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Sega Makes A Profit In Q2 2012 (But Not From Video Games)

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Sega has returned to profit - but not thanks to video games | AP

Sega has returned to profit - but not from video games.

The former console giant, which until 2001 competed with Sony and Nintendo for supremacy in home gaming but now makes software for other platforms, made £20.6m in profit during the last three months.

The Tokyo-based company took in £567m in revenue, and successfully reversed the £18m loss it made in the same quarter last year.

But anyone toasting the success of Sega should know it wasn't Sonic The Hedghog who made the difference. In fact sales of 'packaged games' (IE disks and cards) are low, and falling lower.

And while Sega lost less money on video games this quarter than last year (£12.5m loss, down from £31m), it remained a drag on its overall profits.

Sega actually makes most of its money (£567m in revenue for the quarter) from selling pachinko arcade machines, which are a Japanese type of arcade slot machine often used for gambling.

In Japan arcades full of the machines are almost ubiquitous - and often baffle tourists.

The idea of the game, which has been around for at least 80 years, is to shoot balls into a machine which then fall through a network of pins. If the balls fall into the right slots, more balls are released, which can then be exchanged for prizes or cash.

The annual revenue of pachinko machines in Japan is estimated in the hundreds of millions of dollars.

Sega said that its pachinko sales were strong, but that cost cutting and increasing download sales of its games were also making a difference.

"We will cut fixed costs and concentrate efforts on sales of strong titles that are expected to continue posting solid earnings," the company said.