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Sega focusing on digital shift following decreased 2011 financials

Sega has posted declined revenues and profits for the full 2011 fiscal year, due in part to weak demand for its video games, while it will combat this decline with further focus on digital and mobile games.

Mike Rose, Blogger

May 11, 2012

3 Min Read

Sega Sammy has posted declined revenues and profits for the full 2011 fiscal year, due in part to weak demand in the home video game industry, while the company has said it will combat this decline with further focus on digital and mobile games. The company's Consumer Business, which houses its video game business, as well as its toy sales and animated films divisions, was the only business in the company to see losses for the full year. Video game sales were particularly weak in the U.S. and Europe, said the company, and overall software sales fell to 17.2 million copies from 18.7 million year-over-year. Sales in Japan and Europe actually increased year-over-year, while game sales in the U.S. declined to 6.1 million compared to 7.8 million in the previous year. The company provided sales figures for a number of its key releases during the last fiscal year. Mario & Sonic at the London 2012 Olympic Games for Nintendo Wii and 3DS sold 3.28 million copies in total, while Sonic Generations sold 1.85 million units across PS3, Xbox 360, PC and 3DS. Elsewhere, Virtua Tennis for PS3, Xbox 360, Wii, PS Vita and PC sold 1.04 million units, Football Manager 2012 sold 710,000 units on PC and PSP, and Yakuza: Dead Souls for PS3 sold 550,000 units. Sega saw the most success on the Nintendo Wii, for which it sold 3.05 million units during the fiscal year, compared to 2.45 million on PS3, 1.79 million on 3DS and 1.54 million on Xbox 360. In comparison, during the current fiscal year Sega estimates that it will sell 2.43 million copies of 12 new PS3 software titles, 1.54 million units of 7 new Xbox 360 titles, and only 380,000 copies of 3 new 3DS titles. The company does not plan to release any new Wii or DS games during this fiscal year. Looking to the PS Vita, Sega estimates that it will see 600,000 software units sold across 8 new Vita titles. While the company's console games business is declining, its digital and mobile game sales are exceeding expectations. In particular, its smartphone game Kingdom Conquest has surpassed 2.5 million downloads thanks in part to the release of an Android version in December 2011. As a result, Sega says it is adapting its business to this social and smartphone gaming environment, while also focusing on digital PC games going into this fiscal year. As part of this shift, the company outlined plans to split its Sega Corporation subsidiary and separate its game development from its Internet services business. A new subsidiary, Sega Networks, will be established on July 2, 2012, with Haruki Satomi as president and CEO. Sega Networks will focus on the planning, development and design of online products for the company, while Sega Corporation will continue to focus on the development of console games. Looking to Sega's Pachinko business, despite uncertainty surrounding the aftermath of the Great East Japan Earthquake and floods in Thailand, the division still recorded increased operating income of 71.0 billion yen ($889.5 million), up 10.6 percent year-over-year. For the fiscal year ended March 31, 2012, Sega Sammy's Consumer Business saw revenues of 85.6 billion yen ($1.1 billion), down 3.6 percent compared to 88.8 billion yen ($1.1 billion) year-over-year. Breaking this down, the company's packaged and digital games business made 66.4 billion yen ($831.9 million) in revenue, down 1.0 percent compared to 67.1 billion yen ($840.6 million) year-over-year. In terms of losses, the Consumer Business recorded operating losses of 15.1 billion yen ($189.2 million), compared to operating income of 1.9 billion yen ($23.8 million) in the previous fiscal year. Overall, Sega Sammy posted revenues of 395.5 billion yen ($4.96 billion), down 0.3 percent from 396.7 billion yen ($4.97 billion) year-over-year, and profits of 21.8 billion yen ($273.1 million), down 47.4 percent compared to 41.5 billion yen ($519.9 million) year-over-year. Looking to the current fiscal year, the company predicts full year revenue of 470.0 million yen ($5.9 million), up 18.8 percent year-over-year, and profits of 40.0 billion yen ($501.1 million), up 83.5 percent year-over-year.

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