Sega to cancel games, lay off hundreds

Written by Tim Smalley

February 11, 2009 // 1:04 p.m.

Tags: #arcade #cancel #cancellations #closures #development #games #layoffs #recession #sega #workforce

Sega has announced plans to cancel a number of games in development, close more than a hundred arcades and lay off approximately 18 percent of its workforce.

The layoffs would amount to around 560 employees worldwide and are expected to come into effect before the end of the company's fiscal year ending on 31st March 2009. The company expects these workforce cuts to save around $55 million in labour costs in its next financial year.

The publisher's research and development budget for arcade and consumer titles will be cut by around 20 percent as well - it will achieve this by consolidating its portfolio of titles being developed and also increasing the ratio of in-house developed titles to those currently outsourced.

In other words, this probably means Sega will cut the number of outsourced game development projects significantly while keeping in-house titles reasonably stable. But that's not to say there won't be development cutbacks internally as well, as suggested by the major workforce cuts.

Finally, Sega currently owns and operates 450 videogame arcade halls in Japan - 110 (or 25 percent) of these will be closed because they show "poor future potential and profitability," according to a statement released by the publisher.

The reason for these cuts is the company's worse-than-expected financial performance this year. Earlier in the year, the game publisher expected to turn a profit of around $55 million, but it now expects to end up making a $237 million loss - a massive difference of $292 million. It blamed the poor performance on weak Japanese game sales and the weak yen-to-dollar exchange rates. It's not all doom and gloom though, as the loss it expects to post this year will be much less than the $577.4 million net loss it recorded in its last fiscal year.

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