Sega Sammy Profits Down 6% in 2011

Sega SammySega Sammy Holdings has released their consolidated financial results for the nine-month period starting March 31, 2011 and ending December 31, 2011. While net sales were up 0.5% and operating income increased by 2.2%, the over all net income was down by 6.6% from ¥36,821 million (approx. $483.2 million USD) in the same period in 2010 to ¥34,384 million (approx. $451.2 million) this year.

Sega Sammy also continues to forecast a total profit loss of 8.5% for the year ending in March 31, 2011.

Much of this loss is attributed to the Consumer Business sections, which are primarily the video game business. Sales dropped by 4.9% compared to last year, and the division reported an operating loss of ¥5,509 million (approx. $72.3 million) compared to a profit of ¥2,881 million (approx. $37.8 million) in the same period of 2010.

While conventional retail games were lacking, the company noted the strong performance of its digital and social gaming business.

The Group needs to adapt to a changing business environment in which the market demand for new content geared toward social networking services (SNS) and smartphones is expanding.

Sega underlined their decision by pointing to the success of their iOS game, Kingdom Conquest, which achieved over 2 million downloads. The company expects more with the release of an Android version.

Analysis: If you look at Sega’s release list this year, it’s no wonder they did poorly. The only titles they developed and released during this period was Mario & Sonic at the London 2012 Olympic Games and Sonic Generations. In addition, Football Manager 2012 is always a sure seller, but three big titles over nine months is not going to get you a good return no matter how well they sell.

Some might argue that Yakuza 4 and Total War: Shogun 2 deserve to be in there, but in reality, they were both released mid-March and before this report starts. In addition, Yakuza 4 is a niche title in North America and only really popular in Japan—where it was released in 2010, not 2011.

The one thing I find interesting is that the financial report does not blame currency exchange values like Nintendo usually does, but I suppose that’s because Sega Sammy is far more centered on the Japanese market rather than on exports.

The final thing to note is how happy Sega seems to be with their smartphone and social games. They’re so happy, in fact, that only three days after publishing their earnings, they downsized their Australian Studio to have them focus on “digital avenues.”

Now I’m an optimist by nature, so I could’ve assumed they were making some high-quality digital releases like Section 8, Sonic the Hedgehog 4, or Monday Night Combat. But with the downsizing coming so soon after the financial report? Yeah, I think these guys are going to be shitting out Facebook games for the foreseeable future.

Mohamed Al Saadoon

About Mohamed Al Saadoon