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Sega’s Video Game Business Holds Strong Among Bleak Overall Financial Results

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Sega’s Video Game Business Holds Strong Among Bleak Overall Financial Results

Sega released its financial results for the first half of the fiscal year, related to the period between April and September 30, 2020.

Sega released its financial results for the first half of the fiscal year, related to the period between April and September 30, 2020.

The situation for the whole company was rather negative, as showcased by the slides below. The impact of COVID-19 was certainly felt and the structural reform centered on the drop of the arcade business did not help.

Sales dropped sharply year-on-year (from 165.5 to 110.2 billion yen) and Sega recorded a 3 billion yen operating losses for the six-month period.

That being said, the only light in this bleak scenario was the strong performance of the Consumer field of the Entertainment Contents business, which includes video games (mobile, free to play, and PC/consoles).

Video game sales increased from 55.8 billion yen to 61.4 billion yen for the six-month period, while operating income grew from 9.7 billion yen to 20.3 billion yen year-on-year.

Specifically, repeat sales (of games released in the previous quarters) were strong, especially outside of Japan. The performance of new free to play titles was also solid.

Sega expects the strong performance of its video game business to continue for the rest of the fiscal year, including both repeat sales and the free-to-play segment.

Below you can see more slides related to Sega’s video game market. including the confirmation that Shin Megami Tensei V will launch before the end of 2021.

Funnily, there is a typo in the number of downloads for A Total War Saga: Troy. Checking the Japanese slide reveals that it’s 7.5 million downloads and not 750 million. Many certainly liked the fact that it was provided for free, but not that much.

The focus of the IP strategy for the company has a broad spectrum across existing IP, new IP, external IP, and revived IP combined with global parnerships.

Below you can get an update of the number of shipments for relevant franchises like Total War, Sonic, and Persona.

An interesting pair of slides provides a look at the performance of Phantasy Star Online 2 in the west.

The global version of the game ranked second among the top free-to-play games for the company between July and September, beaten only by its own Japanese version.

We also noticed that its release in the first quarter of this fiscal year caused free-to-play sales in the west to grow from 0.6 billion yen to 1.9 year-on-year.

In the second quarter they grew even more, from 1.1 to 3.9 billion yen.

Sega now expects free-to-play sales in the west for the full fiscal year (until March 2021) to be 7 billion yen, nearly tripled compared to the previous year.

Unfortunately, the strong video game sales could not prevent the poor performance of the whole company, which is now forced to reduce costs.

As such, the compensation of executives is being cut (between 10% and 30% depending on rank) for the rest of the fiscal year.

On top of that, Sega is calling for 650 employees across the group to apply for voluntary early retirement before December 25, promising payment of extraordinary retirement allowances and reemployment
support for those who apply.

If you’d like to compare, you can check out the results from the previous quarter, released in August.

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