Could you take us through Sega’s western re-structure?
To put it simply, Sega America and Sega Europe is now Sega West.
The mid- to long-term vision is that Sega’s digital business will be based in the San Francisco office, while packaged goods will be handled by Sega Europe.
The thinking behind this is that the talent pool on the West Coast of America and around San Francisco makes it a more logical place to set up our digital division.
We are now in the process of looking for a senior vice president of digital to be based in the US.
That’s not to say we’re not going to do anything digital until that person joins us. We are continuing to do various things in this space. We’ve had good sales of digital PC products; we’ve had reasonable success with premium DLC for our PC games and recent releases such as Aliens vs Predator. And also we are seeing other Sega IP made available over PlayStation Network, Virtual Console, XBLA and obviously in the mobile arena.
But once this new digital person has been put in place, and he or she has decided how to structure that side of the business, we may see Sega go into a number of different areas.
In terms of packaged goods, the teams based in Chiswick already manage that side of the business for EMEA. This includes all of our direct territory offices – so UK, France, Germany, Spain, Benelux and Australia. But also for our other key European markets. So it makes sense for them to now manage that process in the US.
Because of this, we’ve made a few role changes. I am moving over to the US to head up the packaged side of the business for America, while Jurgen Post will take over my current role as MD for Europe. Jurgen was previously in charge of Sega Benelux.
What can you tell us about the job losses?
Most are aware of the reduction in headcount at Sega Europe and Sega America. I don’t think this is any different to what any other publisher is going through.
This is just ensuring that Sega West can continue its growth plans and continue to make profit over the next three to five years. It is certainly not reflective of our fiscal performance. In Europe we’ve had another very strong year, which finished end of March. A lot of this has been planned for a while. We need to continue to make profit, not just grow our revenues.
Why does Sega feel the need to keep digital and boxed separate?
They are separate divisions but we are all part of the same company. At the moment the digital content coming from Sega is either our existing IP or digital versions of existing products on current formats. But there are many areas of digital that Sega is not involved in. And it probably needs a different set of eyes on it and an increased level of focus.
The two divisions won’t necessarily run poles part, because a consumer in France or Germany or America will still buy packaged goods and potentially download digital copies from us. Our PR and marketing will be done very much together.
The packaged studio focus will be driven by people in the UK and Europe, while the digital roadmap, strategy and the content will be driven by a bunch of guys in San Francisco. The actual execution and implementation will be done by all of the territory teams.
Does Sega think that digital sales will continue to impact retail?
We still think packaged goods is a very important part of our business, it is still the biggest part of our business. There is a lot of talk about digital being of equal value to packaged, or certainly becoming so in the next few years. And we just need to make sure we are at the front of the market leading and not following.
There seems to be a digital goldrush happening at present. Take-Two, Capcom, Codemasters and now yourself have all told MCV you want to be leaders in digital. Is there really room for all of you?
It’s an interesting one. There are many areas of digital. There’s the download of PC products through the likes of Steam and other services, there’s premium DLC, there’s mini-games and full games downloadable via the first party networks, there’s streaming of online games, there’s mobile games, there’s iPhone applications – there is quite a few digital formats and applications out there at the moment.
We are obviously looking at our own business, listening to the rest of the market, engaging with first parties as well as company’s such as Apple. There are lots of arguments that would suggest there is plenty of room to move in digital.
But there does seem to be a bit of a herd mentality at the moment, with everyone rushing to every digital opportunity. We have seen this in the past, about three or five years ago on mobile phones. Mobile gaming used to be quite buoyant and successful at one point for publishers and developers. But suddenly there were too many products on the market place, too much stuff available for free, and it became a declining market – until Apple and iPhone reinvigorated it.
It is difficult thing for myself or anyone to say that absolutely yes, there is room for everyone. But it is still something we need to be a part of and we need to invest in. The strategy is to be at the forefront of that, and not at the back of the queue.
Is your new episodic game, Sonic 4, representative of the direction we can expect Sega to go in?
As you can imagine, we’ve got a locker full of great IP from old Sega formats that we can potentially bring to market.
Strangely, the packaged goods side of the business are screaming out for a packaged version of Sonic 4. So it is interesting to see that some of the titles we plan to release on digital, will have great appeal to the other side of the business.
There are a number of digital releases that we have slated for the next 12 to 18 months, most of which haven’t been announced yet. As you can imagine, there’s a world of old Sega IP that we can bring to market.
When it comes to retail, you’ve had some big hits but also a number of titles that haven’t met sales expectations. Is retail perhaps proving too competitive?
I think it is key to find the least competitive time to release products. For the last two years it has been very difficult for publishers to find a free release window, where they have a great share of voice from a PR point-of-view and enough retail space.
We do try and avoid going head-to-head with key competition products, either from the same genre or other big titles such as sequel IP that could suck a lot of consumer money out of the marketplace. I think when you get the release timing as good as you can get it, with a free three or four weeks, you have good PR and marketing and the products is of good quality, then you have a good opportunity at retail. I believe we achieved that with Bayonetta and Aliens vs Predator.
Looking forward, what are your thoughts on the new hardware Move, Natal and 3DS?
From some of the tech demos we have seen, these products certainly look rather exciting. The first party companies on Move and Natal have given us broad brush indications as to launch timings and potential availability. It certainly feels like there is going to be a be a big opportunity, although we are waiting for E3 to get that next layer of detail.
Sega has had various discussion with Microsoft and Sony. And at E3 we can share more about our thoughts on these products and our potential involvement with them.