SEGA SAMMY Management Meeting 2018/11/30 SEGA SAMMY HOLDINGS INC. Pachislot and Pachinko Machine Business Market Environment (Pachislot and Pachinko) パチスロ・パチンコ設置台数Pachislot / Pachinko installations (Thousands(千台) of units) 1.5 3500 パチスロ・パチンコ年間回転率（回転）Pachislot / Pachinko machine annual turnover rate (Times) Installations keep stable 1.5 1.11 1.07 1.19 Turnover rate is declining 3000 7,000 1.15 0.93 1.13 0.92 1.11 1.07 0.88 0.89 0.87 1.0 0.860.95 0.94 0.96 0.82 0.94 0.91 0.85 0.86 0.85 0.84 0.83 1.0 0.70 0.75 0.75 6,000 0.63 0.71 2500 0.62 0.57 0.58 0.54 0.52 0.45 0.38 0.5 0.36 0.5 2000 5,000 4,754 0.30 4,330 0.0 4,000 1500 0.0 (0.5) 3,000 1000 (0.5)(1.0) 2,000 500 1,000 (1.5) 0 (1.0) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 0 （予想） (2.0) 2000 2002 2004 2006パチスロ設置台数（千台）2008 2010パチスロ年間回転率（回転）2012 2014 2016 2018 (Forecast)（予想） 2 Market Environment: Around previous regulatory revision (Pachislot) パチスロ設置台数（千台）Pachislot installations (Thousands of units) パチスロ年間回転率（回転）Pachislot machine annual turnover rate (Times) 1.11 Both turnover rate and installations increased 3500 1.07 0.93 0.92 1.0 0.88 0.89 0.87 0.86 0.82 0.85 0.86 3000 0.75 0.70 0.63 0.58 0.57 0.52 2500 0.5 0.36 Sep, ‘09 0.30 2000 Launch of “Pachislot Psalms of Planets 1,660 Eureka Seven” 0.0 1500 1,323 1000 (0.5) 500 0 (1.0) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 (Forecast) （予想） 3 Market Environment: Around previous regulatory revision (Pachinko) Turnover rate increased パチンコ設置台数（千台）Pachinko installations (Thousands of units) 1.5 パチンコ年間回転率（回転）Pachinko machine annual turnover rate 1.37 (Times) 1.30 1.31 5000 1.14 1.07 1.09 1.06 0.98 0.97 0.98 0.92 1.0 0.84 0.82 4000 ‘04 0.69 0.68 0.65 3,431 Regulatory 0.54 0.51 revision 0.43 0.5 3000 2,670 0.0 2000 (0.5) 1000 0 (1.0) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 (Forecast) （予想） 4 Market Environment: Revision of voluntary regulations Remove upper limit of No. of obtained medals Shorten play time Pachislot per game Remove 65% Can develop machines upper limit in with high probability playability Pachinko continuous rate change continuous rate of probability change Expand scope of 5 Strength of Sammy (IP) Owns multiple popular series ＜No of titles/Total sales units (Total of Pachislot and Pachinko machines)＞ Hokuto No Ken 31 titles Approx. 2,870K units ALADDIN 14 titles Approx. 560K units Beast King 14 titles Approx. 500K units SOUTEN-NO-KEN 11 titles Approx. 450K units Hokuto Muso 4 titles Approx. 160K units Eureka Seven 3 titles Approx. 130K units Bakemonogatari/Nisemonogatari 9 titles Approx. 120K units CODE GEASS 3 titles Approx. 60K units ※No. of titles includes spec changed ver. 6 Strength of Sammy (Development resources) No. of development staffs (comparison with other manufacturers) 437 More than 400 development staffs Top-class scale among the industry Source: “Trend and Market share of Pachinko manufacturers 2018” A B C D E F Sammy from Yano Research Institute Ltd. 7 ZEEG (Business model) Integrated support covers both ZEEG hardware and software Supply hardware Supply software development kit (ZSDK*) Supply environment for Deliver hardware on a software development unit and machine cabinet bases Reducing procurement costs Suppliers Development and production by each manufacturer by reuse Reuse that taking advantage of Universal Buy-in hardware Sammy Other economies of scale on a unit and Entertainment manufacturers machine cabinet Increase the reused component ratio bases and the ratio of cabinets use Trade-in by each Sales from each Reduce procurement costs for buy-in on manufacturers manufacturers component bases Pachinko Hall ※ZSDK：ZEEG amusement machine Software Development Kit 9 ZEEG (Variation of models) Selling 5 types of proto type 10 B to C Activities To build future fans More than 16,000 fans attended “Universal Carnival” x “Sammy Festival 2018” 11 Entertainment Contents Business Amusement Machines Sales and Amusement Center Operations Transition of market scale of Amusement center operation Transition of sales by operators Sales of operators tend (Billions of Yen) 485.9 to recover after 2014 422.2 - Favorable performance in prize field - Contribution of the sales from “KanColle Arcade” and etc. - Parts of Entertainment Establishments Control Law revised and interpretation base has changed. (2016/6) Source: Amusement Industry Survey 2017, JAIA 2014 2017 14 Expansion of operators business YoY sales ratio of existing domestic amusement centers Strengthening profitability trough the 104.5 % enhancement of operation in prize field 100% Train full-time leaders for operation 94.1 % Supply official operational manual Improved accuracy in buying-in of prizes 2014/3 2018/3 15 Promote the collaboration with other operators Co-development and sales of Unify