Japanese publisher (and House of Sonic) Sega Sammy posted a ¥10.5 billion (approx. US $96 million) net loss for the first quarter of Fiscal 2009 – that's double the losses from a year earlier -- and sales of ¥74.6b, a 22% decline. Despite all this, the publisher managed to beat expectations and subsequently shares were up 13% to ¥1,201 per share, the sharpest increase since its listing as a holding company on the Tokyo Stock Exchange in October 2004, according to Bloomberg.

The pachinko and arcade divisions, as well as the global and Japanese economy, were cited as reasons for the losses. Particularly, the pachinko business saw around US$40 million in losses. The games division increased sales to ¥30.5 billion, reducing the operating loss to ¥4.12b. Overall unit sales were around 6.89 million (3.16m in US, 2.89m in Europe and 830k in Japan), with Mario and Sonic at the Olympics noted as having so far shipped 7 million units worldwide.

It's no wonder Sonic is looking blue these days (har har). Sega Sammy has reported a ¥52.47 billion (US $501 million) loss in its fiscal year 2008, with sales of ¥458.98b (US $4.38b). Comparatively, the company posted ¥43.46b net income (¥95.93b difference) with ¥528.4b in sales (¥69.4b difference) in fiscal year 2007.

According to GameDaily, Sega's entertainment group will be cutting 400 jobs and close 110 facilities. The company is predicting that fiscal year 2009, which ends in March 2009, will see a net income of ¥5b with sales of ¥470b.

Life comes at you fast if you're Sega Sammy. Just a couple of years after increased profits had the company rolling in money, the company today announced that it plans to lose a whopping 26 billion yen (approx. $230 million) this fiscal year. Compared to the previous projection of a billion yen profit for the year, the turnaround comes as a bit of a shock.

The main culprit behind the downturn seems to be the pachinko side of the business, which saw a predicted 85 percent fall in profits, and arcade sales, which switched from a slight profit last year to a 11.4 billion yen loss this year (damn that popular Wii).

To staunch the bleeding, the company will be offering early retirement to 400 employees and closing 110 unprofitable amusement parks and arcades around Japan. Hard to believe the previous incarnation of this company once held the lion's share of the home video game market.

Et tu, hedgehog?

Sonic and Mario may be friendly enough to co-star in the Olympics, but there are some dissenters in the upper ranks of Sega who think Nintendo's console reign will soon end.

"I am a little concerned about the creative depth of the Wii pool. I'm not sure if they will top out in 2008 or 2007," said Scott Steinberg, VP of marketing for the U.S. unit of Sega Sammy Holdings Inc., in an interview with Reuters. "The Wii will start to look really dated in a couple years when developers get more value from the 360 and learn more and more about the PlayStation 3."

Steinberg seems to be equating creativity to graphical horsepower, a notion that runs counterintuitive to Nintendo's party line. "How much value can developers and creative folks get out of this wrist motion two years from now, or 5 years from now, or 10 years from now? ... How can they design products that aren't too derivative of what's already out there?" he said. Those are strong words, though we aren't sure what parallel dimension he lives in where the PS3 and Xbox 360 are immune to a multitude of derivative titles, themselves.

To be sure, Steinberg does not oversee any of the development and production decisions -- he's a marketing guy. However, with Nintendo currently riding high on sales charts and a once-unimaginable friendship existing between the two companies, is Steinberg being short-sighted or prophetic?

[Update: Responding to some of the negative reaction to his comments, Scott Steinberg has shared additional remarks with Reuters Blogs. His new comments can be viewed after the break.]

Dude, we had no idea pachinko was so cool! We knew Japan was all into it, but we always thought it was some boring gambling thing. Turns out it's all a bunch of big people with huge chest muscles beating the crap out of each other in a post-apocalyptic wasteland! Man, when that guy punched the other guy like a hundred times really fast, that was some awesome pachinko! And then the other guy like exploded into a beam of yellow light! And the cool pachinko music was playing, and it totally got us pumped about pachinko!

We know the graphics aren't totally next-gen (look at the cardboard hair), but it must be super tough to render realistic pachinko visuals! We are going to buy Jissen Pachinko/Pachislot Hisshouhou! Sammy's Collection Hokuto no Ken Wii RIGHT. NOW. We're totally ready for some pachinko mayhem! Watch the totally cool pachinko video after the break, and you'll feel the same way! PACHINKOOOOOO!

[Via Siliconera]

Welcome to our weekly feature, Virtually Overlooked, wherein we talk about games that aren't on the Virtual Console yet, but should be. Call it a retro-speculative.

Arkista's Ring is an action/adventure/puzzle game about an elf girl who battles giant scorpions, orcs, and forest-dwelling ninja in a labyrinth-like forest, all displayed in the charming square-tile graphical style popular with games like Zelda. It was released for the NES in 1990, published by American Sammy. Sammy now owns Sega, and Sega and Nintendo are newly in love. So today's game is kind of timely, in an oblique way. Also it's fun to play and stuff.

