Today Sega released its financial results for the fiscal year that ended on March 31, 2021.
Looking at the whole company, results aren’t exactly stellar, with net sales dropping 24.2% year-on-year, and operating income decreasing 73.6% year-on-year.
This is mostly due to the fact that the COVID-19 pandemic hit many branches of Sega’s business heavily.
Things are a lot better for the Entertainment Contents business, which includes video games. While net sales were down 12% year-on-year, operating income grew 71.6% year-on-year.
The drop in sales is mostly due to the fact that (unlike many other companies), Sega’s video games division includes real-world business like arcade machines, even if that business has been sold earlier this year.
The Consumer area of the business (full non-free-to-play games for consoles and PC), on the other hand, is indicated as the driver for the growth in profit, thanks to a significant increase in repeat sales due to the pandemic. New free-to-play games also performed strongly, while existing ones were steady.
Looking at the current fiscal year, ending on March 31, 2022, Sega expects a drop in both sales and profits for the Entertainment Content business compared to the past year simply because the effect of the pandemic should soften, leading to less reliance on video games, and fewer sales as a result.
You can find this all summarized in the tables below, including cumulative sales figures for various key franchises.
Interestingly, the documentation also includes the description of Sega’s medium-term and long-term plans.
For video games, the publisher plans to invest aggressively (up to 100 billion yen in 5 years) in growth and would like to reach 40 billion yen or ordinary income for the Entertainment Contents business in the fiscal year ending in March 2024. That’s nearly double the past fiscal year’s result.
In the medium term, Sega plans to solidify its earnings base by turning existing IP into globally-recognized brands and promoting games with an eye to the global market.
The ultimate goal is to create a “super game” in five years.
Past IP can also be expanded upon simply by using them and by supporting subscription services.
To grow mainstay IPs that have a core fanbase around the world Sega plans to strengthen global releases, support multiple platforms and multiple languages.
Their life cycle can be prolonged by strengthening digital sales and monetize in multiple ways, while user engagement can be improved with community management and growing the media mix.
An example of making an existing IP into a global brand is Lost Judgment, which will be the first simultaneous global launch of a game by the Ryu Ga Gotoku Studio, will support multiple platforms, and 9 languages at release.
We also hear about the development of a new FPS game at a European studio, which will lead to the creation of the “super game” mentioned above. The aim is for 100 billion yen (approximately $900 million) in lifetime sales. It’ll target the global market, support online, utilize Sega’s IP assets, and expand to other media.
Speaking of old IP, Sega brings examples of active IP that are globally recognized and could be utilized, on top of dormant one. It’s Important to mention that the decision of which of these IP should be used is still in progress.
Active IP are Phantasy Star, Yakuza, Sonic, Persona, Total War, Megami Tensei, and Football Manager.
Dormant ones are Cazy Taxi, Jet Set Radio, Shinobi, Virtua Fighter, Space Channel 5, Altered Beast, Rez, House of the Dead, Panzer Dragoon, Streets of Rage, NiGHTS, Soul Hackers, and more.
These initiatives could be achieved via remasters, remakes (that add significant new features while maintaining the original gameplay) and reboots, which would maintain the look and feel of the world of the original IP while creating new games.
It’s worth mentioning that some of these concepts were expressed in the interview published by Famitsu yesterday.
If you’d like to compare, you can check out the results from the previous quarter, released in February.