Last time we talked about the founding of Service Games and a few of the many entities that were related to it. Today, we discuss their many run-ins with the government.

Service Games was initially founded in Honolulu to distribute slot machines and other coin-operated amusement devices to US military bases in Hawaii. As I mentioned last time, there were probably few, if any, distributors serving the Hawaiian market at the time, so Service Games likely had the market to themselves. The good times came to an end, however, in 1951 when Congress passed the Gambling Devices Transportation Act of 1951 (a.k.a. the Johnson Act), which made it a crime to transport gambling devices across state lines except to states where the devices were legal. This meant that slot machines were now illegal on military bases in the continental US and (likely) in the territories of Alaska and Hawaii, leaving Service Games with an abundance of them (Steven Kent reports that the government actually confiscated their machines and that the Brombergs bought them back, but I didn’t see any mention of that in the senate report, which merely reports that they had an abundance of machines).

In any event, the Johnson Act did not apply to US military bases in foreign counties, providing Service Games with an opportunity. In February 1952, Marty Bromley sent Richard Stewart and Raymond Lemaire to Japan to distribute Service Games machines to US military bases in the Far East. Initially they appear to have merely distributed slot machines made by Mills (and maybe Jennings) to PXs and servicemen’s clubs. In the 1960s, however, they began to manufacture Sega-branded slots. In They also distributed other kinds of coin-op amusement machines and sold things like pizza ovens, snacks, rotisseries and other goods.

