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Sega begins to see payoff from new video game strategy

Sega begins to see payoff from new video game strategy

July 31, 2012 | By Mike Rose

Sega's move to better focus its video game business appears to be working, as the company reported a swing to profits for the first quarter of the current fiscal year -- although there's still some work to be done.

Sega's consumer business, which houses its video game sales, was still its only segment to record losses -- however, these losses were notably reduced year-over-year. It put the losses mainly down to weakened demand for home video games in the U.S. and Europe.

The reduction in losses for its video games sector is due, in part, to Sega's new strategy in the video game sector. The company is currently looking to streamling this segment by focusing on digital and mobile games, with strong IP where possible.

This shift was clear to see in the number of retail video games the company sold during the quarter -- just 1.34 million, down 42.5 percent compared to 2.33 million year-over-year.

In comparison, Sega saw "favorable performance" for its mobile games, as Kingdom Conquest has now been downloaded over 3 million times, and multiple other mobile titles were launched, including Samurai & Dragons, Sakatsuku Social World Stars and Miku Flick.

Elsewhere, Sega's Pachinko and amusement machine businesses saw increased sales and profits thanks to solid performance of certain machines and sales of collectible cards, more than balancing out the consumer business' losses.

For the quarter ended June 30, 2012, Sega's consumer business posted revenue of ¥15.1 billion ($192.9 million), a decrease of 6.9 percent year-over-year, and operating losses of ¥1.6 billion ($19.9 million), compared to operating losses of ¥3.9 billion ($49.3 million) year-over-year.

Overall, the company saw revenues of ¥70.0 billion ($894.2 million), up 7.1 percent compared to ¥65.3 billion ($834.8 million) year-over-year, and profits of ¥2.5 billion ($32.5 million), compared to losses of ¥2.2 billion ($28.4 million) in the same quarter last year.

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