Japan's games industries

(c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s game makers and markets (Version 30) June 21, 2015
JAPAN’S GAMES INDUSTRIES
Version 19 of August 13, 2013
by Gerhard Fasol PhD, Eurotechnology Japan KK
http://www.eurotechnology.com/
fasol@eurotechnology.com
Latest revision available from: http://www.eurotechnology.com/store/jgames/
1
JAPAN’S GAME MAKERS
AND MARKETS
Version 30 of June 21, 2015
by Gerhard Fasol PhD,
Eurotechnology Japan KK
http://www.eurotechnology.com/
fasol@eurotechnology.com
This is a preview with selected pages.
Download full report from:
http://www.eurotechnology.com/jgames/

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2

JAPAN’S GAME MAKERS AND MARKETS REPORT -VERSIONS
3
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Version Date Comments
1
2
3
4 September 5, 2005
5 September 2, 2008
6 October 7, 2008
7 October 14, 2008
8 October 14, 2008
9 October 15, 2008
10 January 9, 2009
11 February 14, 2009
12 May 25, 2009

4
13 July 11, 2009
14 July 13, 2009
15 July 19, 2009
16 July 20, 2009
17 July 27, 2009
18 August 18, 2009
19 August 13, 2013 rewritten
20 October 1, 2013 rewritten, ﬁnancial analysis added
21 October 6, 2013 compare new vs old game co’s.
22 Dec 13, 2013
23 April 7, 2014 company coverage added
24 April 9, 2014 company coverage added

5
25 May 10, 2014 LINE, Colopl, and more added
26 May 11, 2014 corrections, market caps update
27 May 29, 2014 Casino law, Konami Gaming
28 June 1, 2015 ﬁnancial updates, 25 new co’s
29 June 9, 2015 update new companies
30 June 21, 2015 update new companies
31
32
33
34
35
36

EXECUTIVE SUMMARY -
JAPAN’S GAME MAKERS AND MARKETS
6
•Japanese companies have created many of the global game genres, platforms and characters, and represent a US$ 50
billion industry sector - far higher still if Pachinko and Pachislot are included.
•With consumer focus shifting from dedicated game platforms such as Nintendo’s Wii or DS, Sony’s Playstation or
Microsoft’s Xbox to smartphones, Japan’s traditional game companies are facing unprecedented disruption, as shown in
the ﬁgure above: 24 new game companies combined exceed and achieve almost double the net income of all 8 traditional
game companies in operating income.
•Most established game companies, including Nintendo and SONY, see an erosion of business, while at the same time
new a large number of new game industry startups (at least 24 publicly traded on theTokyo Stock Exchange) are rapidly
growing and ﬁlling the space vacated by traditional game companies.
•This report presents a detailed overview of Japan’s traditional game sector, as well as an overview of some (25) new
emerging players in Japan’s game sector.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
100
200
300
400
netincome(YENbillion)
Japan's major game companies (annual net income, excl. SONY)
US$
US$ 1 billion
US$ 2 billion
US$ 3 billion
US$ 4 billion
(c)2015EurotechnologyJapanKK
www.eurotechnology.com
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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300
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Japan's new game companies net income
US$ 1 billion
US$ 2 billion
US$ 3 billion
US$ 4 billion

AGENDA - LIST OF CONTENTS
7
•Executive Summary
•Game trends for 2015: smartphone games disruption
•Game industry structure and segmentation
•Hardware:
•Arcade games
•7th generation console platforms:Wii, PS3, Xbox-30
•The paradigm shifts
•Handheld: DS, PSP
•The two remaining Japanese console platform companies
•Nintendo
•SONY Computer Entertainment
•Japan’s game software markets
•Game software companies: 9 traditional video game companies + 25 new smartphone game
companies
•Overview of Japan’s games software companies
•Financials
•Recent consolidation
•Proﬁle of top ranking Japanese games software and equipment companies
•Video game generations and history
•Pachinko and Pachislo (short overview)
•Ethics and rating organizations
•Summary

SMARTPHONE GAME
DISRUPTION
8

JAPAN = NO. 1 APP MARKET
GLOBALLY
9
Japan’s App-Market is a direct continuation of i-Mode / EZweb / Jsky which
started in 1999.

JAPANESE APPS AND JAPANESE APP COMPANIES HAVE A
PROMINENT POSITION INTHE APP STORES
10
Japanese apps and Japanese app companies rank very high in the global “top grossing” rankings for Apple and Google App
stores.The table below shows that:
• the top ranked company by revenue globally for iOS+Google Play is the Japanese company LINE.
• 5 out of 10 top ranked “top grossing” apps globally are Japanese apps
top-grossing ranks for global iOS+Google Play stores (source:AppAnnie, 2014)
Rank companies by revenue top apps by revenue
1 LINE (J) LINE (J)
2 Pandora(USA) Pandora Radio (USA)
3 InterActiveCorp (USA) Spotify (S)
4 Spotify (S) Zoosk (USA)
5 Zoosk (USA) LINE Play (J)
6 Microsoft (USA) LINE Manga (J)
7 Disney (USA) Skype (USA)
8 Smule (USA) Dragon Quest (J)
9 MagazineCloner (UK) Badoo (UK)
10 Voltage (J) PocketColony (J)

