On one hand, GungHo Online Entertainment is in the same echelon as King and Supercell, which it purchased a major stake in: It's a world-beating mobile game company, with millions upon millions of installs of its biggest hit, Puzzle & Dragons, and the revenue that comes along with it.
But it's quite different from those companies, too. It's located in Japan, of course, which is a huge cultral difference. It also owns a number of formerly indepedent studios which are focused on developing console games (the jewel in that crown is Grasshopper Manufacture, best-known for cult classics Killer7 and No More Heroes, and its idiosyncratic auteur Goichi "SUDA51" Suda.)
But it's also different because its founder, Kazuki Morishita, still keeps his hand in the console space, designing titles for niche audiences on niche platforms. The Puzzle & Dragons team even developed the extensively reworked 3DS edition of the game, Puzzle & Dragons Z, itself, rather than farming it out.
What does Morishita think about the scrutiny his company, so long never discussed in the West, is under? What is his philosophy toward free-to-play games, and what would he say to the skeptics who mistrust them? This meaty interview, conducted at GDC, gets to the heart of this company's philosophy toward business and game development.
I noticed you'd been reporting a lot more the success of Puzzle & Dragons in the West. Is that something you're emphasizing for 2014?
In terms of our priorities, in terms of our global initiatives, right now Japan is number one, obviously. But outside of Japan, U.S. is number two. So yes, we're trying to focus a lot more on the U.S. side.
What do you think about the global social games market? Is there truly a global social games market, or are the hits going to be different from country to country?
I used to think that way -- that it was segmented. Right now I'm trying not to think of it that way, obviously, because it closes all the doors.
There's no way for me to think with a Western mentality, because I'm Japanese. After reincarnation, maybe I'll be a Westerner, but that's the only way.
This goes for both the U.S. and Japan as a market, but I've never really created games based on the user base. It's more that, as a company, we create what we think is good at GungoHo. Internally, whatever we think is good, we always try to release that.
We're not trying to focus on the user base -- we're trying to create a game that's solely good based on quality, and what we think is good. If that sticks, then good. If not, we've got to go back to the table and rethink everything.
In terms of the service that we're providing, whether that's on the backend side, or customer support, that all has to be culturalized, so we have to base it off of the country that we're handling.
I think it's a layered, step-by-step process that we're trying to take. Obviously, that takes a bit of time. But I think that's our focus right now. We're taking it one step at a time, being able to have a presence in the U.S. that's as strong as it is in Japan.
In terms of gaming, we're not really focused on creating social games. That's not our thing. Obviously the business model is completely different, but in terms of how we create games, when we try to make a game, we put it on par with creating a console game -- whether it's mobile or console.
Even our mobile titles, we have a lot of experience on the console side as well. We have a lot of creators on the console side, and those are the people creating our mobile games right now in our company.
I really believe that the success that we're having is because we're creating games off of the console model and treating our games as seriously as the console games we've done.
Obviously, Puzzle & Dragons started off as a smartphone title, but it evolved into Puzzle & Dragons Z, which is the 3DS version. That's already gotten a million sales within the first month after release, so we believe that's our strength. And that's the same team. Smartphone, console, whatever -- it's the same team, the same members working on the title.
Puzzle & Dragons Z, for the Nintendo 3DS.
You say you have that strong console background which you're bringing to the mobile game sphere. Are there differences in the way you make these games, or do you really not see it that way? Do the knowledge and your approach transfer directly?
In terms of the business model, it comes after. Obviously, like I mentioned earlier, we focus on the good of the game. Whether the game is good or not is probably the most basic, core point we base our development off of. The business model itself comes later.
I'm deeply involved in the creative side of the games. I do a lot of game design as well. When I'm doing game design, I really don't think about the sales potential or the monetization.
We've released six mobile titles from 2012 till now. They all have been profitable. Four out of the six are making more than a million dollars a month. Obviously, Puzzle & Dragons is a huge hit for us, so everybody focuses on that. But we do have other titles that we're actually releasing and are doing great. Some of them, we're making multi-million dollars a month. We're not really thinking about sales when we're creating games, but obviously the sales are following the quality, is what we're thinking.
GungHo has been around for a long time. What's it like to suddenly have so many people outside of Japan following your company, and scrutinizing it?
In terms of scrutiny, for example, everybody's following our sales. So if it dips a little bit, everybody says, "Oh, Puzzle & Dragons is already done. They've got to find something new." We do have a dip in our sales, sometimes. They compared our third quarter 2013 sales to our second quarter. It did go down. I mentioned that our fourth quarter would be higher and nobody believed me, but that's how it turned out to be.
Note the dip for 3Q and the jump for 4Q. Deliberate, says Morishita.
The fourth quarter was probably the highest sales we've ever had. The reasoning is pretty much easy to explain. During the holiday season our MAU does increase. And special events -- if we have a good event that is successful, our ARPU goes up. But we don't really want to max out the ARPU. From our standpoint, we don't want it to be too high.
It's on purpose. If ARPU goes up one quarter, for the next quarter we want it to go down a little bit. The higher the ARPU goes up, it's sort of similar to starting to a bonfire. If you keep feeding it kindling, it starts burning faster and stronger, and sooner or later you'll run out of kindling. That's what we're trying to avoid.
We do have our own business logic that we're basing it off of. Scrutiny is great, but we do have our own business strategy. People can scrutinize us, but we have to do our own thing, our own business model. It's not that we ignore it, but we don't take it too seriously.
I'm sure that some people will like us; some people will be anti-GungHo. It's bound to happen. Our continued focus will be to focus on creating good games. That's where we want to stay.