Sega Technical Institute

Sega Technical Institute (STI) was an American video game developer owned by Sega. Founded by the Atari veteran Mark Cerny in 1990, STI sought to combine elite Japanese developers, including the Sonic Team programmer Yuji Naka and his team, with new American talent. STI developed games for Sega Genesis, including several Sonic the Hedgehog games, before it was closed at the end of 1996.

After working in Japan for Sega on games for the Master System, Cerny proposed the creation of a development studio in America, which was approved. When Naka quit Sega after the release of Sonic the Hedgehog, Cerny convinced him to join STI. After completing Sonic the Hedgehog 2 in 1992, STI was divided in two due to friction between the Japanese and American developers: the Japanese developed Sonic the Hedgehog 3 and Sonic & Knuckles before leaving in 1994, while the Americans developed games including Sonic Spinball. The failed development of Sonic X-treme for the Sega Saturn became representative of a culture shift at Sega.

The mainline Sonic the Hedgehog games developed by STI are considered significant in the history of the Genesis. Developers have described STI as a unique workplace that did not fit into Sega's corporate structure.

Mark Cerny, a fan of computer programming and arcade games, joined Atari in 1982 aged 17. At 18, he designed and co-programmed Marble Madness, his first major success. After his time with Atari, Cerny became an independent programmer and signed a contract with Sega in 1985 to work on an arcade game out of an office at the company's arcade division in San Jose, California. Cerny was approached by Sega's president, Hayao Nakayama, about canceling his project and coming to Japan to work on software for Sega's upcoming Master System console. Cerny relocated to Tokyo in late 1986. There, he developed Master System products, including launch games and the SegaScope 3D glasses accessory. Despite initially planning on a six-month stay, he worked with Sega in Japan for over three years.

In 1990, Cerny desired to return to the United States. At the same time, the Sega of America CEO, Michael Katz, and the executive vice president, Shinobu Toyoda, prioritized increasing game development in the US due to a lack of games catering to American tastes. This resulted in Sega's head of research and development, Hisashi Suzuki, announcing his intention to send a group of younger, but experienced, arcade developers to the US to develop games for the region, and would be supplemented with American development staff as well. Suzuki wanted to call this new studio the "Sega Institute of Technology" (SIT), but was convinced by Cerny to change the name to "Sega Technical Institute" over concerns that the "s" sound in the group's initials would be pronounced instead with a "sh" by Japanese speakers. Sega initially planned to send 11 developers. Sega applied for O-1 expert visas, for "nationally or internationally recognized" people with "a record of extraordinary achievement", unaware that the developers did not qualify. As a result of the applications for this quantity of unqualified visas, the US Embassy in Tokyo denied them all and temporarily barred Sega from applying for more. Sega instead sent Cerny to the US and had him hire Americans without assistance from Japan.

Believing it would bolster creativity, Cerny located STI near the arcade division offices in San Jose, away from Sega of America's headquarters in San Francisco. Within a year, STI had outgrown its space and relocated to Palo Alto. Ken Balthaser, Sega of America's product development manager, did not support STI's independence and wanted it to be part of Sega of America's corporate structure. He was overruled by Nakayama, who was convinced by Cerny that he could make this level of independence work, something which had never been tried at a major game developer before. This allowed Cerny to report directly to Sega's offices in Japan and avoid the game concept approval management of Sega of America. He aimed to establish an elite development studio that would combine the design philosophies of American and Japanese developers, much like Suzuki's original plan.

Cerny's first employee at STI was Yutaka Sugano, who had previously created the arcade game Shinobi and had already been assigned to work in the US. The first STI project was Dick Tracy, based on the 1990 film for which Sega obtained a license to develop a game. Sega gave STI five months to complete development, while STI still had only Cerny and Sugano on staff. American staff were hired to program the game, and Japanese graphic artist Takeshi Doi worked on the animation. According to the game's lead programmer, Mike Schwartz, the Japanese and American staff collaborated well despite the language barrier; Sugano and Doi had some understanding of English, and Cerny, a fluent speaker of Japanese, helped to ensure good communication. Sega also sent American staff members, including Schwartz, to Japan to visit Sega's headquarters, with Sugano and Doi leading their tour. Despite STI's efforts, which included having each character's likeness approved by their actor in the movie–including Warren Beatty, Madonna, and Al Pacino–Dick Tracy was poorly received and did not sell well. The game's late release in February 1991, eight months after the film debuted in theaters and two months after its home video release, prompted Sega to insist on being a part of film-based projects at least a year before the film's release date.

STI began development on its next game, Kid Chameleon, in 1991, as they were finishing Dick Tracy. Cerny and others conceived Kid Chameleon in 1990 as an action game, with knowledge that such games were popular due to the success of Nintendo's Super Mario Bros. and that the Genesis lacked many of these games, and among the few it did have, none were originally developed in the West. A number of new staff were hired as Kid Chameleon's development began. The team consisted of 15 people, all American, with sound being outsourced to a third party. Cerny facilitated open communication during the game's development and created opportunities for the developers to bond and spend their off time together; this led to increased communication between artists, designers, and programmers, which was crucial because the game's development did not use version control to prevent overwriting the work of each other. The game includes over 100 levels despite the small 1MB cartridge used, but does not include any save feature. Kid Chameleon was released in late 1992 and sold well for Sega.