SMARTPHONE DISRUPTION - REVENUES
11
•Left hand side: top 9 traditional video game companies
•Right hand side: top 25 new smartphone game companies (24 are traded onTokyo Stock
Exchange + LINE)
•While traditional Japanese game companies seem to have peaked during 2008-2010, and are
dropping rapidly in size, new start-up game companies are emerging.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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1000
2000
3000
4000
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revenues(YENbillion)
Japan's first generation game companies (annual revenues)
US$ 10 billion
US$ 20 billion
US$ 30 billion
US$ 40 billion
US$ 50 billion
Nintendo
Sony Games
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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1000
2000
3000
4000
5000
revenues(YENbillion)
Japan's new game companies (annual revenues)
US$ 10 billion
US$ 20 billion
US$ 30 billion
US$ 40 billion
US$ 50 billion

NEW GAME COMPANIES HAVE ALREADY OVERTAKENTHE
TRADITIONAL GAME SECTOR
15
•Left hand side: annual net income of Japan’s top 8 traditional video game companies
•Right hand side: annual net income of Japan’s top 24 smartphone game companies
•Net income of Japan’s traditional video game companies peaked in 2008 at almost US$ 3.5 billion,
but in 2013 fell back to around US$ 1 billion mainly due to a shift of consumer interest to smart
phones
•Combined net income of the 24 smartphone game companies (shown on the right hand side) is
approachingYEN 200 billion (US$ 2 billion), about twice as much as combined net income of
traditional video game companies
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
100
200
300
400
Japan's major game companies (annual net income, excl. SONY)
US$
US$ 1 billion
US$ 2 billion
US$ 3 billion
US$ 4 billion
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
100
200
300
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Japan's new game companies net income
US$ 1 billion
US$ 2 billion
US$ 3 billion
US$ 4 billion

TRADITIONALVS NEW GAME COMPANIES - NET INCOME
16
•Combined net income of 24 top smartphone game companies is almost twice as high as combined
net income of the top 8
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US$ 1.0 Bill.
US$ 2.0 Bill.
US$ 3.0 Bill.
Net income of Japan's game companies: 8 old vs 24 new
top 8 established game companies
top 24 new game companies

JAPAN’STWO REMAINING CONSOLE PLATFORM
COMPANIES: 
 
NINTENDO AND SONY COMPUTER
ENTERTAINMENT (SCE)
19

JAPAN’S GAME INDUSTRY 
STRUCTURE AND OVERVIEW
23

HARDWARE: 
ARCADE GAMES AND GAME
CONSOLES
30

ARCADE GAMES
32

CRANE GAMES - UFO-CATCHER
42
•Crane games are games where the player pays typicallyYEN 100 (US$ 1) and operates a crane. If the player is lucky he/she can pick
a prize, move the prize to a shute, and drop the prize into the shute and pick the prize and take the prize home.
•The UFO-catcher/crane game machine on the right is cooled and the prizes are cups of icecream

CONSOLE PLATFORMS
44

WII- (NINTENDO’S INTERNAL
CODE NAME:“REVOLUTION”)
54

PS3
65

PS4
69

PS4
71
•Our reports are works in progress - this section will be included in one of
the next updates
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•http://www.eurotechnology.com/store/jgames/

XBOX & XBOX 360 IN JAPAN
72

PARADIGM SHIFT IN BUSINESS
MODELS: 
PRICESVS MANUFACTURING COSTS
77

HANDHELD GAME
PLATFORMS
80

7TH GENERATION HANDHELD GAME CONSOLES
81
SONY PSP
•Japan release: Dec 12, 2004
•Total sold: 41 million (as of August 20, 2008)
Nintendo DS
•Japan release: November 21, 2004
•Total sold: 77.54 million (as of June 30, 2008)

NINTENDO DSI ANDTHE INTERNET
86
•Nintendo DSi is fully internet capable with a
WiFi connection.
•The image on the left demonstrates the
http://www.eurotechnology.com/ home page
as seen on the screen of a DSi.The lower
touch-screen allows data input, and allows to
zoom in on details of the page shown on the
upper screen

WITH 2 CAMERAS AND WIFI DSI HAS MANY SIMILARITIES  
WITH IPOD-TOUCH AND MOBILE PHONES
87
•Nintendo wants the DSi to be at the top of everybody’s wish list.
•Personalization: one DSi per person – not one DSi per family
•DSi aims to enrich everybody’s daily life: education, camera,
pictures, internet access (WiFi), applications to download

