Analysis: Eastern promise

While the Japanese population is highly receptive to games of all sorts, there have been few signs of the market embracing the social casino genre.

Social gaming is undoubtedly a lucrative industry in the Far East. While Zynga struggles in the US market, Japanese social gaming heavyweight GREE currently has a market cap of $4.7bn – more than twice that of its US counterpart. However, despite this region’s thriving social gaming sector, social casino operators are yet to firmly establish themselves in this market, begging the question why more companies have not tried.

Crackdown

Many may have been deterred by a ban on a prize mechanic in May this year, which prompted fears of a crackdown on gambling-style games. While social casino operators resolutely deny that they offer gambling in any shape or form, it seems the Japanese Consumer Affairs Agency begs to differ. The agency initiated a crackdown on kompu gacha, a game mechanic wherein payers could win a virtual prize and progress in a game after wagering a stake of ¥300 ($3.74), decreeing that it was too similar to gambling and ordering all operators to comply.

The effect was immediate, with GREE’s share price dropping 23%, though the head of its corporate division, Ryutaro Shima, claimed that “even if kompu gacha is abandoned, it won’t rock the foundation of GREE”. Despite Shima’s  confidence that the ban would not affect the company, Macquarie Securities analyst David Gibson suggested that net income could drop 18% as a result.

But Japan-based social gaming consultant Dr Serkan Toto denies that this is part of a wider crackdown on social casino. Dr Toto says that it was the lack of transparency with which the kompu gacha mechanic was being operated which prompted the government’s actions.

“The interesting thing about the kompu gacha ban is that the government was not opposed to the ‘mystery box’ element, which is obviously a game with an element of chance, but it was the fact that players had to win several items in sequence to win the grand prize, so the mechanic was too similar to bingo and lotteries,” he explains.

“This doesn’t mean the government is opposed to social casino titles – if you want to play poker, blackjack or slots, you can. The government doesn’t mind these social games, and GREE, who was affected by the kompu gacha ban, already offers poker.”

Lost in translation

This may offer hope that the ramifications of the ban may not affect social casino operators, but Dr Toto maintains that any company looking to enter the Japanese market will struggle, due to the nature of the sector. Gambling-style games just don’t have the same traction as they do in the European and US markets.

“The biggest moneymakers in the casino genre are pachinko games, which have a slot mechanic within them, but these are very simple games and more approximations of real pachinko games. Poker and slots are present in the market but virtually unknown,” he concludes.

Dr Toto adds: “I think that the Japanese social gaming market is very different from that of the US or Europe. In Europe and America, casino games are moneymaking machines, but in Japan the market is dominated by the ‘traditional’ social genres, such as farming and puzzle titles.” Ultimately, while there remains glimmers of hope such as the booming pachinko sector, it seems the appeal of social casino may have been lost in translation.

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