They Create Worlds

7
Rising Sun

When Nate Robin and Al Rest broke their exclusivity agreement with David Gottlieb to sell Bingo in late 1931 and thus set in motion the series of events that led Gottlieb to release Baffle Ball, they did so at the behest of a Chicago tool and die maker named Leo Berman. At the time, pinball remained a Midwestern phenomenon, but Berman harbored ambitions to take the game nationwide. Doing so required cracking the competitive New York City market with its thriving Sportland arcades, and doing that required a man with solid connections throughout the five boroughs. Berman turned to an acquaintance named Irving Bromberg.¹

The son of Russian Jewish immigrants like so many of the early pinball magnates, Irving Bromberg was born in June 1899 and grew up in Brooklyn, New York. After marrying as a teenager, Bromberg secured a job selling glassware before joining with two other men in 1922 to establish the Greenpoint Motor Car Corporation, for which he served as president.² In 1930, Bromberg became a salesman again, this time in the penny candy trade that operated on an honor system in which a patron was supposed to leave a penny when taking a candy from a store display. Bromberg was not selling games when Berman contacted him and did not even have his own showroom, but he borrowed some space from a friend in the gum vending business and put the machines on display.³ After some initial difficulty generating interest in the product, Bromberg attracted the attention of Bill Shorck, one of the last great penny arcade moguls from their heyday at the turn of the century,⁴ and sales took off.⁵ Before the end of 1931, Bromberg established the Irving Bromberg Company as a distributor of coin-operated amusements. The next year, he began selling Bally tables, and his business expanded rapidly until he was one of the largest distributors on the East Coast with his primary office in Brooklyn and branch offices in Manhattan, Boston, and Washington, DC.

In early 1933, Bromberg moved to Los Angeles to become the only Bally distributor on the west coast and sold off his east coast distributorships a few months later. When Harry Williams and Fred McClellan required help selling Contact nationwide, however, Bromberg established the Pacific Amusement Distributing Company to ship units into the New York area, once again playing a crucial role in the spread of an influential machine.⁶ Bromberg remained a major force on the west coast into the late 1940s, but his most important legacy was a series of new businesses in Hawaii that grew into a global empire and transformed Japan into one of the most important centers of the coin-operated game industry in the world.

***

Coin-operated amusements first entered Japan during the Meiji period of rapid industrialization and modernization. As in the West, peep shows were some of the first machines to arrive in the late nineteenth century, but it appears they never achieved the same level of success as they did in the United States and Great Britain.⁷ Instead, it was bagatelle, introduced around 1924, that first interested the Japanese public in coin-operated amusements.⁸ The game was initially seen as a children’s pastime and became common in candy stores, where it gained the name “pachi-pachi,” the Japanese onomatopoeia for the clicking sounds made by the metal balls. Before long, the game spread to market stalls, where it morphed into a gambling game in which adult players could win prizes like soap or cigarettes.

Because space was at a premium in the crowded markets and narrow streets of Japan’s major cities, the Japanese transformed their bagatelle games into something new by mounting them vertically rather than horizontally and borrowing elements from the European coin-operated gambling device called the allwin such as a lever in place of a plunger and circular tracks to supplement the traditional bagatelle pins. This new game gained the name pachinko, a combination of the aforementioned “pachi” and “ko,” the Japanese word for ball. As the game’s popularity grew, Japan’s first dedicated pachinko parlor opened in Nagoya in 1930.⁹

Meanwhile, a man named Yoshikazu “Kaichi” Endo began laying the groundwork for a broader Japanese amusement industry. Born in 1899, Endo opened a medical supplies company in Osaka in 1922 and designed his own vending machine the next year.¹⁰ After the Great Kanto earthquake devastated a wide swath of Japan around the cities of Tokyo and Yokohama in 1923, Endo’s business grew rapidly due to increased demand for vending machines and automatic signs to replace those destroyed in the calamity.¹¹ After developing a fortune telling machine for the Takarazuka Family Land amusement park, Endo renamed his company the Japan Automatic Machine Recreational Equipment Manufacturing Company, Ltd. and refocused on amusement machines, which he handcrafted in limited quantities.¹²

In 1931, Endo approached the Matsuya Department Store in Asakusa, Tokyo, to open an amusement venue on its roof. Dubbed “Sports Land,” Endo’s attraction combined activities like roller skating, archery, and cycling with equipment like rocking horses, coin-operated testers, and peep shows.¹³ Other department stores soon began emulating Sports Land, but just as both novelty amusements and pachinko machines were poised to enter a major growth phase, the Japanese government halted the production of coin-operated machines in 1937 due to the need for resources to support its war against China. As the conflict intensified, the government came to view leisure activities and luxury items as a dangerous distraction from the war effort, so in 1938 it ordered the closure of all the pachinko parlors in the nation. Japan’s pachinko halls and rooftop amusement spaces subsequently vanished in the fires of World War II.¹⁴

