Kevin Williams: The SEGA Situation

Let’s start the week with an opinion piece, where site friend and industry specialist Kevin Williams weighs in on what’s been happening with SEGA over in Japan. Take it away, Kevin:

Opinion Piece: The SEGA Situation!

There has been a flurry of speculation regarding the recent SEGA amusement business developments in Japan, and it was thought that there should be a more informed perspective on the developments; breaking the situation down to its main constituents, supplied by Kevin Williams.

*Colorized by Arcade Heroes

• Status of SEGA

While most know SEGA as the legendary video game developer and publisher, that has also dabbled in console manufacturing, less may be familiar with the corporations ongoing investment in out-of-home entertainment. While the legacy of their arcade heydays may be treated as ancient history the reality is far from that.

The operation under SEGA Sammy Holdings, having continued to develop amusement, prize, pachinko, medal games and slot machines [SEGA Corporation], while also operating, and supporting, some 200 amusement venues [SEGA Entertainment], along with jointly working on their indoor amusement parks and resort business. Internationally, amusement games are developed by Sega Amusements International, with the next release aiming to be Mission: Impossible Arcade.

Credit: Sega

• Impacts to Business

The facility operation business in Japan has been under incredible stress, long before COVID. The sector regarding Pinslots and Pachinko has been under pressure to reform, while the Japanese Diet [Parliament] looked towards implementing new casino style legislation. The generational shift from traditional gaming matched by a move in investment in medal games. At the same time the generational shift has seen the Japanese amusement factories restructure, looking at the future of their offering, and its viability alongside growing business concerns.

The Global Health crisis has accelerated the clearing of the deadwood from amusement, the enforced lockdown of business revealing the cracks as liquidity was drained without regular infusion of revenue. Plans to permanently shutter non-performing venues was accelerated, and in some cases moves to divest of un-profitable business units have been fast tracked.

• The Restructuring

The corporation had already started a far-reaching restructuring program towards divesting itself of non-core operations (the board feeling consumer gaming and content licensing represented its future). SEGA Sammy Holdings had already in 2015 partnered with China Animation, to sell off control of their indoor amusement park and resort interests, creating SEGA CA JOYPOLIS. And, after closing its iconic Tokyo amusement site [Akihabara], moved to divest itself of the remaining operational liabilities. SEGA as a whole enduring “significant loss” in earnings exacerbated by facility operations and underperformance of gaming business interests.

Source: SEGABits.com

The division, SEGA Entertainment, managed some 193 amusement sites, representing pinslot, video amusement, prize, and medal game machine placement. In October it was revealed that the majority holding of this business was to be acquired by GENDA; an amusement machine operator and rental business, emanating from start-up Midas Entertainment. SEGA would keep a tentative holding in the operation that would still retain their branding, for the time being.

With this news the amusement machine manufacturing division of SEGA in Japan would continue as normal, though still implementing major restructuring. And likewise, in the West, SEGA Amusement International, the video, redemption, prize machine and service / support operation would still operate as normal, while continuing to report to its Japanese head-office.

• What the Future Holds

While SEGA may be celebrating its 60th anniversary (under the tagline “Go SEGA!”), its focus is clearly on leveraging its extensive library of properties and positioning itself for the future landscape of digital gaming. Creating new retro-revival products such as the ‘SEGA Mega Drive Mini’, and ‘Game Gear Micro’, examples of the moves in this direction. Obviously, from the board-of-directors perspective, evaluating possible affiliations towards maximizing their position, or even divesting their assets in a favourable acquisition.

Credit: Sega

We can expect a continued restructuring of the amusement component across all the leading Japanese factories. As they weigh the value to their bottom line and assess the social entertainment business post-COVID. Possible acquisitions and mergers are an element expected to continue in this fluid landscape.SEGA is one example of the Japanese entertainment sector with legacy in the amusement sphere. The operating of amusement venues a profitable concern previously, now come with liabilities and pressures that fellow operators TAITO, KONAMI, CAPCOM, and BANDAI NAMCO will also be looking to address. Restructuring across this sector has commenced in earnest. While operations like KONAMI, still with amusement concerns have also looked to diversify heavily into eSports, building their own arena in Tokyo.

• Commentator – Kevin Williams, is a specialist in the Out-of-Home entertainment sector, covering amusement, attraction, and immersive entertainment development internationally. Both running a consultancy for the industry (KWP), and a prolific writer and presenter on the sector, most notably through his industry news service (The Stinger Report).

END