Sega's Big Bet on Console Games Falls Short

Profits down despite big spend on development and advertising; Football Manager and Wii U sales in decline.

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Beleaguered publisher Sega has revealed details of how its big spend on console games has not materialised into major profits, with sales of Wii U games and Football Manager 2015 falling short in particular.

For the nine months between April and December, Sega spent $210 million on games development, representing a 27 percent increase compared to the year prior. Meanwhile, its advertising expenses climbed 53 percent, up to $73 million.

This major push will result in the release of 50 games by the end of the financial year in March, but combined sales of all those are expected to be about 5.4 million units--a figure that is eclipsed, singlehandedly, by the best selling games from rival publishers.

Alien: Isolation was the best new performer, with 1.76 million sales. The Football Manager series appears to be in decline, with current sales of the latest edition (released in November) at 640,000 units. The previous game had made 790,000 sales (albeit with three extra months on the market), and the one prior to that--Football Manager 2013--broke records with 940,000 sales.

But it was the Sonic Boom games for Wii U and 3DS that were the biggest disappointment, coming in together at 490,000 units.

Sega initially expected to sell about 300,000 units of its four latest Wii U games, but it has revised that forecast down to 230,000, making it the weakest platform in terms of unit sales. (Full year expectations for other consoles follow. PS3 960,000; PS4 920,000; Xbox 360 240,000; Xbox One 420,000; 3DS 1,160,000).

Due to these results, Sega's revenue for the three-quarter period was $685 million, but after expenses, that translates to a profit of $18 million.

The publisher is now organising a sweeping business restructure, which will rebuild the corporation into three divisions, as part of a wider plan to "drastically improve profitability". At least 300 positions at the corporation are targeted for redundancy.

Sega has set aside $125 million for the restructure costs, and now expects to lose $110m for the full year.

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