In 1946, pachinko returned to Nagoya and began spreading across the country once more. Over the next four years, the game gained increasing popularity through the work of designer Shoichi Masamura. In 1948, Masamura debuted a new layout called the “Positive Gauge Forest” that added spinners and additional pins to increase playfield action and scoring opportunities. In 1949 and 1950, he introduced machines that ejected ten and fifteen balls, respectively, whenever one of the player’s balls entered a scoring hole. Any balls remaining at the end of a play session could be exchanged for prizes. Playing pachinko now provided a person the opportunity to win everything from soap to vegetables to cigarettes, all of which were in incredibly short supply after World War II. Therefore, the number of pachinko parlors in the country expanded rapidly to a peak of 70,000 in 1953 housing over 2 million machines.¹⁵ These parlors were taking in over $42 million per month, more than all the department stores in Japan combined.¹⁶ After the government began regulating the industry more closely in 1954, the number of parlors dropped rapidly to a low of 8,000 housing half a million machines in 1956. The introduction of lighting and electrically powered “tulip” scoring pockets around 1960 helped revive interest in the game again, which continued to grow steadily in popularity over the next two decades.¹⁷

While pachinko proved popular in the early 1950s, the widespread adoption of the game by the Japanese public did not spearhead the return of other coin-operated amusements to Japan. Still reeling from the devastation caused by World War II, Japanese citizens were working six and a half days a week for meager compensation that barely covered heavily rationed necessities and had little time or money for frivolous pursuits. The outbreak of the Korean War changed everything. As the United States stepped up aid and investment in the country so as to have a strong ally in the region to forestall the spread of communism in Asia, the economy began to improve rapidly, setting the stage for the country’s “economic miracle.” Furthermore, the war brought with it a rapid influx of American servicemen to bases leased from the Japanese government. While it would still be several years before the Japanese people would have the time and disposable income to engage in recreational pursuits, American soldiers required entertainment during their downtime, so American military bases became the first point of entry for coin-operated amusements into post-war Japan.

***

As Japan was finding its feet again during the Korean War, so were Irving Bromberg and his son, Marty. Born in 1919, Martin Jerome Bromberg – who later changed his last name to Bromley – grew up surrounded by coin-operated machines and even maintained his own route in Los Angeles while in high school after earning his driver’s license at the age of 13. Marty entered his father’s business full time upon graduation and relocated to Hawaii, where he joined with his father and two friends named Glen Hensen and James Humpert to establish a new company on January 9, 1940, called Standard Games to operate slot machines and coin-operated amusements in the territory.¹⁸ The outbreak of World War II soon after only increased the fortunes of the nascent company. Though inducted into the Navy, Bromley took work in a local shipyard so that he could be placed on the inactive duty list and continue to run his business in his off hours.¹⁹

Over the next few years, Bromley and Humpert established a network of companies with various partners both inside and outside the coin-op industry. These included Jimmy and Ray Music Service with Ray Cheong and Jimmy Sugiyama and Pacific Tobacco Company with Curtis Suber.²⁰ In August 1945, the Brombergs dissolved Standard Games,²¹ but continued operating amusement equipment in Hawaii through California Games, established in May 1945.²² This company was wound up as well the next year and superseded by a new partnership established by both Brombergs and Humpert on September 1, 1946, called Service Games.²³

In 1951, Service Games faced a serious threat to its business activities with the passage of the Johnson Act, which not only limited the transport of coin-operated gambling devices, but also banned their operation on military bases within the United States. Left with a stock of suddenly worthless slot machines, Bromberg and Bromley sent a company salesman named Richard Stewart and a company mechanic named Raymond Lemaire to Japan to establish a new firm that would buy the equipment from Service Games and operate it at American military bases in the country, which were not subject to the ban. The duo established a partnership called Lemaire & Stewart for this purpose in May 1952.²⁴

With the Japanese company proving a success, Stewart, Lemaire, Bromley, Bromberg, and Humpert formed a new Service Games company in September 1953 as a Panamanian Corporation with Irving Bromberg as president and Dick Stewart as general manager. The sole purpose of the company was to purchase coin-operated equipment from Chicago firms like Gottlieb, Bally, and United and ship it to Lemaire and Stewart’s partnership, incorporated in 1953 as Japan Service Games, so they could operate the machines in the officers’ clubs and open messes of U.S. military bases not just in Japan, but also in Korea, the Philippines, and Guam.²⁵ The original Service Games in Hawaii continued to operate as a subsidiary of the new Panamanian company as well until Bromley sold it in 1961.²⁶