As you might guess, not everyone liked the idea of the military having slot machines on its bases. During a 1971 senate investigation of fraud and corruption in military clubs in Vietnam, Senator Abraham Ribicoff said, "the sooner the military kicks out all the slots the better." In January 1951, Army brass directed that slot machines be removed from Army installations in the continental US, Alaksa, Hawaii, and the Panama Canal Zone. In February 1952, however, the Army Chief of Staff ruled that in US bases in foreign countries, it was up to each base commander to determine whether or not to allow the games. The Navy banned slot machines from all of its installations in 1951 but changed its mind in early 1959, after the Commander of the US Naval Forces, Japan recommended that slots be allowed in messes and PXs in his command. In July the Chief of Naval Personnel ruled that they could be. During the 1971 senate investigation, Marty Bromley claimed that there were 10,000 slot machines being operated by the combined armed forces. While it might seem odd that the military would allow slot machines at all, they felt that doing so would keep soldiers and sailors on base and out of local bars (and trouble). They also felt that the games would raise morale and that the money taken in by the machines, since at least part of it would go back to the facility owners, would directly benefit military personnel by keeping down the cost of food and other items. The machines were governed by strict rules, however. They had to be purchased from American manufacturers, they had to be owned and maintained by the PX or mess (renting was not allowed), and they had to pay back at least 93-94% of money to the players.
While the military, for the most part, did not have a problem with the slot machines themselves, they did have a problem with Service Games and the illegal activities that it was allegedly engaged in. In 1954, an informant sent a letter to the Office of Naval Intelligence saying that the company was illegally importing slots into Guam using phony release forms. In 1958, the IRS began investigating Bromley at the instigation of an employee of Service Games Hawaii. The investigation soon became a matter of public controversy and political interest and the IRS expanded its investigation into every aspect of every business in which Bromley was engaged. In the 1971 senate investigation, the military claimed they had reports of over 100 instances of violations of law by Service Games, including bribery, illegal use of military and sea transport, illegal imports, customs violations, fraud and forged documents, kickbacks, collusion in bidding, circumvention of the "Buy American" program  illegal gratuities, coercion, and intimidation. Alleged offenses by individuals associated with Service Games included theft, assault, intimidation, coercion, bribery, rape, assault with a deadly weapon, and others. In the fall of 1959, the eighth army blacklisted Service Games. In December 1959, the Navy banned Service Games and all of its officers, employees, and affiliates from its installations in Japan. When Service Games later began to offer machines on behalf of Utamatic and Nihon Goraku Bussan, the Navy banned those companies as well. In 1960, the Navy permanently banned Service Games from its installations in the Philippines. In 1961, the US Civil Administration of Okinawa fined Service Games $300,000 for smuggling, fraud, bribery, and tax evasion. The day before Christmas 1963, the Air Force debarred Service Games from its installations (the ban lasted until April 1967).
What, in particular, were some of the crimes Service Games was accused of? One was avoiding payment of required duties. Because Service Games' machines were imported for use on military bases, they were exempt from the normal import duties or commodities taxes. The company was accused of importing the games duty free, sometimes with counterfeit importation or customs clearance documents,  then diverting them to storage facilities and selling them on the Japanese market (slot machines were illegal in Japan). Service Games was also accused of manufacturing their machines outside of the US, sending them to Nevada for final assembly, then falsely claiming they had been made in the US as required by military regulations. Even when Service Games did place the machines in PXs, there were problems. While regulations required that clubs own any machines they operated, Service Games was accused of applying the club's take to the purchase price so that all they got was the machine itself with no benefit to the personnel. They were also accused of skimming profits from the machines  Marty Bromley was accused of using phony names to open Service Games accounts in Japan-based branches of US banks. The accusations continued after Service games “merged” with Sega Enterprises. In April 1969, a source who was allegedly “closely connected with the Service Games complex” began corresponding with federal authorities, claiming that Sega was shredding tons of documents relating to military coin machines. The source also claimed that Sega Enterprises, through David Rosen, had attempted to write off as tax deductible, bribes of 30 members of the US military. When Japanese tax authorities refused to allow it, Sega wrote them off as “business expenses.” In October 1969, the government claimed, Marty Bromley met with General Earl F. Cole at the Frankfurt airport and offered him a $50,000 bribe to take the fifth and not appear before the senate subcommittee investigating Service Games and Sega. Cole denied that he had met with Bromley and Bromley claimed he was in Madrid at the time.
For all the accusations, the government did not seem to have had much luck making any charges stick. In fall 1960, Service Games was tried by the Japanese Criminal Affairs Division in Yokohama but ended up only paying a small fine. In 1964, the IRS charged Marty Bromley and his wife with failure to pay $4.7 million in taxes between 1962 and 1964. They were only able to collect $47,145.26 and about $10,000 in interest, $15,000 of which was returned to the Bromleys. In December 1964, the US Tax Court found that there had been no fraud of any kind on the part of Bromley or anyone associated with Service Games.
So where does that leave us? Was Service Games guilty of the crimes it was accused of or was it the victim of an overzealous government investigation? From the information in the report, it’s hard to say. During the Vietnam conflict, there was so much graft and corruption in the military club system that it is difficult to determine to what degree Sega was involved, if at all. While Sega and Service Games were certainly discussed during the 1971 senate investigation, during which all of their principal officers were called to testify, it was only as part of a much larger investigation of the club system in general. The clubs were run by NCOs (non-commissioned officers), who often operated with little or no supervision. It is perhaps unsurprising, then, that some turned to graft and corruption. In 1965, a group of seven sergeants, led by William Wooldridge, who was appointed Sergeant Major of the Army in 1966, began to exploit the system for their own personal gain, something for which it seems Sega cannot be blamed. On the other hand, the sheer number of subsidiaries, the number and timing of corporate name changes, the admitted use of aliases, and the fact that Service Games had set up its controlling corporation in Panama, a well-known tax haven , do arouse one’s suspicions – or at least mine. On the other hand, it is not uncommon for companies to set up multiple subsidiaries in the countries in which they operate (though perhaps not as many and not with so many different names), not is it unheard of for a company to establish its headquarters in a tax haven. Still, while i' do not think they were guilty of some of the more egregious crimes they were accused of, I am nonetheless suspicious. Of course, that’s entirely subjective and it is entirely possible the Service Games was innocent of any wrongdoing. 

Tuesday, May 12, 2015

The Early History of Sega - Service Games Part 2 - When was Sega/Service Games Founded

NOTE - since my first post, I have finished reading the two source documents (or at least the parts referencing Service Games and Sega) and have new information, so I thought I would reorganize the posts and create one that just concentrates on Sega’s founding date (I changed my previous post to just talk about the pre-history of Service Games).
So when was Sega founded? Sega's website says it was 1951.
Of course it depends on what you mean by Sega and what you mean by founded. Others say it was 1952, 1965, or some other date.

Since Sega was preceded by Service Games, you might trace Sega’s founding to the founding of Service Games. So when was Service Games founded, and when did it become Sega? It depends on which “Service Games” you mean. Various entities existed under that name in the 1950s and ‘60s.

