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Social Killer: How DeNA Leads Japan's Market

October 28, 2011 Article Start Page 1 of 3 Next

In Japan, the lead player in social games is DeNA, with its Mobage mobile network. One of the remarkable facts about the company is that it gets around $12 average revenue per user (ARPU), as compared to much, much smaller numbers in the West.

"I think that people who don't know much about the Japanese market just dismiss those users as crazy, but that's not the case. You really need to research thoroughly at what time monetization becomes the most fun for your users," says Kenji Kobayashi, DeNA's director, and the global executive producer for its social games business.

Gamasutra met with Kobayashi at the company's Tokyo headquarters last month to converse with him about his role overseeing game development for the company, which also includes San Francisco-based subsidiary Ngmoco.

We've heard good things about Kobayashi. Given the swagger in this interview -- and his professed mixed interest in both the fun and business of social games, it's not surprising that he leaves an impression.

A recovering Final Fantasy XI addict with a masters in Aesthetics and Art from the University of Tokyo -- Japan's most prestigious -- he doesn't quite fit the profile of your typical social games executive.

What is your role in the company?

Kenji Kobayashi: Currently, I link together the first and third parties globally -- that management role, on the game development side.

Why does DeNA make first party games?

KK: Well, part of it is that it can become a profitable venture, but more importantly, there's the fact that if we didn't make games on a first-party basis, we wouldn't have a good idea of what third parties would want from us.

For example, we have ngCore, our own game engine, and we make games on that platform partly to test out the functionality of the engine, and work on functions or sections we see as inefficient. I think that process of having the first party work on it first is really important. We then give feedback to the third parties, and have them use it.

Apart from the engine, there is also a lot of knowledge and experience we've learned from deploying this platform, and that's something we also provide to third parties as a form of feedback. It's a large part of the consulting work we do for them, to help them try to share in the proceeds as much as possible.

Is that available to all developers?

KK: Yes. It's not that we give an equivalent amount to each developer, since that wouldn't work from a cost perspective, but it's something that we provide in exchange for working with us.

Between small independent small developers and larger ones, which is more important?

KK: Both are important. It's a fact that the third parties that had the most success on feature phones weren't necessarily the large players.

The first real success stories were really very small, and while they didn't become enormous successes immediately from the start, they became that way through the consulting efforts we later provided, because they had good insight.

On the other hand, you have companies like Koei Tecmo who worked with us from the beginning, and managed to take franchises like Nobunaga's Ambition and turn them into very quick successes. So you can get good results from both sides of the picture.

How important are analytics and data?

KK: It plays the most important role in our competitive abilities. As for how... Well, social games are inherently doing pretty simple things gameplay-wise. You don't see the intense, intricate 3D graphics of Call of Duty or something similar. It's really simple, and in some respects it's more like performing a task.

So what part of that is fun for the gamer? That lies in the very delicate play balance that the games maintain.

One example that often gets brought up is Dragon Quest, a game that's intensely popular in Japan even though it hasn't duplicated that in the U.S. It's a game that everybody knows, and the play balance there is really great. If you changed even a single parameter, though, it'd turn into just this terrible thing, this kusoge. How do you say that in English?

Kusoge? "Shitty game."

KK: Dragon Quest is an RPG, and you run into enemies as you run around the world. If you changed the encounter rate... On the average, you run into an enemy once every seven or eight steps. Try to imagine it if it was once every three steps. It wouldn't be any good as a game -- you couldn't finish it, the tempo would be off, it'd take too much time. The whole balance would collapse, over a single parameter.

Social games share a lot of aspects with that; the balance of the in-game parameters dictates whether it's a comfortable game, or an exciting game, or how fun fighting the enemy is. If you mess this up, it becomes a very uncomfortable game.

Do you try to erase the user's stress with design?

KK: It's not that we erase it; we control and release it. When you think about what games are at the core, they are about delivering stress to the user. It wouldn't be fun if it's something that anyone could finish -- you put up obstacles for the user, and they feel a sense of achievement when they overcome them, which is fun.

That applies to any games -- the ability to do things that you couldn't before, or that other people can't. That feeling is very important, but, for example, if you have something like this -- if the capabilities of the user are here, and if the hurdle is here [not aligned] -- then you can't clear it. Get a bit stronger, though, and you can overcome it and get a sense of achievement. If it's like this [too far apart] though, then you would just give up.

On the other hand, if someone can do this -- if you were level 99 in Dragon Quest and killing slimes, that isn't interesting. The user is always changing, and this applies to the balance of social games. You have to retain a balance such that it's fun to overcome the hurdles that come your way.

That, and lots of users are playing at the same time -- in Kaito Royale [DeNA's Mafia Wars-style game] you can have users just starting alongside people at level 2000. It's extremely difficult to provide a play balance that can satisfy both extremes.

If you have this user and that user, then the solution seems to be to provide a difference balance; that seems to be the best idea. If you do that, though, then at what time do you switch out? You could change the difficulty with each level or each stage, but where do you make the final decision? So the important thing that needs to be spread across the entire game is that users are enjoying what they're doing.

Article Start Page 1 of 3 Next

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E McNeill
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"What we sell instead is the opportunity to make treasure gathering easier. For example, have you played mahjong? This may work with poker, too. If you're one card away from a royal flush, you only get one chance to draw that card. Well, what if you paid 100 yen [$1.31] and get three chances instead? (laughs) Which do you think is more interesting to the user: very difficult odds, or a chance at easier odds?


That in itself is interesting. Paying out has to be interesting in itself, I think. We're selling chances, and it results in some interesting reactions from the users."

This reminds me of a blog post from David Sirlin some time ago:

"Some company makes literally hundreds of millions of dollars off this: the treasure box. The Chinese government was upset at the effect this was having on people, which also blew my mind. So a country with flagrant human rights violations found this GAME MECHANIC so objectionable that they stepped in? Anyway, here's what it is. You pay money (or virtual money? what's the difference) to open your 'treasure box.' When you do, a slot machine thing spins, showing all the very rare and valuable virtual items you might get. Then it settles on a not so valuable virtual item, and you get that one (well you know, most of the time. I'm not implying it's cheating you, other than entire concept itself being a cheat). The Evil Genius part is that they also give an award to the top X people who open the most treasure chests that day(!!!). Those people automatically win the most valuable prizes.

This egregious, unethical practice is the kind of thing he should have prevented as extremely dangerous. If you are 'playing to win' in business, yeah you'd do that. But doing so is damaging to the lives of our own customers."

Robert Carter
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How do you figure this is unethical? The odds of winning items is known. The fact that you might not get what you want is know. How much the random prize is is known. The player can make an informed decision, and that decision may very well be not to buy the box or not to play the game at all. But I see nothing unethical with selling a mystery box.

Do you think Wizards of the Coast is unethical for selling booster packs of Magic cards? They are all random, same as your mystery item. Wizards does not sell singles. Period. All singles are second market sales, much like you can do with these games (TF2 hats, for example, are bought and sold on eBay). So it is exactly the same thing.

If the company lies about odds, or lies about what you can get in the box, or misleads in some other way, then that is unethical. But offering the player the full information of what they are buying, including the odds of what the treasure box may have, is not unethical at all. Neither are incentives to reward players who spend the most and encouraging them to continue. It is not damaging to the lives of the customers AT ALL. They have the choice not to buy, the choice not to play, or the choice to play a competitors game. Thats how the free market works.

Players decide what games are successful. Look at Eve. Look at netflix. When customers feel betrayed, they let the company know. Nothing this company is doing is unethical.