Once Service Games opened the Far Eastern military market, other companies followed. The company’s biggest competitor in its early days was an entrepreneur named Kenneth Cole. A former navy pilot, Cole established the Cosdel Amusement Machine Company in 1953 to operate coin-operated amusements and jukeboxes across Japan, Okinawa, Hong Kong, and Taiwan,²⁷ though within a decade he had left coin-operated amusements to focus on the record business. As Service Games and Cosdel brought an increasing amount of coin-operated equipment into Asia, a new Japanese coin-operated industry began to take hold as machines originally intended for U.S. military bases migrated into the local economy through the work of entrepreneurs like Russian businessman Mike Kogan.

Born into a Jewish family in Odessa, Ukraine, in 1920, Michael Kalman Kogan fled with the rest of his family to Harbin, Manchuria, in 1929 to escape persecution in the Soviet Union.²⁸ When Japan occupied the region in 1931, Kogan and other Jewish refugees endured anti-Semitism from Japanese soldiers, but they were also afforded unique opportunities after a small group of military leaders led by Norihiro Yasue bought into anti-Semitic conspiracy literature describing Jewish control of world finance and media and believed they should harness the expertise of Jewish refugees in Manchuria to further develop Japan.²⁹ While Yasue never realized his so-called Fugu Plan, the brief pro-Jewish sentiment his ideas generated gave Kogan the opportunity to study economics at the prestigious Waseda University beginning in 1939.

While studying at Waseda, Kogan roomed with Russian literature scholar Masao Yonekawa and helped him translate the works of Dostoevsky into Japanese. With the outbreak of World War II, Japan mobilized its college students for the war effort, so Kogan ended up working in a factory.³⁰ In 1944, he left the country to join his father in Shanghai and founded a trading company that operated under the name Taitung – which translates to “Taito” in Japanese³¹ – specializing in floor coverings, hog bristles, and natural hair wigs.³² After the Communist takeover of China, Kogan liquidated his business and relocated to Tokyo to establish a new import business called Taito Yoko in 1950 that handled clothing and other products.

Taito Yoko struggled mightily because careless employees regularly lost goods and/or failed to collect full payment. In August 1953, Kogan wound up the company and started a new firm called the Taito Trading Company. At the new business, he was joined by a lawyer and retired newspaper man named Akio Nakatani, whom Kogan met at a karate dojo he attended where Nakatani served as an instructor.³³ Nakatani became Kogan’s right hand man as the new Taito began a vodka distilling business while also importing and distributing a popular line of peanut vending machines and a less successful line of perfume machines.³⁴

Taito left the vodka business in 1955 due to increased competition, but the success of the vending machines led Kogan to enter the jukebox business in 1954. Unable to secure a license to import machines from the United States because they were classified as luxury items by the Ministry of Industry and Trade (MITI), Kogan turned to U.S. military bases to purchase broken-down machines so his employees could salvage parts from three or four of them at a time to cobble together working units. As the Japanese economy improved, Taito secured a deal to become the official Japanese distributor of AMI jukeboxes in 1958, ending its reliance on refurbished machines. The jukebox business was not lucrative at first, but once Taito began mixing in traditional Japanese records with American popular music sales began to climb until there were over 1,500 jukeboxes on location in Japan by 1960. As the jukebox market continued to expand, a deal with industry leader Seeburg to become the exclusive Japanese agent for the company in 1962 further solidified Taito’s position as one of the top jukebox companies in the nation.³⁵

***

At the same time Taito began exposing Japan to the jukebox, an American named David Rosen began laying the groundwork for a company that would finally bring a full-fledged coin-operated amusement industry to the country. A native of Brooklyn born in January 1930, Rosen attended Columbia University after high school, but cut his education short to volunteer for the U.S. Air Force, in which he served from 1949 to 1952. Rosen’s assignment as a script writer and program producer for the Armed Forces Radio Service saw him posted to a string of Far Eastern locations from Shanghai to Okinawa before and during the Korean War, but he spent the majority of his time in Japan and fell in love with the country. After witnessing a Japanese painter earning a living through portraiture, he established a side business called Rosen Enterprises in 1951 that arranged for American photos to be sent to Japan to be turned into portraits by local artists.³⁶

Upon leaving the Air Force, Rosen returned home to New York with the intention of finishing his degree while furthering the interests of his portrait business in his native country. The venture proved unsuccessful, however, so Rosen dropped out of school once again and returned to Japan in April 1954 to transform Rosen Enterprises into a trading company that exported products like paintings, sculptures, and woodcrafts and manufactured small items like cigarette lighters and money clips for the domestic market festooned with advertising for American companies.³⁷

