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Sega to turn ¥1.5bn profit to ¥22.1bn loss

Fiscal year won't be a good one after all

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The day after its main rival's biggest product roll-out, a sorry Sega conceded today that 2000 will go down in its books as its fourth loss-making year in succession.

The company had previously said it will finally get back into the black this year.

Dreamcast maker Sega said it will lose ¥22.1 billion ($204.2 million) for the full year to March 2001 - a significant change on the ¥1.5 billion profit it said it was looking forward to.

The change comes for reasons not dissimilar to Sony's own explanations for financial problems. Sony's quarterly profits were this week found to be well down on expectations thanks to stellar losses at its games - ie. PlayStation - division, brought about by the fabulous cost of marketing and developing the next-generation console.

Sega's troubles, likewise, come from console marketing: it take costs of ¥18.5 billion on the chin after cutting the price of Dreamcast in the US and Europe over the summer in a desperate - though not unsuccessful - bid to ramp up sales ahead of the PlayStation 2 launch.

Last year, Sega lost ¥42.88 billion, so at least the company is moving in the right direction. Sales of Dreamcast consoles have increased since the price-cuts, but probably not sufficiently to dent the loss. And, for the full year, sales will be down on Sega's early expectations too. The company now expects annual sales of ¥320 billion, down from its previous estimate of ¥336 billion.

Sega at least has its online gaming service SegaNet, cannily targeted at PC users as well as Dreamcast owners, to fall back on, as the company attempts to target revenue streams beyond its traditional hardware focus. License fees from games will help a little too, but it's hard to see Sega reaching its former glories. Its traditional rival, Nintendo, is at least fighting back with its upcoming GameCube console, but with PlayStation 2 and Microsoft's X-box as competition, it is going to have a tough time. That leaves little hope in the console arena for a much diminished Sega. ®

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