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Sega cancels games, cuts staff

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Hard times in the video game industry are catching up with Sega.

The publisher has slashed its financial forecast for the current fiscal year, announced plans to cut its staff in the U.S. and Europe and canceled an unknown number of games.

Sega said it expects to report a 7.1 billion yen (approximately $85 million) loss for the fiscal year, which ends on March 31. Calling the current economic climate "challenging" and noting its expected loss was "extraordinary," the company said it plans to move more into the digital content development space.

Sega hopes the moves will position the company for profitability down the road.

Sega didn't divulge details on the games it's planning to shelve, nor did it indicate how many staffers it plans to let go. The statement, however, implies that the company plans to focus less on boxed software and look more towards downloadable titles on Xbox Live Arcade and PlayStation Network as well as the mobile space, where it has seen some success in the past year.

[Related: Best Buy sales, restructuring disappoint]

Some long-standing Sega games appear to be safe, though. The company indicated titles based on strong IPs such as Sonic the Hedgehog, Football Manager, Total War and Aliens are still in production, though there may be fewer than originally planned.

Sega has a number of games under development these days. It's publishing Alien: Colonial Marine from Gearbox Software and the beat-'em up Anarchy Reigns. Several other titles were also in the works for this year's E3, which takes place in just over two months. It's likely that many of the cuts came from those unannounced games.

The bigger question is what happens to franchises that have small, but loyal fan bases. For now, the fate of titles like Yakuza, Fallen Realms and Valkyria Chronicles will have to hold their collective breath and hope for the best.

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