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Sega Drops Profit Forecast For Fiscal Year By 89.5 Percent

by Mike Futter on Dec 04, 2015 at 03:08 AM

Sega has announced significant changes to its current year fiscal performance. The company is dropping expectations across the board for the year ending March 31, 2016.

While sales are only dropping by 15.5 percent from ¥420 billion ($3.4 billion) to ¥355 billion ($2.9 billion). Operating income forecast has been reduced by 60 percent from ¥25 billion ($203 million) to ¥10 billion ($81.2 million). Profits are expected to plummet from original expectations by 89.5 percent from ¥19 billion ($154 million) to ¥2 billion ($16.2 million).

Sega pins the dramatic differences on two key areas. Pachinko and pachislot machine sales are exceedingly weak. The publisher will be restructuring that division.

Digital game software has also been the source of trouble. The company suggests that the Japanese market is becoming much more difficult, and development time is lengthening. There are also titles that did not launch on time (like Sonic Boom: Fire and Ice on 3DS and Persona 5) and others that underperformed (like the first two Sonic Boom games).

[Source: Sega]


Our Take
These dramatic decreases signal ongoing challenges at the publisher. Sega has recently had to move its American headquarters and, in the process laid off staff. The company still has strong properties, but it’s clear that the business model needs to be updated to reflect changing times.