Here is a list of some of them. Note that most of these were subsidiaries rather than separate corporations:

Service Games, Inc. - Service Games, Hawaii, Inc. - Service Games, Japan, Inc.
Service Games, Korea, Inc. (located in Okinawa, later became Garlan) - Service Games, Philippines, Inc. - Service Games, Panama, Inc. - Service Games, Nevada, Inc.

There were also several other entities with different names allege to have been affiliated with Service Games, many of which had the same partners/executives.

This is the only ad I could find mentioning Service Games - from the April 2, 1949 issue of Billboard

To help answer the question at hand, here is a brief timeline:

1945 - Standard Gaems of Hawaii is sold. Irving Bromberg, Martin Bromberg, and James Humpert form a new company called Service Games, Hawaii to distribute slot machines and other coin-operated devices to US military facilities on the islands. Service Games is formed as a partnership with each partner contributing $50,000 in capital.
Humpert served as the company’s PR man, finding locations for machines and “keeping location owners happy.”
Martin Bromberg changed his name to Martin Bromley.

February 15, 1952 - Service Games, Hawaii and salesman Richard Stewart enter into agreement by which Stewart will move to Japan and open a distribution office, while Service Games will supply him with machines and pay him a 10% commission on gross sales.

February 1952 - Marty Bromley sends Stewart and mechanic Raymond Lemaire to Japan to promote and expand sales of Service Games on US military bases in the Far East. In Tokyo, they form a partnership called Lemaire & Stewart, which also does business as Japan Service Games, and Service Games, Japan.
Stewart and Lemaire leave the employment of Service Games, in which they have no financial interest at the time.
The partnership later becomes successful enough to warrant the establishment of factories and a sales organization.

1953 - Service Games, Japan, Inc. is organized??
In the senate report, Delmar Fox, Assistant Chief of the Fraud Investigations Division, Office of Special Investigations, US Air Force testified “I was able to trace the evolution of the Bromley enterprises in Japan to Service Games, Japan, Inc., which was organized in 1953.”
I am unsure of this. I don't know if Service Games, Japan was ever an actual corporation or if it was just a dba name for Lemaire & Stewart. It was referred to numerous times in the testimony, but I didn’t find any place that said it was actually incorporated as a separate company

September 10, 1953 - Service Games, Inc., Panama files for incorporation and becomes the controlling corporation for all of the other Service Games entities. Irving Bromberg, Marty Bromley, Raymond Stewart, Raymond Lemaire, and James Humpert each have a 20% stake (200 shares of stock).

September 22, 1953 - Service Games, Panama's second board meeting provides for Lemaire & Stewart to represent Service Games in Japan

April 24, 1954 – first use in commerce, and first use anywhere of the Sega trademark for coin-op amusement machines, as per the 4/2/1962 trademark application

April 30, 1955 - Martin Bromley and Irving Bromberg buy Humpert's interest in Service Games, including Service Games, Panama, for $50,000 each.

January 2, 1956 - Raymond Lemaire buys 50 shares in Service Games, Panama from Irving Brombeg for $30,000. Richard Stewart buys 50 shares from Marvin Bromley for the same amount. All four now own 250 shares (25% of the company)

1957 - Service Games, Nevada is incorporated. Korwin Hailey is president, Martin Bromley is VP, Irving Bromberg is secretary-treasurer, R.N. Nickels is director. Hailey subsequently names Stewart and Lemaire as members of the firm as well. Service Games, Nevada and Service Games, Japan have same cablecram code.

May 31, 1960 - Service Games (Japan), Inc. is dissolved. Two new companies are organized: Nihon Goraku Busan Kabushiki Kaisha (Japanese Automatic Manufacturers Company, Inc - sometimes called Nippon Goraku Bussan) and Nippon Kikai Seizo KK (Japanese Machine Manufacturers Co. Inc.)
Nihon Goraku Bussan was a distributor of coin-op amusement devices while Nippon Kikai Seizo manufactured slot machines and also did business as Sega, Inc.

June 1960? – According to Moody’s international manual, Sega was “established” in June 1960 as “Nihon Goraku Bussan Co. Ltd.”
Not sure about this one either. Is NGB “Co Ltd” a different company than NGB “KK”? I’m guessing that they are referring to the May 31 event.

