Sega Sammy has officially confirmed a major revision to its financial outlook, signaling a difficult quarter defined by the underperformance of its mobile gaming investments. Back in 2023, the Japanese publisher made headlines with its aggressive acquisition of Rovio Entertainment, the studio famous for Angry Birds. This strategic purchase, valued at roughly $776 million, was intended to be the cornerstone of the company's expansion into the lucrative mobile market. Management at the time expressed high hopes that Rovio's proprietary "Beacon" technology and live-service expertise would catalyze growth across the publisher's existing portfolio for Sega. However, the mobile sector is notoriously volatile, and integrating a legacy mobile giant into a traditional console publisher's ecosystem is a complex endeavor that requires sustained growth to justify the initial price tag.
Leading up to this fiscal year, the publisher had been relying on a multi-pronged strategy involving mainstay IPs like Persona and Like a Dragon, alongside its transmedia initiatives. The industry has seen a general trend of consolidation, yet the mobile market specifically has faced headwinds regarding user acquisition costs and market saturation. While Sega's console and PC output has remained relatively stable, its attempts to crack the mobile code have faced scrutiny. The company recently launched Sonic Rumble in an effort to bring its mascot to mobile audiences in a new format, hoping to replicate the success of other party royale games. These efforts set the stage for the current fiscal year's third-quarter results, where the realities of market competition have come into sharp focus against the backdrop of Sega games.
Sega Reports Second Year of Declining Revenue, But With Some Good News
Sega Sammy shares its financial report for fiscal year 2025, reporting yet another revenue drop mixed with some encouraging signals.
Sega Sammy Records Significant Impairment Loss For Rovio
According to the official notice released by Sega on February 13, an impairment loss of ¥31.3 billion (approximately $200 million USD) was recognized in the third quarter. The document explicitly states that while Rovio possesses "strong development and operational capabilities," the business environment surrounding the mobile ecosystem has deteriorated rapidly. The emergence of multiple competitor titles within a short window has made it increasingly difficult to attract and retain players, causing the subsidiary's profitability to fall significantly below the initial forecast established at the time of the merger. As a result, the company determined that the recoverable amount of the asset fell significantly below its carrying amount, necessitating the write-down.
This impairment loss had a drastic impact on Sega's overall financial health for the fiscal year. While net sales actually saw a modest increase of 4% year-on-year to ¥335.2 billion ($2.1 billion USD), the costs associated with the write-down dragged operating income down to ¥19.8 billion ($129.2 million USD), a sharp decrease of 54.6% compared to the same period in the previous year. The Entertainment Contents segment, which houses the company's video game operations, was particularly hard hit, with its operating income dropping by 31%. This decline was exacerbated by the lackluster performance of new releases in the consumer area, specifically citing that full game sales did not meet their targets, further compounding the issues faced by the Angry Birds developer.
Beyond the headline losses associated with Rovio, the report highlighted broader struggles within the company's new release slate. In the third quarter, the publisher launched Football Manager 26 and the mobile title Sonic Rumble. While the former maintained its reputation as a consistent earner, Sonic Rumble did not meet expectations. This underperformance reinforces the narrative that the mobile market has become increasingly hostile to new entrants, even when those titles are backed by massive intellectual properties like Sonic. The difficulty in scaling new mobile games likely compounded the issues within the division, leading to the re-evaluation of the Rovio asset.
To address these challenges, management has announced a strategic shift. The company plans to refocus its development efforts on its mainstay IPs and aggressively promote its transmedia strategy, which has previously seen success with the Sonic the Hedgehog film franchise. Additionally, a leadership change has been made at Rovio, with Daniel Svärd, formerly the head of live game studios at King (the creators of Candy Crush), appointed as the new COO. The goal is to leverage Svärd's operational expertise to stabilize existing titles and guide new projects toward profitability, using the Candy Crush experience to improve performance. Fans of franchises like Persona can likely expect the company to lean heavily into these reliable pillars while it restructures its mobile approach.
The financial recalibration has also led to a revision of the full-year forecast. The company now expects net sales to reach ¥490 billion ($3.2 billion USD), an increase from the previous May estimate of ¥475 billion. However, due to the impairment losses and the "sluggish" performance of the mobile sector, the operating income forecast has been slashed from ¥53 billion to ¥40 billion ($261.5 million USD). This mixed forecast suggests that while the publisher is still generating significant revenue, likely driven by its pachislot business and strong licensing deals, its efficiency and profit margins have been severely impacted by the mobile gamble.