Why Isn't SEGA Overprotective of its Intellectual Property?

Sega is famous for how generous it is with its intellectual property... but why? Does it come from the goodness of Sega's corporate heart? Or is there another reason?

I'm Moony: a lawyer. Let's explore Sega's corporate decision making by looking at its history, controversies, investor reports, lawsuits, and more. We'll compare Sega to Nintendo, explore Sega's curious past, and see what growing success means for Sega, and SONIC, in the future.

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Chapters:
00:00 - Intro
01:28 - Sega History Context
08:04 - Case Study: Sega v. Accolade
14:06 - Sonic Gets Special Treatment by Sega
18:22 - The Tale of SegaSammy
22:30 - Intro to Investor Reports
24:01 - Investor Report Revelations
30:31 - Tangent; Sonic Team Not to Blame
34:19 - Case Study: Ken Penders
38:34 - Summary So Far
40:00 - Prediction of Sega's Future Behavior
41:58 - Conclusion
44:40 - Post Script
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Additional Reading:
Sega Sammy 2022 Integrated Report:

Sega Sammy 2021 Integrated Report:

Sega Sammy 2005 Annual Report:

Sega Enterprises Ltd. V. Accolade, Inc. 977 F.2d 1510 (9th Cir. 1992)
w/ Amicus Curiae:

KENNETH PENDERS, II V. SEGA OF AMERICA, INC., No. 12-55544 (9th Cir. 2013):

I hope that's everything I promised! Let me know if I missed anything.
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The Track List, by Fan Request:
Sorry, I had to get rid of the timestamps; they were messing with the chapters!

(1) Chao Garden - Neutral - Sonic Adventure 2;
(2) Casino Night Zone - Sonic the Hedgehog 2;
(3) Green Hill (Classic) - Sonic Generations;
(4) Angel Island Zone - Sonic Mania Plus;
(5) Marble Zone Act 1 - Sonic Mania (Not in Game);
(6) Star Light Zone Act 1 - Sonic Mania (Not in Game);
(7) Studiopolis Zone Act 1 - Sonic Mania;
(8) Beneath the Mask (Rain) - Persona 5;
(9) Intro - The Stanley Parable ;
(10) Casino Night (Act 2) - Sonic Generations;
(11) Can You Feel the Sunshine? - Sonic R;
(12) Deodoro - Mario & Sonic at the Rio 2016 Olympic Games;
(13) Chemical Plant Zone Act 1 - Sonic Mania;
(14) Flying Battery Zone Act 1 - Sonic Mania;
(15) Major Boss - Sonic 3 HD;
(16) Carnival Night Zone (Act 1) - Sonic 3;
(17) Pumpkin Hill - Sonic Adventure 2 Battle;
(18) Deodoro - Mario & Sonic at the Rio 2016 Olympic Games;
(19) Star Light Zone Act 2 - Sonic Mania;
(20) City Escape (Classic) - Sonic Generations;
(21) Maya Fey Turnabout Sisters Theme 2001 - Phoenix Wright Ace Attorney;
(22) Pumpkin Hill - Sonic Adventure 2 Battle.

Whew! Maybe these track playlists and additional reading resources can be a Patreon reward in the future or something.
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Subtitles by: James Hugh
(Thank you, James!)

[mikebliss]

"We are going to read some terribly exciting annual investor reports."

He said, with a smugly evil smile.

[just_dondre]

This video puts into context so many things about this franchise ive always loved sonic and wondered why the games had such mix of amazing and terrible games but now knowing the circumstances behind them makes me realize how much of giga chads sonic team developers are they made colors and generations with low budget and upper management interference my respect for them has increases immensely

[poisonshroom]

I think it is important you pointed out how Sega's fanbase is a lot more prone to backlash than Nintendo is. While Nintendo will always have their army of drones, I'll bet that (at least in the sonic department) Sega is aware that their brand loyalty is a lot more volatile if they start playing hard ball with them.

[ReijiArisu]

Also somewhat relevant, is the reason why Sammy distances itself from Pachinko. The laws have changed since a few years back. SNK, Konami have dramatically slowed down their Pachinko businesses.
First : Teens don't play Pachinko. The Bayonetta Pachinko machine wasn't very effective in bringing younger audiences in Pachinko. The player base is shrinking

Second : Gambling in Illegal, as in "It's up to luck and not skill, like in card games. The player doesn't have control in whatever cards comes up", but in Pachinko there is a bit of player control, that's supposedly makes a difference in the eyes of the law. And you can press buttons, so it does create the illusion of skills.

Third : During the Olympics 2020, SNK, Sammy and Konami figured it would be the perfect time to have all those foreigners play too. Growing the player base and spread the craze to the world. But for that to be allowed, it would be easier without this fake money pawn shop stuff. So they asked for gambling to be legalised. So a test run was performed by the government. So now all Pachinko machines have to pass inspections from the governement. So the governement can regulate the RNG and give the player a fair chance of winning. Any machine the doesn't pass inspection is rejected. An inspection can take 6 to 8 months. And you have now to pay Regulation fees from the Governement.

TLDR : The player base is shrinking, attempt at legalising casino screwed Pachinko. A new law passed on July 20 2018 legalizes the construction of casinos in Japan, with the aim of supporting its economic growth. But now it means the governement must inspects machines to limit RNG and addiction. Such inspections take 6 to 8 months and you make less money out of it. Pachinko's profit has been divided by three.

