SEGA Sammy Q3 2015: Time for change

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SEGA Sammy posted their earnings for Q3 2015 but also came up with the new developments in the corporate structure. Read on to find how the consumer division did and what changes are in store for the company.

SEGA’s consumer division saw good sales on the current generation of consoles. In fact the sales on the Playstation 4 was so good that full year expectations was raised no doubt to stronger than expected sales of Alien: Isolation. Catalogue sales continue to a major boost for SEGA too, another area that saw expectations revised upwards no doubt helped by the likes of Valkyria Chronicles for PC, which also saw steady sales. It wasn’t so great for the other platforms though with the last generation HD twins suffering heavily and both the Wii U and Vita seeing similar reductions in sales forecast. The big drop however, surprisingly perhaps, was the Nintendo 3DS which saw SEGA lower sales by over 1 million units.

Alien-Isolation
But how did the games themselves do? Well Alien: Isolation was SEGA’s top seller so far this year enjoying sales of over 1.7 million. As I mentioned prior that the big gains Alien: Isolation made on current generation unfortunately could not offset what I presume was the loss on the last generation consoles which for a conservative estimates, means a loss of 500,000 sales. Football Manager continues to perform as well as it ever does enjoying sales of 640,000 units. But now we come to the failures and from the looks of things, the one title that dragged down SEGA’s earnings was Sonic Boom which only managed to sell 490,000 units. Another failure was Phantasy Star Nova by my calculations, seeing as how the Playstation Vita saw a revision down by 450,000 units.

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In total SEGA managed to sell 1,400,000 units in Japan, 3,540,000 units in US and 3,950,000 in Europe bringing a total of their units sold to 8,900,000 which already beats their last fiscal year’s full year total of 8,730,000. The consumer division saw an operating profit of 2.2 billion ($18 million) again beating last year’s full year results by 0.2 billion yen. Despite this the forecast was revised down for the full year from 5 billion yen operating profit to 2.7 billion operating profit.

Now before we talk about how the group itself did, to better understand the future we need to have a look at their plans. What’s interesting is just how much more bloated SEGA side of the business is just about to become. Currently SEGA Toys, Marza Animation and TMS Entertainment are covered in the consumer division but are actually not grouped together in the corporate divisions, that’s all changing as SEGA becomes even bigger. The group will also offer shares in the creation of this new company, SEGA Holdings, that will basically house everything except the Pachinko and Pachislot business. What I find interesting is that the resort business is also placed under the control of SEGA Holdings, the company called SEGA Live Creation.

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A key man in this new company will be the son of Sammy founder Haruki Satomi. The young man has risen from the ranks of SEGA America, helping to establish SEGA’s digital content business (Some of his earlier pieces of business and green lighting Guardian Heroes for Xbox 360.) and recently was head honcho over at SEGA Networks. Now Satomi is set
become CEO of SEGA Games Co., LTD, effectively making him the top man at the games division. SEGA’s famed producer Toshihiro Nagoshi continues to helm the producer of director, now both at SEGA Games Co and SEGA Interactive, the latter being the new name for SEGA’s arcade division.

With this established the cost of restructuring the entire company has been put to a massive 15 billion yen or $126 million. As a whole SEGA Sammy is slightly in the red with a 24 million yen loss or $200,000, this is due mainly due to the tax hike that has caused a good amount of grief to Japanese businesses but the full year results are less rosy. It shouldn’t surprise anyone then that the company is predicting a full year loss of 13 billion yen after declaring such a massive extraordinary loss to the restructuring.

It’s difficult to assess where SEGA Sammy will be going from here. On one hand you have another restructuring, on the other hand you can see that SEGA themselves are getting much beefy and the establishment of a new company might be long overdue, especially bringing in subsidiaries there were initially independent from SEGA (Such as SEGA Toys) perhaps this would lead to better synergy between the various teams. Whatever the case, the time for change is drawing near.

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