Bandai was that exception.
In the edge area of the South Hall of the Los Angeles Convention Center, Bandai's booth setup was underway.
There were no towering neon signs, no enclosed demo "black rooms" built with heavy investment, and no exaggerated, massive posters.
A few workers were moving boxes of plastic model kits into the booth, stacking them behind transparent glass display cabinets.
This was a company that survived by selling plastic toys and anime merchandise.
This year, the game lineup Bandai brought was pitifully thin.
Apart from a 3D fighting game titled "Dragon Ball Z: The Legend" and a 2D fighting game titled "New Mobile Report Gundam Wing: Endless Duel," they hadn't announced any new titles.
Yakumo, the manager of Bandai's North American branch, who was in charge of the on-site setup, was irritably tugging at his tie.
He watched the workers clumsily assembling that tall XXXG-00W0 Wing Gundam model and couldn't help but curse.
"Be careful! The clip on that wing is very fragile; if it breaks, there aren't even any spares!" Yakumo shouted.
A young Bandai employee walked over to him, holding two game discs with an awkward expression.
"Manager Yakumo, the demo units for these two games are powered on, but the graphics really aren't presentable." The young employee pointed to the two small CRT televisions behind him.
Yakumo sighed and walked over to the televisions.
On the screen, Dragon Ball Z: The Legend was running. Goku and Vegeta were engaged in stiff combat in the air, with jagged edges covering the rough polygonal models. Every hit detection was accompanied by frame drops, and the stuttering visuals were dizzying.
The development team had deliberately referenced the camera angles and control logic of Sega's Virtua Fighter in their design, trying to catch the tailwind of the 3D fighting game craze, but the result was counterproductive.
"This is the best version the development department could come up with," Yakumo said, rubbing his temples. "They spent the entire budget on licensing fees for the animated cutscenes and had no money left to optimize the underlying 3D engine."
"What about the other one, Gundam Wing? That's an old-generation product from the Mega Drive and Super Famicom era. If we show it now, the media will just laugh at us," the young employee whispered.
"That's a relic from the MD and SFC era; bringing it out now will just get us mocked by the media," the young employee said, lowering his voice.
In 1996, Sony and Sega were locked in a fierce battle on the field of 3D polygons, and Nintendo was about to join the fray with its N64 console. Yet, Bandai was relying on a 2D game from an obsolete platform as its flagship offering, presenting it at the world's most prestigious next-gen game exhibition.
"It's an order from top management; it has to be displayed." Yakumo turned around, looking at the Gundam model that had finally been assembled. "Our primary mission at E3 this year is to push toy orders for the second half of the year to North American distributors and to manage the limited-edition merchandise booth in the Kentia Hall. The game is just an afterthought. Put these game discs in the corner; just make sure the machine runs. Focus the lighting on the model."
The young employee complied helplessly. In an E3 exhibition hall filled with next-gen 3D blockbusters, this approach was essentially burying one's head in the sand. As a low-level employee, he was powerless to change the company's strategy.
Bandai's top management was immersed in the profit reports driven by toy sales, lacking even the most basic reverence for the technological evolution of video games. Or, perhaps more accurately, they had given up hope on the gaming division; while they hadn't explicitly sentenced it to death, they had left it in a state of total neglect.
Half a month earlier, in Tokyo, Japan. At the Sega headquarters, inside the Executive Director's office, Hisao Oguchi knocked on the door and walked in, holding a thick stack of papers containing the exhibitor list and the booth layout plan.
Half a month ago, Tokyo, Japan. Sega Headquarters Building, Executive Office. Oguchi Hisao knocked on the door and walked in, carrying a thick list of exhibitors and a booth layout plan. He had just taken over the overall coordination for this year's E3 and needed to finalize many details. Nakayama Takuya sat behind his large desk, reviewing the hardware sales report for the North American market. "Managing Director, this is the final confirmed list faxed over from Los Angeles." Oguchi Hisao handed over the document, flipped to the middle page, and pointed to a few lines of text. "The booth and event arrangements for other manufacturers have all been coordinated. It's just the situation with Bandai that is baffling." Nakayama Takuya picked up the list, his gaze landing on the line for Bandai. "They only registered two games." Oguchi Hisao pulled out a chair and sat down, his tone full of confusion. "One is Dragon Ball, and the other is Gundam. The Gundam one is actually a product of the old generation for the MD and SFC platforms. Yet, the booth area they applied for is not small at all. They said they need to leave a large amount of space to display their new Gundam models and peripheral toys for the second half of the year." Nakayama Takuya put down the list and picked up his teacup to take a sip.
"The exhibition space they requested is quite large, claiming they need the extra room to showcase their new Gundam models and peripheral toys for the second half of the year." Takuya Nakayama set down the list and took a sip of tea from the cup on his desk.
"Don't worry about them," Takuya Nakayama leaned back in his chair. "Bandai's gaming division is just being an ostrich right now. They've buried their heads in the sand, pretending there's no technological revolution happening outside." "Then how should we arrange their booth? Should we put them on the periphery?" asked Hisao Oguchi. "Give them the space they requested. Put them in the side aisle of the South Hall," Takuya Nakayama tapped his fingers on the desk. "Don't interfere with their booth setup. If they want to sell toys, let them sell toys." Hisao Oguchi frowned. E3 was the Electronic Entertainment Expo, not a toy fair. Bandai's approach was a waste of the precious resources Sega had coordinated as one of the organizers. "Bandai's top management is very confused right now," Takuya Nakayama said, looking out at the view of Tokyo Bay. "Their core business is character IP licensing and toy manufacturing. The video game market has been expanding too quickly these past few years, and they're jealous, wanting to come in and grab a slice of the pie. But deep down, they are still a traditional toy company. Next-gen games, with their long development cycles, high technical barriers, and significant investment risks, don't fit their business logic." Hisao Oguchi listened without interrupting. "They're used to taking a popular anime IP, finding an outsourced team to slap together a reskinned game, and recouping their costs on the loyalty of their fans."
Oguchi Hisao listened without interrupting.
"They are used to taking a popular anime IP, finding an outsourced team to slap together a reskinned game, and recouping their costs by relying on fan loyalty," Nakayama Takuya said, withdrawing his gaze and looking at Oguchi Hisao. "In the 3D era, that playbook no longer works. Players' tastes have been refined by Virtua Fighter and Final Fantasy VII. Shoddily made IP-derivative games can't even make it onto retailers' shelves. Look at the self-developed games they've put out over the last two years—without Sega holding their hands, they can't even walk on their own."
"Then why are they coming to E3?" Oguchi Hisao asked.
"Just to coast. To prove to their investors that they're still in the gaming industry," Nakayama Takuya smiled. "Just wait and see. After next year, Bandai's financial statements will teach them a lesson. I'll be making some moves on my end as well. When that time comes, they'll be begging Sega for a merger."
Oguchi Hisao was stunned.
"Begging us for a merger?" Oguchi Hisao couldn't help but ask.
"The shrinkage of the traditional toy market is an irreversible trend," Nakayama Takuya continued, analyzing the situation. "They need Sega's game development capabilities and our global distribution channels to revitalize those dormant anime IPs they have on their hands."
"The decline of the traditional toy market is an irreversible trend," Takuya Nakayama analyzed the situation. "They need Sega's game development capabilities and global distribution channels to revitalize the dormant anime IPs they hold. Sega, in turn, needs their peripheral production capabilities to expand our product boundaries."
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