September 5, 1960 - Billboard reports that the assets of Service Games (Japan), Inc. have been purchased by Sega, Inc. and Ultimatic Inc. (managing director: Richard Stewart) - Service Games itself has been liquidated
I think Sega, Inc. is Nippon Kikai ‘Seizo and Ultimatic is Nihon Goraku Bussan

March 31, 1961 - Irving Bromberg and Marty Bromley sell Service Games, Hawaii, Inc. to a group headed by Harold Okomoto for $1.4 million - they reserve the use of the name "Service Games" for their foreign operations

April 2, 1962 – Nippon Kikai Seizo files two trademarks on name “Sega”, one fior use on jukeboxes the other for use on other coin-op amusement devices

April 12, 1962 - Service Games, Panama, Inc. changes its name to Club Overseas Inc., Panama

June 1964 – Nihon Goraku Bussan acquires Nippon Kikai Seizo

July 1, 1965 - Rosen Enterprises and Nihon Goraku Bussan merge to form Sega Enterprises, Ltd.
NOTE that according to David Rosen's testimony in 1971, what technically happened was that Rosen Enterprises was acquired by Nihon Goraku Bussan

Mid June 1969 - Gulf + Western buy out Marty Bromley, Richard Stewart, and  Scott Dotterer's interest in Sega Enterprises, Ltd. Bromley is paid , 1,673,429 and 114,065 shares of Gulf + Western stock, Richard Stewart gets $836,710 and 57,032 shares, Scott Dotterer gets $371, 901 and  23,350 shares.

January 5, 1970 - Gulf + Western completes its buyout of Sega. David Rosen gets $513,173 and 32,850 shares and his wife Masako gets $185,894 and 11,881 shares. Based on the price of the stock at the time, the total sales price for the 1969 and 1970 transactions is to $9,977,043.
Gulf + Western now owns 80% of Sega Enterprises. Ltd. The other 20% is owned by Raymond Lemaire.

A few observations. As others have pointed out, the “Service Games” that became Sega was not the same Service Games that was founded in 1945, nor was it the same as Service Games, Japan. OTOH, I don’t know if you can really say it was a “completely different company” either. On paper, that may be true, since Service Games Japan was dissolved when Nihon Goraku Bussan was created. In reality, however, was Nihon Goraku Bussan just Service Games Japan under a new name? They seem to have had the same executives, but I cannot really say if they were different or not, since I am not sure what led them to dissolve the former and create the latter.

I mentioned earlier Steven Kent’s claim that “Service Games began in May 1952,” which I said was “wrong.” In reviewing the information, perhaps “wrong” was a bit strong. He seems to be referring to the Stewart & Lemaire partnership, which did business as Service Games Japan (SGJ). If so, I can see why he would pick that date rather than the founding of Service Games, Hawaii (SGH). He may have been thinking that SGJ is the one that became Sega (though this is not entirely accurate) while SGH did not. I am not sure what the significance of May 1952 was but if SGJ was incorporated on that date then I can see why he makes his claim.

As I said, however, I am not entirely sure that SGJ ever was officially incorporated.
What about the 1951 date? I’m sure where they got that one.

Next time, I’ll talk more about the problems Service Games had with the US government – and boy, did they have them.

Bonus Content

Since someone else made reference to the Polly Bergen Company last time, I thought I'd include this little blurb from my book about the formation of Sega Enterprises, Inc. (the American arm)

"Meanwhile, in 1974, a new corporate entity called Sega Enterprises, Inc. appeared on the scene, though it happened in a roundabout manner that only an accountant could understand. At the time, Gulf + Western, in partnership with David Rosen, was trying to establish a conglomerate in the Far East similar to Gulf + Western, with Sega as a subsidiary. When that effort failed, they decided to spin off Sega into a separate US company headed by Rosen (Kent 2001). One of Gulf + Western’s many holdings was a cosmetics company called the Polly Bergen Company, which they owned a 53.5% interest in via another subsidiary (naturally) called Consolidated Brands. By 1973, Polly Bergen was losing money and in March 1973 Gulf + Western sold its cosmetics business to Faberge, leaving Polly Bergen with no product line whatsoever. In March 1974, Gulf + Western transferred its Sega Enterprises, Ltd. subsidiary to the Polly Bergen Company. Then, on March 25, it effected a one-for-ten reverse stock split and acquired Polly Bergen for 1.7 million shares of stock, increasing its ownership of the company to 95%. The same day, they changed its name from The Polly Bergen Company to Sega Enterprises, Inc. with Sega Enterprises, Ltd. (Sega’s Japanese operations) as a subsidiary (makes perfect sense to me)."

