Overview of Restructuring
Clarified Core Businesses and Strengthened Portfolio Management
The following provides details on the restructuring measures the Group had implemented by March 31,2015.
Measure 1. Clarified Core BusinessesThe SEGA SAMMY Group comprises approximately 90 Group companies in Japan and overseas. Some operating companies and divisions had overlapping business areas. Others were insufficiently linked despite having related business areas. Therefore, after clarifying the status of the Pachislot and Pachinko Machine Business, the Entertainment Contents Business, and the Resort Business as core businesses that enable the realization of strengths as a comprehensive entertainment corporate group, we reorganized business segments accordingly. The aim of this reorganization is to heighten the awareness of all officers and employees of the direction in which the Group should advance.
While the Pachislot and Pachinko Machine Business segment is likely to continue facing tough business conditions, its position as the pillar of the Group's earnings will remain unchanged. We gathered into a single segment the businesses, mainly from the former SEGA CORPORATION, that have quality entertainment content at the core of their competitiveness, even though they offer this content through different channels. We want the Entertainment Contents Business segment to contribute to earnings as soon as possible.
The Resort Business segment brings together the personnel and expertise of the integrated resort business, the closely related entertainment park business area of the former SEGA CORPORATION (TOKYO JOYPOLIS and Orbi Yokohama), and the resort business centered on Phoenix Resort Co., Ltd. With our sights set on establishing a full-fledged integrated resort business in Japan, we will develop this business segment as a pillar of medium-to-long-term growth.
Measure 2. Restructured Unprofitable and Underperforming Businesses DrasticallyAt the same time as clarifying core businesses, we withdrew from or shrank businesses and services that had little strategic importance, focusing on businesses that had been unprofitable with regularity. One example of this approach was our decision to discontinue an independent movie production project. Also, in the amusement machine sales area we cancelled the development of titles with unfavorable earnings outlooks. Other measures included reducing fixed costs, mainly those related to corporate functions, in the overseas packaged game software area.
On the other hand, we decided to continue several businesses that are currently unprofitable. One such business is the computer graphics (CG) animation production business of MARZA ANIMATION PLANET INC. We made this decision because the company's CG animation technology—among the most advanced technology of its kind in Japan—has significant potential for use in CG animation movies and within the Group.
Measure 3. Laid Foundations for Strengthening Business Portfolio ManagementWe laid foundations that will help strengthen management of our business portfolio. As well as optimal and flexible deployment of such management resources as intellectual properties, development personnel, and cash. These foundations will enable further business reorganization.
SEGA SAMMY HOLDINGS INC. has established SEGA Holdings Co., Ltd., as an intermediate holding company that reports directly to it. Under the control of this new company, we placed the amusement center operations area and the digital game area, which had belonged to separate companies. Furthermore, we spun off the former SEGA CORPORATION's mainstay amusement arcade machine and packaged game software areas and also placed them under the intermediate holding company's control. We also transferred direct control of the animation and toy sales areas from SEGA SAMMY HOLDINGS to SEGA Holdings.
As a result of this reorganization, SEGA Holdings is responsible for preparing overall strategies and adjusting the distribution of management resources. Meanwhile, its discrete operating companies receive development personnel and other management resources and function as self-contained businesses. The aim of this organizational structure is to delegate significant authority to accelerate decision making and clarify management responsibility. The dramatically improved management efficiency of SEGA Networks, Ltd. (currently SEGA Networks Company of SEGA Games Co., Ltd.), which became a separate company in 2012, and SEGA ENTERTAINMENT CO., LTD., testifies to the benefits this new organizational structure promises.
Measure 4. Optimized Personnel DeploymentIn conjunction with establishing a new organizational structure, we optimized personnel deployment.
Going beyond previous initiatives to transfer personnel from the packaged game software area to the digital game area, we are transferring personnel on a larger scale and on a Groupwide basis. For example, we have deployed mechatronics specialists from amusement machine sales to casino machine development. We have also transferred experts in animation technology development to the digital game area. Despite these transfers, we concluded that, relative to market sizes, the amusement machine sales and the toy sales area had surplus personnel. Regrettably, we had to downsize through voluntary early retirement programs and other measures. The reduction in employees for the SEGA SAMMY Group as a whole was approximately 300, including roughly 120 from the former domestic SEGA group.
These initiatives have focused personnel deployment on strategic areas, adjusted personnel numbers to reflect earnings levels, and rejuvenated the workforce's age composition.