We brought you the story that an EA producer was not given access to Mii code for My Sims, and that according to him, no third parties were. The situation seems to have changed, because Sega Sammy is using the little guys and gals in its Jissen Pachinko/Pachislot Hisshouhou! Sammy's Collection Hokuto no Ken Wii. It's not the most exciting implementation of Miis, with no Fist of the North Star-style makeovers or actual in-game avatars-- in fact, it consists mainly of a Mii portrait tied to a character profile.

The game uses Nintendo Wi-fi as well, but for online rankings, which hardly counts as online play. We aren't ready to call that an implementation of third-party online play yet.

Coming from a licensed pachinko game, proof that it is possible for third parties to use Miis. Sega does what E ... Ain't?

We might sound sarcastic, but we're happy to see different kinds of games come to the Wii. This latest title from Sega Sammy is a collection of pachinko and pachislot (pachinko plus slot machine) simulations, called (deep breath!) Jissen Pachinko/Pachislot Hisshouhou! Sammy's Collection Hokuto no Ken Wii (Fighting Pachinko/Pachislot Victory Way! Sammy's Collection Fist of the North Star Wii).

It's based on the same popular Sega Sammy pachinko games that have been released on the DS, PS2, and PSP, and contains a bundle of pachinko and pachislot boards. And, of course, it carries the license of the classic, brutal Fist of the North Star manga and anime series.

This one is interesting for the same reason a lot of Wii games are: Wiimote controls. Apparently, you can use the Wiimote steering-wheel style to control the speed of the dropping balls. We admire the novel Wiimote use! It also has online ranking, in case competition motivates your pachinko-playing.

Jissen Pachinko/Pachislot Hisshouhou! Sammy's Collection Hokuto no Ken Wii (Fighting Pachinko/Pachislot Victory Way! Sammy's Collection Fist of the North Star Wii) comes out on May 24th in Japan, and probably never anywhere else. Any pachinko fans here? Do any of you import these kinds of things?

The Sega Sammy group has experienced a 23 percent drop in profits within the first nine months of the financial year, reports Gamesindustry.biz. Net income (stay with us here) went down from $526 million (¥63.49 billion) to $409 million (¥49.38 billion), with sales dropping by 4 percent to $3.35 billion (¥404.29 billion). The current financial state of the company isn't nearly as interesting as the reason given for a drop in profits -- pachinko machines proving less than popular.

Pachinko machines are, of course, a notable aspect of Japanese gaming that Sammy brought along when it romantically joined hands with Sega. Though the company's net profit forecast remains unchanged for the full year, it's easy to observe the parallels between Sammy dragging profits down and Sammy dragging Sega down as a developer. The Ono-like arrival of the Pachinko maker is considered by many to be the turning point for what was once a brilliant and innovative developer. Then again, what good are brilliance and innovation when you can't pay the bills?

Sega Sammy and Hello Kitty toymaker Sanrio have agreed to form a "strategic alliance" that will likely re-introduce the anthropomorphized feline to video game platforms. To date, Sanrio has worked with a mess of game publishers -- ranging from Namco and THQ to lesser-known companies like ValuSoft and Typhoon -- to release a haphazard catalogue of Hello Kitty titles. The partnership with Sega Sammy will likely spur a more aggressive and consistent campaign that could also include a line of pachinko machines.

While Hello Kitty remains a globally recognizable brand, its popularity has no doubt diminished since the late 90s. With an uninspired history in the games medium, Sega Sammy's gonna have to spend some solid hours submerged in the think tank before attempting a jump-start.

More good gaming biz news keeps rolling in, though this silver cloud comes with a gray lining. Sega Sammy (more commonly known as just Sega) announced a 52% increase in profits of $322 million for the first six months of the year, compared to $211 million last year. Before gamers stop and cheer, the profits aren't helped any by the actual video game division.

Sega Sammy's game division was hampered by R&D costs resulting in a $57 million loss despite an increase in software sales. The full year forecast is also lower due to problems with the company's pachinko division. This just goes to show you how minimally actual video games impact the company.

Video games only make up 14% of Sega Sammy's $2.4 billion in sales. Since they're pulling a loss, holding onto the game division may start looking like a bad idea. Will Sega be able to make a transition into the next-generation era, or will they start feeling the pressure? No other company is showing similar financial difficulties moving into 360 and PS3 development. No company can last forever, but let's hope Sega manages to stay in the game a bit longer ... we still have a soft spot for the Dreamcast.

Yuji Naka, the original programmer behind Sonic the Hedgehog and arguably the most influential man at Sega (next to Yu Suzuki, of course), is rumored to be leaving Sega.

Citing sources "close to Sega," Next Generation claims that the influential leader "is planning to set up his own studio." If true, this action would mirror those of other game industry greats such as Tetsuya Mizuguchi (who founded Q Entertainment) and Hironobu Sakaguchi (who started Mistwalker).

Unfortunately, this kind of rumor is difficult to confirm as you don't know for sure whether someone's leaving a developer until he's actually gone. With all the organizational changes at the company, however (especially since Sammy bought Sega), such a move wouldn't be too surprising. We just hope the next-gen sequels to Sonic are in good hands.

See also:

• Next-gen Sonic to be "re-invented" for PS3 and Xbox 360
• Rumor: Sonic coming to Revolution
• DS: Sakaguchi & Co. working on new RPG
• Lumines sales top gold status