Profits tumble at Sega Sammy

Financial report calls for greater focus on smartphones and social networks

Sega Sammy Holdings Inc. reported declining revenue and profits for the six months ending September 30, 2011.

The company's overall revenue fell 29.9 per cent year-on-year to •152.6 billion ($1.94 billion/£1.21 billion). Net profit declined 83.7 per cent to •3.9 billion ($49.7 million/£31 million).

The report cited the aftermath of the Great East Japan Earthquake as key to its financial performance. The supply chain for the company's pachislot and pachinko machine business was "devastated" by the event, and prolonged electricity shortages also harmed the business.

Sega's consumer games division posted revenue of •33.8 billion ($431.8 million/£269.6 million), a year-on-year drop of 13.1 per cent. It reported an operating loss of •6 billion ($76.6 million/£47.8 million), up from •1.3 billion in the same period last year.

The games division sold a combined total of 4.8 million copies worldwide: 1.65 million in the US, 2.12 million in Europe, 1.06 million in Japan. The report noted that this is "below the performance level" of the same period last year.

"In the home video game industry, demand was generally weak in the US and European markets due to the headwinds such as sluggish personal consumption." the report states. "The Group needs to adapt to a changing business environment in which the demand for new content geared toward social networking services and smartphones Is expanding."

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Latest comments (7)

I'm not sure if refocusing on Social networking services or casual games is necessarily the right focus. Its certainly worth looking at. But the solution is really to make better games and review which IPs can be rejuvenated well, as well as establishing really good new unique IPs
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Ryan Pearson Studying Computer Gameplay Design and Production., Staffordshire University6 years ago
I agree with you Chee.

I think they're trying to play "safe" to recover their economic damage from the earthquake; if they make the right IP they could recover really well, but if they don't spark any interest it'll be another shot in the foot.
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Liam Stockley Studying Computer Science, Nottingham Trent University6 years ago
I agree that refocusing on social networking games is a bad idea. That market is shrinking fast (look at Zynga's report on how they're losing so many players) and won't help company growth at all.
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Terence Gage Freelance writer 6 years ago
They're probably having a long hard look at Capcom's success with Smurfs and want to net themselves a similar success.

I think they should try to come up with some new brands that are a bit more appealing and relevant in the current market, and perhaps form or partner with some Western development studios (not dissimilar to Squeenix or Capcom). I am looking forward to Binary Domain though, and it was one of my favourite new games at the Eurogamer Expo.

I'd also love to see another Vanquish, hopefully backed by a better marketing campaign this time. Bayonetta 2 also seems like a sure bet at some point.
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Rick Lopez Illustrator, Graphic Designer 6 years ago
Totally agree with you Mr. Chee
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The thing is Sega wanted more Western appeal since 2006, and not all its investments have matured accordingly. The studio acquisition has been a mixed bag.

Amauze (stockholm closed 2005-8 post headhunter redmption); Sega SF closed in 2010 (golden axe, iron man 2), Sega Racing Studios (bought by Codies in 2008) and a couple of other studios were purchased when independant, then became independant or split up; whereas in contrast Plantinum games have produced some good new IPs

Here is a list of titles in development (Wiki)

Crush 3D (Nintendo 3DS)
Shinobi (Nintendo 3DS)
Mario & Sonic at the London 2012 Olympic Games (Wii, Nintendo 3DS)
Sonic Generations (Xbox 360, PlayStation 3, Nintendo 3DS, PC)
Sonic the Hedgehog 4: Episode 2 (Xbox Live Arcade, PlayStation Network, WiiWare, Windows Phone 7, iOS)
Anarchy Reigns (Xbox 360, PlayStation 3)
Binary Domain (Xbox 360, PlayStation 3)
Aliens: Colonial Marines (Xbox 360, PlayStation 3, Wii U, PC)
Virtua Fighter 5: Final Showdown (Xbox Live Arcade, PlayStation Network)
Yakuza 5 (PlayStation 3)
Yakuza: Dead Souls (PlayStation 3)
Yakuza Black Panther (PlayStation Portable)
Hastune Miku: Project DIVA Extend (PlayStation Portable)
Sonic CD Remake (Xbox Live Arcade, PlayStation Network, PC, iOS and Mobile devices)
Daytona USA (Xbox Live Arcade, PlayStation Network)
Phantasy Star Online 2 (PC)
Rhythm Thief & the Emperorís Treasure (3DS)
Virtua Tennis 4 (PlayStation Vita)
Super Monkey Ball (PlayStation Vita)

As you can see, there are some regular titles (however the situation whereby slot machines/arcade machines account for a majority of profit similar to 2006 period, mean that as a whole net profit can be a large swining yo yo for Sega overall)

Good IP and titles take at least 2 - 2.5 years to build, to establish a beachhead as a viable IP, and nuturing of this would be the golden opportunity to making say the Next alternate Monster hunter (dragons of Dogma) or Smurfville (Sonic ville?). By the time the casual/social market is developed for, the times would have moved on for smartphone and tablet arena.
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Jamie Watson Studying Bachelor of Games & Interactive Entertainment, Queensland University of Technology6 years ago
i would agree with chee as the what the others have said.\

i think that hopefully sega will be able to get alot of profit from the new sonic game which is due to be released soon and that along with some other titles should be able to help them not have to make the dive into social games as their main source of income.
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