Sega Sammy Reports Decline In Profits

Sega Sammy reported a large decline in profits and revenue today for the half year period ending September 30. Net profit plummeted 83.7% to ¥3.9 billion ($49.7 million). Revenue fell 29.9% to ¥152.6 billion ($1.95 billion).

The company cited the tsumani in Japan that occurred on March 11, 2011 as a major contributing factor to the declines, stating in the report, “The availability of parts and materials and the struggle to cope with an expected prolonged shortage of electricity supply” in regards to the supply chain for its pachislot and pachinko machine business. It also noted flagging sales for their new titles, with 4.8 million copies sold worldwide: 1.65 million in the US, 2.12 million in Europe, and 1.06 million in Japan.

The company intends to shift its focus to social networking services and mobile gaming. The report states, “In the home video game industry, demand was generally weak in the US and European markets due to the headwinds such as sluggish personal consumption. The Group needs to adapt to a changing business environment in which the demand for new content geared toward social networking services and smartphones is expanding.”

Analysis: I instinctively wince whenever a company says it’s going to focus on the mobile and social networking services (in other words, casual market). While yes, it does have its advantages and there’s a reason it’s seen as lucrative, it should not be Sega Sammy’s only focus. It should also concentrate on making games that people will be interested in and want to play. Without that, it’ll be even more of an uphill battle to recover from the blows the tsumani and weak sales dealt. Hence, relying solely on the casual market would be a mistake, given that even casual and social network giant Zynga reported a large drop in profits earlier this year.


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