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SEGA Sammy Holding’s Fiscal Year 2016 Results Reveal Lower Sales but Higher Profit

Sega-Sammy Holdings

SEGA-Sammy have revealed their financial results for the full fiscal year, ending March 2016. Compared to the previous fiscal year, sales for each of the three main business segments of the SEGA Sammy Holding are down, but profits are slightly up. In total, the net sales amounted to ¥347,981 million ($3.2 billion), while the total operating income was ¥17,617 million ($162.18 million), a minor 0.7% increase over the operating income of the year before.

As such, it’s Immediately obvious that overall, SEGA-Sammy have managed to increase their profitability, which was their main goal following their restructure in 2015. Nonetheless, if you look at the chart I included below, the results for the different segments of SEGA Sammy continue to show the same trend that we’ve seen from the holding company for a while now. The Entertainment Contents Division (which includes everything related to their video games business) achieved the highest amount of net sales, but barely manages to bring in a profit. In comparison, the Pachinko/Pachislot business remains more efficient.

Console & Mobile

Taking a look at the statements from SEGA-Sammy, they very much resemble what has been said in past fiscal statements. Again, they point out that sales for Phantasy Star Online 2 remain “robust”. The same holds true for these mobile titles: CHAIN CHRONICLEKizuna no Shintairiku (an update for Chain Chronicle), Puyopuyo!! Quest, and the relative newcomer Hortensia SAGA. On the other hand, SEGA-Sammy does state that some mobile titles, as well as the expansion of Football Manager Online in South Korea, were “less well-received than expected”.

Packaged games

For the packaged game software (physical game sales), SEGA Sammy highlights the success of Football Manager 2016 in Europe, where the franchise has been going strong for over ten years now. But despite this release, the 9,220 thousand copies of packaged game software that were sold proved to be lower than the year before. The focus on fewer titles, however, did increase profitability.

Arcade

In the arcade business, SEGA-Sammy reports “strong sales” for the medal-pusher cabinet “The Medal Tower of Babel”, as well as Chunithm, a rhythm arcade game from the development team of “maimai” (also a rhythm game).

Animated film and toys

In terms of animated films, strong sales were reported for LUPIN III, the first new entry for the TV series in 30 years. The theater film Detective Conan: Sunflowers of inferno also reached the highest-ever box-office revenue for the series. In its toys section,  SEGA-Sammy highlights the fact that they started selling toys based on the “Anpanman” series, as well as “Disney Character Magical Pod” toys.

Looking forward

The next fiscal year, ending March 2017, is clearly an important one for SEGA. They’re looking to continue on the path towards greater profitability, which involves optimizing advertising expenses and operating costs. Their intent is also to continue updating key titles such as Phantasy Star Online 2 (now also available in Japan for the PlayStation 4), as well as their main mobile titles (Chain Chronicle, Puyopuyo!! Quest, and Hortensia SAGA). SEGA expects to release 7 new digital games in Japan in the fiscal year 2017, all of them free-to-play.

For their packaged game sales, SEGA is looking to release Persona 5 and Yakuza 6 in Japan, and Total War: WARHAMMER overseas. As it stands, Persona 5 should be a game to watch in the West as well. The recently revealed fourth trailer has surpassed 1 million views on Youtube, already doubling the view count of the Yakuza 6 reveal trailer. The first Persona 5 trailer has reached almost 3.5 million views.

In the arcades, SEGA has recently released KanColle Arcade (to great success, as people were waiting in line for a chance to play it), and they will be releasing a new Sangokushi Taisen game. In regards to film, they’ll be releasing Detective Conan: The Darkest Nightmare, and toys based on the Rilu Rilu Fairilu series (joint development with Sanrio Company,  Ltd).

Challenges

SEGA-Sammy also included a section in their financial report where they discuss issues that they still need to address. They note how in the (mobile) digital game market, a key selection of top titles in the market are dominating sales, and as such medium and lower titles are becoming less relevant. In response, SEGA-Sammy will “maximize product quality focused on existing mainstay titles” as well as “supply new  titles that will enter top sales rankings”. They also note the importance of gaining entry in the rapidly growing mobile games market in Asia, something they consider to be a “management issue”.

Conclusion

There are no big surprises with these financial results, in what still seemed like a year of transition for SEGA Sammy. The fact that they were profitable is nonetheless a good sign, although it’s clear that the Entertainment Content Business still has a lot of room for progress in terms of profitability. But with Persona 5, Yakuza 6 and Total War: Warhammer and no doubt as-of-yet unannounced big games hitting the market in 2016/2017, they seem to be in a good position to make a bigger profit next time around.

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