JAPAN’S GAME SOFTWARE
MARKETS
88

JAPANESEVIDEO GAME
SOFTWARE COMPANIES
96

Company Founded Origin, ﬁrst products Key products
Annual sales (approx.)
FY ending March 2013
Nintendo Sept 23, 1889 Playing cards > games Wii, DS, games, characters US$ 6.5 billion
SCE (SONY) Nov 16, 1993 Founded within SONY Playstation, PSP, games US$ 4.8 billion
Sega Sammy Holdings
SEGA: 1940 in Hawaii
Sammy: Nov 1, 1975
SEGA: games
Sammy: Pachinko
Game software, arcade
games, pachinko
US$ 4 billion
BandaiNamco
Bandai: July 5, 1950
Namco: 1955
Toy Maker
children’s rocking horses
Pac-Man US$ 1.3 billion
Konami March 21, 1969
Juke box rentals and
repairs
Metal Gear, Dance Dance
Revolution,YuGiOh cards
US$ 2.7 billion
TakaraTomy
Takara: 1955
Tomy: 1924
Toys, pre-school
education toys
Jinsei Game (game of life),
TOMICA cars
US$ 1.9 billion
Square-Enix
Enix: Sept 22, 1975
Square: Sept 1986
Role playing games,
characters
Final Fantasy, Dragon
Quest, Kingdom Hearts
US$ 0.64 billion
Capcom
1979 as “Japan Capsule
Company”
manufacturing electronic
game machines
Monster Hunter US$ 0.83 billion
KOEI July 1978 initially business software
historical simulation
games,Three Kingdoms
US$ 0.2 billion
for comparison:
EA Electronic Arts
1982 Computer games
Racing games, sport
games, action games
US$ 4.1 billion

JAPANESEVIDEO GAME
SOFTWARE COMPANIES
ON JAPAN’S STOCK EXCHANGES
98

NINTENDO
106

NINTENDO AND NEW STRATEGY
SMARTPHONE GAME PARTNERSHIP WITH DENA
107
•Nintendo was founded in 1889 and has succeeded through many
pivots.
•During the FY2006-FY2012 period Nintendo saw extraordinarily
high revenues and income because of the great success of the
disruptive Wii and DS platforms.
•Today ﬁnancially Nintendo is essentially back to pre-FY2006 days
in terms of revenues and income, however, Nintendo is clearly in
defensive mode faced with the shift of people’s interest to
smartphones.
•Recently, Nintendo has announced several measures to adapt to
the new environment. Nintendo has announced a partnership with
DeNA to develop games for smartphones based on Nintendo
characters.

Nintendo 任天堂
お任せ=leave the responsibility to someone, 天=heaven
therefore 任天= leave responsibility to heaven/god
Founded Sept 23, 1889 in Kyoto for the production of handmade “hanafuda” cards
Founder FujasiroYamauchi
Headquarters Kyoto
Stock Exchange TokyoTSE 7974, Nasdaq NTDOY
Consolidated sales YEN 635.422 Billion (US$ 6.4 Billion) (FY2012, March 31, 2013)
Number of employees 5095 consolidated (September 2012)
Major share holders
HiroshiYamauchi (10%), Bank of Kyoto (4.50%), Japanese indiv.(14.91%), Japanese
institutions (26.33%), foreign: (45.98%)
Major business areas games, characters, game devices game software
web https://www.nintendo.com/

HIROSHIYAMAUCHI
(NOV. 7, 1927 - SEPT. 19, 2013)
109
•Nintendo CEO from 1949 - 2002
•Transformed Nintendo from a “hanafuda” playing card company
into today’s video game company
•Initially shifted strategy from playing cards to board games, toy
guns, baseball machines, then arcade games
•Resigned as Nintendo’s Chief Executive in 2002

NINTENDO’S CEO, SATORU IWATA
110
•Nintendo’s CEO Satoru Iwata at a
recent press conference inTokyo
•Asked about his strategy in the crisis,
his answer:
•We work to have Nintento products
at the top of everyone’s wish list
•We do not intent to cut prices (we
want to make our products so unique
that they do not compete on price)

CEO SATORU IWATA AND  
CHIEF GAME DESIGNER SHIGERU MIYAMOTO
111
•CEO Satoru Iwata and Chief Game Designer
Shigeru Miyamoto introduce the DSi at a recent
Press Conference inTokyo.
•They want to personalize the DSi, so that there
will be one DSi per person – not one per family.
•Their strategy:
•DSi to enrich everyday’s life
•Personalize by incorporating two cameras
•Oneline store for downloads to personalize
the installed software

Year Nintendo company history
1889 FusajiroYamauchi starts to manufacture Japanese playing cards in Kyoto
1933
FusajiroYamauchi founded the partnership “Yamauchi Nintendo & Co” to produce, market and
expert playing cards
1962 IPO on the Osaka Stock Exchange and on the Kyoto Stock Exchange
1970 Started to use opto-electronics, introduces electronics into the toy industry:“Beam gun series”
1974 Developed image projection system, exports to US and to Europe
1975 Develops video game system based on microprocessor in cooperation with Mitsubishi Electric
June 15, 1983
Launches “Family Computer” (=“Famicom”) home video console including custom CPU and
PPU (=Picture processing unit) in Japan
1985
Launches Famicom in the USA under the product name “Nintendo Entertainment
System” (NES) with the games “Duck Hunt” and “Super Mario Brothers”
1987 Computer Game “Legend of Zelda” sells more than 1 million copies
April 21, 1989 Launches Game Boy (Total sold globally: 118.69 million, including Game Boy Color)
March 21, 2001 Launches Game Boy Advance (total sold globally: 81.24 million)
Nov 21, 2004 Launches DS (total sold globally until June 30, 2008: 77.54 million)
Nov 19, 2006 Launches Wii (total sold globally until June 30, 2008: 29.62 million)

NINTENDO’S HQ IN KYOTO
114

SONY
SLOGAN:“SONY. LIKE NO OTHER.”
118
for detailed analysis of Japan’s electronics sector read our report:
http://www.eurotechnology.com/store/j_electric/

