Japanese Online Gaming Titans Down But Not Out

The last 3 or 4 years has been a tumultuous period in Japan for the burgeoning industries of social media and online gaming. So what does the future hold?

The last 3 or 4 years has been a tumultuous period in Japan for the burgeoning industries of social media and online gaming. Japan has such a long and dazzlingly creative history of video game production and the incredibly fast internet connections here make it the perfect country to steer the evolution of online gaming. In June of this year, Jerome Watanabe wrote about the phenomenal proliferation of the various SNS themed applications by Korean company LINE in Japan. Over the past 18 months, the popularity of LINE has been unbelievable, with pretty much everyone under the age of 50 using it not only as a text messaging service but also, thanks to unlimited internet usage as standard on Japan mobile phone carriers, for all their phone calls. Also during this time, Facebook and Twitter have gained a strong market presence but before them, two of the dominant players in the SNS market here also incorporated online games as an integral part of their marketing strategies. Gree and Mobage are (or perhaps more accurately were) household names in Japan with most young people using them and the rest of the population being exposed to their bombardment of commercials on TV, online and in the street. The history of Gree is a bit more of a fairy-tale than that of Mobage because of Yoshikazu Tanaka, who started the company in 2004 as a hobby. In 2010, at just 33 years old, he became Asia’s youngest self-made billionaire.

The rise in popularity of Gree was tremendous, right up until the end of 2011, at which time they had around 29 million users. It could be said that Gree pioneered the concept of playing video games with other people on mobile phones with the 2007 release of their game Tsuri-Sta (Fishing Star), which the company claims was the world’s first mobile social game. It was also with this game that Gree cemented their business model of selling “virtual items” that could be used in games for real money. These digitized products used within the gaming world were extremely profitable for the company, but they have also been very controversial and in May of 2012, Mr. Tanaka is said to have lost $700 million in one day when Gree stock plunged after the government announced that it would be putting an end to what was essentially a virtual slot machine housed within Gree games.

Both Gree and DeNA stock has been in the Japanese financial news a lot in the last 12 months, and in November of 2011, Gree shares peaked at 2,840 yen and got as low as 769 yen in late July. What makes this drop seem even more dramatic is that from November of last year through to May 2013, the Japanese stock market had a stunning rally that saw it double in value, and some stocks going up several hundred percent.

There was a ray of hope on August 14 when Gree announced a 7.7 billion yen profit for the fourth quarter of 2012, dramatically beating their forecast and sending their stock up by 13% to close at 963 yen on the following day. It would seem that Gree and DeNA are still both fighting very hard to get back to their former glory and both companies have acquired several other foreign online gaming operations as a base for overseas expansion. In July, Gree also announced that it had gained licensing rights to make a game for smartphones using Marvel comic book characters, which has been slated for release in Autumn.

Considering all this, Gree’s corporate message, that is proudly written on its website, proves to be both prophetic and amusing:

“New challenges don't always end in success. There are times when we cannot achieve our highest aims. But as long as there is a slight possibility, we will ceaselessly continue our efforts.”

 

Ben Olah is originally from Sydney but he has lived in Japan since he graduated from university. He says that, even after having lived there for many years, he never ceases to find Japan and its people to be a source of amazement.