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Sega Sammy posts half-billion-dollar loss

Tokyo-based publisher suffers major setbacks on decline of its once-popular pachinko business; game sales up overseas, but down in Japan.


Back in October, it was becoming clear that all was not entirely well within the franchise of Sega Sammy. The company, which makes the majority of its money from pachinko machines, downsized its profit and net sales forecasts for the financial year.

Although the official figures, released today, aren't quite as low as forecast, they're not far off. For Sega Sammy's financial year from April 1, 2007, through to March 31, 2008, net sales were down 13 percent over the previous year to ¥458.9 billion ($4.4 billion). Both operating and net income were in the red, with the company's operating loss hitting ¥5.8 billion ($55 million) and net loss at ¥52.5 billion ($500 million).

Sega Sammy pointed out a number of reasons behind the numbers. Its pachinko business in Japan continued to decline, with machine sales falling by 24,000 units to 108,000 units, and it had postponed a number of major pachinko machine titles until fiscal 2008.

The minus figures also included impairment losses for Chinese businesses, and a cancellation fee for ceasing development of an entertainment complex in Minato-ku. The company also dissolved Sega Amusements Singapore along with Sega Korea, in order to "increase operating efficiency in the amusement machine sales business."

Game sales were up overseas, but down in Japan--2007 saw the release of Sega titles including Condemned 2: Bloodshot, Mario & Sonic at the Olympic Games, and Viking: Battle for Asgard. The company sold just under 27 million games in total during fiscal 2007, an increase of 5.7 million over the previous fiscal year. Nonetheless, only a small amount of these sales came from its home nation. In Japan, 2.6 million games were offloaded onto the public, compared with 12 million in the US, 12.3 million in Europe, and 70,000 in other regions.

Sega stated that Mario & Sonic at the Olympic Games was a best-seller overseas, whereas the third part in the Yakuza action adventure series, Ryu ga Gotoku Kenzan, fared well in Japan.

Despite the year's losses, the company remained upbeat about the outlook for fiscal 2008. It believes that the group will return to profitability, forecasting consolidated net sales of ¥470 billion ($4.5 billion), consolidated operating income of ¥15 billion ($143 million), and net income of ¥5 billion ($48 million). Sega Sammy concluded that it expected its game sales to once again "show healthy growth" overseas, although it made no new announcements regarding upcoming games.

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