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Sega Networks downgrades FY16 sales prediction by $125 million

Blames delays, Japanese competition and 5 game failures
Sega Networks downgrades FY16 sales prediction by $125 million
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Demonstrating the ultra competitive nature of the Japanese mobile market, Sega Networks - the mobile F2P arm of Sega Sammy - has announced disappointing results for its FY15-16 financial year.

Despite initially predicting full year sales would grow 34%, now Sega Networks expects full-year annual sales to come in 27% below predictions.

This difference is around $125 million.

And as can be seen in the graph below, it's not expecting to hit its target (the dotted red line) in any of the four quarters.

Yet, despite this mis-step, the company expects to see annual sales up 35% compared to Fy14-15 to around $340 million.

Assuming this plan b is fulfilled, Sega Networks existing games in Japan will have generated around $180 million.

When it comes to existing games, Sega Networks has solid performers with RPG Chain Chronicle - Kizuna no Shintairiku, Hortensia Saga and Puyopuyo!! Quest.

These each generate over ¥500 million (around $4 million per month).

Monster Gear and Sen-no-kaizoku are two other mainstay titles for the company.

However, Sega Networks expects its new Japanese titles will perform 42% lower than expected, while international sales would have under performed predictions by 46%, although they would be 76% higher than during FY14-15.

Lost generation

Of course, with five weeks of its financial year to go (the 12 month period ends 31 March 2016), Sega Networks hopes to make up some lost ground

It's launched or launching five new titles in Japan - including a new title using characters from Hello Kitty company Sanrio - as well as updating all its key existing products.

Sega also released its first game with the LINE network - Fortisia Sega X LINE in December.

Yet, more generally, in Japan, the company highlights that its longterm download trend is also declining; something it refers to as "market share competition" because the domestic market is mature.

Indeed, it labels five major titles in 2015 as failures, which cost the company around $60 million in terms of unrealised revenues (compared to its predictions).

A future $30 million of 'lost revenue' came from production delays in games that were eventually released in Japan.

In the west, it hopes to boost existing titles Sonic Dash Boom and Puzzle & Glory with additional marketing, while releasing some localised titles.

Asia will also receive new localised launches, and Sega Networks hopes to grow its Hortensia Saga game in the region.

Advertising opportunities

And more generally, as it looks to the FY16-17 financial period, Sega Networks is looking beyond games to mobile services.

It already runs the cross-promotion service Noah Pass, which has 12.9 million MAUs in Japan, and is now offering paid UA in the shape of its NoahAd service.

Sega Networks also hopes to roll out other advertising opportunities including a location rewards-based network, and its goPlay services, which are designed to help games break into the fast-growing southeast Asian market.

Including services such as payment, customer support, analyics, marketing, localisation and publishing, the operation will be run by separate company goGame.