APRIL 2, 2010 • Sega Studios San Francisco that most recently worked on games based on the Iron Man motion pictures, was closed by Sega of America. The closure did not affect the release of  Iron Man 2, which was already completed. The studio started out as Secret Level when it was launched in 1999, and was acquired by Sega in 2006. To better address growth in mobile and online games, Sega Sammy Holdings confirmed on April 2 that Sega of America would address these new market segments and become the Digital Division within the company. Sega Europe would continue with traditional game development. As a result of the restructuring 36 staffers were let go in San Francisco, and 37 more in London.

Impact: It’s becoming obvious that there is a lot of money to be made with mobile, online and social network games. The recent Sega restructuring is another clear signal of how the traditional packaged goods model in the games industry is facing pressure from increasing costs.  Mobile gaming, particularly now in the age of the iPhone, Android and other rich media capable smartphones with broadband internet connectivity, is becoming an increasingly attractive platform. Despite lower gross revenues currently, the high rate of smartphone adoption and higher margins will make this sector increasingly important to established games publishers.  As Sega of America has had few breakout titles in recent months, it makes sense to shift resources where consumers are flocking to spend their gaming hours.