SONY artiﬁcial word, to sound like sunny
Founded
1945 Masaru Ibuka started radio repair shop, joined in 1946 by Akio Morita.They
jointly foundedTokyoTsushin Kogyo KK.
Founder Masaru Ibuka and Akio Morita
Headquarters Tokyo
Stock Exchange
TokyoTSE 6758
Sony FinancialTSE 8729
Consolidated sales YEN 7181 Billion (US$ 90 Billion) (FY2010 ending March 31, 2011)
Number of employees 167,900 consolidated (March 31, 2010)
Major share holders
Major business areas
electronics, Sony Music Entertainment, SONY Pictures, SONY Computer
Entertainment, SONY Finance
web
http://www.sony.jp/CorporateCruise/SMOJ-info/
http://www.sony.jp/

THE SONY BUILDING ANDTHE SONY BRAND
123
- Sony was a relatively small company
when SONY acquired the famous
building at Ginza crossing inTokyo.
- Acquiring the Sony building was a
strong brand statement and part of
Sony’s successful strategy to build a
strong global brand.
- Interbrand estimates that the SONY
brand is ranked as the 5th most
valuable global brand, with a value on
the order of US$ 10 billion

SONY: REVENUES AND INCOME
124
•SONY’s revenues/sales are essentially flat all the way since 1998 - no growth
•SONY’s operating and net income have been falling steadily since 1998
•SONY has reported losses for years ending March 31, 2009 - 2012.
•In the year ending March 31, 2013, SONY reports a small profit, however much of this profit is due
to profits on asset sales (NY and Osaki HQ buildings, and reassessment of the value of SONY’s
holding of the medical information and services company M3).
•SONY income averaged of the period FY1998-FY2012 is:
•average annual operating incomeYEN 171 Billion (US$ 1.7 Billion)
•average annual net incomeYEN 46 Billion (US$ 460 million)
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US$ 120 Bill.
Annual revenues of SONY
c2013EurotechnologyJapanKK
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US$ 2 Bill.
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Annual operating and net income SONY
mean operating income ¥ 171 Billion
mean net income ¥ 46 Billion

SONY: MARGIN
125
•SONY’s operating margins have been steadily declining since SONY’s “better times” where stellar
products including Walkman andTrinitronTV’s contributed to high margins
•Margins averaged over the period FY1998-FY2012 are:
•average operating margin = 2.3%
•average net margin = 0.5%
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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annualoperatingandnetmargin
Annual operating and net margin SONY
mean operating margin 2.3
mean net margin 0.5

SONY COMPUTER
ENTERTAINMENT 
SCE
128

SONY COMPUTER ENTERTAINMENT/SCE
FINANCIALS
132
•SCE (Sony Computer Entertainment) records revenues on the order of US$ 8-15 billion.
•During the period FY1997-FY2014, SCE went through ups and downs
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SEGA SAMMY HOLDINGS
134

Sega Sammy Holdings
Founded October 1, 2004 by merger of SEGA and Sammy.
Founder Hajime Satomi (founder of Sammy)
Headquarters Tokyo
Stock Exchange TokyoTSE 6460
Consolidated sales YEN 396 Billion (US$ 4 Billion) (FY2011)
Number of employees 6700 consolidated (September 2012)
Major share holders Hajime Satomi (16.36%), Mellon Bank NATreaty Client Omnibus (6.8%)
Major business areas games, arcades, pachinko, pachislot
web https://www.segasammy.co.jp/

SEGA SAMMY HOLDINGS FINANCIALS
145
•Averaged over the period FY2004-FY2014, the mean operating margin is about 10%, while the
mean net margin is just below 5%
•There is a downward trend of margins, which indicates the necessity to adjust business models.
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Annual margins SegaSammy (%)
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BANDAI NAMCO HOLDINGS
152

BANDAI NAMCO MARGINS
• Bandai Namco’s margins are now recovering to 10% operating margin and 7% net
margin
• Average margins over the period FY2004-FY2014 are:
• mean operating margin = 7.1%
• mean net margin = 3.1%
162
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Annual margins BandaiNamco (%)
operating margin
net margin

BANDAI NETWORKS AND NAMCO ON “GALAKE” I-MODE
PHONES
163

KONAMI
167

BEATMANIA
173
•Image on the left shows a Beatmania IIDX
machine.
•Play: on the screen of the game machine,
notes fall downwards and when they cross a
line, the player must press buttons, move the
turntable etc in rhythm with the music. Every
time the players touches the controls correctly
and in tune, a sound is played completing
missing parts of the song.
•Beatmania has given the name BEMANI to
the whole series of music games by Konami

KONAMI GAMING JAPAN KK
(IN PREPARATION FOR JAPAN’S
POTENTIAL CASINO LAW)
176

HUDSON
(ACQUIRED BY KONAMI)
179

Hudson
Hudson Soft Company Ltd
March 1, 2012 merged with Hudson Digital Entertainment
Founded May 18, 1973 in Sapporo, Hokkaido as amateur radio store
Founder 工藤裕司
Headquarters Tokyo (integrated with Konami), previously Sapporo
Stock Exchange
TokyoTSE 4822 (from Dec 20, 2000 - March 29, 2011),
delisted due to acquisition by Konami
Consolidated sales YEN 14.3 Billion (US$ 144 Million) (FY 2011)
Number of employees 433 consolidated (March 2011)
Major share holders Konami (100%)
Major business areas game software
web
http://www.hudson.co.jp
http://www.konami-digital-entertainment.co.jp/

