Digital games driving growth at Sega as packaged titles underperform

Both sales and profits are up at Sega Sammy, which said its video game business "performed solidly" during the quarter.

Both sales and profits are up at Sega Sammy, which said its video game business "performed solidly" during the quarter. 

According to the company's fiscal report for the three months ended December 31, 2019, consolidated net sales increased by 12.2 percent to 280.8 billion yen ($2.5 billion), while profits rose to 22.9 billion yen ($208.6 million) from 681 million yen ($6.2 million) due to the company recording extraordinary income of gain on sales of noncurrent assets by its Sammy Corporation subsidiary. 

Focusing on the Entertainment Contents segment, which houses the video game business, net sales were up by 12.1 percent to 186.2 billion yen ($1.7 billion), and operating income rose by 52.8 percent to 16.1 billion yen ($146.6 million). 

That upswing comes despite new packaged game sales from the likes of Persona 5 Royal and Mario & Sonic at the Olympic Games Tokyo 2020 falling below expectations -- although Sega still sold 19.3 million units in Q3 2020 compared to 18.5 million units in Q3 2019 -- with digital and catalog titles picking up the sack. 

Digital game revenue for the quarter rose to 34.9 billion yen ($317.9 million) from 29.4 billion yen ($267.8 million), and was driven by Phantasy Star Online 2, Fist of the North Star Legends Revive, and SEGA Pocket Club Manager, which have been the company's three best performing digital titles of late. 

"With regard to Entertainment Contents Business, although net sales fell short, operating income is expected to exceed the previously announced forecast due to improvement in the Digital Games area, while the number of new titles sold in the Packaged Games area was lower than expected," explained the company. 

Based on its current performance, Sega has revised its full-year operating forecast for the Entertainment Contents segment, and now expects to bring in net sales of 246 billion yen ($2.24 billion) (down 13 percent) and operating income of 14 billion yen ($127.5 million) (up 3 percent) by the end of the fiscal year on March 31, 2020.

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