Before long, Rosen chose to pursue a new business opportunity. With heavy rationing still in place following World War II, the most important possession of any citizen was his or her photo ID, required for everything from buying rice to acquiring a railway pass to registering for work or school. As part of applying for an ID, a Japanese citizen was required to have a photo taken, which cost around 250 yen and took 2–3 days to develop. In the United States, however, there had recently been a surge in popularity for photomat booths, which could not only provide a picture at a cheaper price but could develop the film nearly instantaneously. Rosen decided to import photomats into Japan, but he soon discovered a problem: as the photos were intended as novelty souvenirs, they would actually fade within 2 years due to inadequate temperature controls in the booths rendering them useless for official IDs. After some thought, Rosen modified the booths so they were manned by an attendant who could regulate the temperature, allowing for the creation of pictures that could last up to five years. Rosen soon had a massive hit on his hands as people proved willing to wait in line for over an hour to have a picture taken for just 150 yen that would be developed within two minutes.³⁸

In short order, Rosen had placed over 100 booths around the country under the Photorama brand name. This success came at a cost when the owners of traditional photo studios began staging protests over unfair American business practices. Rosen established a franchise system for local photographers, but licensing his technology opened the market to unsanctioned competition that cut deeply into his profits. Rosen kept his Photorama business going into the early 1960s, but he also looked for new avenues to expand.³⁹

By 1957, the Japanese economic revival was well underway, and for the first time since the war Japanese citizens were beginning to have both leisure time and disposable income. Therefore, Rosen decided to enter the business of what the Japanese Ministry of International Trade and Industry designated “luxury goods,” which required an import license that until recently had been nearly impossible to acquire. Rejecting the currently popular entertainments of pachinko, dance studios, bars, and cabarets, Rosen focused on coin-operated games. He negotiated a license to bring in $100,000 worth of merchandise and acquired older games at a relatively cheap price from distributors in the United States that had accepted the games as trade-ins for newer product and then just piled them in warehouses with no idea what to do with them.⁴⁰

Rather than concentrate on pinball, which presumably would have faced stiff competition from pachinko, Rosen largely imported target shooting games, a coin-operated amusement that had enjoyed intermittent popularity for over 50 years. The earliest such games had been developed in the United Kingdom in the late nineteenth century in the form of electric rifle games in which the gun was connected to a target by wires and registered a hit through the use of wipers and contacts. In 1934, a Tulsa, Oklahoma, company called the Rayolite Rifle Range Company introduced a new target shooting system based around the recently invented light gun, in which pressing the trigger focuses a narrow beam of light that can be detected by a photosensitive vacuum tube in order to register a hit.⁴¹ The company incorporated this technology into a new game called the Rayolite Rifle Range that featured a duck as the target. In 1935, Seeburg Corporation took over the manufacturing of the game. When it proved popular, the company released several additional light gun games over the next two decades including Chicken Sam (1939), Shoot the Bear (1947), and Coon Hunt (1952).

Light gun games and elaborate electric rifle games enjoyed their peak popularity in the early 1940s as the United States prepared to enter World War II. After the war, a more compact version of the old electric rifle game developed by a man named Eldon Dale predominated in which the gun is anchored to a swivel stand attached to a metal rod that extends under a truncated playfield given the illusion of greater depth through the use of strategically placed mirrors. If the rod is in contact with a target when the player pulls the trigger, a circuit completes and the game registers a hit. Dale-style gun games entered arcades in 1949,⁴² achieved peak popularity in 1954,⁴³ and remained an arcade staple over the next decade.

In Japan, gun games became the premier coin-op amusement through the efforts of David Rosen. Through his photo booth business, he had established good relations with two prominent Japanese movie theater chains, Toho and Shochiku, so it proved relatively simple to reach agreements with both to place “gun corners” in the lobbies of their theaters.⁴⁴ With Japan’s strict gun control laws, these locations proved incredibly popular with target shooting enthusiasts and paved the way for rapid growth in the new industry. In June 1960, Rosen opened Japan’s first large arcade, the Hibiya Gun Corner, in Tokyo.⁴⁵ In July 1960, Taito joined Rosen in the amusement business by opening its own large gun corner near Ureoku Station in Osaka stocked with over 40 shooting games and pinball tables.⁴⁶ In April 1961, Rosen countered by opening his own large Osaka location, the Umeda Gun Corner.⁴⁷ Coin-operated amusements were now a major pastime in Japan for children and adults alike.

