Sega Sammy Holdings shows massive pachinko returns

$444 million returned as Sega future assured, but in what form?

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Sega Sammy Holdings shows massive pachinko returns
Sega Sammy Holdings, the interim umbrella firm set up to facilitate the acquisition of Sega by pachinko giant Sammy, has reported massive profits for the nine months ending December 2004.

The figure offered to the Tokyo stock exchange this afternoon in Japan was a shade over $444 million in group net profit.

Although a breakdown was not offered, the group did mention that various Sega games had sold well, mentioning Sonic Mega Collection’s performance in the American market.

However, the vast majority of this riotous cash bonanza comes from Sammy’s sub-monopoly on the lucrative Japanese pachinko industry. The ball bearing pinball spin-off maintains its position as one of the most popular forms of entertainment in disposable cash-rich Japan for its loopholing of gambling regulations in the country.

It remains a fact that Sammy is currently dismantling Sega of old in favour of a more focused, streamlined operation that should avoid the disastrous money-haemorrhaging ways of old.

As to whether Sega is allowed, or even able, to find balance between its famous innovation and its revised development strategy, likely to fall inline with general market-driven trends as adopted in the rest of the games industry, remains to be seen.

Companies:

Comments

NiktheGreek 3 Feb 2005 21:46
1/9
Results converted from Yen figures at Sega-Sammy's IR report.

Pachinko division
Sales: $2,123,801,772 (£1,127,407,428)
Costs: $1,272,372,365 (£675,431,236)
Profit: $851,429,407 (£451,976,192)
Costs = 60% of total sales.

Arcade manufacturing division
Sales: $611,408,704 (£324,562,642)
Costs: $549,751,215 (£291,832,134)
Profit: $61,657,489 (£32,730,508)
Costs = 90% of total sales.

Arcade operating division
Sales: $599,402,377 (£318,189,156)
Costs: $550,992,254 (£292,490,932)
Profit: $48,410,124 (£25,698,224)
Costs = 92% of total sales.

Consumer business
Sales: $472,393,146 (£250,767,067)
Costs: $521,120,744 (£276,633,820)
Profit: -$48,717,978 (-£25,861,646)
Costs = 110% of total sales. LOSS!

Other business
Sales: $175,371,253 (£93,094,778)
Costs: $176,958,628 (£93,937,426)
Profit: -$1,577,754 (-£837,541)
Costs = 101% of total sales. LOSS!

Corporate crap
Sales: -$139,573,545 (-£74,091,779)
Costs: -$113,309,705 (-£60,149,777)
Profit: -$26,254,219 (-£13,936,894)
Outgoings = 123% of income. LOSS!
NOTE: A minus figure in the costs obviously means they made money. Ask Sega-Sammy, not me.

Total pre-tax profit
Sales: $3,818,832,446 (£2,031,706,695)
Costs: $2,939,419,608 (£1,563,838,838)
Profit: $879,412,839 (£467,867,857)
Costs = 77% of sales.

Other stuff (taxes, minority interests, etc)
-$560,774,468 (-£298,344,915)

Total income for the nine-month period
$441,919,651 (£235,111,418)

Bear in mind that the online currency converter I used knocked out small change and such, so a certain margin of error is to be expected.

What can we get from this? Firstly, Pachinko = Money. The arcade operations bring in nearly $100 million in profit too. So what's the lead weight of the sales categories? Hello, consumer games. Notably, looking at Sega's US figures, games under-performing in that market. Even the massive sales (over 2 million) of ESPN NFL 2K5 didn't help, because all the money went to Take 2!

Take Two wrote:
Effective May 2004, we entered into a three-year agreement with SEGA Corporation, whereby we co-publish and exclusively distribute SEGA’s sports titles. Under our current arrangement, we are entitled to receive all of the revenue and profit, if any, from the sale of the sports titles developed by Visual Concepts and Kush, and we are obligated to pay for development and marketing costs of the sports titles. The agreement may be terminated by us under certain circumstances, including as a result of SEGA’s failure to obtain licenses from the major sports leagues and players associations.


However, because the consumer games aspect of the company isn't nearly as important as it was before, this doesn't drag them down too much.

Successes for Sega in the past year include strong sales of Sonic Heroes, Football Manager 2005 and apparently Headhunter Redemption in Europe. However, in Japan, Heroes underperformed badly.

Over the course of the next year look for many of the old franchises to be returning to drive sales (this worked wonders for Shinobi). I don't see innovation going anywhere just yet, given the likes of Feel the Magic/Project Rub.

We shall see.

EDIT: Interesting bit here about how many copies they sold per region:

Japan: 7 games, 550,000 sales. Average sales per game: 78,571 copies.
USA: 11 games, 1.56 million sales. Average sales per game: 141,818 copies.
Europe: 7 games, 1.95 million sales. Average sales per game: 278,571 copies.

Draw your own conclusions from that...
kid_77 3 Feb 2005 22:59
2/9
F**k me, you've taken number crunching to a whole new level. Good work that man :-)
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Pandaman 3 Feb 2005 23:28
3/9
If Sega doesn't continue to contribute to the gaming scene in favor of a more streamlined approach, it'll be a large sign that the entire gaming industry is heading into either a boring monopolized industry, or another crash.
NiktheGreek 3 Feb 2005 23:49
4/9
kid_77 wrote:
F**k me, you've taken number crunching to a whole new level. Good work that man :-)

Heh, thank you!