[crashboombang]

My GOD this video was incredible. I genuinely don't understand how Sammy managed to keep all this under wraps for so long, because it puts so much of Sonic's dark years into a completely different perspective. Absolutely fascinating and makes me reconsider a lot of things. Thank you so much for making this.

[traxiom]

So the "dark age" started right when the merge happened. Makes me wonder how Sonic Unleashed managed to be so polished and ambitious in the middle of all the corporate meddling. This video made me appreciate Sonic Team way more.

[NoBillsOfCrashDamage]

This clarifies so much about the different approaches Nintendo and Sega use for IP protection, as well as the inconsistent quality of Sonic games. It would have never crossed my mind that a gambling company was responsible for such things.
Now I wonder if Sonic having recurring casino levels was just a coincidence.

It seems we may start to see Sega be on the same level of aggressive protection as Nintendo in the near future. If it happens, assuming it hasn't already, I'm curious to see how the community will react.

[seto_kaiba_]

As a Sonic fan, watching this feels like learning that your wife has been cheating on you and the baby is not yours. lol.

[kindoflame]

I love the perspective you use to look at the gaming industry. Few people try looking at it from a legal perspective, and those that do usually stop at just what the law says. The way you analyze why gaming corporations use the law as they do really adds a lot to the conversation.

[ArcadeAwesome]

When it comes to DMCAs, I think Sonic is an exception for SEGA because Sonic is their biggest IP. Sonic fans are insanely loyal to the character and keep him alive and relevant even when there's long gaps for official Sonic content. Sonic is so special of an asset that SEGA can experiment with the character and not worry about destroying the IP because the fan base is so dedicated.

[ifjNagyMiklos]

Reminds of WoTC situation.
They had a once popular brand so they decided to revitalize it by OGL, which essentially allowed 3rd party content creators to make extra content for their game with basically no restrictions, and it was a huge success.
But than, two decades latter, they tried to revoke it, and saying it had disastrous consequences would be an understatement.

[ArcadeStriker]

The SegaSammy explanation about their aggressive development schedule, lack of regard for game quality over their wider media appeal for Sonic as a brand really feels like something that could have been brought up by someone before but somehow this is the first time I ever hear of this; yet it is great to have an optimistic note at the end with how Sonic's biggest success yet with Frontiers might lead to far better things for the players as well as for media outside of the games. If anything, that thing that Sonic Team had confirmed about the staff reportedly, FINALLY being allowed more development time for their next game and wanting to build on what Frontiers did, does mean that they are now willing to let Sonic's full potential at Sonic Team's hand to bloom (even if the reason is because the poential shown = big cash for them if done right...but at least we'll get things right this time around, right?)

I fhave the feeling like this video will really blow up, not only because of the superb research but also because it sounds like it will spread like wildfire in the community as such an in-depth explanation of circumstances around the franchise up to this point.

[sock]

I'd love to see a video about Valve next. They not only allow fan games, they allow them to be sold on their own platform.

[AkameGaKillfan]

The way you described SEGA wanting to keep their image of: "we totally like our fans and encourage fan projects!" explains the reception of Sonic Mania pretty well. Everyone thinks SEGA is so nice and respectful of their community, ignoring what Christian Whitehead, Tee Lopes, Stealth and all the others actually went through to get CONTRACTED, NOT HIRED, by them.

People can be so gullible.

[Tuss]

I sent an email once to a company they work with for music asking permission to use a song in a video (that I haven't actually made yet). After getting through the language barrier, they linked me a place I could buy the music, but said it wasn't an official license as:

"SEGA allows fan arts, but does not provide no material, other than stated in its web site.

* to put all fans under equal condition."

My read being that they don't play favourites when it comes to fan works, which was interesting to learn.

[piousthepious]

As a law student I love this kind of stuff and I feel like I can share it with friends that aren’t as into law and still get a lot of value from it. I would love more videos like this!

[islaamN]

So hey! I haven’t finished the video yet (cuz i have some errands) but can I just say how well put together this video is? Everything from an intriguing yet simple title, the thumbnail stands out, and the editing is great. Really enjoying it so far Moon! Well, I’ll be back to finish the video later Godwilling!

[kennylauderdale_en]

Sonic was absolutely more popular than mario here in the United states for around 3 years from 93-95. I think SEGA-Sammy just never understood that was true of more than the u.s., or maybe never realized that at all. With the advent of the internet though, yeah, that had to have woken them up. The whole Ken Penders thing is also a great point. That was their Nintendo Vs. King Kong wake up call.

[Solesteam]

41:34 I hope beforehand they give the fans a warning at least saying something along the lines of: "Hey, since Sonic is doing much better in terms of funding for Sega's works were gonna have to tighten our grip on what we allow to slide, please save or backup your fanworks to offline incase we may need to take legal action to avoid any loss of properties." So that they can at least still keep that good easy going with Sonic reputation while also being strict, unlike Nintendo who to nearly everyone looked like they suddenly went berserk on their fandoms without warning one day and remained the mean math teacher of the corporate world since then.

[kordianronnberg]

This largely scary film is one of the most revealing gaming materials I've seen in recent years. Thank you very much from the perspective of a fan of old Sonic Team and Am2 games, a graphic designer, and a novice developer. All the best!