Sega profits plunge as rivals turn up the heat

Fight to the death: Analysts believe computer giant may quit games market unless 32% decline is reversed

MATHEW HORSMAN

Media Editor

Sega, the once mighty power in computer games, has lost further ground in the battle for supremacy in the cut-throat market, announcing sharply lower profits for the half-year to September.

Pushed by its competitor Sony, and still awaiting a frontal assault from the arch-enemy Nintendo, the Japanese company yesterday reported profits down 32 per cent to 11bn (pounds 679m) from 16bn last time, citing soft demand in the key markets of the US and Europe.

The worst may be ahead. The all-important Christmas season could make or break Sega's claim to being market leader in an industry worth pounds 600m a year in the UK alone.

If its fortunes do not improve soon, some in the industry even expect Sega to get out of the hardware business altogether, concentrating on providing software alone. That would be an admission that the highly competitive business may not have room for three giants.

Richard Rosen, analyst at Durlacher Securities, said: "This is more than just a transition. Sega is plagued with problems."

He cites marketing mistakes, the rushed introduction of the new Sega Saturn and inferior game titles for the plunge in half-year profits.

Sega said yesterday it expected full-year pre-tax profits to be roughly in line with 1994. But analysts were divided yesterday, with some suggesting that results could plummet yet further in the face of competition from other manufacturers.

"The company is clearly at a crossroads," a senior New York-based analyst said.

Two of the three big games producers, Sega and Sony, introduced new higher-performance game consoles into the UK market this year, promising better graphics, sound and action for titles such as Sony's Ridge Racer. They are vying for a share of the pounds 600m annual market for games and accessories.

The third leading manufacturer, Nintendo, has delayed the launch of its new-generation console until next spring, but continues to sell titles for its old 16-bit equipment.

The key period for Sony and Sega will be the lead-up to Christmas, and both have launched marketing campaigns. Sony is outspending Sega five to one, with a pounds 20m campaign that includes televison spots, a presence at raves and other youth venues and narrowly targeted newspaper and magazine advertising.

Sega's Saturn was rushed into shops early, to beat Sony's PlayStation to the punch. But since Sony's CD-based system was introduced last month at pounds 299, it has sold more than 60,000 units, three times as many as Saturn, despite a decision two weeks ago by Sega to lower the price to pounds 299 from pounds 399 in the UK.

Simon Jobling, marketing director for Sony in the UK, said: "We believe we are outselling Sega Saturn in nearly every market."

Sega's theme park and amusement arcade division performed strongly in the first half, helping to offset the decline in the sale of mass-market games. Sega has traditionally relied on its arcade business to create a demand for new games, customising them for the home market a few months later.

But analysts say Sega did not provide enough high-quality product for the rushed launch of the Saturn.

Not all industry analysts are ready to call the contest. The real test for both Sony and Sega, they say, is likely to come with the introduction of Nintendo's Ultra 64, more powerful still than either the PlayStation or the Saturn.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
News
people
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
PROMOTED VIDEO
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick