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Sega Europe is to form is own publishing operation, the games development company announced today.

From April, all future Sega titles will be published by Sega itself. Its first title - Phantasy Star Online Episodes 1 and 2, for Xbox - will be released in May, with two further titles - Sonic Adventure DX: The Director's Cut on GameCube and Virtua Fighter 4 Evolution on PS2 - following in June.

The plan also paves the way for Sega to publish titles developed by third-parties, a company spokesman told The Register.

To date, Sega Europe has concentrated on game creation, preferring to leave publishing, distribution and marketing to specialists, such as Sony, Infogrames and Acclaim. Its role has been to develop titles for what it calls 'the PAL market' - territories, in other words, which use the PAL TV standard, including the UK, France, Australia and New Zealand.

Sega will now distribute its own titles in the UK and France, but rely on third-party distributors in other countries. The company is currently putting those distribution deals in place, the company spokesman said.

Existing deals with third-party publishers will come to an end next month, and following a "hand-over period", will be offered by Sega itself.

The move follows Sega's shift from a hardware producer to a developer of software for all gaming platforms. Taking on board the publication of the titles it produces shows the company feels that transition has been made sufficiently successfully for it to take on a lot more of the risk in the games market. Promoting a game can be a costly business, particularly if the title proves unpopular, as Eidos - to name but one - has learned over recent years.

That said, the rewards can be very great indeed, and it's a sign of Sega Europe's confidence that it's willing to risk losing a lot of money on duds to win the big bucks on a successful title. Sega Europe won't say how much the plan will cost, but the company clearly feels its new business will recoup the significant cost of the restructure. The move, it says, will give allow it to maximise the value of its development efforts - cut out the go-betweens, in other words.

No wonder its initial titles are all from well-known and successful franchises: Virtua Fighter, Phantasy Star and, of course, Sonic the Hedgehog. Sega believes it is able to promote and leverage these brands more effectively than third-parties can. By all accounts, Sega can?t do any worse - its titles have not been big sellers of late.

Sega Europe will continue to take software developed by the parent company and convert it for PAL territories. The restructure announced today will not involve the expansion of the Sega Europe's development operation, said the spokesman. However, that may well be something the company looks to in the future. ®

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