This came from Sega's annual reports. Despite my comment at the end, I actually suspect that it made perfect sense to somebody. My initial suspicion was that it was done specifically to take control of Polly Bergen by diluting its stock. Since I am not well versed in such matters, however, that was a guess. Wikipedia claims that reverse stock splits are often done to  satisfy the stock exchange's reduce the number of shareholders so that the company is placed in a different regulatory category.

Sunday, May 10, 2015

The Early History of Sega - Service Games Part 1 - the Prehistory of Service Games

In recently came across some solid information about one of Sega's predecessors - Service Games. If you're read much on the early history of Sega, you've probably learned that it was formed via a merge of two existing companies: Rosen Enterprises and Service Games, the latter of which was founded in the early 1950s to distribute games on US military bases, first in Hawaii, and later overseas.

Unfortunately, beyond these basic facts, you probably didn't learn much else. About the only work that goes into the predecessors of Sega in any detail is Steven Kent's seminal Ultimate History of Video Games. While it does a good job discussing Rosen Enterprises, however, it goes into much less detail on Service Games and what little information it does have isn't entirely accurate (or at least incomplete).

Nonetheless, Kent’s book remains -perhaps the most thorough telling of the early history of Sega. And that’s part of the problem. You would think that for a company as important as Sega, its full history would be well known and well documented. Sadly, in my opinion, it is neither. Not only do most sources barely cover the company’s early years but they generally ignore its non-console history altogether. Even Sam Pettus’ Service Games: The Rise and Fall of Sega, is guilty. Of the book’s 386 pages (using my current Kindle settings), probably three of them talk about Sega’s pre-console history and arcade games probably don’t even get that. It’s really a shame, because Sega has probably produced more arcade games than any other company on the planet – well over 500 video games alone. Even the company itself does not seem to be aware of its own history and has listed 1951 as the date of its founding.
In this article, I will try to give a more accurate account of Service Games and its early history. I don’t pretend that this will be a comprehensive history and given the conflicting information that’s out there, I have no doubt that I will get some things wrong myself. One problem with researching Sega’s early history is the dearth of information in existing sources. Another (that seems endemic to video game histories) is that even those works that do have seemingly accurate information do not identify their sources. Nonetheless, I did find some sources that provide what seems to be some solid facts about Service Games and its founders. Two of them are legal documents (always a great source for hard dates and other info).

One is the case Martin Bromley and Allyn Bromley v. Commissioner United States Federal Tax Court, filed December 9, 1964 and available at this link

The other is a 1971 Senate investigation with the laborious title, “
Fraud and corruption in management of military club systems. Illegal currency manipulations affecting South Vietnam. Report of the Committee on Government Operations United States Senate made by its Permanent Subcommittee on Investigations. November 2, 1971”.

Most of the information in this post, aside from the biographical info, is taken from these sources.

Service Games actually appears to have been formed in 1945 by Irving Bromberg, his son Martin, and James L Humpert. Before we get to the company, however, let’s talk about the men who founded it.

NOTE – information below was taken from various sources available on Ancestry, including the 1920, 1930, and 1940 federal census, 1925 New York state census, Social Security Death Index, California Death Index, World War I Draft Registrations, New York Marriage Index, city directories from Los Angeles and Honolulu, and various ship passenger lists. This was made a bit difficult by the fact that there were two Irving Brombergs living in LA at the time, both with sons named Martin.

Irving Bromberg and Dave Robbins in 1937
The son of Russian Jewish immigrants, Irving Bromberg was born on June 10, 1899 in New York. On June 15, 1918 Irving, who had just turned 19, married Jeannette Blumenthal. In September 1918, Irving registered for the World War I draft in Brooklyn, listing his occupation as a salesman of glassware. On August 6, 1919 Irving and Jeannette’s son Martin Jerome Bromberg was born. On the 1920 census, Irving was still selling glassware. From 1923 to 1930, he served as president of the Greenpoint Motor Car Corp of Brooklyn and from 1930 to 1933 he operated a vending and coin-operated amusement machine distribution company called Irving Bromberg Co. in Brooklyn, Boston, and Washington DC (Fraud and corruption… 1971). On the 1930 census, Irving listed his occupation as a salesman of “chewing gum” (by then, they had a second child: daughter Ehthelda, who had been born in 1924). In 1933, he sold the New York office to Leon Taksen, who had managed the office (Billboard 7/29/33).  Though the July 1933 issue of Coin Machine Journal included an ad saying that the Supreme Vending Company of Brooklyn (Wm Blatt pres) had purchased the Irving Bromberg Company of Brooklyn. That same year Irving moved to Los Angeles and opened up either another company called Irving Bromberg Co. or another branch of his existing company

