Saturday, March 31, 2012

SEGA posts 7.1 Billion Yen Loss, Cancels Projects and Restructures

Sega Sammy Corporation has just announced that the organization's Board of Directors approved a plan to implement structural reform in Sega Corporation. This is following a loss of 7.1 billion yen ($85.7 million dollars) for the fiscal year of 2011. According to the report released on March 30, 2012 the organization blamed the financial downturn and "significant changes in the home video game software market environment in the U.S. and Europe." The organization will be taking four major measures to ensure future profitability: streamline operations, reduction of titles, book impairment loss on work in process assets, and streamline process of inventory. Sega will streamline operations in North America and Europe, which means that the organization will be downsized and redundant positions will be removed. The organization is taking quick action, since there have been rumors circulating about heavy personnel changes in Sega of America. The organization will be reducing titles to a very small amount of profitable titles and cancelling unprofitable ones for North America and Europe. This means that chances of smaller series like Valkyria Chronicles 3 release went from small to none. Sega will also be booking impairment losses on work in process assets, to translate accounting speak to English, this means that games that are cancelled will be written down as a loss to make up for the fact that those games cancelled will never make profit (or increase organizational assets). The organization will be changing the way inventory is processed, which means that there could be potential outsourcing or smaller print runs to reduce costs.

Now that I went over the released report, here is how it will affect you, the regular Sega fan. The first consequence of this decision is the reduction of the workforce in Sega of America and Sega of Europe. This means that the localization turnaround for Sega games will likely be slower. It also means that localization for Japanese games will likely be outsourced to reduce operational costs. Secondly, since Sega is focusing on releasing games that will be profitable in North America and Europe, it means that the smaller niche titles like Valkyria Chronicles and Yakuza will likely not get releases in the west. It is one thing to be profitable, it is another to focus on franchises that are sure sellers. This also means that Sega Japan will not be as risk averse when creating new properties since they want to ensure that a franchise will get traction in Japan and the West. The third major consequence comes from tighter distribution, which means that games will get smaller print runs to reduce inventory costs. It will affect you as a consumer since it means that Sega game prices will not drop as fast as other companies. It also means that if you want to buy a game, preorder it to ensure that you get it. As a Sega fan it is disheartening, so if you want to play the unique Sega games, better start learning Japanese.

Here is the full report as given out to the public.

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