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
ebooks
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower