The End for Sega Video Game Arcades

Akihabara News (Tokyo) — The announcement earlier this month that Sega Sammy Holdings had decided to sell most of its subsidiary Sega Entertainment to Genda Inc. signified the end of an era, and it is likely to significantly reshape the face of the Akihabara district of Tokyo.

Although this issue was not specifically addressed in the companies’ statements, it’s reasonable to assume that Genda Inc., which will hold an 85.1% stake in Sega Entertainment by the end of the year, will rebrand the nearly two hundred amusement facilities it has obtained under the deal from the iconic bright red Sega style that currently exist into video game and entertainment facilities with their own Genda logos.

Sega Sammy explained that its motivation for letting go of its arcades was very much a financial matter, commenting, “As the amusement center operations area in the entertainment contents business is strongly affected by Covid-19, utilization of facilities has declined remarkably, and a significant loss was recorded [in the April to June financial period]. In addition, despite the recent recovery trend, the situation remains uncertain.”

Although gross sales at the Sega Entertainment arcades have actually risen somewhat in recent years, profits had begun to sink into losses even before the impact of the pandemic. In the 2017-2018 fiscal year, the segment had recorded a profit of ¥804 million (US$7.8 million), but in the fiscal year that closed this March, it recorded ¥915 million (US$8.9 million) in losses.

Moreover, it may be that the main attention of the Sega Sammy group as a whole has decisively shifted away from video game arcades (not expected to be a high-growth industry) and toward its resorts and casino businesses, which company leaders have repeatedly stated is their direction of the future.

That’s very much not the case with the much smaller Genda, hitherto an arcade game rental firm, which appears to be quite enthusiastic about making its big move into Japan’s video arcade industry.

In their own statement on the deal, Genda explained, “Sega Entertainment operates 199 entertainment facilities (including 193 amusement facilities) nationwide with the mission of creating smiles and positive feeling through its ‘places for fun’… We will revitalize the industry and create an amusement industry where everyone is involved, including manufacturers, operators, and end users, and aim to create ‘even more fun.’

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