Sega Sammy Posting Losses for First Half, Blame "Weak" Overseas Sales

Sega SammyJapanese entertainment conglomerate Sega Sammy is changing its fiscal forecast for the first half of the year ending September 30, saying that it’s expecting a decrease in revenue but an increase in profits, according to Gamasutra.

Sega Sammy was created in 2004 after amusement and video game developer Sammy bought Sega. They are most well known overseas for their publishing work on the Guilty Gear fighting game franchise, the Sonic franchise, and other Sega holdings. In Japan, they also create and distribute “amusement machines,” like the random games you might see in a boardwalk arcade, and pachislot and pachinko games, as well as operating various amusement or “game centers” around the country.

The corporation published in a recent investor relations press release that projected revenue for the first half of the fiscal year, ending in March of next year, is down from ¥165 billion ($2.15 billion USD) to ¥150 billion ($1.95 billion), a loss of ¥15 billion ($1.95 million USD). Sega Sammy cites a harsh market environment and weak new game software title sales overseas as reasoning for the reduced projected revenue.

However, income is expected to increase by 700%, mostly due to efforts to reduce the operating costs of their pachislot and pachinko machines, as well as to increase sales of domestic amusement machines and sales of Sega Sammy-held game centers.

Analysis: First off, I’d like to state that, gosh, Sega Sammy is a huge corporation. There has to be at least 50 or more individual companies within its umbrella. That being said, because of how large the corporation is, it doesn’t really have to worry about deficits in one market if it’s made up in another market, as is shown here. On the surface, posting losses while posting gains at the same time seems a little strange. But it’s simple, really.

They expect sales to go down, which isn’t all that unusual in the global economic climate and even less unusual in the game industry. However, with operating costs and sales of “game centers,” which are basically arcades, they’re more than making up for the loss of sales. They’re losing 9.1% value from sales, but they’re gaining 700% from the income due to the lower operating costs of their game center machines in addition the sale of said game centers. That’s a 690.9% increase in revenue for the corporation.

Of course, since Sega Sammy doesn’t own any arcades in the West, this means almost nothing for us in the Americas and even less for video game players. It’s very possible that the “harsh market environment” mentioned in the press release is referring to the market analysis that all gamers in the States want are first-person shooters, a genre which no Sega franchise has ventured into. The only “shooters” I can think of are Shadow the Hedgehog and the Phantasy Star franchise, and those aren’t really shooters so much as they are third-person action games. Therefore, it’s more than possible that, to stay reasonably afloat in the States with their software sales, they’re falling back on tried-and-true titles to make up at least some profit. This is evidenced through games like Sonic Generations and through the fact that Sega Sammy has had no plans to localize titles such as the recent additions to the Phantasy Star series. Of course, that’s all speculation dependent on what titles they decide to bring over to the West. It took a year for both Yakuza 3 and Yakuza 4 to come over to the States, even without recording English lines, so it’s difficult to gauge what titles will eventually cross the Pacific.


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