Sega Sammy Holdings

SWELCOME TO THE NE X T LE VEL!

tarting this year as one of
rescue SEGA, agreeing to the management
the world’s most investible
integration.
countries, Japan is poised
SEGA, which boasts the highest sales
to further entice global
within the group, brings decades ofdealmakers into its vibrantexperience at the forefront of the global
businessc o m m u n i t y.
game industry and a beloved, iconic brandSignificant changes tocherished by millions worldwide. Theirthe Companies Act are expected to be
influence and recognition extend far beyond
proposed as early as next year, allowing
Japan, with millions of fans worldwide.
international businesses to use their own
From classic arcade games to cutting-edge
stock as consideration for acquisitions—aconsoles and beloved characters like Sonic
preferred method known as ‘share delivery.’the Hedgehog, SEGA has made an indelible
This move will be transformative for corporate
mark on game culture across the globe.
Japan, enhancing its competitive stance
After overcoming some hurdles, including
globally, especially if the yen remains weak.
a ‘Structural Reform’ due to the COVID-19
Encouragingly, Goldman Sachs forecasts
pandemic, Mr. Satomi proudly asserts thatthe yen to maintain its current level over thethe group’s position is now stronger than ever.
next 6-12 months, suggesting that several“Our performance has been nothing shortlisted companies are currently undervalued,of excellent, particularly over the past three
Haruki Satomi
presenting attractive opportunities foryears. In May 2024, we announced a new
President & Group CEO
investors.
medium-term plan centered on Transmedia
Among the most enticing investment opportunities in Japan arestrategy,” explains Mr. Satomi. Fittingly, the goal for the group’s newits entertainment and game industries. According to Statista, Japan’s
medium-term plan—‘WELCOME TO THE NEXT LEVEL!’—is a homage toentertainment industry is set to achieve a CAGR of 10.3% between 2022
the famous marketingand 2027, reaching a market volume of USD 3.3 billion. While impressive,
tagline used for thethis figure is overshadowed by the country’s video game industry, which
SEGA Genesis in 1989.
ranks as the third-largest globally and is projected to generate USD 28
The Sonic IP is thebillion in revenue this year. With industry legends like SEGA, Japanese
first major successcompanies have dominated the global game market since the 1980s.
story in Transmedia.
Through unique storytelling, innovative gameplay, and strategies such
The movie ‘Sonic theas simultaneous worldwide releases and cross-play, Japanese game
Hedgehog,’ released
studios consistently create captivating games that transcend culturalin 2020, became abarriers.
huge hit, and licensing
Formed in 2004, Sega Sammy Holdings resulted from therevenue for the Sonic
management integration of two Japanese titans, SEGA and Sammy. TheIP has increased more
Sega Sammy Group is a comprehensive entertainment company thatthan tenfold in the pastdelivers a wide range of entertainment to the world. In more detail, thefive years. Mr. Satomi
Group mainly comprises the Entertainment Contents Business, whichstates that due to theoffers a diversity of content such as games; the Pachislot and Pachinko
success of Sonic, there
Machines Business, which handles everything from development tois continued interest
sales of Pachislot and Pachinko machines; and the Gaming Business,fromHolly wood
which operates an integrated resort and develops casino gaming
producers and studios
products and software. The group currently comprises 43 domestic andfor other SEGA IPs,
53 overseas companies, controlling a treasure trove of IPs that include
and they are prepared
many of the industry’s most coveted franchises. These beloved IPs, suchto of fer them toas Sonic the Hedgehog, the Persona series, and Total War, collectivelyvarious media. With
have a staggering unit and download count of over 1.74 billion.
an eye towards furtherAccording to the group’s president and Group CEO, Haruki Satomi,
growth, the Sonic IP©Buronson & Tetsuo Hara/COAMIX 1983,before the management integration, his father, Hajime Satomi—whowill release a new©COAMIX 2007 Approved No.YRA-114, ©Sammyfounded Sammy in 1975—was asked by Isao Okawa, the former ownergame titled ‘Sonic X
of SEGA, to become SEGA’s CEO. “At the time, my father was hesitant
Shadow Generations’to take over the company—he wanted to focus on Sammy,” Mr. Satomi
in October 2024, and the third movie is scheduled for release inrecalls.
December.
However, just before Mr. Okawa passed away in 2001, he transferred
COVID-19 has rapidly accelerated the digital distribution of the gamemuch of his own assets to SEGA to keep the company afloat. Mr.
industry. The removal of regional and console barriers has allowed
Satomi says that when Mr. Okawa passed away, his father decided tomore people to engage with games. Furthermore, the ways in whichpeople engage with games have diversified.
Currently, there are three billion ‘Gamers’
in the world. ‘Gamers’ are not limited to justplayers; they include game streamers andtheir viewers, as well as esports athletes
and their supporters. When considering allof these, we believe that games can reach 3billion people.
Currently, various platforms such as
GAFAM are participating in the gameindustry. Mr. Satomi says that SEGA has two
major strengths in this situation. One is having
numerous game studios internationally, as
well as owning various titles and IPs. ‘Since
we don’t focus solely on one big game,when a new game platform emerges, wecan flexibly provide game titles that meettheir preferences and needs as a launch
partner,’ he explains. The second strength isthat the generation that grew up with SEGA
has now become business owners anddecision-makers. They played SEGA games
when they were young, so there is an instantemotional connection. ‘It’s a big tailwind forour partnership business. It’s easy to communicate our ambitions tothem,’ he says.
Another route to unlock Sega Sammy opportunities is by considering
investment in their stock. Since the beginning of this year (4 Jan-4 Jun),SegaSammy©ATLUS. ©SEGA.
Holdings’ shareprice has surgedby 10.5%. Mr.
Satomi maintains
that the stockcould still besignificantlyundervalued,especially given
the group’s recent
robust financialperformance.
Indeed, thehighlightsof
Sega
Sammy
Holdings’ mostrecent fiscal year
are impressive.
Operating income
surged by 21.5%,
climbing from JPY
46.7 billion to JPY 56.8 billion, while net sales saw a substantial increaseof 20.1%, rising from JPY 389.6 billion to JPY 467.8 billion. The group
achieved an ROE of 9.6% and provided shareholder returns totalling JPY
20.9 billion, with a total return ratio of 63.3%. “All our businesses areprofitable. There’s no doubt – we’re a growth company now,” says Mr.
Satomi.
Notably, the Entertainment Contents Business saw a 12.4% increasein sales, attributed to the acquisition of Rovio, powerhouse behind
Angry Birds, for USD 776 million as part of its M&A strategy. Rovio,
headquartered in Finland, brings significant value to Sega Sammy
Holdings’ global x mobile domain. Additionally, the group doubled theoperating income from its Pachislot and Pachinko Machines business,reaching JPY 41.2 billion.

