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Japan's smartphone game makers seek profits elsewhere

Publication Date : 21-07-2014


Three major creators of smartphone games—DeNA Co., Gree Inc. and Mixi Inc.—are rapidly diversifying their operations, as their revenue from games has peaked and they seek to escape their dependence on that market.

In mid-August, DeNA will launch a genetic testing service for individuals. The company will sell testing kits over the Internet and check customers’ saliva for such things as their susceptibility to so-called lifestyle diseases.

It also announced in December last year the release of an application that allows users to read manga on their smartphones. Content is initially free, but a fee is charged for reading past works in bulk.

Gree launched a service in May to accept sales of used designer goods online. The service is being conducted in cooperation with Komehyo Co., a seller of recycled luxury items, which will appraise and purchase the items. Gree also began a same-day hotel reservation service in June.

In both cases, Gree expects to garner revenue from commissions.

Last year Mixi launched the nohana app, which creates albums from photos taken with users’ smartphones. The service will also make printed books from online albums, with some fees involved.

To members of younger generations used to using smartphones, it suggests such uses as sending family albums to their parents.

Mixi was a pioneer in the field of social networking services, and last autumn it purchased an event operations company and began Machicon, a service providing singles with places to meet.

The companies’ smartphone games allow players to interact with other users on the Internet as they play. The games themselves are free, but many involve paying several hundred yen per “boost,” special features allowing players to advance more quickly.

However, the number of users who pay such fees has dropped, following the decision by the Consumer Affairs Agency that the “kompu gatcha” lotterylike features in some games violated the law against unjustifiable premiums and misleading representation.

This was a significant blow to DeNA and Gree, who derive more than 80 percent of their total sales from games.

In fiscal 2013 ending in March, DeNA saw the first year-on-year drop in its sales and after-tax profits since the company went public.

Gree expects to post year-on-year declines in sales and profits for the business year ending in June for the second year in a row.

Smartphone games produced by new software companies, including Puzzle & Dragons, are gaining popularity. Both DeNA and Gree also grew rapidly on the strength of their games for traditional cell phones, and they were late in adapting to smartphones.

Under pressure from LINE and other companies, Mixi has seen users of its main social networking business decline. It was able to recover through success in the smartphone game market, but its earnings are now dependent on this field.


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