Today Sega published its financial results for the 9 months that ended on December 31, 2023, and at least part of them wasn’t really great.
Sales for the overall company were 349,924 million yen (up 28.7% year-on-year). Operating income was 54,445 million yen (up 42.4% year-on-year). Yet, this strong overall performance was due to the Pachislot and Pachinko Machines business.
Looking at games, the Entertainment Content business recorded 219,316 million yen in sales (up 4.2% million year-on-year) and 19,736 million yen in operating income (down a whopping 52.5% year-on-year).
While sales were up due to the acquisition of Angry Birds developer Rovio, some of the new consumer (consoles and PC) games released in Q3 (between October and December 2023) were “weak” causing a sluggish performance during the Holiday season.
Repeat sales of games released in previous fiscal years were steady, and Sega recorded losses associated with inventory writedown. On top of that, sales of UFO catcher prizes that are part of the Amusement Machine area of the Entertainment Content business also performed below expectations.
Sales of new games were 5.27 million units(compared to 6,97 million in the same period of the previous fiscal year), while repeat sales were 13.83 million copies (compared to 13.77 million in the previous fiscal year). In total, the company sold 19,1 million copies of games, down from 20,75 million.
Mainly due to the weak performance of some of the new games in Q3, Sega revised its outlook for the full fiscal year downward.
The overall outlook for sales is 463,000 million yen, down from 474,000 million yen. Operating income is expected to be 51,000 million yen, down from 60,000 million yen.
Sales for the Entertainment Content business are expected to be 313,500 million yen, down from 327,000 million yen, while operating income Income is expected to be 24,500 million yen, down from 36,500 million yen.
Titles mentioned among those released in Q3 as cited in the outlook downward revision announcement are Sonic Superstars, Endless Dungeon, and Total War: Pharaoh. Sega stops short of identifying any game directly as the culprit, but we do know that Total War: Pharaoh disappointed.
We also hear that the company is continuing to consider structural reform for its gaming business in Europe including a review of the medium-term lineup, optimization of fixed expenses, improvement of investment efficiency, and the review of the development and sales structure and management system.
Part of this is the recently announced return of Jurgen Post as COO of West Studios and regional managing director of Sega Europe.
If you’d like to compare these results with historical ones, you can check out our article related to the previous quarter, published in November.