For its third fiscal quarter ending 12/31/22, Sega Sammy saw sales increase 20% to ¥122 billion (nearly $1.1 billion). Sales in the entertainment contents division rose 33% to ¥94 billion (about $800 million), with video game sales for that division growing 39% to ¥68 billion.
Analysis
Sega Sammy is a diversified company that is seeing much of its recent growth from its overseas home video game business. Sega was a pioneer in home video game console systems back in the 1990s and franchises such as Sonic the Hedgehog gave Nintendo a run for its money.
After retreating from the global console hardware business, Sega merged with amusement arcade machine manufacturer Sammy in 2004. Revenue for the combined group was about $2.9 billion in fiscal 2022.
The entertainment content division produces consumer video games, operates amusement centers and has an animation and toy division. In the third fiscal quarter ending 12/31/22, consumer video games accounted for 55% of total Sega Sammy revenue (72% of entertainment content revenue).
The big driver for the consumer video game division was high-end video games led by a new Sonic title. Sonic Frontiers, which launched in November, sold 2.9 million units through the end of the year. Sega also enjoyed success with the remaster of the hit RPG Persona 5 Royal Remastered.
Sega Sammy is similar to many Japanese companies in that it has a large domestic business but much of the growth opportunity looks to be in North America and Europe. For several years the company had focused on mobile and free-to-play titles targeted primarily towards Japan. However, that revenue has been flat.
Among Sega Sammy’s many divisions, full-game consumer content accounted for 27% of total revenue and 83% of that home video game revenue came from North America and Europe. The challenge the company faces is that it does not have the large international marketing divisions that existed in the glory days of Sega hardware.
Like many Japanese companies, the goal is how to maintain a Japan-based business while growing an international video game presence. There is a significant amount of classic IP that is familiar to Western audiences. This is a major potential opportunity if the company can take advantage.
