Sega Sammy Holdings Discussion Points 2019
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SEGA SAMMY HOLDINGS DISCUSSION POINTS 2019 The SEGA SAMMY Group endeavors to reflect the viewpoints of diverse stakeholders in management strategy by providing the Group’s management team with feedback on the various requests and opinions received from shareholders, investors, and other stake- holders. DISCUSSION POINTS 2019 summarizes the SEGA SAMMY Group’s challenges and initiatives as well as other key information excerpted from INTEGRATED REPORT 2019. Overview of the SEGA SAMMY Group’s Businesses Created through the management integration of Sammy and SEGA, the SEGA SAMMY Group is a comprehensive entertainment corporate group that provides entertainment across a wide range of fields. These include pachislot and pachinko machines, game content for digital games, packaged games and other games, amusement machine sales, amusement center operations, animation and toys, and resorts. Pachislot and Pachinko Entertainment Machines Business Contents Business The mainstays of this business are industry-leading pachis- This business segment has businesses in a broad spec- lot machines and a lineup of pachinko machines that we are trum of fields, such as digital games and packaged making ever-more competitive. Boasting one of the indus- games as well as amusement machine sales, amuse- try’s largest development systems, we are developing ment center operations, and animation and toys. appealing new pachislot and pachinko machines that will invigorate the industry as we realize our “Always Proactive, Always Pioneering” company credo. WHOareYOU? Designed & © 2018 Worlds Apart Ltd. All Rights Reserved. Ryu ga Gotoku ONLINE ©SEGA Pachislot DISC UP Ikebukuro GiGO ©Sammy ©SEGA ENTERTAINMENT 5th version: White panels Co., Ltd. Detective Conan The Fist of Blue Sapphire ©2019 GOSHO AOYAMA/ DETECTIVE CONAN Pachinko CR Shin Hokuto Muso Chapter 2 COMMITTEE ©Buronson & Tetsuo Hara/NSP 1983, All Rights Reserved. Approved No. KOK-115 © 2010-2013 Koei Tecmo Games Co., Ltd. ©Sammy Team Sonic Racing ©SEGA Resort Business The Resort Business operates an integrated resort and a resort complex. We are taking a variety of measures with a view to accumulating know-how, ©PARADISE SEGASAMMY Co., Ltd. All rights reserved. heightening our profile, and ultimately participating in the integrated resort business in Japan. For example, we are assigning personnel to South Korea’s first integrated resort, PARADISE CITY, operated through an associate accounted for by the equity method. Also, we operate Phoenix Seagaia Resort, one of Japan’s premier resort complexes. ©Phoenix Resort 1 SEGA SAMMY HOLDINGS Performance Trends Regulatory revision has affected the Pachislot and Pachinko Machines Business, once the mainstay of operating income. In the Entertainment Contents Business, which we have strived to enhance, operating income has grown over the past three fiscal years. Operating Income (Losses) by Segment since Management Integration*1 Billions of yen / % 160 20.4% 120 105.0 80 3.9% 40 13.0 0 –40 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 Pachislot and Pachinko Machines Business Entertainment Contents Business Resort Business Other businesses Head office costs, etc. Operating income margin (FY) R&D Expenses, Content Production Expenses*3 / Net Sales*2 R&D Expenses to Net Sales Ratio Billions of yen Billions of yen / % 20.1 19.2 18.4 18.3 396.7 395.5 384.6 378.0 16.7 366.8 366.9 15.7 347.9 67.6 321.4 323.6 331.6 14.1 67.1 66.6 13.5 62.0 59.2 58.0 53.3 10.8 10.4 45.2 41.5 41.1 ’’10 ’’11 ’’12 ’’13 ’14 ’15 ’16 ’17 ’18 ’’19 ’’1010 ’’1111 ’’12 ’’13 ’’14 ’’15 ’’16 ’17 ’18 ’’19 (FY) R&D expenses, content production expenses R&D expenses to net sales ratio (FY) Profit (Loss) Attributable to Owners of Parent*3 Cash Flows Billions of yen Billions of yen 41.5 87.6 75.2 59.1 33.4 54.9 58.1 54.3 30.7 47.3 27.6 38.0 36.6 37.0 26.4 21.8 24.9 20.2 18.6 16.9 14.8 6.0 –0.7 6.3 –4.7 8.9 –7.6 –7.2 5.3 –20.9 –18.3 –20.4 –22.1 2.6 –29.5 –38.5 –37.7 –35.2 –59.0 –11.3 ’’1010 ’’1111 ’’1212 ’’13 ’’14 ’15 ’16 ’17 ’18 ’’1919 ’’1010 ’’1111 ’’1212 ’’1313 ’’1414 ’’1515 ’’1616 ’17’17 ’18’18 ’’1919 (FY) Net cash provided by operating activities (FY) Net cash provided by (used in) investing activities Free cash flows *1 In fiscal 2015, the Company changed its business segmentation. For the fiscal year ended March 