Sega to scale back digital games as it reports a $17 million loss in 2018/19

Sega has announced it will be pulling back on its digital games business after holding company Sega Sammy reported a 33.7 per cent drop in its gaming operating income over the 2018/19 financial year despite a boost in sales.

Sega Sammy’s latest financial reports (thanks, GI.biz) reported “losses in Digital Games area” and while packaged sales in E.U. and the U.S.”remained steady”, helping the company gross $1.86 billion across its gaming business, operating income dropped to $88 million. Consequently, this saw the digital games business report a $17 million loss across the period in spite of boosting its sales income by 5.9 per cent to $366.5 million.

The company attributes the loss to several factors, including a “slowdown of existing mainstay titles” and “a lack of hit titles”, as well as “intensified competition in [the] domestic market”. It also only launched eight of the 12 games it had planned.

Across all of Sega Sammy’s activities, the company grossed $2.97bn – an increase of 2.4 per cent over the period thanks to raised sales – but overall the firm saw its operating income slump by 36 per cent to $116.7bn.

Looking ahead, Sega now plans to release just six new digital games across the financial year ending March 2020. It also intends to improve profitability “by adjustment of the number of developed/operating titles”, decrease running costs across this sector of its business – although it hasn’t expanded on how – and transfer resources “to profitable areas”.  

One of the games delayed by Sega, at least in the West, is Yakuza spin-off, Judgment. After withdrawing it from sale after one of its performers was arrested on alleged drug charges, Sega exhausted almost 97 per cent of its Japanese stock. The company called the event “highly regrettable” and given Pierre Taki, who plays Yakuza Kyohei Hamura, reportedly admitted using cocaine, the publisher then decided to withdraw the game from sale both physically and digitally as it considered how best to proceed. It remains unclear how long Sega plans to withdraw the game for, or how it might affect the game’s intended worldwide release later this year.

Just last month, Sega announced the Sega Mega Drive Mini, a new mini-console pre-loaded with 40 classic Sega games. The mini-console – which releases on September 19th, 2019 –  sees Sega join Nintendo and Sony with its own mini-console replica, although it remains to be seen if the console will set tills ringing like Nintendo’s inaugural NES Classic.

The ports have been developed by M2, the same company that worked on Sega Ages and Sega 3D Classics Collection. The 16-bit console will include a host of “legendary games” although right now the publisher’s only confirmed 20 of them including Castlevania: Bloodlines, Sonic the Hedgehog, Altered Beast and Gunstar Heroes.