previously known as is a video game development team within the Japanese multinational video game developer Sega. Yu Suzuki, who had previously developed arcade games for Sega including Hang-On and Out Run, was the first manager of the department.
AM2's first game produced was 1992's Virtua Racing, followed by the highly popular Virtua Fighter and Daytona USA. Through the remainder of the 1990s, they developed more arcade titles and focused on fighting and racing games. AM2 was placed under the management of CSK Research Institute in 2000, and a year later became SEGA-AM2 Co., Ltd. Their development of Shenmue was over budget and cost millions of dollars, and despite positive reviews and good sales was unable to become profitable.
Suzuki was promoted and left AM2 in 2003; Hiroshi Kataoka became the head of AM2. A year later Sega was acquired by Sammy Corporation and AM2 was merged back into Sega. Since, the team has continued work on arcade games such as Border Break and the Hatsune Miku: Project DIVA series, as well as smartphone games in Japan. Several games produced by Sega AM2 have influenced and innovated the video game industry from a technical and developmental perspective.
History
Precursors to AM2: Yu Suzuki and Studio 128
Yu Suzuki joined Sega in 1983 as a programmer. At the time Suzuki joined Sega, there was only one development division at the company. In his first year, he created a 2D boxing game called Champion Boxing for Sega's first home game console, the SG-1000. According to Suzuki, the executive staff at Sega found the game so impressive that they released it in arcades as-is by simply installing an SG-1000 into an arcade cabinet. He was promoted to project leader while still in his first year at the company. Suzuki's next project was the motorcycle racing game Hang-On. To accomplish his desire to make a 3D game despite technological limitations at the time, he specified the design of Sega's new Super Scaler arcade system board, which utilized 16-bit graphics and sprite-scaling. Hang-On was very popular at launch and sold well for Sega. Suzuki's success followed with additional titles Space Harrier, Out Run, and Enduro Racer. He and his team relocated to "Studio 128", a more private location where After Burner and Power Drift were developed. He also worked on development of G-LOC: Air Battle and the R360 arcade cabinet. Developer Toshihiro Nagoshi joined Sega in 1989 as a designer with Suzuki's team.
Establishment of AM2 and years as a department
Some time after the release of Power Drift, Sega began to separate the amusement division into the Amusement Machine Research and Development teams, or AM teams. Suzuki was made general manager of Research and Development No. 2, or Sega AM2. According to Suzuki, Sega employed approximately 600 people in research and development, and that AM2 began as a group of around 100 people. He has also stated the reason for this separation was the advent of advanced computer graphics technology. Around the time of AM2's formation, Suzuki's team moved back into the main office, then to an annex a short walk from the office. Even so, Suzuki worked with a desire of secrecy, so much so that Sega president Hayao Nakayama was denied entry on one occasion.
The first project developed by AM2 was Virtua Racing. While development began with 10 people on Virtua Racing, it finished with 25 workers on the project for a year, and the Model 1 arcade system board on which it runs took approximately three years. AM2 also ported the game for the Sega Genesis. Next Generation stated that AM2 "single-handedly chang[ed] the perception of polygons in a gaming environment" with Virtua Racing.
After the release of Virtua Racing, AM2 split into two teams; one began work on Virtua Fighter, while another started on Daytona USA. According to Suzuki, he wanted to develop a game with multiple joint movements, such as a soccer or rugby game. Finding that the Model 1 was not powerful enough to handle this many motions, Suzuki resorted to a game with only two moving characters at a time. With the massive success of Street Fighter II in the industry at the time, he made the decision to make a 3D fighting game to compete. In developing the game, Suzuki identified the need for the game to be realistic, yet fun to play. Virtua Fighter became a huge success in Japan, and its Sega Saturn port sold at a nearly one-to-one ratio with the console itself.