With David Rosen as CEO, Sega decided to go after a whole new market with the 1965 release of the arcade game Periscope. Periscope proved to not only be a major turning point for Sega but also for the struggling video game market that had been lacking innovation and was becoming stagnant. Originally developed by Namco, Sega decided that after the positive reception the game received in Japan, they would distribute the game worldwide release a year later and the game received an equal amount of praise around the world. With the arcade scene on the rise after the release of Periscope, Sega decided to go all in and began exporting about 10 games a year. Sega continued to grow through the rest of the 60's and well into the 70's before David Rosen sold the company in 1974 to Gulf and Western. The arcade boom allowed Sega to surpass a quarter of a million dollars in revenue thanks to popular games like Zaxxon, Out Run, and Astro Blaster. Sega would be forced to find a new avenue to release video games after their success in the arcade market came to an end with the video game crash of 1983.

Thanks to home consoles like the Atari and ColecoVision, the introduction of the home computer, and the competition in the arcade market, Sega was experiencing a drop in their arcade sales. Sega decided to join the home console market on July 15th, 1983 with the release of the SG-1000 in hopes of tapping into a new market. Sega encountered an unexpected hurdle when Nintendo decided to release its own home console, the Famicom on the same day. The SG-1000 received multiple versions over the next few years, but it never saw a release outside of Japan and was ultimately discontinued in 1985.

Despite the fact that The SG-1000 was never able to surpass the Famicom in popularity, the console still did well enough to give Sega hope for the future. Thanks to the Famicom's success, the video game market was revitalized and Sega was able to use their knowledge to create the Sega Mark III which would later be known as the Master System worldwide. With improved specs and a new sleek design, Sega had hoped this was the boost they needed to hit the mainstream market. The system was set to compete with Nintendo's rebranded Famicom, the NES, around the world.