It’s that time again! Okay, so financial reports may seem boring to some, but if you are a SEGA fan, reading these things is vitally important. Knowing how well (or how poorly) certain divisions did dictates how SEGA Sammy moves forward as a company. After the break to find out how the company’s latest set of financials turned out as they released the third quarter results for the fiscal year 2020.
Mario & Sonic stumbles, but gain’s traction
One of SEGA’s biggest releases failed to deliver the gold medal they were expecting in 2019. Instead of opening with a record breaking first week sales, Mario & Sonic at the 2020 Olympics opened with the second lowest first week sales (19,438 units) in the franchise’s history, only being able to beat the disastrous opening of the Wii U release (5,149 units) for comparison to the original title way back in 2007 which opened at 67,054 units and went on to sell over 500,000! It’s not all doom and gloom for the latest entry however, unlike the other titles that have underperformed, Mario & Sonic managed to continue to perform strongly passed the Christmas period and even now still remains in the Japanese top 20. By the end of 2019, it came close to selling 200,000 units and now at the beginning of February, sits at 260,000 units sold. With the Olympics around the corner, I wouldn’t be surprised to see the title end up being the 2nd most successful entry in the spinoff franchise’s history and if that happens, it’d have recovered some of that lost momentum for SEGA.
Franchise revivals don’t revive SEGA’s sales
The situation was flipped for SEGA’s other two underperformers. Unlike Mario & Sonic which had weak first week sales, Persona 5 Royal (200,000) and Shin Sakura Taisen (140,000) debuted with strong first week sales and quickly fell by the wayside. Both titles only managed to add another 30,000 to 40,000 units to their physical total before exiting the top 30. It’s hard to estimate what SEGA’s expectations were for these titles but we can have a decent idea by looking at their original total for software sold in Japan. Originally forecasted to sell 3.84 million units in Japan, SEGA has since reshuffled that number down to 2.6 million, a decrease of over 1 million! With what we know, I do not think it’s a far fetched idea that SEGA could have possibly expected 500,000 units from each of the three major titles. There were other minor titles that also failed to register any notable sales, such as 13 Sentinals and another franchise revival, Super Monkey Ball Banana Blitz HD but these titles probably were not in the same ball park as the other games. There was also a decrease in Asia too, but this was much less notable, going from 1.49 million to 1.3 million.
Global sales show the way
But while Asian audience didn’t turn up, the same can’t be said of SEGA’s other markets where the publisher actually revised its forecast upwards for America and Europe. From an expectation of selling 19.86 million to 21.10 million, an increase that almost offsets the poor performance in Japan and the rest of Asia. With titles like Total War: Three Kingdoms performing exceptionally well and Mario & Sonic proving to be a hit with European audience, it underlines the importance that SEGA should be aiming for global release of it’s major titles in the same release window. Take for example Mario & Sonic, it’s weaker performance in Japan was easily offset by it’s stronger performance in the other markets and looking at how Shin Sakura Taisen and now Yakuza 7 have performed, they’ll need strong Western sales to be profitable for SEGA.
It’s a testament to SEGA’s strong Western sales that even relatively minor titles like Team Sonic Racing has helped SEGA’s packaged game’s division to record operating profits of 4.6 billion yen / $41.8 million. Unfortunately that didn’t stop them from lowering forecast for the year with operating profits decreasing from the initial forecast of 6 billion yen to 4.1 billion yen by the end of the year. This was due to increased expenses in releasing newer titles and lowered sales in the previous quarter.
SEGA hits gold again in mobile sector
On the other hand, whilst completely misreading the Japanese console market, it looks like SEGA finally gets the mobile hit they’ve been searching for so long since Puyo Puyo Quest and Chain Chronicle came into the market. The company reported steady performance for SEGA Pocket Club Manager and Fist of the Northstar: LEGENDS ReVIVE, two titles that helped smash their mobile expectation and another area where the company revised expectations upwards. While originally expecting operating profits of 2 billion yen by the end of the year, after a stellar Q3 saw the digital game division (not to be confused with digital games such as Sonic Mania, what digital game means is mobile titles and MMOs) record operating profits of 7.5 billion with expectations to see operating profits at 9.2 billion yen / $81 million by the end of the year. That’s over four times what the company originally expected their mobile games division to record and should ease the worry the company’s Midas touch with mobile titles had long since left them.
Conclusion: Don’t expect the world of Japan
What these results show to me is that while Japan is a declining market for consoles, there’s still a substantial amount of people still willing to purchase traditional games. SEGA’s own Judgment managed close to 300,000, as did other new IPs such as Sekiro and Death Stranding. The difference between those two and Judgment is that they released in a similar time frame in foreign markets as it did in Japan. We know that Judgment surpassed sales expectation in the West and would have made the it more impressive in SEGA’s financial report, you’ve gone from an under 300,000 seller to over half a million.
While SEGA have had a rough time in its packaged game division, overall the company remains healthy with increased year on year in both sales and operating profits. The company recorded sales of ¥280 billion / $2.6 billion (Up 12.2% from last year) with an operating income of ¥28 billion / $260 million (Up 135.4% from the same period last year) but despite this respite, SEGA should make it’s overall healthy position count and start to rejig how they roll out their titles. Japan is still an important market and they can pull between 200,000 – 400,000 units, but this should be complimented with sales in America and Europe as well as multiplatform releases across the board.Ad: