In Business Model, Distribution, News

Sega Digital Games Drive Growth

Phantasy Star Online 2 on the PS Vita.

Phantasy Star Online 2 on the PS Vita.

AUG. 1, 2013 • Digitally delivered games are accounting for a larger portion of revenue at Sega Sammy Holdings Inc. For the first quarter ending June 30, the Sega digital games segment grew 60.8% to ¥8.2 billion ($82 million) compared to the same period last year. What’s more, Sega brought in more in digital sales than its packaged titles, which accounted for ¥7.6 billion ($76 million). Leading the upswing in digital games was Phantasy Star Online 2 that saw 500,000 copies of the PlayStation Vita client downloaded in the three months following its February launch. Phantasy Star Online 2 is a free-to-play game only available in Japan that released on the PC in July of 2012. Since then, all told the title has seen more than 2.5 million registrations on all versions, and has seen a high of 107,000 concurrent users in July of this year. The title will launch in Taiwan, Hong Kong, Macau and six southeastern Asian countries during 2014. Western markets have yet to receive a launch date. Also doing well was Puyopuyo!! Quest that launched on iOS and Android platforms during the quarter and has seen 3 million downloads to date. Company of Heroes 2, which launched at retail in Europe and the U.S. at the end of June sold more than 380,000 units. The consumer division was Sega Sammy’s second largest revenue generator during the quarter at ¥18.8 billion ($189 million) behind the Pachislot and Pachinko Machines division that brought in ¥51.8 billion ($520.6 million). The company posted a profit of ¥12.9 billion ($129.7 million) for the period, an increase of 408% over the ¥2.5 billion ($25.1 million) profit for the same quarter last year.

Sega_Sammy-SImpact: Sega Sammy is benefiting from possessing a fairly diversified line of products. While the upswing in digital sales easily caught our attention, the company is also seeing strong sales of its Jewelpod toy messaging device based on a similar design in the Jewelpet Twinkle anime series. There also is an animated film business that recently released LUPIN THE 3RD. The toy and animation products brought in ¥1.2 billion ($12 million) and ¥1.8 billion ($18.1 million) respectively during the quarter. This kind of product balance suggests that Sega Sammy is in one of the better strategic positions compared to competitors such as Capcom or Square Enix. Yet what really intrigues us about Sega Sammy’s financial disclosure is how well Phantasy Star Online 2 is doing on the PS Vita, and how well the franchise is being leveraged between platforms – the PC and Vita versions are identical. Android and iOS versions are also in the pipeline, but these mobile titles will have their own feature sets closer to social network games. Another smart move was getting an Episode 2 content release for the game out within a year last month. The company also has a project in the works to tap into the burgeoning battle arena genre, Total War Arena by Creative Assembly. These are savvy plays that bear further watching as new franchises are launched and Phantasy Star Online 2 fans out across other Asian markets. Three years ago, Sega Sammy significantly refocused toward mobile development and the fruits of that strategy are paying off. Not bad for a company that many were writing off as an also-ran not so long ago.

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