the specs of IC card for terminal for multiple arcade game electronic money for amusement centers Common symbol Enables players to use the same card for corresponding arcade machines of each company 16 Utilization of external IP ・KanColle Arcade ・Fate/Grand Order Arcade 17 Packaged Games Improve and maintain product quality Transition of average score in external review site Rated more than 70.0 for average of all titles 75.5 consecutively from 2014 Titles received high score in 2018 (FY19) Titles Release Date Score 67.9 Football Manager 2019 2018/11/8 86 Valkyria Chronicles 4 2018/9/25 85 Two Point Hospital 2018/8/29 84 Sonic Mania Plus 2018/6/17 87 Yakuza 6: The Song of Life 2018/4/17 83 2011 2012 2013 2014 2015 2016 2017 19 Expansion of title lineup Transition of No. of Sega titles on Steam (units) 249 Numbers of titles on Steam is increasing 121 2011 2012 2013 2014 2015 2016 2017 20 Distribution of old titles (Example) Realize long tail sales with Chronicle of Total War series sales continuous distribution via Steam 2005 2018 SHOGUN: Total War Medieval: Total War Rome: Total War Medieval II: Total War (2006) Empire: Total War (2009) Acquisition of Creative Napoleon: Total War (2010) Assembly Total War: Shogun II (2011) Total War: ROME II (2013) Total War: Attila (2015) Total War: WARHAMMER (2016) Total War: WARHAMMER II (2017) 21 long sales term long Strategy Transition of sales number of Total War: WARHAMMER Steam in WARHAMMER War: Total of of sales number Transition 16/4 Release DLC Regular launchesof contents additional (DLC) DLC DLC for raising DLC DLC Winter Promo ( example) MWNL Promo WH Promo profit from 17/4 Summer Promo GW Promo DLC CA Promo Regular promotional salesafter release Week Promo Autumn Promo Winter Promo MWNL Promo Week Promo 18/4 Skull Promo Summer Promo Franchise Promo 22 Sales of 3rd party titles and licensing in titles (Thousands of units) 2,000 Japan Asia (except Japan) Support earnings 1,600 with the sales of 3rd party titles 1,200 800 Commenced self-distribution in Asia from March 2017 400 0 15/3 16/3 17/3 18/3 19/3 (Forecast) ※3rd party titles are not included in sales number of Sega titles ※Licensing in title: Includes SEGA publishing titles 23 Trend of download sales ratio in Japan Download sales ratio of Sega titles in Japan Download sales ratio is also increasing in Japan 30% 16/3 17/3 18/3 19/3 (2Q) 24 Present issues in Digital Games Area Transition of top 3 titles in quarterly sales (Digital Games) Top titles remained to be occupied by the titles operated over long-term 17/3 18/3 19/3 Titles Service launch Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 PHANTASY STAR ONLINE 2 Jul, 2012 1st 1st 1st 1st 1st 1st 1st 1st 1st 1st Puyo puyo!! Quest Apr, 2013 2nd 3rd 3rd 3rd 2 2 3rd 3rd 3rd CHAIN CHRONICLE 3 Jul, 2013 2 3rd Hortensia Saga Apr, 2015 3rd 2nd 2nd 2nd 3rd 3rd SHIN MEGAMI TENSEI Jan, 2018 ー ー ー ー ー ー ー 2nd Liberation Dx2 SEGA Pocket Club Manager Apr, 2018 ー ー ー ー ー ー ー ー 2nd BORDER BREAK Aug, 2018 ー ー ー ー ー ー ー ー ー 2nd ※Red font = new titles Numbers of titles newly launched in each quarter 2 1 1 2 1 0 1 1 3 1 26 Delay in launch of new titles Actual Title A Planned release 7 months release Launch of new titles Tends to delay Actual Title B Planned release 6 months release chronically Actual Title C Planned release release 3 months Title D Planned Actual release 13 months release 27 Transition of overseas sales ratio (Digital Games) Sales (Billions Yen) Composition ratio of overseas sales 140 50.0% 12.0 45.0% 120 Overseas sales 10.3 40.0% transitions at 100 35.0% low level 30.0% 80 25.0% 60 19.5% 20.0% 13.7% 15.0% 40 10.0% 20 5.0% 0 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 17/3 18/3 19/3 28 Reorganization of SEGA Games (Summary) Fundamental reorganization Consumer video games/PC games related business sectors Entertainment Content HQ Integrated business sectors for mobile games and consumer video games/PC games Mobile game related → Consolidate IP roll-out capabilities business sectors → Narrow down the number of mobile game titles to develop/operate Development Facilitation HQ Turned project progress and budget management functions into an independent division → Strengthen the schedule management → Establishment of management environment aiming for improving accuracy 29 Progress IP-centric strategy Roll-out on Create / grow IP × multiple platform × Global roll-out IP Platform Japan Asia Americas EMEA Console PC New IP Package Mobile Existing IP Console ・Current ・Idle PC ・External Operation Mobile 30 Example: Titles from Ryu ga Gotoku studio Create/grow IP Roll-out on Global roll-out multiple platform Original series Ryu ga Gotoku 1-6 Yakuza 1-6 Kurohyo: Ryu ga Gotoku Shinsyo, Spin-off Yakuza: Dead Souls Ryu ga Gotoku OF THE END, etc.