AMENDMENT TO PREVIOUS POST

Somehow, I managed to screw up the Other Stuff category (taxes and stuff). The figures SHOULD read:

$427,703,345 (£227,548,017)

This makes things reasonably correct.
Ditto 4 Feb 2005 09:03
5/9
Wow! Well done Nik!

It's interesting that Europe is the second biggest market for Sega, as for most companies it seems to be the smallest.

You can't blame the Japanese for not lapping up Heroes. An epitome of poor design.

I don't think we have a Sega of old anymore. Sega can't appear to produce good games from it's classic franchises and it's last wave of critically-acclaimed games appeared on the Dreamcast.

What I find even more amusing is that, as Nik pointed out, we'll probably bein to see a Nintendo-style Sonic-this, Golden Axe-that, NiGHTS-pinball. I'm hoping they'll forget about S**tnobi - one of their worse 16 bit games.

Prehaps it's good that Sammy can now reorganise and make Sega profitable. Only with profit can they afford to create the mind-blowing games, and Sammy could provide the guidence and resources to allow this to happen.
kid_77 4 Feb 2005 09:08
6/9
Adam M wrote:
I'm hoping they'll forget about S**tnobi - one of their worse 16 bit games.


Surely you're not referring to Revenge of Shinobi (Super Shinobi)??? I bloody loved that!

The PS2 version was cack, though, especially compared to Ninja Gaiden.
Ditto 4 Feb 2005 09:28
7/9
kid_77 wrote:
Surely you're not referring to Revenge of Shinobi (Super Shinobi)??? I bloody loved that!quote]

I'm sorry, but Revenge was one game that no-one I know could get into or liked.

After Mario World and Sonic it just didn't cut it for me :p :p.
NiktheGreek 4 Feb 2005 17:17
8/9
Adam M wrote:
Wow! Well done Nik!

Thank ye!

It's interesting that Europe is the second biggest market for Sega, as for most companies it seems to be the smallest.

It probably explains why Sega put the Naoya Tsurumi (former head of the European operation) in charge when they integrated US and European management teams.

I don't think we have a Sega of old anymore. Sega can't appear to produce good games from it's classic franchises and it's last wave of critically-acclaimed games appeared on the Dreamcast.

I was getting ready to say that a while back, until I looked at the very good non-DC games they've been behind in 2001-2004:

- Super Monkey Ball 1/2
- Panzer Dragoon Orta
- Jet Set Radio Future
- Virtua Fighter 4/Evolution/Final Tuned
- F-Zero GX/AX
- Shining Force (GBA remake)
- Sega Superstars
- Outrun 2
- Feel the Magic/Project Rub
- Ghost Squad

And of course, there's a few personal favourites I've not listed (Phantasy Star Online Episode 3 certainly isn't for everyone, and neither are Nightshade or Headhunter Redemption). However, the above list certainly isn't unimpressive in my opinion. With Spikeout: Battle Street, Sega Rally 2005, Phantasy Star Universe and other games to look forward to, the future's looking pretty bright too.

Personally, I think people are too hard on Sega at present.

What I find even more amusing is that, as Nik pointed out, we'll probably bein to see a Nintendo-style Sonic-this, Golden Axe-that, NiGHTS-pinball. I'm hoping they'll forget about S**tnobi - one of their worse 16 bit games.

That was just a prediction - I certainly hope that they don't turn Sonic into a Mario-style "I'm in too many games" character. Well, even more so. However, I certainly wouldn't mind seeing a more thorough exploitation of the back catalogue - NiGHTS, Streets of Rage and Ecco the Dolphin are all under-utilised. In fact, that appears to be part of the problem - Sega does something that is widely recognised as good, and then decides that it's too close to success and forgets the whole idea.

I loved Shinobi.

Perhaps it's good that Sammy can now reorganise and make Sega profitable. Only with profit can they afford to create the mind-blowing games, and Sammy could provide the guidence and resources to allow this to happen.

It should be noted that according to current figures, little has changed thus far. They're still making money on the arcades and losing it on the home systems. To see change, we're probably going to have to wait for a year. However, if this does work out, I'll demand Shenmue 3, possibly with the aid of a bomb.

Don't look for any new home console hardware soon.
Ditto 4 Feb 2005 18:19
9/9
Yeah, I suppose you're right. But I still don't think they've used their backcatalogue very well. None of their classic franchise games have been much cop.

I would like to see the use of their backcatalogue, but only in quality games. I don't want to see the Sonic/Shenmue/NiGHTS etc brands on run-of-the mill games. This is a pit that Nintendo has fallen into, and the average consumer now has problems knowing just which Mario games are real Mario games.

Re: Sammy, provided they keep some innovation and creative freedom, I don't think that Sammy's profit maximisation would be bad for Sega in the short-term. Sammy will force them to make money frome consoles.

Well done again Nik on your figures, it's all really interesting.
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