Sega cites smartphones as key to driving games business back into profit

Digital holds the key for Japanese giant

Sega cites smartphones as key to driving games business back into profit
While Sega's parent company – Sega Sammy Holdings – returned to profitability during its first financial quarter of 2013, the firm's games business has been less than successful.

Sega Sammy posted an operating income of ¥5.4 billion ($69 million) for the three months ending 30 June 2012.

Its games business segment, however, posted an operating loss of ¥1.6 billion ($20 million) during the same period.

Nevertheless, the company claimed its games losses are not as straightforward as they might first look.

Going mobile

In March 2012, Sega Sammy announced a structural reform that saw the company shift its focus away from packaged games, to pursue opportunities in the smartphone and digital space instead.

So, although the company's consumer business segment has posted a loss, Sega Sammy noted that its performance actually "remained favourable in the field of digital game software for mobile phones, smartphones, and PC downloading."

"Kingdom Conquest, a title for smartphones, exceeded 3 million downloads on a cumulative basis as of June 2012,” the firm confirmed.

Sega's iPhone hit Kingdom Conquest

Furthermore, the segment's loss still represents a considerable improvement on the previous year's report, which saw Sega Sammy's consumer business segment post an operating loss of almost ¥3.9 billion – equal to nearly $50 million.

Feelin' weak

"In the home video game software industry, demand weakened, mainly for packaged games, due to the severe economic environment in the US and Europe," Sega Sammy explained in its report.

"Meanwhile, the Group needs to adapt to a changing business environment in which market demand for digital games geared toward social networking services and smartphones is expanding."

Sonic The Hedgehog 4: Episode II, which launched in May

To this end, Sega also made reference to the establishment of Sega Networks, which has been designed to "bolster development of the digital game software field and shifting business structure with a view to adapting to changes in the business environment."

[source: Sega Sammy (PDF)]
Staff Writer's news editor 2012-2013