Sega Spending More Time on "Higher-Quality" Content Prompts 90% Profit Forecast Cut

"Higher-quality content is expected, thus resulting in a trend of longer development lead times."


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Sega announced this week that, after reviewing recent business performance, it's decided to cut its revenue and profit projections for the current fiscal year by significant margins.

For the year ending March 31, 2016, Sega now expects revenue to be ¥355 billion ($2.8 billion), down ¥65 billion ($528 million)) from its previous forecast of ¥420 billion ($3.4 billion). Total profit is now expected to be ¥2 billion ($16.2 million), which is nearly 90 percent lower than the ¥19 billion ($154.3 million) that it was previously expecting to make.

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Sega attributed the downward revision to a number of business considerations.

First, Sega's Pachislot and Pachinko business unit, which is regularly the company's overall top-earner, is taking a hit as a result of new measures being implemented by the Japan Pachislot Machine Industry Association and the Japan Pachinko Machine Industry Association (Nikkoso). Sega said "demand for new pachinko machines is expected to become weak in line with the application of the voluntary agreement on measures to prevent players from becoming too immersed in playing, which were decided by Nikkoso."

In addition, Sega warned that pachislot machine sales, apart from mainstay titles, "are weak." As a result, Sega now expects to sell 154,000 units before the end of the fiscal year, compared to its previous forecast of 265,00 units. Pachinko machine sales, meanwhile, are now expected to reach 203,000 units for the year, compared to an earlier projection of 220,000.

Another factor in Sega's revised earnings projections has to do with gaming. The company said competition in the Japanese market is "intensifying," and as such, the company needs more time to deliver games that stand out as a result of their quality.

"Higher-quality content is expected, thus resulting in a trend of longer development lead times," the company explained. "Sega also has titles whose launches were postponed from the initial schedule and titles that did not fulfill our expectations in terms of market reception."

One major Sega game that was recently delayed was the new Sonic Boom for 3DS, Fire & Ice. The game was previously expected to launch this year, but was pushed to 2016 so the developer could spend more time making it better and more complete.

"In the grand scheme of things, while the downside is that you won't be playing the game this year, the upside is that what you'll play next year, and what fans will continue to play for years after they pick up the game, will be a stronger, more enjoyable experience," the developer said back in September.

In July, Sega Games CEO Haruki Satomi admitted the company betrayed the trust fans put in the company over the last few years. At the time, he stressed that Sega's goal was to improve the quality of its games in hopes of re-establishing itself as a valuable brand.

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