SEGASAMMY FY 2012 earnings & the announcement of SEGA Networks Ltd

[Suzuki Yu]

today SEGASAMMY posted its full year earning results

the holding company posted a 21.8 billion yen of net income ($273 million) with forecasting of 40 billion yen for the next period (2013)

operation income/loss results by segment:
Pachinco & Pachislots = 71 billion yen ($889.4 million) profit
Amusement Machine Sales (Arcade) = 7.4 billion yen ($92.8 million) profit
Amusement Center Operations = 355 million yen ($4.4 million) profit
Consumer business (Video Game Software) = 15.1 billion yen ($189 million) loss

this year the consumer business segment is losing quite a lot than usual! this is the worst performance since the merger (i have no idea if the re-structuring loss is included or not which is around $83.2 million)

Arcade Major titles:
StarHorse3 Season I　A NEW LEGEND BEGINS | 10.1 billion yen
WORLD CLUB Champion Football Series | 3.6 billion yen
SEGA NETWORK MAHJONG MJ5 | 2.8 billion yen
BORDER BREAK Series | 2.3 billion yen
SENGOKU TAISEN | 1.2 billion yen

Video Games Major titles
Mario & Sonic at the London 2012 OlympicGames (Wii/3DS) | 3.28 million copy
Sonic Generations (PS3/360/PC/3DS) | 1.85 million copy
Virtua Tennis™ 4 (PS3/360/Wii/PSV/PC) | 1 million copy
Football Manager 2012 (PC/PSP) | 710 thousands of copies
Yakuza: Dead Souls | 550 thousands of copies

SEGA sold in total 17.2 million copy of games worldwide (6.1 in U.S / 8.3 in Europe / 2.8 in Japan)

it's worth to note that in the next year SEGA will be releasing around half the amount of the packaged releases of this year, also they are expecting equal sales between Packaged and digital games.

http://www.segasammy.co.jp/english/pdf/release/20120511_hosoku_e_final.pdf
http://www.segasammy.co.jp/english/pdf/release/20120511_tanshin_e_final.pdf


there is another announcement from SEGASAMMY today about a new company or a split company called SEGA Networks Ltd (a wholly owned company of SEGA Corporation)
this split will start next July the 2nd

Notice is hereby given that SEGA SAMMY HOLDINGS INC. (the “Company”) and consolidated
subsidiary SEGA CORPORATION (the “transferring company”) have determined to conduct a
company split on a part of the business operated by the transferring company (incorporation-type
company split) effective July 2, 2012 and transfer such business to the newly launched SEGA
Networks, Ltd. (“incorporated company in incorporation-type split”) as described below

1. Purpose of company split
The purpose is to maximize profits by building an adequate business structure corresponding to
changes in business environment through a company split of the main functions of the network
business operated by the transferring company, transferring it to the incorporated company in
incorporation-type split, and seek to speed up management decision making and provide services
that cater to customer needs.

2. Summary of company split
(1) Schedule of split
-Date of split (effective date): July 2, 2012 (planned)
-Registration of incorporation of new company: July 2, 2012 (planned)
Based on the provisions of Article 805 of the Companies Act of Japan (simplified
incorporation-type company split), a general meeting of shareholders to approve the split will not
be held.

business description

Business involved in the planning,
development, design, sales,
delivery and management and
operation of products and services
that utilize the Internet and other
means of communication

not quite sure what is this all about 

http://www.segasammy.co.jp/english/pdf/release/0511_sega_e_final.pdf
 
 

 



 

[Centrale]

I think 550,000 copies makes Yakuza: Dead Souls the best-selling of the Yakuza spin-offs thusfar. 

Looking ahead, I think the shift to non-packaged (digital) releases is going to help the bottom line for the consumer software division.  Although old-timers like me will miss the boxes.

[max_cady]

That's goes for all of us, methinks.

Some games do make sense. While major releases will likely get both psyhical and digital copies, some of the yearly stuff might just be download-only from here on end.

I can see them do that with the Total War series.

[MadeManG74]

Ouch, no wonder they are moving to digital focus, I can't blame them with results like that.

[Ben]

The digital focus is only a short-term solution, I feel. In the short term, it will certainly help them save money on manufacturing, packaging, and having to sell their products in stores.


However, as the digital marketplace grows more crowded, and it will, with its increasing focus industry-wide, the same problems will occur; Sega does not seem to know how to market their games, or even to get their own fanbase excited about their games.

This isn't something that a digital switch will fix. In the digital space, people will skip over Sega's games just like how they skip over them in a store.

A digital-only release would make their flops like Binary Domain and Rhythm Thief less costly for them, sure, but, unless Sega has a strategy in mind that will allow them to dominate the digital landscape, (and they haven't dominated anything since the Genesis era) it won't bring them a ton of success.

Edit; and apparently 60% of iPhone developers don't even break even on their aps:
http://venturebeat.com/2012/05/04/ios-developers-lose-money/

[MadeManG74]

^That's why they are also cutting out all the chaff and focusing on titles that actually do get attention and have strong sales history. I won't be upset if Storm Front 2 doesn't get a release soon...

