Editing Sonic Team (section)

===1999–2003: Dreamcast, Sonic Team USA and formation into an actual company===
In 1999, shortly after the release of ''Sonic Adventure'', twelve Sonic Team members relocated to San Francisco to establish Sonic Team USA, while others remained in Japan. Shortly afterward, a number of key employees—including Ohshima—left Sega to form a new studio, [[Artoon]]. Sonic Team achieved success in the [[arcade game]] market in 1999 with the launch of [[rhythm game]] ''[[Samba de Amigo]]'', released for the Dreamcast. They also began developing [[online game]]s; in 1999, they released ''[[ChuChu Rocket!]]'', a [[puzzle video game|puzzle game]] that used the Dreamcast's online capabilities. In 2000, Sonic Team launched the [[role-playing video game|role-playing game]] ''[[Phantasy Star Online]]'' to critical and commercial success.<ref name="RetroST" />

Sega began to restructure its studios in October 2000 and spun off its software divisions into subsidiary companies.<ref name="Edge 89" /><ref name="RetroST" />  When the departments took new names, Naka felt it important to preserve the Sonic Team brand name,<ref name="RetroST" /> and the division's new legal name as a company was SONICTEAM, Ltd.<ref name="RetroST" />  Naka was installed as the CEO, and Sonic Team USA became a subsidiary of the new company.<ref name="Edge 89" />

Despite a number of well-received games, Sega discontinued the Dreamcast in 2001<ref name="RetroST" /> and exited the hardware business.<ref name="gameinformer_sega_nintendo" /> Sega transitioned into a [[third-party developer]] and began developing games for multiple platforms.<ref name="gameinformer_sega_nintendo" />  From 2000, Sonic Team in Japan began to release fewer games, with a few releases such as the puzzle game [[Puyo Pop (video game)|''Puyo Pop'']] and the action game ''[[Billy Hatcher and the Giant Egg]]''. The company changes and lack of a Sega console affected Sonic Team; according to Naka, in a 2006 interview, "Our approach was always to create strategic title concepts, which included the hardware. We do somewhat miss the idea of being able to address these constant challenges."<ref name="RetroST" /> Yasuhara left to join [[Naughty Dog]] after Sega discontinued the Dreamcast.<ref name=":1" /> However, originality remained important for Naka; Sonic Team developed ''Sonic Heroes'' instead of ''Sonic Adventure 3'', explored the [[digital card game]] genre with ''[[Phantasy Star Online Episode III: C.A.R.D. Revolution]]'', and developed the original game ''Billy Hatcher''.<ref>{{Cite web |title=インタビュー『ソニックヒーローズ』 - 電撃オンライン |url=https://dengekionline.com/soft/recommend/sonic-heroes/index.html |access-date=2022-11-19 |website=dengekionline.com |archive-date=26 March 2023 |archive-url=https://web.archive.org/web/20230326080533/https://dengekionline.com/soft/recommend/sonic-heroes/index.html |url-status=dead }}</ref> Naka credited the enduring success of ''Sonic'' to the character's appeal to children. Naka's goal was to appeal to the largest audience possible and to appeal to children.<ref>{{Cite web|last=Reed|first=Kristan|date=2003-05-23|title=E3 2003: Yuji Naka speaks|url=https://www.eurogamer.net/articles/i_yujinaka|access-date=2021-07-14|website=Eurogamer|language=en}}</ref>

Early in 2003, Sega president Hideki Sato and COO Tetsu Kamaya announced they were stepping down from their roles, with Sato being replaced by Hisao Oguchi, the head of [[Sega AM3|Hitmaker]]. As part of Oguchi's restructuring plan, he announced his intention to consolidate Sega's studios into "four or five core operations".<ref>{{Cite news|url=https://www.gamesindustry.biz/articles/sega-reports-a-profit-but-top-execs-step-down|title=Sega reports a profit, but top execs step down|last=Fahey|first=Rob|date=20 May 2003|work=GamesIndustry.biz|access-date=11 July 2018|publisher=Gamer Network|language=en|url-status=live|archive-url=https://web.archive.org/web/20180711093416/https://www.gamesindustry.biz/articles/sega-reports-a-profit-but-top-execs-step-down|archive-date=11 July 2018}}</ref> Sonic Team was financially solvent and absorbed [[United Game Artists]], another Sega subsidiary led by [[Tetsuya Mizuguchi]] and known for the [[music video game|music games]] ''[[Space Channel 5]]'' (1999) and ''[[Rez (video game)|Rez]]'' (2001).<ref name="RetroST" /><ref name="eurog mizuguchi" />