Sega Drops Arcade Business Amid COVID-19 Slump

Today Sega announced with a press release that it’s relinquishing control of Sega Entertainment, transferring most of its shares to another company.

To be specific, the house of Sonic will sell 17,882 shares of its Entertainment business (which includes its arcade machines, UFO Catchers, and their prizes) to Genda.

While Sega will retain a small stake in the business, this means a drop in voting rights from 100% to 14.9%.

Sega Logistics will also continue provide its services to Genda on the distribution front.

The transfer of shares will become effective on December 30.

As a result, Sega predicts a 20 billion yen extraordinary loss due to restructuring , which results in the following revision to its annual forecast.

It’s worth mentioning that in financial terms, “extraordinary” loss means that it’ll happen only once.

Here’s Sega’s comment on the issue:

“As Amusement Center Operations area in Entertainment Contents Business is strongly affected by COVID-19, utilization of facilities has declined remarkably, and a significant loss was recorded at 1Q of the fiscal year ending March 2021. In addition, despite the recent recovery trend, the situation remains uncertain.

We have been considering various options in order to adapt to these changes in business aiming for improvement of the profitability and early recovery of sales of Amusement Center Operations area. In this process, we have been discussing the transfer of SE shares to GENDA, a company that has a strong desire to expand Amusement Center Operations business and has decided to conclude the share transfer agreement at Board of Directors meeting held today.

Accordingly, we reduce the book value of non-current assets and others held by SE to the recoverable amount through transfer of shares, and will record this reduced amount and others of 20 billion yen as extraordinary losses (structural reform expenses) at the fiscal year ending March 2021.”

It’s worth mentioning that Sega still retains its Pachislot and Pachinko Machines and its Resort businesses on top of the Entertainment business (which is the segment dedicated to video games).