In 1963, Taito expanded its amusement operation by becoming the official Japanese distributor for pinball manufacturer Gottlieb.⁴⁸ Rosen, meanwhile, looked for new avenues to expand outside of traditional coin-op. With space at a premium in Japanese cities, he purchased an indoor computer golf game he felt certain would become a hit, but it failed because the Japanese proved interested in playing golf only outdoors. Next he turned to slot cars, but only succeeded in creating a passing fad. Finally, in 1962 he decided to open a bowling alley. At the time, bowling had been popular in the United States since the development of the first automatic pin-setters roughly a decade before but had yet to penetrate Japan save for one Tokyo alley that strictly catered to American servicemen. To ensure his alley would be a success, Rosen located it in the Shinjuku district of Tokyo, a popular entertainment area that would guarantee high turnover. He secured space for 14 lanes by approaching the president of one of the movie theater chains that housed his gun corners and reaching an agreement to place the alley over one of his theaters. Rosen’s alley ultimately set business records as the Japanese embraced bowling as a pastime.⁴⁹

After Rosen proved there was a viable market for bowling in Japan, the two largest U.S. bowling equipment firms, AMF and Brunswick, partnered with Japanese companies C. Itoh and Mitsui, respectively, in 1961 and ultimately captured two-thirds of the domestic bowling business between them. Consequently, bowling alley operation never became an important component of the Rosen Enterprises business. Bowling alleys did, however, become a prime venue for coin-operated games, so as the number of locations in the country grew into the hundreds and then into the thousands, coin-operated amusements became ubiquitous across the nation.

As demand for coin-operated games increased to new heights, Taito expanded its operations in 1963 by establishing a subsidiary called Pacific Amusements Limited to develop and manufacture original coin-operated amusement products.⁵⁰ At the time, the Japanese industry was experiencing a fad centered around crane machines after a model imported from Italy proved popular, so in 1965 Pacific developed the first domestically produced crane, the Crown 602, and helped cement the place of a product category that has been popular in Japanese game centers ever since. Before Taito established Pacific, most amusement machines in the Japanese market were imported, but after the success of the Crown 602, dozens of small companies followed Taito’s lead by setting up their own manufacturing operations.

***

While Taito and Rosen Enterprises focused on the Japanese market, Marty Bromley and Irving Bromberg took steps to turn the country’s other large coin-operated amusement provider, Service Games, into an international coin-op empire. Since 1953, the father and son duo had been funneling amusement equipment into U.S. military bases in the Far East from Panama-based Service Games to Service Games Japan. Now, they prepared to reverse this process by bringing equipment produced in Japan to the rest of the world.

In 1956, Bromley and Bromberg organized a new wholly owned subsidiary of Service Games in Panama called Club Specialty Overseas, Inc. (CSOI) to serve as a financial clearing house for the global operation and act as the middle man between Service Games manufacturing and distribution operations.⁵¹ Then, in 1957, they incorporated Service Games Nevada to give the company a presence in the U.S. market and function as a final assembly point for slot machines to circumvent a law requiring equipment purchased by the government to be American made.⁵² The same year, the company bought a never-before-used Mills slot machine tooling set from Bell-O-Matic Corporation – for which Service Games already served as a distributor in the Far East – and began manufacturing replacement parts and modified Mills designs in Japan.⁵³ These machines were then funneled through CSOI to Service Games Japan and Service Games Korea in the Far East and another Bromley distributor called Firm Westlee in West Germany for distribution to American military bases.⁵⁴ Service Games marketed both its Mills-produced slots and the machines it manufactured itself under the brand name Sega, a contraction of the company name.

As the Service Games complex expanded its operations, it attracted intense scrutiny from both the U.S. and Japanese governments. Starting in 1954, the company continually faced accusations of smuggling, fraud, bribery, tax evasion, coercion, and intimidation in its quest to become the largest supplier of coin-operated equipment to the U.S. Armed Forces around the world. The charges rarely stuck, but there were consequences. In 1959, the U.S. Navy banned Service Games from all its bases in Japan, followed by a complete ban in the Philippines the next year.⁵⁵ In 1961, the U.S. Civil Administration of Okinawa fined Service Games for smuggling, fraud, bribery, and tax evasion.⁵⁶ In 1963, the Fifth Air Force banned Service Games from all its bases worldwide.⁵⁷

