Sega's earnings drop 10.5 percent on last year, plans to close bases in Europe and reduce number of titles

An uncertain economic climate and "turmoil in the global financial markets, mainly in Europe" are to blame for Sega's weak net sales, the publisher's holding company Sega Sammy reported in its six month consolidated financial statement.

In the six months ending Sept. 30, Sega Sammy made 136,583 million yen in net sales, a decrease of 10.5 percent on the same period in the previous fiscal year. Its operating income was 7,892 million yen, a decrease of 48 percent on the same period last year and its net income was 3,874 million yen, down 2.7 percent on the previous fiscal year.

The company recorded a drop in net sales across all its departments except for Consumer Business (video games). Pachislot and Pachinko Machines, Amusement Machines and Amusement Center Operations all experienced decreases in net sales on the previous year, while its video game department experienced an increase of 5.6 percent in net sales on last year.

Sega's parent company, Sega Sammy, reported that sales were strong for titles like Hatsune Miku: Project Diva and registrations for Phantasy Star Online 2, which launched in Japan in July, exceeded one million "and pay-per-use income exceeded forecast levels."

Sega's smartphone title Kingdom Conquest also performed strongly and the company's pachinko and pachislot game website for mobile phones and PCs drew many pay-per-use users.

The company said in the fiscal report that it experienced a "year-on-year decline in total volume of packaged software sales" because of the structural reform policies it implemented on March 30, 2012, which aimed to reduce the number of titles the publisher releases.

The company's plan moving into the third quarter of the financial year will be to "carry out streamlining of the organizations responsible for the packaged game software field in the U.S. and European markets in a bid to establish structure that can consistently generate profit." The company writes in its report that part of this plan will see the closure of bases primarily in Europe and reducing the number of titles it publishes.

"Going forward, we will cut fixed costs through utilization of external distributors, and concentrate efforts on sales of strong titles that are expected to continue posting solid earnings, in order to improve our earning power," the company wrote.

No amendments have been made to the end-of-year forecast of consolidated results that were announced on May 11, 2012.

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