Sega is to sell a controlling share of its arcade business to an outside buyer. The sale is happening thanks to reduced revenue due to the ongoing COVID-19 pandemic, with Sega expecting to make a significant loss this year as a result.
Why is Sega selling its arcade business?
According to an announcement made by Sega, its Amusement Center operations have been "strongly affected" by COVID-19, with footfall in its arcades declining "remarkably". This lack of business has resulted in a "significant loss", leading to the company needing to make reductions in expenses to the tune of around 15 billion yen. After considering "various options" in order to adapt to the changing market and the COVID-19 crisis, Sega made the decision to sell its arcades to an outside buyer.
The company buying the arcade shares is Genda, a company that Sega says "has a strong desire" to expand its arcade and Amusement Center business. Around 17,882 shares will be sold to Genda, which constitutes roughly 85% of the entire value of the business. This will leave Sega with just a 15% stake. According to the above announcement, the company expects to lose around 20 billion yen in "structural reform expenses" as a result of this transfer.
What does this mean for Sega?
This news comes as another blow to Sega's arcade operations. Earlier this year, the famed Sega Building 2 arcade located in Tokyo's Akihabara district closed down, likely due to dwindling revenues exacerbated by the COVID-19 pandemic. Although the studio will lose money as a result of this transfer, some analysts have suggested that there's a way it could work out positively for the company.
Effectively, by dropping a business that's heavy on real-estate overheads and costs - and one that's notably struggling due to the pandemic - the Japanese studio is streamlining itself. This could look very appealing to companies like Sony and Microsoft, who are currently looking to buy up gaming studios. Buying Sega could shore up the exclusive libraries for either company in the coming console generation and beyond.
What do you think about Genda buying up these arcade shares? Let us know in the comments below!