TAKARATOMY
183

SQUARE ENIX
191

SQUARE ENIX
192

TAITO
(ACQUIRED BY SQUARE ENIX)
203

CAPCOM
207

KOEITECMO HOLDINGS
214

KoeiTecmo Holdings
English:Tecmo Koei Holdings Co Ltd
Japanese: コーエーテクモホールディングス株式会社
Founded
April 1, 2009 by the merger of Koei andTecmo
short form: Koei-Tecmo (コーエーテクモ)
Founder
Headquarters Yokohama, Kanagawa
Stock Exchange TSE 3635
Consolidated sales YEN 35.5 Billion (US$ 360 Million) (FY 2011, March 2012)
Number of employees 1386 consolidated (March 31, 2012)
Major share holders 株式会社光優 (KK Kouyu) (32.5%), 環境科学（株） 7.24%
web https://www.koeitecmo.co.jp/

KOEITECMO HOLDINGS FINANCIALS
216
•Koei-Tecmo Holdings revenues are steadily increasing, approximately doubled between FY2000 and
FY2014.
•Operating and net income are seeing ups and downs, with the exception of a temporary drop
around FY2009-FY2010, and steady increase in recent years since 2010
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US$ 50 Bill.
Annual income TecmoKoei
operating income
net income

KOEITECMO MARGINS
217
•KoeiTecmo Holdings’ margins are high- with a peak around 40% operating margin in FY2003-
FY2004.
•Even average operating margin for the period FY1999 - FY2014 is around 25%, while net margin is
18% on average over the same period.
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KOEI
218

Koei 光栄 = koei = honor, privilege, in the past: KOEY, now: KOEI
Founded
founded initially as software development dept. of Miyamoto Masafumi’s fathers
electricity service company in October 1983
Founder
ErikawaYouichi (襟川陽一)
(pen name Shibuzawa Kou, シブサワ・コウ)
Headquarters Tokyo
Stock Exchange
TSE 9654 (from November 16, 1994 - March 25, 2009) until merger intoTecmo Koei
Holdings
Consolidated sales YEN 20.2 Billion (US$ 204 million) (March 2009)
Number of employees 1191 (March 31, 2008)
Major share holders Tecmo-Koei Holdings (100%)
computer software and development tools, history simulation games,
especially historic “Battle of three kingdoms” games (三國志)
web www.koei.co.jp/

KOEI - HISTORY
220
Year History
July 25, 2979
Founded byYoichi Erikawa and Keiko Erikawa close to Keio University campus in Hiyoshi/Yokohama.
initial business: PC sales and production of business software
Company name
several explanations: (1) rearranged KEIO-University name KEIO-> KOEI, (2) pen names of authors:
Kou Shibusawa and Eiji Fukuzawa are used as pen names of the founders/game authors
1983
Releases historic strategy game “Nobunaga’s ambition” set during Japan’s Sengoku period. Start of a
series of games with historic content:“Romance of the three kingdoms”,“Uncharted waters”
1988 US subsidiary established
1994 Neoromance series “Angelique”
Sept 2008 Talks to potentially acquireTECMO announced
April 1, 2009 acquiresTECMO

KOEI’S MAIN GAME SERIES
221
Series title numbers sold globally (as of 2007) number of titles in series
Dynasty warriors 11.84 million
Nobunaga’s ambition 7.8 million
Romance of the three kingdoms 6.55 million
Samurai warriors 4.28 million
Winning post 3.81 million

TECMO
222

Tecmo
Founded
Sept 1964 as 帝国管財株式会社, for building maintenance
July 31, 1967 (reestablished on March 15, 2010)
Founder Yasuhiro Fukushima (福嶋康博)
Headquarters Tokyo
Stock Exchange TSE 9650 (until delisting on March 26, 2009)
Consolidated sales
Major share holders KoeiTecmo Games (100%)
web www.tecmo.co.jp/

TECMO - HISTORY
224
Year History
Sept 1964 Teikoku Kanzai KK, (帝国管財株式会社), for building maintenance, supplier of cleaning equipment
July 31, 1967
April 1981 releases arcade video game “Pleiads”
Jan 8, 1986 changed name toTECMO
August 29, 2008 Square Enix offers friendly take over
Sept 4, 2008
TECMO rejects Square Enix’ offer
press reports thatTECMO is in discussions with KOEI about potential merger
April 1, 2009 Merged with KOEI to form KOEI-TECMO Holdings

TECMO’S MAIN GAME SERIES
225
Series title numbers sold globally (as of 2007) number of titles in series
Dead or alive 7.5 million
Ninja garden 5.5 million
TECMO bowl 5 million
Monster farm 4 million
CaptainTsubasa 2.62 million
Gallop racer 1.55 million
Fatal Frame (Project zero) 1.35 million
Dino Crisis 4.4 million 13

