SEGA plans to merge its successful pachinko and dedicated gaming businesses together to solidify its business.
Like Konami, SEGA is in an interesting company that doesn't just make video games. It has multiple branches in various fields like resorts, pachinko machines, and of course its mainstay, gaming. Now the company will merge two of these together to form one unit in an effort to consolidate its cross-synergy focus.
SEGA today announced that it will merge SEGA Interactive Co., the division behind its pachinko and arcade machines, with SEGA Games Co., the division that makes digital games like Yakuza and Sonic. Technically SEGA Games Co. will absorb the interactive branch, and as of April 1, 2020, SEGA Interactive Co. will be no more.
In order to increase the presence of the Company Group and realize further growth, we decided to reorganize the Company Group because of the necessity of integrating the two major business companies of the Company Group, SGC and SIC, in order to make reallocation of the domestic R & D resources of the Company Group more flexible than ever before, thereby strengthening our competitiveness in global markets.
Going forward, we will work to further expand sales of existing titles in overseas markets and actively develop global titles originating from domestic R & D. At the same time, we will promote the creation of synergies among group through derivative development of IP that leverages the integrated strengths of the Company Group.
The reasoning behind this is simple: SEGA wants to keep costs down, tighten up cohesion between its branches, and offset slight earnings drops in its Games division. Right now SEGA's mobile gaming strategy isn't doing too well and this consolidation will help fortify those weak points.
Also remember that SEGA's games development branch directly feeds the amusement, pachinko, and arcade segment--all of which are based on the video games IPs that SEGA wholly owns.
Neither branch is doing badly though.
This isn't a band-aid for a larger problem at SEGA. It's more of a fortification of its main strengths to ensure the segments work more closely together; although the branches will be unified, we'll still see an arcade/pachinko team working alongside the main game dev teams. Pachinko isn't going anywhere.
Pachinko/Pachislot machines raked in a substantial 44.1 billion yen in sales ($408.1 million) and 7.8 billion yen in operating income ($72.1 millon) in Q2'19 earnings.
SEGA's main breadwinner is dedicated gaming, though, and this segment pulled in 115.8 billion yen in sales ($1.07 billion) in sales, 12.7 billion yen ($117.52 million) in Q2'19.