Ad for Irving Bromberg Co in Los Angeles, 1934

Irving Bromberg Co, New York 1932
 The March 1933 issue of Coin Machine Journal reported that Bally had opened "another office at 1034 W. 7th , Los Angeles, Calif., under the management of Irving Bromberg. The April 1933 issue of Automatic Age reported that "Irving Bromberg of Los Angeles has taken over the Pacific Coast representation of the Universal Novelty Mfg Co". So it seems he moved to LA in early 1933. Around September 1933, the Irving Bromberg Co and SS Glaser of LA merged (Automatic Age 9/33). Though it seems they operated under the name Irving Bromberg Co as ads continue to appear using that name.

According to the senate report, Iriving formed a new distribution company called Standard Games Co. in Los Angeles in 1934. A search of the arcade museum's Automatic Age and Coin Machine Journal archives, however, turns up no reference to the company (Perhaps they were doing business as Irving Bromberg Company??) As a distributor, Bromberg played a major role in the popularizing two of the most important early pinball games. The first was Bingo, released in 1931 by the Bingo Novelty Company. Bingo’s claim to fame is that it was sold to David Gottlieb, who modified the game and released it as Baffle Ball, which has been credited with launching the modern pinball industry. Bingo, however, was a national hit in its own right, a fact that pinball historian Dick Bueschel attributes to a salesman named Leo Berman. After Gottlieb began producing Bingo in the Midwest, Berman took the game to New York, where he paid a visit to his old operator friend Irving Bromberg to see if he was interested in becoming a Bingo rep. As Bueschel describes it in his 1996 book Pinball 1

"Bromberg, not having facilities of his own, got ahold of his friend, Hymie Budin, a specialty jobber of roasted peanuts, gum, candy and glass globes for vending machines, and sold him on the idea of leasing window space. That made Budin "the first distributor to have a pin game display in his quarters. That's when he was down on Dumont Avenue in East New York, Brooklyn, and Irving Bromberg ... displayed his first three Bingo machines in one of Hymie's front display windows. Hymie just couldn't waste the space in his store, for the men crowded in daily for their supplies of nuts and candies and peanut machines, so he allowed Irving to display his Bingo machines in his front windows."' The display got off to a slow start "and it was some time before Irving could get the operators to even think of buying this sort of contraption." lt wasn't long before "Bromberg had about ten Bingo games stocked one atop another and, after some effort, sold out in a few weeks at the price of $12.50 each." Bromberg was firmly established as a Brooklyn game distributor by late October, 1931."  (quotes are from The Coin Machine Journal, January 1941 and January 1940)

 In Los Angeles, Bromberg had a hand in the success of another influential pinball game – Harry Williams’ Contact. While Contact was not the first pinball game with sound, electricity, and a kicker device as some have reported, it did popularize the features. According to an article by Roger Sharpe in the July 1989 issue of Play Meter, ”Contact did not gain national recognition until it was noticed by a Bally distributor, Irving Bromberg,”

Meanwhile, Martin Bromberg graduated from high school and went to work for his father. At some point, Martin went to Hawaii and began selling games to US servicemen stationed there. At the time, Hawaii was still a US territory and mainland distributors were likely not selling games there. Exactly when the Brombergs began selling games in Hawaii is unclear. From passenger lists, we know that Irving and his wife made a trip there in January 1940. According to the 1964 case, “In or about 1940, Irving Bromberg, Glen Hensen, James L. Humpert, and the petitioner [Martin Bromberg/Bromley] formed a coin-operated machine company in Honolulu known as Standard Games." We also know that Martin Bromberg was inducted in the navy during World War II but was placed on inactive duty due to his employment at the Pearl Harbor shipyard (Fraud and corruption…1971). Humpert was also employed at the shipyard. From the wording, it seems that this “employment” was independent of their coin-machine company. According to other source, James Humpert was a friend of Martin’s – a claim that draws some support from the fact that the 1964 case reveals that he and Martin were each entitled to one-third of the profits of the Irving Bromberg Company of LA.

