Sonic Mania success makes up for digital shortfalls in Sega financials

Sega's financial results for the first half of the year are in, showing solid performances across most of its businesses - particularly traditional video games.

For the six months ended September 30th, Sega Sammy Holdings reported net sales of ¥194.7bn ($1.71bn), up 14.9% year-on-year from ¥169.5bn ($1.49bn). Operating income came in at ¥26.8bn ($235m), up almost 75% from ¥15.3bn ($134m) last year.

These results encompasses the entirety of the Sega Sammy business, including its pachinko, pachislot and resort segments. While the pachinko and pachislot sector saw its net sales grow by 36% year-on-year, the resort division saw a 30% loss. Fortunately, net sales from its Entertainment Contents segment - which includes video games, mobile, animated films and toys - made up more than half of the company's total sales.

The division's sales were reported as ¥101.5bn ($890m), up 3.8% year-on-year, and operating income at ¥10.1bn ($88.5m), a year-on-year increased of 10.9%.

The packaged games results show that Sega benefits from a slightly slimmer line-up at retail. The publisher released 16 titles in the first half of its current fiscal year, whereas it published 21 in the same six month period a year ago. Despite a smaller release slate, the publisher sold 8.65 million units during the six months, up from 4.65 million copies year-on-year.

This is thanks primarily to the strength of Sonic Mania, which the company proudly declared has the highest Metascore the series has seen for the past 15 years. It also highlighted Total War: Warhammer 2 as a key launch and sales driver.

Sega expects full-year sales of 11.6m packaged games, with 22 more titles to launch by end of financial year. However, these are mostly heading to Japan and Asia, with only three games set for release in the West - including Sonic Forces, which launches next week.

Packaged games remain Sega's biggest sellers in Entertainment Content, generating ¥27.1bn ($247.7m) compared to the ¥19.3bn ($169.3m) made by digital sales. Download sales are actually behind the money made from sales of amusement machines and amusement centre operations.

But Sega is hoping for a turnaround in the coming months with full-year forecasts of ¥59bn ($517.4m) from digital games versus ¥51.5bn ($451.6m) from packaged ones.

This will no doubt help with the dip seen in monthly active users for its digital titles, reported as 3.4m for first quarter and 3.3m for second quarter. By comparison, these rarely dipped believe 4m in the previous financial year.

Accumulated downloads are also generally down compared to the previous year. First quarter downloads came in at 28.4m - which is actually up year-on-year from 22.3m - but the second quarter's 21.9m are massively behind last year's 32.6m. Third and fourth quarter downloads last year never dropped below 30m.

According to the firm's financial report, the first half results have already surpassed forecasts revealed in May, "mainly as a result of robust performances in every business field of the Entertainment Contents Business". However, Sega Sammy has opted not to revise its forecasts for the full financial year.

For the twelve months ending March 31st, 2018, the publisher hopes to report sales of ¥380bn ($3.33bn), up 3.6% year-on-year, including ¥220bn ($19.3bn) from Entertainment Contents, up 7% year-on-year. Operating income is actually expected to drop by 32.3% year-on-year to ¥20bn ($175m).