JAPAN’S SMARTPHONE GAME
COMPANIES
226

SMARTPHONE GAME COMPANIES
227
•Japan is the world’s No. 1 app market for smartphones by cash value (source:AppAnnie)
•Global top-grossing app-company ranking: For iOS and Google-Play combined, in terms
of downloads on a per company basis, Facebook, Google,Apple, Sungy Mobile, Cheetah
Mobile, Baidu, Microsoft etc are top ranked. However, ranked by company cash revenue,
the Japanese company LINE is ranked globally No. 1, and the Japanese companyVoltage is
ranked No. 10 - thus there are two Japanese companies among the top 10 companies
ranked by cash revenues (source:AppAnnie).
•Global top-grossing app ranking:Again combining iOS and Google-Play, ranking Apps by
revenues, there are 5 Japanese Apps among the top 10, these are:
•LINE
•LINE Play
•LINE Manga
•Dragon Quest by Square Enix
•PocketColony by Cocone
In the following section, we describe and analyze Japanese new smartphone game
companies.This is a work in progress - please subscribe to this report and receive updates.
To subscribe:
http://store.esellerate.net/s.asp?
s=STR0576176470&Cmd=BUY&SKURefnum=SKU85943952648

LINE
“the leading provider of sticker-based
communications”
invented stickers for chat apps
resulting from the Tohoku disaster 2011
230

LINE KK LINE Corporation
Founded
September 4, 2000 as Han Game Japan KK,August 28, 2003: changed to NHN Japan
KK.April 1, 2013 changed to LINE KK.
Founder
founder CEO:Akira Morikawa
current CEO:Takeshi Idezawa
Headquarters Tokyo
Stock Exchange -
Consolidated sales YEN 86.3 Billion (US$ 689 million) (2014, ended Dec 31, 2014)
Number of employees 790 (October 10, 2014)
Major share holders Naver (S-Korea)
messaging, stamps, creators market, smartphone games, communications, phone
services, payments, taxi app and more
web http://linecorp.com/

DENA (2432)
“DELIGHT AND IMPACTTHE WORLD”
240

DeNA “Delight and impact the world”
Founded March 1999
Founder Tomoko Namba (南場智子) and Shogo Kawada (川田尚吾)
Headquarters Tokyo
Stock Exchange TSE 2432 (IPO: December 12, 2007)
Consolidated sales YEN 142.4 Billion (US$ 1.14 Billion) (March 31, 2014)
Major share holders
Tomoko Namba (13.0%), SONY (11.7%), JapanTrustee Service (2.8%), Shogo
Kawada (2.6%)
Major business areas games, ecommerce, SNS, software, online services, online auctions
web http://dena.com/

DENA FINANCIALS
242
•DeNA showed very healthy growth for revenues and income until FY2011, when margins started
to drop, followed by drops in income and revenues from FY2013.
•The main reasons for these difficulties are increasing competition in the smartphone space,
difficulties in transitioning from a platform business on traditional feature phones, and webbased
games to smartphone games, and - common with many Japanese companies - difficulties in
developing global business
•recently Nintendo and DeNA announced a cooperation to create smartphone games based on
Nintendo characters, including mutual investments. It remains to be seen how the Nintendo-DeNA
will develop, and if this cooperation is successful, revenue and income growth for DeNA may resume.
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DeNA: annual income
operating income
net income

DENA MARGINS
243
•DeNA operating margins were stable around 40%, while net margins are stable around 20% up until
FY2011, when margins started to drop due to difﬁculties in globalizing the company, and difﬁculties in
the transition to the smartphone space
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60annualoperatingmargin(%)
Annual margins DeNA (%)
operating margin
net margin

GREE (3632)
244

GREE
Founded December 7, 2004
Founder YoshikazuTanaka (田中良和 )
Headquarters Tokyo
Stock Exchange TSE 3632 (IPO December 17, 2008)
Consolidated sales YEN 152.2 Billion (US$ 1.54 Billion) (June 2013)
Number of employees 2582 (June 2013)
Major share holders
YoshikazuTanaka (48.92%), State Street Bank andTrust Company (4.21%), KDDI
(3.41%)
Major business areas SNS, games, software, game platform
web http://gree.jp

GREE FINANCIALS
247
•GREE showed good growth until FY2012, but recently ran into problems which led to drops in
revenues, and dropping income.
•GREE tried to grow aggressively internationally, and invested in acquisitions in USA and opening
branches in several countries outside Japan, however, some of these overseas business activities were
not successful and lead to saturation of growth and dropping income.
•In addition GREE changes business model from “platform-on-platform” to native games
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Annual revenues of GREE
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US$ .6 Bill.
Annual operating and net income GREE
operating income
net income

GREE MARGINS:“PLATFORM ON PLATFORM” DOES NOT WORK
248
•GREE margins were high in the past - about 30% operating margin and 15% net margin in FY2012,
however, margins are dropping indicating problems with GREE’s business model.
•Net margin has dropped to essentially zero in FY2014.
•GREE’s business model was essentially “platform on platform”, ie GREE created its own game
platform on top of Japanese mobile operator’s platform, ie on top of i-Mode, EZweb, andYahoo-
Mobile. However this model does not seem to be successful on top of global smartphone platforms
Google/Android and iPhone, since both Android and iPhone have their own platforms.Therefore
GREE seems to return to a business model of creating or acquiring original games instead of the
platform business model.This change of strategy is reﬂected in saturating revenues and dropping
margins.
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operating margin
net margin

