SEGA and Microsoft to trailblaze gaming's new frontier

SEGA's bold new business plan could be powered by Microsoft's Azure platform.

3

Today SEGA and Microsoft announced they might team up to trailblaze the new frontier of cloud gaming. SEGA wants to use Microsoft's Azure servers for its new billion-dollar Super Game class of video games, which are huge sprawling multi-year live games with tons of engagement and monetization. Microsoft in turn needs content for its Xbox cloud games program (which is rumored to have a Hideo Kojima game in the works).

SEGA may use Azure to not only power, host, and scale its online games, but to build them as well. Game developers can use Azure to create titles and SEGA's press release explicitly mentions it wants to establish a "next-generation games development environment."

3

SEGA's first Super Game is Phantasy Star Online 2, a popular online MMO that has generated nearly $1 billion in lifetime revenues. Coincidentally, PSO2 also uses Azure. SEGA is investing heavily in its Super Games model and is prepared to spend 100 billion yen ($875 million) over 5 years to fund new games. SEGA wants to have at least two new Super Games on the market by 2030. PSO2 has proven to be a safe bet and SEGA needs more long-term goals especially as it shifts away from its arcade and resort businesses during COVID-19.

Here's a statement from SEGA president Yukio Sugino:

"We are very pleased to announce today that we are considering a strategic alliance with Microsoft to help develop SEGA's new "Super Game" initiative as well as build a next-generation game development environment.

By considering a strategic partnership with Microsoft, we seek to further advance our game development so that our titles can be enjoyed by fans all over the world; in this regard, we aim to build an alliance that utilizes both SEGA's powerful game development capabilities and Microsoft's cutting-edge technology and development environment.

3

The synergy makes sense. Online games (especially ones powered or propped up by Azure cloud servers) fit perfectly with the Xbox ecosystem. After all, Xbox is practically glued together by the online Game Pass subscription model. It wouldn't be outlandish to see SEGA's new Super Games show up on Game Pass at some point--Game Pass subscribers already get in-game bonuses for PS02.

So what does all this mean exactly? SEGA is making new online games that are the size and scope of PSO2, and is likely to use Microsoft's Azure servers to help power them. SEGA is also spending big bucks into a guaranteed business model that has made them nearly $1 billion in revenues to date.

Here's how SEGA defines its Super Game plan:

The biggest area for growth investment is in the Consumer area. We created a new word called "Super Game" within the company, and this is what we are aiming for. The definition is to create games that can aim for cumulative sales of 100.0 billion yen over their lifetime.

We will provide not only a mere game, but also services, including various communities that are produced within the game. We would like to challenge to developing new genres of games by providing various playing other than the game itself and communities, where people can spend time in the game world.

In the Entertainment Contents Business, for the next 3 years, we will be digging deeper into our existing IPs. By expanding existing IPs globally, we will enlarge our earnings scale.

Also, we are going to put our investment towards global players, and within 5 years, we are aiming to create a Super Game.

In fact, PSO2 will reach a cumulative total of 100.0 billion yen in sales by the end of this fiscal year, and we have also set a strategy to reboot to New Genesis, which is substantially a new game, and deliver it to the entire world at once.

In the next fiscal year, we are planning to release a new FPS title which is in development at our European Studio. 2 games that we are currently working on are planned to be released around 4 to 5 years later, and we aim for these games to become a Super Game.