Sega’s latest financial report shows that new game releases make just a third of the revenue that free-to-play games bring in, but the company says it will continue to use money earned by the latter to make “highly volatile new games.”
In a recent Q&A session that was held following Sega’s latest financial report, the company describes why it puts so much time and money into developing new games when free-to-play games make so much more money. The answer is that the new games actually bring in the big bucks, as long as you’re willing to play the long game.
A summary of the session reported by Game Biz, and translated by GamesRadar+, describes how while it appears that free-to-play games make more money, established games increase revenue in the long run. This financial quarter, new games accounted for 87 billion yen (around $556.1 million) compared to free-to-play’s 269 billion yen (roughly $1.72 billion), but the ratio is expected to level out to around 1:2 by the end of the year.
However, these figures don’t tell the whole picture. “Regarding the large discrepancy in revenue between premium games and free-to-play titles, Sega says that high profit margins come from the sale of licensing, and legacy game sales, which originate as premium games,” the report states. “The continuous revenue that free-to-play games provide, becomes a ‘stable foundation’ from which the company can try developing highly volatile new games.” This doesn’t mean that Sega is developing the successor to LSD: Dream Emulator, but that releasing games from new properties is always a risk.
The numbers don’t lie. If we include the revenue of legacy games then premium titles almost match free-to-play’s figures earning 268 billion yen ($1.71 billion) this quarter, and is expected to surpass the total by the end of the year. In addition to this, licensing made the company an additional 133 billion yen ($850 million) last financial year, and is expected to surpass that number before the end of March.
However, Sega recognizes that the majority of this licensing revenue comes from its synonymous blue blur, with Sonic making up 60% of the total, with just 16% coming from sources like Atlus’ and Ryu Ga Gotoku Studios’ exceptionally popular games, Sega is looking to diversify its profitable personalities portfolio. The best way to do this is to develop new hit games with loveable characters.
Rapid-release “Definitive” editions like Persona 5 Royal could put people off buying games at launch, Sega worries, with players “hesitant to make purchases” when their version could become outdated.
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