Pachinko and pachislot recreational arcade games are a booming and extremely lucrative business in Japan. Just how popular is this past-time? So popular that SEGA, one of the premiere Japanese game developers, earned over $1 billion in pachinko earnings in nine months.
SEGA recently reported strong third quarter financial earnings, especially in the pachislot and pachinko department. According to the IR documents SEGA pulled in an impressive 119.7 billion yen--$1.05 billion USD--from pachinko and pachislot sales from March to December 2016.
In fact, pachinko net sales were higher than digital and physical game sales combined, and made up half of SEGA's total nine-month earnings of 285 billion yen, or about $2.51 billion USD.
Recreational amusement sector net sales were up 23.7% year-over-year, and operating income in pachislot and pachinko segment spiked an amazing 71.7% compared to the same period in the last fiscal year.
Operating income from pachinko and pachislot machines jumped by 72% to 5.8 billion yen ($227.5 million).
Total operating income saw a tremendous 189% boost to 35 billion yen ($308.6 million) during this nine-month period, driven by consistent pachinko revenue and strong game sales.
As far as actual game sales during the third quarter, SEGA's digital game net sales hit 35 billion yen ($308.6 million USD), up 14% year-over-year. Actual physical game sales were higher, but not by much: net physical game sales saw 37.3 billion yen in sales, or about $328.9 million dollars.
Retail games saw an astronomical boost of 740% in operating income compared to the last nine-month period, which boosted the overall operating income of its parent Entertainment Contents Business sector by 446% to hit 15.3 billion (~$135 million USD).
In the pachislot machine business, the Group has delivered the mainstay title "Pachislot Hokuto No Ken Syura no kuni hen," and launched titles including "Pachislot INUYASHA," which pursued the uniqueness of intellectual property as well as playability, leading to overall sales of pachislot machines of 169 thousand units, above the results of the same period in the previous fiscal year (an increase of 48 thousand units from the same period in the previous fiscal year).
In the pachinko machine business, the Group launched "Pachinko CR Monster Hunter 4," which recreated the worldview of "Monster Hunter" as with its predecessor, and "Pachinko CR Shin Hokuto Muso Ver.," which changed the specifications of its popular predecessor to improve ease of play, leading to overall sales of pachinko machines of 111 thousand units, around the same level as the previous year (a decrease of 4 thousand units from the same period in the previous fiscal year).
In addition, the Group is working to improve profitability through cost improvements by reusing components, and reducing expenses including development expenses.
As a result, net sales in this segment were ¥119,739 million (an increase of 23.7% for the same period in the previous fiscal year) and operating income was ¥25,885 million (an increase of 71.7% for the same period in the previous fiscal year).