SEGA gets a new president as group lowers profits forecast

SEGA Corporation president Naoya Tsurumi will be stepping down from his positions as President, Representative Director and Chief Operating Officer and to be replaced by Hideki Okamura (pictured above) as of April 1st, 2014. Okamura has been a long time SEGA employee but has mostly held marketing positions since joining the company in the 1990s. He moves from his position as Chairman of TMS Entertainment, whilst Tsurumi becomes Vice Chairman of the Board. Also announced today by SEGA Sammy is that the group is expecting lower forecasts for the full year. Hit the break to get a rundown on the full figures and how SEGA Sammy hopes to rectify the situation.

Reasons for lowered forecast

The group has slashed the full year forecast from profits of ¥47 billion to ¥30 billion and a decrease of ¥3.360 billion from the previous year. One of the biggest factors for the dramatic slash in the forecast came due to the delay of several major titles in the pachislot (Down from 478,000 units to to 307,000 units) and pachinko (Down from 324,500 units to 198,000 units) division. The reason given by the group is due to delaying several major titles to maximize sales in the next fiscal year.

Phantasy Star Online 2 continues to provide strong sales for SEGA

Whilst over on the SEGA side of the business, the company stated sales of amusement units were lower than predicted and attributed it to amusement centre operators curbing their investment in new titles whilst the amusement centres continue to struggle for profitability. However SEGA’s consumer division fared much better, noting that despite sluggish sales in the packaged games division, strong sales in the digital games division helped the segment continue to meet their end of year targets. In particular Phantasy Star Online 2 continues to provides robust sales whilst PuyoPuyo Quest (6 million downloads) and Chain Chronicles (Over 2 million downloads) enjoyed strong sales.

Business measures carried out by the group

SEGA Sammy hopes to strengthen sales in the pachislot and pachinko division by developing mainstay titles. What is more interesting however is SEGA Sammy’s plan for their amusement division. The group will opt to raise the share of revenue they provide to amusement operators and develop free to play arcade titles, but even more interesting is that the group aims to shift management resources from arcade games to digital games. It’s a decision that is sure to cause some level of downsizing in the amusement development for SEGA but also means that there should be some level of growth in resources for their consumer division.

The sales of arcade units continue to decline despite SEGA’s best attempts

SEGA Sammy hopes that by closing down unprofitable amusement centres and opening ones targeted at families and/or accompanying restaurants will help to bring profitability to the segment. There is also plans for SEGA obtaining licensing income from overseas companies by providing knowledge and development of amusement centres. SEGA’s consumer division will be enjoying the bulk of changes as the group shifts resources from amusement machine development and amusement centres towards the consumer division; in particular digital games, which the group has indicated enjoys significant growth, will get further resources provided. Finally SEGA Sammy points to the development of their resort complex business as the biggest income generator in the long run. The group is hoping to accelerate development by maximizing the full resources available.

Conclusion

Looking at the full picture it certainly seems as the group has earmarked the amusement division to struggle for further growth whilst the consumer division will enjoy further resources provided to continue the strong growth it has enjoyed recently. Whilst the group’s efforts to license out to overseas operators could help to revive growth in the Western world, the arcade market is suffering in Japan. It will be interesting to see the effect the resort complex will have on the group’s fortune that already enjoys extremely strong sales on a yearly basis. In any case, we will get a better idea of the Sega Sammy’s future plans when they provide the full year review in May whilst providing the following fiscal year’s prediction.

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