Sega responds to concerns after recording $200 million impairment write-down for Rovio

Sega addressed the $200 million impairment write-down for Rovio during Q3, stating it relied too much on local management after its $776 million acquisition and was unable to fully implement Rovio’s Beacon technology in its own mobile titles.

In a recent earnings call Q&A, Sega CEO Haruki Satomi said it will “take these lessons into account for future initiatives” after Rovio’s Q3 performance “fell significantly short of the initial forecast due to rapid changes in the market environment and other factors.”

One factor was Rovio’s mobile game platform and technology suite Beacon, which Sega had issues implementing into its own mobile games.

“Beacon was built for the free-to-play casual games that Rovio excels in, and it remains an indispensable system for operating Rovio’s titles,” said Satomi.

“Our objective was to strengthen effective operations and global rollout by applying this system to Sega’s mobile titles for core users.

“However, upon actual installation with existing live titles, we found that the operational and marketing methods and approaches significantly differ from Rovio titles and new mobile games are yet to fully exploit Beacon. Consequently, we have unfortunately not achieved the level of results that had been expected prior to the acquisition.”

Outside of Rovio, Satomi recognised that Sega is “lagging in initiatives such as digital sales and data-driven marketing.”

“To move toward a data-driven structure, we will first review our current publishing organisation, which is divided by region (Japan/Asia and Europe/US), and will transition to a structure that can execute marketing and sales under a common global strategy.”

He continued: “We will strengthen data analysis to optimise digital sales pricing by region and shift our marketing focus from individual new releases to an IP-based approach, aiming to maximise sales over the long term, including repeat sales.”

Satomi also addressed the challenges and improvement measures that Sega will implement to scale up its full game titles.

“While the development costs per title for our mainstay titles are lower compared to so-called AAA titles in the industry, we recognise that our strength lies in the relatively high acclaim we receive for quality. On the other hand, we also recognise that such high evaluations have yet to translate into a further increase in unit sales.

“While continuing to hone our development capabilities – the source of our strength – we believe there is still significant room for improvement and earnings upside in our ‘power to sell,’ namely our marketing and sales mechanisms. We are currently undergoing reforms in this area to realise a scale-up in sales.”