Perhaps due to so many government investigations tarnishing the Service Games name, Bromley reorganized his web of businesses in the early 1960s. First, on May 31, 1960, Service Games Japan was terminated and two new companies were formed to replace it.⁵⁸ Nihon Goraku Bussan KK, literally Japanese Amusement Products Company, Inc., which also did business as Utamatic Inc., was led by Dick Stewart and managed the Service Games operating business in Japan. Nihon Kikai Seizo KK, literally Japanese Machine Manufacturing Company, Inc., which also did business as Sega, Inc., continued the Service Games manufacturing operation under the leadership of Ray Lemaire. That same year, Firm Westlee changed its name to Standard Equipment & Service, while Service Games Korea became Establishment Garlan.⁵⁹ Finally, in 1962 Service Games Panama was dissolved and superseded by CSOI,⁶⁰ which became the new heart of the Service Games complex and expanded aggressively into Southeast Asia and England to complement its business in Japan, Korea, Taiwan, and West Germany. Controversy continued to plague the company, however, culminating in a U.S. Congressional investigation in 1971 focused on activities in South Vietnam, where Service Games had cornered the coin-operated machine market in the late 1960s through an intermediary company called Sarl Electronics owned by William Crum, who allegedly owed his success to widespread bribery of military personnel.⁶¹

In Japan, Nihon Goraku Bussan and Nihon Kikai Seizo played a key role in the growth of the local coin-op industry. Like Taito, Nihon Goraku Bussan became a major supplier of machines for the domestic market, with a particular focus on jukeboxes. Though it did not run its own arcades, the company imported Rockola jukeboxes and amusements manufactured by Bally and Williams.⁶² In 1960, Nihon Goraku Bussan developed the first Japanese-designed jukebox to enter production, the Sega 1000.⁶³ The jukebox was manufactured by Nihon Kikai Seizo, which also offered a diverse line of slot machines – though only for international markets since they were illegal in Japan. As both companies continued to flourish, they became one again in June 1964 when Nihon Goraku Bussan absorbed Nihon Kikai Seizo.⁶⁴ By 1965, Nihon Goraku Bussan had placed over 3,000 jukeboxes on location and opened branch offices across Japan.

As Nihon Goraku Bussan and Taito grew in size and scope, a wave of new companies entered the market, and rival firms captured the new bowling business, Dave Rosen watched his prime position in the Japanese arcade industry began to dissipate. His rivalry with Japan’s other two significant coin-op enterprises remained friendly, however, so in 1964 he proposed a merger between Nihon Goraku Bussan and Rosen Enterprises to form a company large enough to stay on top of the increasingly competitive Japanese industry. On July 1, 1965, Nihon Goraku Bussan acquired Rosen Enterprises and changed its name to Sega Enterprises, Ltd.⁶⁵ Rosen became CEO and managing director of the company, while Dick Stewart became president, and Ray Lemaire took the title director of production and planning. Under Rosen, the combined company began phasing out slot machine production and equipment sales and leasing to military bases so that it could focus on a new primary objective: becoming the top coin-operated amusement company in Japan to facilitate becoming a publicly traded corporation.

By the time Sega Enterprises formed, Rosen had long since moved from importing used games to brand new products, but he soon grew disenchanted with the games coming out of Chicago. While game development costs were rising in the 1960s, operators had found it nearly impossible to move beyond nickel and dime play on their machines, so coin drop remained stagnant. Consequently, manufacturers were forced to sell new games at prices too low to completely recoup their costs and began cutting back heavily on R&D and slimming down to just their most popular lines. The result was a relatively static industry in which the manufacturers only invested in small cosmetic changes on existing equipment in order to keep costs down.⁶⁶ Feeling he could do better, in April 1966 Rosen established a new sales division under Shunichi Shiina and prepared to develop his own products.⁶⁷

With U.S. manufacturers refocusing on a narrower product line, Rosen also saw an opening for Sega Enterprises to develop an international audience. Leveraging the company’s large factory operation and the global reach of its worldwide agent, CSOI, Rosen planned to develop a line of low-cost novelty games for export to complement the pinball, baseball, shuffle alley, and target shooting games dominating the output of the big five manufacturers in the United States. In September 1967, Sega became the first company outside of North America to join the Music Operators of America (MOA), the principle trade organization of the U.S. coin-operated amusement industry,⁶⁸ and in October the company secured a deal with Williams to bring its line to the United States.⁶⁹ Sega also began eyeing the European markets, where the company already had a formidable distribution presence, and in 1967 it introduced a large, expensive game there based on a concept originally developed by a competitor called the Nakamura Manufacturing Company.

Born in 1925 in the Kanda district of Tokyo, Masaya Nakamura was the son of a manufacturer of handcrafted shotguns named Yutarou, whose business was destroyed during World War II. At the war’s conclusion, Yutarou Nakamura salvaged what he could from the rubble and established a gun repair shop in the Matsuya department store in Asakusa, Tokyo. Masaya had always been drawn to the sea and harbored dreams of becoming a sailor, but weak eyesight put an end to those ambitions. Instead, he chose to study shipbuilding at Yokohama State University. Masaya graduated in 1948, but proved unable to find a job in the depressed post-war economy.⁷⁰ He joined his father in the family business and performed all manner of odd jobs from sweeping floors to managing the books to designing and hanging advertising posters around the city.⁷¹

Over time, the Nakamuras transitioned from repairing old rifles to selling brand new air guns, but increasing restrictions on gun ownership and shooting threatened the business. Masaya started modifying the air guns for sale as harmless toys and began pondering how the company could expand into other forms of children’s entertainment. In the 1930s, Yutarou Nakamura had manufactured cork guns for Kaichi Endo, who since the end of World War II had been leading the way in reestablishing department store amusement spaces through his Japan Recreational Equipment Company, Ltd.⁷² Masaya felt he and his father should capture a portion of this business as well, but Yutarou was opposed to the idea. Therefore, Masaya broke with his father to establish the Nakamura Manufacturing Company in June 1955 with just two employees and roughly $1,200 in capital to operate rooftop amusements.⁷³

Nakamura’s first installation consisted of two pre-war horse rides that he refurbished and placed on the roof of the Matsuya store in Yokohama. Over the next decade, Masaya added two or three more small locations to his route, but received his first big break in 1963 when he secured a contract to build a rooftop amusement park for the flagship location of Japan’s premiere department store chain, Mitsukoshi, located in the Nihonbashi District of Tokyo.⁷⁴ In addition to horse rides, Nakamura added a 3D sound and picture viewing machine, a pond out of which children could scoop goldfish, and an elaborate amusement machine called the “Roadway Ride.” Based on the success of this venue, Mitsukoshi decided to add rooftop amusement parks to all its locations, and Nakamura was soon operating ten facilities across Japan.⁷⁵ The Mitsukoshi deal made Nakamura Manufacturing one of the larger department store amusement operators in Japan, which in turn allowed the company to buy in bulk from coin-op manufacturers at a discount. Consequently, Masaya Nakamura decided to expand into coin-op distribution by supplying smaller operators with equipment as well.⁷⁶

With the Japanese industry expanding rapidly in the late 1960s, Nakamura Manufacturing had trouble securing the equipment it needed for its rooftop spaces because manufacturers proved unable to keep up with increasing demand. Worse, larger companies like Taito and Sega that served as both operators and manufacturers began invading Nakamura’s traditional stronghold of department store play areas.⁷⁷ Nakamura responded by opening his own factory in the Ota-ku district of Tokyo in February 1966 and securing a license from the Walt Disney Company to use its characters on his products. The factory largely produced kiddie rides modeled primarily on popular anime and Walt Disney characters, but Nakamura also turned his attention to more elaborate coin-operated amusements beginning with a game called Periscope.

A target shooting game, Periscope broke new ground in the genre with a gigantic cabinet featuring a plexiglass ocean and plastic ships on a motorized carriage, great electronic sound effects, and an innovative control scheme in which up to three players peered through actual periscopes to target and destroy the ships with torpedoes represented by points of light that traveled across the fake waters.⁷⁸ While more expensive than the typical coin-operated machine of the day, Periscope became a hit when arcade operators realized that it could bring in sustained earnings far in excess of most coin-operated games.

As Nakamura manufacturing remained focused on the domestic market, Sega saw an opportunity to bring the popular concept overseas. In 1966, Sega engineer Ochi Shikanosuke created his own version of the game that debuted at the ATE trade show in London that November.⁷⁹ After placing a small number of units on location in Europe in 1967, David Rosen realized that it was too large and expensive to export practically and ordered his engineers to develop a smaller single-player unit. Released internationally in March 1968,⁸⁰ the single-player version of Periscope remained too large for typical street locations, but found a home in retail establishments like department stores and shopping malls that would never typically host coin-operated amusements.⁸¹ It remained expensive, costing roughly $1,295 when the typical arcade piece would sell for half that amount, and distributors continued to complain that no one would be able to make money on the game. Rosen responded in late 1968 by reconfiguring the game for quarter play and heavily lobbying distributors and operators to accept 25 cents as a new standard price point.⁸²

With revenues increasing at Sega thanks to Periscope and the continued growth of the jukebox business – in which Sega had captured just under half of the Japanese market with 5,000 machines on location by 1967 – Rosen’s dream of going public now appeared feasible. The company retained an underwriter to begin work on an initial public offering, but ultimately decided the hurdles would be too great. Not only would Sega have been the first American company to go public in Japan since World War II, but it would have also been the first coin-operated amusement company to ever go public in the nation. Therefore, Rosen and his partners began a search for a publicly-traded American company they could purchase so as to turn Sega into a subsidiary. This effort also failed, so the group sold out to Gulf & Western in 1969, where CEO Charles Bludhorn was on a massive acquisition spree that created one of the largest conglomerates in the world.⁸³ Between June 1969 and January 1970, Gulf & Western purchased 80% of the stock of Sega Enterprises – the entire company save Ray Lemaire’s 20% stake – for a total price of $9,977,043.⁸⁴ Bromley and Stewart ended their direct involvement with the company at that point, while Rosen remained as chairman and CEO.

***

With Periscope proving a hit despite its technical complexity and high price per play, the game spearheaded a revival of the moribund novelty game manufacturing business through a new category labeled “realistic” or “audio-visual” games by the trade press that incorporated advanced special effects to provide a closer simulation of the real world than previous arcade pieces. The most important of these realistic games were a new wave of driving games pioneered by a Japanese firm called Kasco.

Established in 1955 by engineer Kenzou Furukawa under the name Kansei Seiki Seisakusho and incorporated three years later, Kasco’s first product was a magic lantern device called the “Stereo Talkie” intended to help guide shoppers around the stores of the Hankyu Department chain. As rooftop amusement spaces regained popularity in post-war Japan, Furukawa repurposed the Stereo Talkie as a picture viewer amusement device called the “Viewbox” that displayed images from Japanese folktales and small comic strips, often accompanied by music. Like Nakamura Manufacturing, Kasco began installing and maintaining kiddie rides in rooftop gardens and transitioned into importing, operating, and manufacturing other types of coin-operated amusements.⁸⁵

Furukawa created his first driving game, Mini Drive, in 1958 after seeing an International Mutoscope machine. Established in New York by Ukrainian immigrant William Rabkin in 1920, International Mutoscope first made a name for itself by reintroducing the peep shows that had long since fallen out of favor, but the trained machinist Rabkin soon expanded into other coin-operated products, most notably the burgeoning market for crane machines that flourished in the 1920s and 1930s.⁸⁶ In 1941, he introduced a game called Drive-Mobile derived from several British games released in the 1930s in which the player uses an actual steering wheel to control a model car set atop a metal drum and keep it centered on a road painted on the drum that constantly shifts to the left and right as it rotates.⁸⁷ Mini Drive followed a similar format, though in a longer cabinet that allowed for a bigger road.

Ten years later, Kasco introduced an elaborate new driving game called Indy 500 featuring a circular racetrack and cars painted on individual rotating discs illuminated by a lamp, providing striking, colorful graphics and allowing the game to detect collisions between the vehicles. The player not only has to keep his car on the track, but he also has to dodge the other cars to avoid a crash that brings his vehicle to a halt. Electronic sound provides both the steady hum of the car engines and the sounds of impact. More realistic and exhilarating than any driving game released before, it became a smash hit in Japan with sales of over 2,000 units.⁸⁸

With Indy 500 proving so successful, Kasco exported the game to the United States and Europe, where it captured the attention of Sam Gensburg of Chicago Coin. Gensburg ordered his engineers to create their own version, which saw release as Speedway in 1969 and became the biggest smash hit the industry had seen in years with sales of 7,500 units.⁸⁹ The game also played a critical role in the growth of quarter play: Chicago Coin wanted to set the machine to one game for a quarter just like Sega’s Periscope, but operators initially balked and asked for two plays per quarter. Chicago Coin responded by testing the game both ways and discovered both models received roughly equal play, meaning the quarter play machine took in twice the money since a single coin bought half the playtime.⁹⁰ Speedway consequently shipped with one play per quarter and helped cement a new price point that would persist for over 20 years.⁹¹

In 1969, Sega scored another major hit in the U.S. with Missile. Continuing to push state of the art graphical effects, the game features a rotating filmstrip displaying silhouettes of jet planes projected onto the back of the cabinet to create the illusion that waves of bombers are flying toward the player. As the planes move across the cabinet, a wiper blade travels along a circuit board containing a series of contacts. The player must shoot down the planes by aiming his missile using two buttons to rotate it left or right, then firing by pressing a button on top of a joystick. The missile is attached to its own wiper that passes over a series of contacts, and if both the player’s missile and the wiper tied to bombers are touching the same contact when the player presses the button, a circuit completes to register a hit, while a solenoid pulls a different slide in front of the projector displaying a red explosion graphic.

By 1970, a slew of manufactures both old and new were rushing to emulate the cartoon-like graphics and realistic sound effects of Speedway and Missile, setting off a technological arms race to provide new games incorporating experiences unlike any the public had witnessed in an arcade before. As a result, the early 1970s were perhaps the best opportunity since the Great Depression for a clever inventor with a slick new product to break into the industry despite having little working capital and/or no previous track record with coin-operated amusements. In short, there would probably never be a better time for Nolan Bushnell and Ted Dabney to introduce the first coin-operated video game.