2014 and before, the figures for the Entertainment Contents Business have been calculated by aggregating the results of the consumer business, the amusement machine sales business, and the amusement center operations business. *2 As recognition of net sales was changed (1) from a net basis to a gross basis and (2) from a shipment basis to a delivery basis in fiscal 2016, figures for fiscal 2015 reflect these changes retrospectively. *3 The Company has adopted the “Revised Accounting Standard for Business Combinations” (Accounting Standards Board of Japan (ASBJ) Statement No. 21, issued on September 13, 2013) and has presented “net income (loss)” as “profit (loss) attributable to owners of parent” from fiscal 2016. DISCUSSION POINTS 2019 2 Market Conditions Market Conditions of the Pachislot and Pachinko Machines Business Market Size and Number今後目指すもの of Pachinko and Pachislot Players Since the number of players began trending downward after peaking in 1995, the pachinko and pachislot machine market has been in a phase of long-term contraction. Market Size and Number of Pachinko and Pachislot Players Breakdown of Pachinko Players by Age Group (2018) Based on 9.5 million players 17.4017.90 17.10 16.60 17.20 16.70 15.80 10’s 1.6% 14.50 12.60 11.10 11.50 10.70 20’s 30’s 40’s 50’s 60’s 70’s Women 9.70 9.40 9.00 9.50 11.3% 13.1% 17.7% 13.0% 11.4% 5.3% 26.6% 51.5 52.2 51.8 51.8 51.8 51.2 48.7 49.0 46.7 46.5 47.4 48.5 49.0 49.3 50.4 51.2 Men 32.3 33.9 34.8 33.6 30.1 28.8 28.2 25.9 25.4 25.6 25.0 24.5 23.2 20.4 19.5 20.7 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’17 Pachinko and pachislot market (Trillions of yen) Other leisure market (Trillions of yen) (CY) Source: White Paper on Leisure Industry 2019, Japan Productivity Center Number of players (Millions of players) Source: White Paper on Leisure Industry 2019, Japan Productivity Center Numbers of Pachinko Halls and Installed Pachinko Pachinko and Pachislot Machine Installations, Unit Sales and Pachislot Machines per Pachinko Hall and Annual Turnover 1.15 1.19 418.7 427.7 405.0 411.9 1.11 1.07 387.8 395.4 371.9 378.0 356.2 365.0 0.94 0.91 349.8 0.85 323.1 336.5 337.9 0.84 0.83 0.75 0.71 0.62 0.54 , , 0.45 , 5.82 0.45 0.44 , , , , , 5.47 4.91 , , , , 4.89 4.93 4.49 4.55 , , 4.58 4.51 4.24 4.57 4.58 4.60 4.59 4.57 4.52 4.43 4.30 4.22 4.09 3.87 3.85 3.81 3.45 3.24 2.84 2.43 2.01 1.95 1.86 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 (Forecast) ’17 ’18 433 Number of pachinko halls (Halls) (FY) Pachislot & Pachinko machine installations (Millions of units) (FY) Number of installed pachinko and pachislot machines per pachinko hall (Machines) Pachislot & Pachinko machine units sold (Millions of units) Annual turnover rate Source: National Police Agency Sources: National Police Agency, Yano Research Institute Ltd. (Figures for fiscal 2019 are the Company’s forecast.) Overview of the Regulatory今後目指すもの Revision Enforced in February 2018 With respect to pachislot machines, Estimate for Reaching 300 Tokens Using Pachislot Machine with AT Function*1 changes in voluntary regulations have Playable in a short period of time Limits on gambling elements 6.25 minutes enabled the development of pachislot No. 6 model*2 Maximum Number machines that can be enjoyed in a shorter number obtained: obtained: period of time. As for pachinko machines, it 300 2,400 has become possible to use new settings No. 5.9 model*3 12.5 minutes Number Maximum (multi-stage payout ratio), meaning that obtained: number 300 obtained: 3,000 *1 One game assumes to be finished in five seconds companies can offer players a wider range *2 No. 6 model assumes inclination value is 4.0 of gameplay. *3 No. 5.9 model assumes inclination value is 2.0 One game 75 games 150 games 1,500 games (Maximum value under voluntary regulations) (Maximum) Approval Process for今後目指すもの Pachinko and Pachislot Machines Before launching a machine, manufacturers are required to navigate multiple approval processes in accordance with the Enforcement Regulation of Entertainment Establishments Control Law. 1. Application for prototype testing Security Communications Association 2. Issuance of certification of prototype testing 3. Application for testing Public Safety Commission 4. Issuance of certification of prototype testing in each prefecture 6. Application for approval 5. Contract / delivery Pachislot / Pachinko halls District police station Machine 7.