A very bad photo of Marty Bromley in 1941

And a better one from 1989 (Marty's the one on the left)

In any event, Irving Bromberg returned LA and continued to run his distributing companies. (as indicated by many references in Billboard). The January 12, 1946 issue of Billboard reports that Marty and Irving were due to visit Chicago to discuss selling the Irving Bromberg Co of LA to Chicago distributor Al Stern, which they appear to have done shortly thereafter.

The 1964 case claims that Standard Games of Hawaii "...continued until 1945, at which time it was sold."

NOTE - I have removed this part of the article after doing more research and will move it to part two, with the addition of further details

And to clean up some loose genealogical ends:

Irving Bromberg died on January 20, 1973 in Los Angeles.
Martin Jerome Bromley died on September 7, 2008 in London.

Bonus Pictures

Here's a rare photo of an upright Exidy 0077 cabinet from an industry show. They later added some more levels and renamed it Top Secret


Saturday, May 2, 2015

The First Light Gun Game

I suspect that most readers of this blog have played an arcade light gun game – those rifle games that used a beam of light instead of bullets or wiper blades and contacts to determine when a target was hit. But do you know when the first light gun game was created? Some of you might guess the 1980s, when Nintendo produced the NES Zapper for the home and games like Duck Hunt and Hogan’s Alley for its arcade Vs. system. Others might opt for the 1970s, when arcade games like Nintendo’s Wild Gunman and Atari’s Qwak! Still others might say the 1960s when Ralph Baer, Bill Rusch, and Bill Harrison created a light gun game for their Brown Box and Nintendo produced its Beam Gun series.

All of those guesses are wrong. The first light gun game was not created in the 1960s, or the 1950s, or the 1940s. No, to find the first known light gun game, you have to go all the way back to the early 1930s, and perhaps earlier.

Before we get to that, however, let’s talk briefly about arcade gun games in general and the most common claimant to the “first light gun game” title – Seeburg’s 1936 Ray-O-Lite Rifle Range. Coin-operated gun games go back almost as far as coin-operated game themselves. According to Nic Costa’s Automatic Pleasures, the first coin-op gun game patent was filed (or perhaps granted) in 1887 by William Reynolds for his “Automatic Shooter.” I have not seen the patent myself, but from Costa’s description it appears that Reynolds merely attached a coin mechanism to an existing air rifle and his device did not include targets – though without seeing the patent it’s hard to say. In 1889, David Johnston patented another Automatic Shooter. According to Costa, this one was a mounted on a pedestal and was later made in Germany as the Electra Automatic Shooting Machine.

Like a number of early gun games, it was a “trade stimulator” – a type of machine that dispensed prizes like gum or cigars for certain winning combinations of high scores (though many of these were gun games, there was generally no skill involved and hitting targets was often a matter of luck). That same year, Coyle and Rogers of Washington DC produced its Shooting Gallery.
Interestingly, the first known electric gun game was patented by J.L. McCullough in 1896. The game used a wiper blade that brushed across a series of contacts when the gun was turned, creating a closed circuit when the bullet was pressed if the gun was aligned with the target. This style of game later became known as the “Dale Gun” after Eldon Dale of Dale Engineering, who created a popular variant called that he sold to the Exhibit Supply Company. Exhibit Supply released the first model in 1947 under the name “Deal Gun” and some mistakenly credit Dale with inventing the method, but it actually predated his creation by over half a century.

What about the light gun game? Most sources (including Wikipedia) claim that the first light gun game was Ray-O-Lite Rifle, a duck hunting game produced by Seeburg in 1936.
Above photos taken from
The first patent for the game was filed on April 12, 1934 by Charles W. Griffith of Tulsa Oklahoma for the Rayolite Rifle Range Company, which was incorporated in Tulsa on August 17, 1934.

The claim, however, may not be entirely accurate. It appears that the game may have been produced prior to 1936 and not by Seeburg. Aside from several patent claims filed in the 1930s and the company, however, I found almost no information on Griffith or the Rayolite Rifle Range Company other than a few brief mentions in trade magazines and a record of the company’s incorporation. I did find an article in the January 1937 Automatic Age titled "The Story Behind the Ray-O-Lite" rifle range. At first, I was very excited. Until I read it. As it turns out, it is nothing more than an ad for Seeburg in the form of an "article" (written by N. Marshall Seeburg) and makes no mention of Griffith or the Rayolite Rifle Range Company or any company besides Seeburg.