[Aki-at]

This isn't something that a digital switch will fix. In the digital space, people will skip over Sega's games just like how they skip over them in a store.

That is why they are focusing on low cost titles to develop (So far) on the digital platform with adequate price plans. Price point has become extremely crucial now, especially in Europe which is gripped in various parts with recession.

Edit; and apparently 60% of iPhone developers don't even break even on their aps:
http://venturebeat.com/2012/05/04/ios-developers-lose-money/

Who are these developers in the 60%? Without knowing who they are its hard to comment on it. The app store is terrible for indie developers (Which is why they've switched to Steam) due to the huge cut Apple takes, but very doubtful that SEGA is one of those developers who does not make money. With thousands and thousands of apps out there, its easy for that 60% to make no money, especially considering the type of apps available on the market and who they are by.

[Ben]

But do you see what I'm saying, dude? As the industry moves to a focus on digital, these digital services will become far more crowded even than they are now.

I've long felt that what Sega really needs to do is to re-build their brand name and develop a big following; something like what Atlus has.

I'm not sure that removing nearly all of their games from store shelves will do much to help this cause. I dunno, man.

[Centrale]

I can agree that Sega needs to focus on improving their marketing.  But to say they need to be more like Atlus, I don't think so.  Atlus is practically a boutique publisher.  Sega's products are far more diversified.  If they were to make a move in that direction, I think what would work well is to establish different publishing imprints that each have a specific focus.  A racing label, a Sonic label, a 3rd person adventure label, etc.

[Sieghardt]

But do you see what I'm saying, dude? As the industry moves to a focus on digital, these digital services will become far more crowded even than they are now.

I've long felt that what Sega really needs to do is to re-build their brand name and develop a big following; something like what Atlus has.

I'm not sure that removing nearly all of their games from store shelves will do much to help this cause. I dunno, man.

you mean release a bunch of shit games like The Cursed Crusade and A Game of Thrones that almost destroy the company? o_O

I think sega's got the right idea seeking out new monetizaton strategies, they've been making a lot of great games and the problem is simply that people havent been playing them, whether they get buried under a sea of "hurr sega games suck" or just dont hear about them, a mixture of great free to play and low priced games like PSO2 and Virtua Fighter 5:FS is at the very least worth a shot to try and get people to check out their games and see how good they are

[Aki-at]

But do you see what I'm saying, dude? As the industry moves to a focus on digital, these digital services will become far more crowded even than they are now.

So far SEGA's titles are not being ignored digitally, Guardian Heroes, Virtual On, Sonic CD, The House of the Dead 3, Afterburner Climax etc are just some of their digital titles that are doing well for them.

Yakuza GREE, Kingdom Conquest and Spiral Knights is also doing well and Phantasy Star Online 2 can be a strong and profitable title for them thanks to its F2P model.

I've long felt that what Sega really needs to do is to re-build their brand name and develop a big following; something like what Atlus has.

You are calling for SEGA to position themselves to general irrelevance. SEGA are aiming to become one of the biggest publishers in the world, focusing on niche products is not going to contribute to that too well.

I'm not sure that removing nearly all of their games from store shelves will do much to help this cause. I dunno, man.

For one, SEGA can now enjoy the profits from Mario & Sonic, Sonic Generations, Aliens and Football Manager without having to worry those profits being eaten away. Second, as they focus on arcade ports, Dreamcast ports or ports in general, titles that SEGA have already made money off and only costs being ported, they have significantly reduced their overheads so it should allow a nice profit off the title.

I can agree that Sega needs to focus on improving their marketing.  But to say they need to be more like Atlus, I don't think so.  Atlus is practically a boutique publisher.  Sega's products are far more diversified.  If they were to make a move in that direction, I think what would work well is to establish different publishing imprints that each have a specific focus.  A racing label, a Sonic label, a 3rd person adventure label, etc.

Exactly, can Atlus fund something like Yakuza? Sonic Generations? Phantasy Star Online 2? They would have trouble with that. As good as Atlus is, they are not what SEGA is aiming to become and should not. SEGA's arcade division makes 5 times the profit all of Atlus does.

[Barry the Nomad]

The "digital services will become crowded" argument does not work for me.

Yes, it is hard for indie devs to have breakout hits, though I think sites like TouchArcade and other iOS/XBLA/PSN fan sites do a great job in getting little known games recognition. Like, there are some XBLA games on the indie marketplace that get insane amounts of downloads (and perhaps sales?)

As for SEGA, no matter how crowded the digital marketplace gets, they still have their brand recognition and popular IPs to help them drift to the top. Note that every time a SEGA digital title is releasing to XBLA/PSN/iOS it is highlighted in the weekly release articles, and often the comments are buzzing about the games.

If we were talking about some unknown publisher, then the "digital services will become crowded" argument works, but this is SEGA and they have proved to have a strong digital presence in the past two years.

[Ben]

^For their back catalogue, yeah...I dunno much about their original digital content, though.