©SEGA

Looking ahead, Mr. Satomi is confident Sega Sammy Holdings canachieve JPY 550 billion in net sales, noting a solid pipeline for organic andM&A-led growth. This includes the development of a new Sonic seriesgame, such as ‘Sonic Rumble,’ fully incorporating Rovio’s experience,and the launch of a brand-new IP titled ‘Metaphor: ReFantazio,’ to bepublished by its subsidiary, ATLUS. In addition, sales of Pachislot andPachinko Machines, which are unique to the Japanese market, will also
make a significant contribution to achieving the sales target.
Mr. Satomi also emphasizes the pivotal role of artificial intelligencein driving future success. “We’re quite aggressive when it comes toAI integration. Initially, it was to enhance productivity; now we aim toleverage AI within our games,” he elaborates.
Mr. Satomi defines the Group’s mission and purpose as ‘Constantly
Creating, Forever Captivating - Making Life More Colorful -.’ He adds,“The entertainment business we engage in is not wholly viewed
positively by society; it’s an industry where negative aspects arealso highlighted. However, by providing captivating experiences thatoutweigh the negatives—with our core aim being to continually deliver
value exceeding customer expectations—we’re confident in maintaining
a welcomed presence in society. Fortunately, now is a time when thecontent business in Japan is receiving attention. We’ve gained significant
opportunities and will continue to have a positive impact on the world.”
In conclusion, Sega Sammy Holdings stands at the forefront of
the global entertainment and game industries, poised for continued
growth and innovation as it leverages its rich legacy, robust financial
performance, and forward-looking strategies to bring joy to audiences
worldwide. With an ambitious goal of reaching three billion individuals
through its comprehensive Transmedia strategy, the company
is positioned to remain a driving force in shaping the future ofentertainment on a global scale.