What I did find, however, seems to conflict with some of the details in the story above. The first trade mention I found of the company was in the February 1935 issue of Automatic Age. The issue includes a listing of exhibitors for the upcoming Coin Machine Exposition. In Booth 76, the Phoebus Amusement Company of Chicago was planning to show the “Rayolite Rifle Range.”
If true, it seems that Rayolite may have sold its game to Phoebus then later he may have either struck a deal with Seeburg, or perhaps Phoebus licensed it to Seeburg. According to this video, Seeburg's Shoot the Chutes (a 1939 rayolite game) was "manufactured by Phoebius [sic? - I assume he meant Phoebus] and licensed to Seeburg" and this may have been the same case with the original duck game.

Unfortunately, I found no other information on the Phoebus Amusement Company. I did, however, find an earlier mention of the Rayolite Rifle Range. This article from the January 24, 1935 edition of the Atchison (KS) Daily Globe offers a $100 reward “for the return of a rayolite rifle range which was stolen from a post on Cermak Road, Cicero IL.”
It further notes that “instead of a bullet, a ray of light is shot from the gun or revolver barrel at a moving target” and that the game “may be related to the Chicago district.” This seems to indicate that a Rayolte game was on location by January 1935 (though perhaps it was made, or was being tested by, Seeburg).

How did the Rayolite work? In his How the Ray Gun Got Its Zap, Stephen Wilk describes its operation as follows: “A device shaped like a rifle fired a beam of light at a target that bore a corner cube reflector. The ‘rifle’ barrel also hosted a photocell receptor that registered a voltage when the light reflected from the corner cube back in the barrel.” This seems to indicate that the light beam was reflected back from the target to a receptor in the barrel. From reading the patent description, however, it seems that the receptor was actually in the target (as was standard with many light gun games).

After Griffith’s first patent, a number of others were filed improving on the device, as detailed here. Alvin Carter improved on the trigger mechanism and William Falkenberg, a Los Angeles operator, added improved targets. Seeburg made a number of Ray-o-lite games over the years, the most popular of which by far was 1947s’ Shoot the Bear, which was redone in video form in Atari’s Triple Hunt (though Triple Hunt did not use a light gun) .

While most sources seem to agree that Rayolite was the first light gun game, Nic Costa claims that a light gun game was patented in 1920 by W.G. Patterson, though there seems to be no record that it was ever produced. Costa also claims that a light gun game called Radio Rifle went into production in 1929, (according to this was in December) - though it did not take off until after 1931.  Once again, however, I an international patent search did not turn up the original patent and I found no other information on Patterson. I did, however, find an ad for the game in the February 1930 issue of Automatic Age.

From  videos of the unit on YouTube, however, it does not appear to have been a light gun game. Instead, it projected an image onto a screen or wall and they used another method  to detect hits (and given the video's claim that it was entirely mechanical other than the projector, it does not appear to have been a Dale Gun mechanism). Still, however, Costa may be correct about the Patterson patent but without more information, the jury is still out and even if it was a light gun game, it may never have been produced. So for now, it looks like the Rayolite may indeed have been the first light gun game - until someone finds an unambiguous reference to an earlier one.  
What about light gun video games? Here too, I do not know for sure which was first. Some sources claim it was Atari’s Qwak! Released in November 1974. Qwak! had some similarities to Nintendo’s Duck Hunt, including the duck hunting theme and a hunting dog that retrieved downed birds. Ironically, in 1986 Nintendo itself cited Qwak! in an attempt to invalidate one of Magnavox's video game patents by claiming that Ralph Baer (who had seen the game at the 1974 MOA show) had merely copied it to create the Odyssey rifle games – though the claim was clearly false since their rifle game was conceived in the late 1960s. Another candidate for first light gun video game is Sega's Balloon Gun, which used pistols rather than rifles. According to some sources, the game was released in August 1974 while others list it as a 1975 game. I don’t have any hard information on a release date. I’m not even sure if it used a light gun. The only information I have is a flyer, and from that, the graphics appear too advanced to me for a 1974 or 1976 game - though it could have used computer imagery superimposed on a filmed or physical background.