During the nine months ending December 31st, 2023, Sega Sammy’s Entertainment division saw its operating income decline by 52.5% year-over-year to ¥18.8 billion ($125.9 million).
However, the company’s latest financial report shows that net sales for the entertainment group increased by 4.2% to ¥219.3 billion ($1.47 billion) during the same period. Part of this sales growth can be attributed to Sega’s acquisition of Rovio for €706 million ($775 million) in August 2023.
Overall, the company experienced a 27.7% year-on-year increase in net revenue to ¥349.9 billion ($2.34 billion) during the nine-month period. Additionally, operating income rose by 42.4% to ¥54.4 billion ($364.4 million).
Challenges and Restructuring
Sega revealed the challenges faced by its games division, including rising development costs and the maturation of the US and European markets. The company attributed the latter to the “worsening economic environment caused by inflation and other factors,” prompting an “urgent need to respond.” As part of its response, Sega incurred a ¥11.7 billion ($78.4 million) “extraordinary loss” during the period, which included costs for business restructuring and a review of its European studios’ portfolio. This restructuring also involved staff layoffs and project cancellations at various studios in the UK and the US.
The company also announced plans to review its medium-term games lineup and consider structural reform measures within its European business, including the development and sales structure and management system.
As a result of these challenges, Sega has revised its forecasts for the full year, expecting overall net sales of ¥463 billion ($3.1 billion) and operating income of ¥51 billion ($341.3 million). For its entertainment division, it anticipates net sales of ¥313.5 billion ($2.1 billion) for the year and an operating income of ¥23 billion ($153.9 million).
Rovio’s Performance
As part of its presentation, Sega highlighted Rovio’s sales performance over the past three years. The developer recorded €66.4 million ($71.5 million) in revenue during Q4 2023, its lowest since Q1 2021 when it generated €64.5 million ($69.5 million). Notably, Angry Birds 2 remained the company’s flagship title, generating €23 million ($24.8 million) in Q4 2023, while Angry Birds Dream Blast generated €21.5 million ($23.2 million). Only Rovio’s hypercasual portfolio and “custom contracts” saw year-over-year growth.
