Combining Major Developmental Resources with Marketing Savvy

Established in July 2012, SEGA Networks, Ltd., has achieved remarkable growth in the digital game area. This was most notable in the third and fourth quarters of fiscal 2014, which elevated the company to the ranks of the industry's leaders. The SEGA SAMMY Group's sales in the digital game area, including those of SEGA Networks, jumped 35% year on year. The company made such dramatic progress by capitalizing fully on the Group's competitive advantages. SEGA has about 2,000 developmental personnel within the Group. Our primary strength is being able to mobilize fl exibly some of the industry's largest developmental resources without transferring personnel or making organizational changes. Moreover, the company has formed win–win business tie-ups with diverse companies. Thus, effectively accessing rich developmental resources regardless of operating company boundaries allows us to redeploy resources to the digital game area without physically transferring personnel.

For example, the amusement arcade machine developmental team created the title CHAIN CHRONICLE—Kizuna no Shintairiku for Apple's mobile operating system (iOS) and Android^TM. The success of this title clearly shows that SEGA's developmental resources will be a significant asset as market demand becomes increasingly high-end. We are "selling" diverse content genres created in this way and sustaining growth by consolidating title lineup composition, management, and marketing capabilities in SEGA Networks. In other words, industryleading developmental resources and a powerful, market-savvy organization are operating in tandem to drive our continued growth in the digital game area.

Our intellectual property portfolio is expanding and improving steadily. Index Corporation transferred its businesses to us in November 2013. Furthermore, in April 2014 we executed a company split to establish its home video game software business as ATLUS. CO., LTD., and its contents and solutions business as Index Corporation. ATLUS. has intellectual properties with proven brand power. Also, because its intellectual properties depict different worlds from those of SEGA, acquiring the business will expand and improve our intellectual property portfolio significantly. Meanwhile, the Group can greatly heighten the value of the intellectual properties of ATLUS. by exploiting SEGA's network technology and expertise in free-to-play (F2P)^* games and developing the intellectual properties across the Group's various businesses.

* These are games based on a business model where basic play is free, but fees are charged for additional items within the games.