Game revenue down at Sega despite increase in physical sales

Sales and profits have dipped at Sega Sammy, which is the latest company to release its financials for the quarter ended June 30 (Q1). 

Consolidated net sales fell by 35.8 percent year-over-year to 68 billion yen ($610 million), while profits dropped by 97.1 percent to 337 million yen ($3.1 million) during the same period. 

The company's entertainment contents division, which houses its video game operations, also took a hit, with year-over-year sales falling to 45 billion yen ($404 million) from 50.2 billion yen ($450.6 million). 

Operating income in the division was also down year-on-year, dropping to 1.6 billion yen ($14.4 million) from 3.7 billion yen ($33.2 million). 

That's partly due to a decline in game revenue, with combined sales from digital and packaged titles falling to 21.3 billion yen ($191.2 million) from 23.9 billon yen ($214.6 million).

Despite that overall drop off, Sega actually managed to shift more physical releases this year, with the company selling 5.7 million packaged titles in Q1 2018 compared to 4.56 million in Q1 2017. 

The Japanese outfit said catalog titles such as Persona 5 and Yakuza 6 were to thank for that upward swing in physical sales, although it noted that existing games are "declining in popularity" on the digital front. 

Focusing on Sega's newer releases, the company talked up the performances of fresh faced digital titles including Kotodaman, which has exceeded 7 million downloads since making its debut two months ago, and Sega Pocket Club Management. 

Looking ahead, the company expects the digital arena to become increasingly competitive in the coming months, and hopes the packaged game market will continue to expand due to the continued penetration of home consoles. 

With that in mind, Sega is forecasting full-year sales of 122 billion yen ($1.1 billion) and operating income of 13.5 billion yen ($121.2 million) in the entertainment contents division. 

The firm also expects consolidated full-year sales and profits to total 390 billion yen ($3.5 billion)  and 12 billion yen ($107.7 million) when the fiscal year ends in March 2019.