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Why "Kompu Gacha" Was Banned
by Betable Blog on 05/25/12 02:44:00 pm   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutraís community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

This was also posted on the Betable Game Monetization Blog.

The Japanese social gaming market is substantial, worth $1.4 billion in 2011, and it is dominated by two major players: GREE and DeNA. When rumors began circulating that the “kompu gacha” reward system that GREE and DeNA utilized extensively was going to be made illegal, their stocks were pummeled by over 20% in two days. Now, kompu gacha is illegal in Japan and both companies are swearing up and down that the new regulation will not cripple their businesses. So what is “kompu gacha”? What made is so valuable to the kingpins of the Japanese social gaming space? And why was it made illegal?

 

kompu gacha explanation
Image source: InsideSocialGames

Kompu gacha, or “complete gacha”, is a system that strongly incentivizes the gacha monetization method. Gacha is similar to a prize vending machine at a carnival: you pay a small amount of money to receive an item at random. Kompu gacha expands on this mechanic by offering players an extremely valuable grand prize for completing a set of gacha prizes. Since the gacha prizes are awarded at random, it’s very hard to get these grand prizes. If you do the math, they can be worth hundreds of dollars each on average.
social game company comparison
This means big money for Japanese social game companies, whose monetization metrics have long been the envy of their Western counterparts. Kompu gacha and the utilization of random rewards play a big part of GREE and DeNA’s record revenues. The extent of this reliance can vary by game (competitive games rely on it much more than casual games), but the overall ARPU lift is clear to see in the graph above. However, kompu gacha as a monetization method isn’t evil: in fact, it’s one that players overwhelmingly enjoy. Kompu gacha mechanics are incredibly popular among players, who enjoy the thrill of possibly winning that grand prize. The use of these mechanics has often been viewed as a win-win for developers and players. Which begs the question:

Why was kompu gacha made illegal?

Kompu gacha is essentially an extension of the core "gacha" mechanic, which gives the player the ability to pay for a chance at a random reward. Random reward schedules area powerful driver for freemium game monetization, and this method is not unlike the “mystery box” mechanic commonly used by American social game companies. The reward is virtual, so this is not explicitly gambling, but the virtual items often have a virtual currency value that can be to a real-money amount. This method has escaped regulation in the past because players can never take their money out of the system, so whether they spent the money "gambling" in game or simply purchasing virtual goods was irrelevant.

However, while gacha itself is not being made illegal, kompu gacha compounded the issue because it has a much lower chance of a much higher payout. This made kompu gacha mechanics feel too close to gambling for Japan’s Consumer Affairs Agency, which banned the practice on May 18th. In addition, concerns were raised that the mechanic exposed gambling gameplay to children under the age of 18. There were two extreme, well publicized cases where a middle school boy spent $5,000 in a month, and one younger student spent $1,500 in three days. While GREE and DeNA have specifically enacted their own consumer protection agency to combat these issues, the government still decided to take additional action.

The kompu gacha scandal teaches two key lessons. First, players love real-money betting on both virtual and real rewards. And second, that social game companies should create a safe, self-regulated environment to prevent excess and restrict players under the age of 18.  Many social games' similarities to real-money gambling mean that it should be given the same care and attention that gambling companies give their games.


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Comments


Jesse Tucker
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Thanks for the writeup! I had heard about this but wasn't quite sure what it was or why it was banned.

Justin Speer
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I know this is kind of an annoying thing to do but... http://begthequestion.info/

Nice analysis though.

Betable Blog
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Thanks for the compliment. Not sure what the begthequestion site is in response to. Is it because I asked a question that I immediately answered?

Simon Ludgate
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It's because you misused "begs the question" :)

Check the site, it explains it!

Adam Bishop
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The OED contains both usages of "begging the question".

Adam Gashlin
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"However, kompu gacha as a monetization method isnít evil: in fact, itís one that players overwhelmingly enjoy."

Now *that* begs the question.

EnDian Neo
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Just to raise a semantic point, his (implied) argument is that kompu gacha is not evil because players enjoy it. He isn't *exactly* begging the question with that statement - he just never explicitly stated the relationship between enjoyment and good/evil, nor backed his statement with data/logic.

However, you can argue that his logic is flawed, Enjoyable != not evil.

Adam Gashlin
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Yeah, it's more of a non sequitur, I suppose. I was thinking specifically of the first part of the statement taken as proven (as it is), though there really isn't an argument advanced through it. That's what I get for being a smartass without enough smart.

I do appreciate the article, it's a clear description of the situation.

Ramin Shokrizade
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Thank you again for this well written article Tyler. I read it back on the 25th and made this reply on LinkedIn on the 26th, I am reproducing it here:

The issue here is a bit more complex than the OP makes it out to be. Randomized rewards are incredibly important in games because this has a strong opportunity to trigger the dopamine release mechanism in humans whereas predictable rewards have a much weaker effect on dopamine pathways. Further, the argument that you cannot take money out of a closed virtual economy has never been true due to real money transfer issues. Every known game currency worth trading has a real world currency exchange value. After all, even "real" currencies are virtual so the distinction is artificial.

Because these kampu gacha rewards are luck based, not skill based, this is what makes them gambling. They are 100%, and anyone that says otherwise just has a poor understanding of virtual economics, the gaming environment, neuroscience, and a few other related fields. One could also argue that a loot drop from a dragon in WoW is gambling, but at least there is some skill involved there, at least in theory.

My primary argument against kampu gacha is not moral/ethical, as I see gambling in games as inevitable and possibly even desirable. I am an economist. The reasons I don't like them is because I spent 7 years developing higher performing models, and why would I want to use an inferior performing model in my games? I was a neuroscience researcher studying addiction before I became a virtual economist so all of these attempts to trigger addictive/compulsive behavior are fascinating to me.

Betable Blog
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I agree that the "gacha" mechanics are more related to gambling because they are direct games of chance. Honestly even a random reward from a FarmVille quest requires more "skill" or at least gameplay input in order to achieve the prize. However, games like FarmVille also use "Mystery Box" mechanics to entice buyers, which is a simple random chance reward. I think the line is blurry and interpretation is left up to the governments, which is where Japan's red-tape-happy government made a choice that the US probably won't make.


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