FOR COMPARISON
351

EA
AND
ELECTRONIC ARTS JAPAN
352

ELECTRONIC ARTS IN JAPAN
353
•By market capitalization, EA is the world’s largest game software company, and EA’s market share in
Japan is about 2%.
•EA opened and closed ofﬁces in Japan several times…
•EA’s sales in Japan were US$ 71 million for the year ending March 31, 2004, which corresponds to a
market share of less than 2% of Japan’s US$ 4 billion game software market.We estimate that for
2007 EA sales in Japan dropped to around US$ 40 million
•EA’s presentation focused on EA’s core properties/licences:“FIFA Soccer”, Starwars, and others.
Currently biggest seller is SimCity for DS
•Japan is EA’s largest market in Asia, and EA aims for US$1 billion sales in Asia by 2010
•On October 6, 2004 EA announced a videogame software studio in China

ELECTRONIC ARTS - HISTORY IN JAPAN
354
Year History
1989
Rejected Nintendo’s conditions (which would have involved agreeing not to provide the same games
to Nintento’s competitors such as SEGA). Focused on SEGA platform (Genesis machine)
1990 Electronic Arts KK established (according to EA KK’s website)
1990
started development for Nintendo’s 8-bit machines (Super NES) (Nintendo had changed conditions,
allowing to run games on competing platforms as well as Nintendo’s platforms)
September 1992
Joint-Venture: Electronic ArtsVictor (Electronic Arts=65%,Victor=35%)
http://en.wikipedia.org/wiki/Electronic_Arts_Victor
Electronic ArtsVictor JointVenture dissolved, sold to Mervellous:
http://en.wikipedia.org/wiki/Victor_Interactive_Software
1998 JointVenture with Square: Square Electronic Arts: Square=70%, Electronic Arts=30%
2003
Square merged with Enix, bought back EA’s 30% of Square-Electronic-Arts JV, and established Square
Enix USA Inc.
from approx. 2003 Electronic Arts KK becomes 100% subsidiary of EA and independent of Square (now Square Enix)

ELECTRONIC ARTS - RANKING IN JAPAN
355
Nintendo BandaiNamco ... Electronic Arts
Rank 2007 1 2 ... 14
Rank 2006 1 2 ... 11
Games sold in
Japan 2007
26.4 million 9.3 million 782,821
Number of titles
offered
84 163 76
Estimated sales in
Japan
US$ 1.3 billion US$ 0.47 billion US$ 39 million
Market share 34.8% 12.3% 1%

ELECTRONIC ARTS - SALES IN JAPAN BY PLATFORM
356
Title Platform Sales 2007
1 Simcity DS 193,826
2
Boku to Sim no machi Resourt
ni genki o torimo douzou
DS 51,642
3 Boku to Sim no machi Wii 40,924
4 Medal of honor vanguard PS2 31,956
5 Need for Speed Carbon PS2 30,919
6 Thema Park DS 23,908
7 Godfather PS2 22,936
8 Medal of honor heros PSP 22,489
9 NBA Live 08 PS2 19,967
10 Need for speed. Most wanted PS2 19,921

ELECTRONIC ARTS - SALES IN JAPAN BY PLATFORM
357
Platform Share of EA sales in Japan
1 DS 39.8%
2 PS2 24.9%
3 PS3 10.3%
4 PSP 10.1%
5 Wii 8.7%

ELECTRONIC ARTS (GLOBAL) FINANCIALS
358
•Electronic Arts globally achieves about US$ 4 billion in revenues, however income has been quite
unstable, with losses around 2009.
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
0
100
200
300
400
500
600
annualrevenueYENBillion
US$ 1 Bill.
US$ 2 Bill.
US$ 3 Bill.
US$ 4 Bill.
US$ 5 Bill.
Annual revenues Electronic Arts
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
150
100
50
0
50
100
150
annualoperatingnet
incomeYENBillion
US$ 1 Bill.
US$ 0.5 Bill.
0
US$ 0.5 Bill.
US$ 1 Bill.
Annual operating and net income Electronic Arts
mean operating annual income
mean net annual income

ELECTRONIC ARTS (GLOBAL) MARGINS
359
•Electronic Arts income and margins are quite unstable and have ﬂuctuated between +30% and
-25% over the period 2004-2012.
•This Electronic Arts maybe thought of falling in a similar class as a movie studio, where particular
games (or movies) can be either very successful, or creating losses.
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
30
20
10
0
10
20
30
annualoperatingmargin
Annual operating and net margin Electronic Arts
mean operating margin 0.45
mean net margin 1.2

VIDEO GAME GENERATIONS
AND HISTORY
360

PACHINKO AND PACHISLOT
371

RATING ORGANIZATIONS
377

COMPUTER ENTERTAINMENT
RATING ORGANIZATION -
CERO
379

ETHICS ORGANIZATION OF
COMPUTER SOFTWARE -
EOCS
383

CASINO LAW OF JAPAN
386

SUMMARY
389

SUMMARY:
JAPAN’S GAME MAKERS AND MARKETS
390
•Japanese companies have created many of the global game genres, platforms and characters, and
represent a US$ 50 billion industry sector, excluding pachinko.
•Japanese companies have prominent position in the global “top grossing” rankings for iOS and
Google-Play app-stores: the world’s No. 1 top-grossing company is Japanese (with Korean origin) - the
company LINE.
•With consumer focus shifting from dedicated game platforms such as Nintendo’s Wii or DS, Sony’s
Playstation or Microsoft’s Xbox to applications or online games on smartphones, Japan’s traditional
game companies are facing unprecedented disruption, and 25 new companies combined achieve
about twice as high revenues than all top 9 traditional game companies combined.
•Most established game companies, including Nintendo and SONY, see an erosion of business, while
at the same time new a large number of new game industry startups are rapidly growing and ﬁlling
the space vacated by traditional game companies.
•This report presents a detailed overview of Japan’s traditional game sector, as well as an overview of
some of the new emerging players in Japan’s game sector.

