May 27, 2022

It’s Not Been a Good Year for SEGA

SEGA is looking at a MAJOR restructuring in Japan. The company has sold off a majority of its arcades, asked employees to take voluntary redundancy, and more besides

SEGA has had a fairly rough time the past month or so following problems stemming from the ongoing pandemic.

Firstly, SEGA has sold off its arcade business. Might sound a little left-field, but the arcade business was big money, pre-pandemic.

SEGA’s parent company, SEGA Sammy Holdings Inc, stated in a press release how it has “sold off the vast majority [or around 85.1%] of SEGA Entertainment [the company’s Japanese amusement business]”.

SEGA sold the stock to Genda, another amusement machine company;

“As Amusement Center Operations area in Entertainment Contents Business is strongly affected by COVID-19, utilisation of facilities has declined remarkably. [As such], a significant loss was recorded at O1 of the fiscal year ending March 2021.

In addition, despite the recent recovery trend, the situation remains uncertain. We have been considering various options in order to adapt to these changes in business, aiming for the improvement of the profitability and early recovery of sales [of Amusement Center Operations].

In this process, we have been discussing the transfer of SE shares to GENDA…and has decided to conclude the share transfer agreement at the Board of Directors meeting held today”.

This news isn’t necessarily going to affect patrons to any of the company’s Japanese arcades. Siliconera reported that these centres will still bear the “SEGA” name after the buy-out.

Furthermore, SEGA confirmed in an interview with Famitsu that its customers will “still be able to continue patronage as usual”. The even better news is that SEGA will continue to produce arcade games.

SEGA’s Fall; Part 2

However, whilst that may sound rosy and optimistic, the pandemic has really had a major impact. Beyond the arcade buy-out, SEGA is asking around 650 staff members to take voluntary redundancy.

As noted by Eurogamer, SEGA has around 9,051 employees in total. The proposed redundancies will only affect the company’s Japanese businesses.

SEGA will offer any of its employees who go for the voluntary redundancy “extraordinary retirement allowances and re-employment support”.

The Final Nail in SEGA’s 2020 Coffin?

Some of SEGA’s top executives are also taking a voluntary pay-cut as well if that wasn’t enough. These cuts range from five per cent, all the way up to 30% of their base monthly salaries. SEGA has also noted it does not expect to pay these individuals their bonuses, either.

Eurogamer also picked up some figures that totals SEGA’s 2020 losses. In Q1 of 2020, SEGA reported a loss of two and a half billion yen [~£18 million]. Q2 saw a loss of ¥18.4 billion [~£135 million], whilst Q3 is expected to be even higher with a minimum further loss of ¥10 billion [~£73 million] following the redundancy call.

If Microsoft is looking to buy any Japanese game producers, now might be an opportune time to do so.

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