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Things Keep Getting Worse For Sega

Sega seems to be experiencing some serious financial problems that it attributes to the COVID-19 pandemic. Sega Sammy Holdings, formed after Sega and Sammy Corporation merged in 2004, just announced that it is asking 650 of its 9,051 employees to retire voluntarily. 

In a new press release, Japan-based Sega Sammy said it is planning to reorganize in order to better reduce costs and adapt to the changing market. The company's Director of the Board and certain executive companies will also take a pay cut. 

"The Company also announces that it expects to record an extraordinary loss in the operating results of the fiscal year ending March 2021 due to the call for voluntary retirement," Sega Sammy's statement said. It projects structural reform costs amounting to 10 billion yen (near $97 million USD, per Kotaku) to affect its operating results, which are expected in March 2021.

This comes just two days after Sega Sammy announced that it was selling off its arcade business to Tokyo-based Genda Inc. Specifically, it transferred 85.1 percent of its shares to Genda, which wants to expand its amusement center business. It's all part of the same restructuring effort, resulting in additional structural reform costs of 20 billion yen.

Sega Sammy said, "As Amusement Center Operations ... is strongly affected by COVID-19, utilization of facilities has declined remarkably, and a significant loss was recorded at 1Q of the fiscal year ending March 2021. In addition, despite the recent recovery trend, the situation remains uncertain."

The company has also revised its income projections for the fiscal year downward. While Sega Sammy says it expects its existing games and upcoming launch titles — including Yakuza: Like a Dragon and Puyo Puyo Tetris 2 — to perform well in coming months, it saw a "significant decline in sales" during the first quarter of the 2021 fiscal year (the March-June 2020 period). Its consumer entertainment sales actually rose as a result of people staying at home, but it saw decreases in its arcade centers, resorts, casino and pachinko operations and in its animation and toys businesses after the delays of theatrical productions and other factors.

The once-dominant gaming powerhouse has been the subject of rumors for months, thanks to recent hyped announcements that turned out to be anti-climactic, the specter of Microsoft acquisitions, the coming of a new gaming generation, and (frankly) wishful thinking within the industry. However, with Sega Sammy's acknowledgment that its financial outlook isn't as strong as it could be, this might be a good time for one of the bigger players in the industry to seriously consider aligning themselves with the home of Sonic the Hedgehog and so many good video-game memories.