EUROTECHNOLOGY JAPAN KK
391

FOUNDED: FEBRUARY 1997 INTOKYO
392
Services and products - focus areas are high-technology, telecommunications, software, middle-ware,
environmental technology and medical equipment:
- Market entry to Japan for European and US high-tech companies, turn-round, reshaping, planning
and building of distribution networks
- European business development and strategy for Japanese companies
- M&A (European and US companies acquiring Japanese companies, Japanese companies acquiring or
investing in Europe)
- Turn-round preparations and management of foreign business in Japan
- Market research and strategy
- Due diligence of high-tech companies, environmental due-diligence
- Advisory services for investment fund managers and investors in technology ﬁelds
- we publish a series of market reports for about 10 years, which are purchased world-wide,
distributed direct and via distribution partners: http://www.eurotechnology.com/store/

393
- Leading high-technology business development boutique inTokyo, working globally
- Founded in 1996/1997 - 14 years experience, relationships, cooperations and success record.
- CEO works with Japan’s high-tech / telecom sector since 1984 - 27 years experience, resources, cooperations.
- Wide network of cooperations in Governments, Embassies, trading companies, distributors, ﬁnance,VCs, traditional
corporations, venture start-ups, industry associations
- Experience: market-entry, restructuring, M&A, acquisitions, due-diligence
Customers include:
- More than 100 investment fund managers
- Industrial customers:
- NTT-Communications, SIEMENS, DeutscheTelekom, Cubic, Unaxis (now: Oerlikon), CITI Group, CLSA Asian
Markets, Genscape, Google, IKEA, Isabellenhuette, Landis+Gyr, National Instruments, Swisscom,TechnoCom,
- Government
- NewYork Police Department, European Union,TEKES (Technology Research funding organization of the
Government of Finland)
Deep Japanese technology market knowledge - we publish a series of market reports for about 10 years, which are
purchased world-wide.You can purchase our reports on Bloomberg: https://www.bmart.com/search?&nuts%5B
%5D=WIRE%3AEUT, and via eSellerate: http://store.eSellerate.net/s.aspx?s=STR0576176470 and from http://
www.eurotechnology.com/store/

GERHARD FASOL
PROFILE: HTTP://WWW.FASOL.COM/PROFILE/
394
- Worked successfully with Japan’s high-tech sector since 1984 - 27 years. Came first to Japan in 1984 to help build NTT’s first
international R&D cooperation on semiconductor lasers
- Entrepreneur inTokyo since 1996, Eurotechnology Japan KK worked with many large corporate groups (e.g. SIEMENS, NTT,
DeutscheTelekom,Asahi Glass...), more than 100 investment fund managers
- Assoc. Professor of Electrical Engineering atTokyo University. Record of Fasol-Laboratory atTokyo University: http://
www.fasol.com/tokyo_university/
- Elite “Sakigake” (Pioneer) R&D project on Spin-Electronics of Japanese Government Science andTechnology Agency.This
work was evaluated by US National Science Foundation and US Department ofTrade: http://www.wtec.org/loyola/erato/
ch7_5.htm
- Co-initiator of spin-electronics device research in Japan, one of the first to start work on spin-electronics in Japan in 1991
- Tenured Faculty member at Cavendish Laboratory/University of Cambridge.
- Assoc. Professor of Electrical Engineering atTokyo University
- PhD in Solid-State Physics (Cambridge University,Trinity College, UK)
- Diplom-Physiker, Ruhr-University Bochum (Diplom-Thesis on Superconductivity)
- Publication list (Books, patents and publications, several publications are specifially concerning electron-spin and spin-
electronics): http://www.fasol.com/profile/publications.shtml
- Languages: English, German (native), French, Japanese, and some Swedish

GERHARD FASOL WITHTETSUZO MATSUMOTO, EXECVP OF
SOFTBANK MOBILE CORPORATION
395

“POST GALAPAGOS STUDY GROUP”
25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR
ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT”
396
see: http://www.eurotechnology.com/2013/10/07/galapagos/

“POST GALAPAGOS STUDY GROUP”
25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR
ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT”
397
see: http://www.eurotechnology.com/2013/10/07/galapagos/

CONTACT AND MORE INFORMATION
398
Contact
•Gerhard Fasol PhD
•Eurotechnology Japan KK,Tokyo, Japan
•http://www.eurotechnology.com/
•Mobile +81-90-8594-6291
•fasol@eurotechnology.com
•gfasol@gmail.com
More information:
•reports:http://www.eurotechnology.com/store/
•twitter: http://twitter.com/gfasol/
•website: http://www.eurotechnology.com/
•personal site: http://fasol.com

Japan's games industries

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