A MESSAGE FROM THE CEO

In April 2017, Haruki Satomi became the president and COO (chief operating officer) of SEGA SAMMY HOLDINGS INC., and the Group launched a new management system that transfers executive responsibility and authority to Haruki Satomi. I am confident that, taking advantage of a youthful sensibility, he will strengthen the Group’s growth trajectory even further.

Remaining in the positions of chairman and CEO (chief executive officer), I will concentrate on formulating long-term strategies for the Group as a whole. At the same time, I will delegate responsibility for managing respective businesses to the chief operating officer and shift my focus to supervising and guiding business management.

The Pachislot and Pachinko Machine Business will continue generating the majority of the SEGA SAMMY Group’s earnings.
However, the outlook does not warrant optimism given market contraction as the player population declines and the introduction of a series of voluntary regulations. Similarly, the amusement machine sales and amusement center operations areas of the Entertainment Contents Business are unlikely to see significant market growth.

Rather than relying on marked sales growth in these businesses, we will focus on establishing highly efficient business structures, improving profit margins, and generating stable earnings. The Pachislot and Pachinko Machine Business will ensure that it prevails in the struggle for survival as the contrast between winners and losers becomes even more pronounced among manufacturers. In the packaged game, amusement machine sales, and amusement center operations areas, we are steadily strengthening earnings structures. Without slackening the pace, we will continue reform aimed at generating stable earnings.

By investing cash earned through core businesses in a prioritized manner, we intend to expand growth businesses. We will expand the digital game area as a driver of medium-term growth. Meanwhile, we will develop the Resort Business, which is at the prior investment stage, into a driver of long-term growth. We expect integrated resorts in Japan to become a mainstay of this business segment. In preparation for this, the Group is accumulating expertise in the development and administration of integrated resorts through Phoenix Seagaia Resort and a joint venture in South Korea with the Paradise Group.

To show how we will realize the above long-term mission, we established Road to 2020, covering the period through fiscal 2020. The chief operating officer will explain this in greater detail. At this juncture, I would like to elaborate on our ambition to enter the integrated resort business in Japan.

In December 2016, Japan moved one step closer to the realization of integrated resorts by enacting the Act on Promoting Development of Areas for Specified Integrated Resort Facilities (IR Promotion Bill). If an IR implementation bill is enacted, the government will advance to the stage of area and operator selection, who will then be able to prepare concrete plans. The Group has announced its intention to participate in the integrated resort business, which would include participation in the operation of casinos. Opened in April 2017, PARADISE CITY will play an important role in enabling the Group to participate in the integrated resort business.

The addition of entertainment and commercial facilities after the second stage of phase 1 development will be completed in 2018, making PARADISE CITY a truly integrated resort. We will ensure the success of PARADISE CITY and then capitalize on our track record and accumulated expertise to realize participation in the integrated resort business in Japan.

With the adoption of sustainable development goals by the United Nations and the adoption of the Paris Agreement by COP21, companies are expected to contribute more to the realization of a sustainable society through their businesses. I believe that meeting such societal expectations will also be indispensable for realizing our long-term vision. In keeping with the spirit of our Group Management Philosophy, we will enrich people’s lives through our businesses. Also, from a worldwide perspective we will identify global issues that we should give priority to tackling.

Further, we are strengthening corporate governance steadily. Given that we have a shareholding structure for which oversight reflecting the interests of minority shareholders is expected as well as a business format in which strict compliance is required, we have bolstered oversight of business management over the past decade. We appointed highly independent external directors in 2007 and established a management system comprising external directors in 2008. Our efforts to strengthen this system are ongoing. For example, we appointed an additional external director in 2016.

I believe that personnel are paramount for continuous enhancement of corporate value. Without a large pool of talented personnel, we could not produce outstanding intellectual properties and competitive products continuously. Therefore, I view fostering the next generation of personnel and establishing shared values that are consistent with corporate goals as critical tasks, and I am committed to accomplishing them.

In the 13 years since management integration in October 2004, the Group has overcome many challenges by its tireless efforts to reform business structures. Finally, we are poised to enter a phase that will be strongly focused on earnings growth. We will meet the expectations of all of our stakeholders by implementing strategies decisively and taking far-sighted measures to realize long-term, sustained enhancement of corporate value. As we advance into a new phase, we would like to ask our stakeholders for their continued support.