Cast your minds back, dear readers, to the start of the year. We reported that Sega would sadly be leaving the arcade market, selling the remaining 14.9% of its Sega Entertainment division to Genda Inc with the division being subsequently rebranded as ‘Genda GiGO Entertainment’.
Now, it looks like the arcade business might be starting to flourish under its new ownership, though not without a bit of jiggery pokery in the accounting department. See, Genda GiGO Entertainment has posted a profit of 3.175 billion yen in its most recent financial report, which is quite the turnaround when you compare it to the 2.308 billion yen loss that was reported the previous year when Sega was still holding the reins.
A 5 billion yen turnaround is impressive, to be sure, but according to Sora News 24, Genda began a mass re-evaluation of its arcade assets and took in what’s known as “impairment loss”, which essentially means that an asset’s fair value is deemed to be less than the full market value on the balance sheets. This then means that the depreciation costs against the assets are much lower than they would have been prior to the takeover, meaning profits can be achieved much more easily.
So while the profit recorded by Genda is good, it’s doesn’t necessarily mean consumers are suddenly flocking to the arcades. To put it in perspective a bit, when Sega was running the arcade business, its fixed assets were listed at slightly less than 24.8 billion yen. In comparison, after Genda’s re-evaluation, the fixed assets were valued at 11.5 billion yen. So, not quite a miracle success story. Regardless, any profit is positive, and it could signal a turn in fortunes for the arcade business in Japan going forwards.
What do you make of Genda’s strategy in achieving profit in the arcade space? Reckon it can maintain its good fortunes? Share your thoughts in the comments below.
