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What's next for Puzzle & Dragons and GungHo?

March 28, 2014 Article Start Page 1 of 3 Next

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.

Article Start Page 1 of 3 Next

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Luis Blondet
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What's next? Hopefully the player base wises up to their evil game design and go support game devs that respect them instead of treating them like digital cattle.

Christian Nutt
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You could at least read the article before commenting :3

Luis Blondet
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I did read it. Just another fluff piece enabling exploitative game design and no, the DS release doesn't even come close to redeeming them.

Tuomas Pirinen
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Excellent article. It was very interesting to find out that the same team did both the console and the mobile version of the game, even though they use a different business models.

Lihim Sidhe
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A CEO that carries around a laptop with Rockstar and P&D stickers? Either that's a brilliant marketing move on the part of GungHo or this guy is authentic. I'm going to go with the latter because as an avid Puzzles and Dragons player everything he said resonates with how I feel about the game.

@Luis Bondet: I am the one that liked Christian's Nutt comment. It seems to me you at best hastily skimmed through the article in a rush to be the first snarky comment against successful F2P games. If that's your thing direct your energy against King for trademarking the use of the word Saga in a video game title for Christ's sake. Anyone that partners with Grasshopper Manufacture to simply gain their experience deserves a more open minded outlook, don't you think?

Tuomas Pirinen
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Well said, especially if you consider that I think Grasshopper would have been in significant trouble without becoming part of the GungHo family. Now we can look forward to more mad Suda51 games.

I also agree on your assessment on the article in general. I am really puzzled (pun intended) by all the anti-P&D comments. I find it an excellent game that I am happy to support with real money now and then.

Lihim Sidhe
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I've been playing the game since mid fall semester. I've come close to making an IAP more than a few times. Especially considering all the Magic Stones I could have bought instead of you know a value meal at Burger King and little junk purchases that we make everyday.

I'm eventually going to give in. Until then it's my Frugality vs P&D.

Luis Blondet
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yeah, ok, i'll just leave this right here:

Larry chau
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a user blog from a full time employee at war gaming has no relation to puzzle & dragons or any insight on how GungHo operates. I'll take the word of their CEO, who Christian has interviewed multiple times according to his Twitter over someone who is has no ties to GungHo. So unless you have other "evidence" for your bias and trashy first comment, I'm siding with Tuomas and Lihim.

Tarinel Lifebringer
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That was a great article. Thanks for posting. I do agree that the F2P model is exploitive and GungHo has been very successful in taking advantage of that model. Personally I don't have a problem with a game company gaming me. Its really a metagame of sorts, and definitely a real life PvP or I should say Player vs Corporation. My personal hope is games like these will help people develop the mental skills early so that by the time they are even older they have the wherewithal to resist being gamed by telemarketers or whatever their equivalent is by the time they reach that age.

Companies exist to make money. We are lucky when we find a company that appears to truly care about their products versus just making money. As you point out it is possible this is just another fluff piece. But like anything you read or hear. The real test is based in the actions of the people speaking or being spoken about. So far it seems GungHo's heart is in the right place with regard to gaming.

Lihim Sidhe
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First of all thanks for the article link. I'm always happy to learn more about game design principles and from intelligent people like you. I believe you're view is a bit skewed but hey... we all have our opinions right?

Your argument's base principle seems to be against capitalism in general. I mean it's pretty simple - all games are forms of entertainment. Consumers choose the entertainment they want. Successful games persist and the less fortunate ones fade.

The resistance against F2P seems to be based on the premise that these F2P developers have discovered the secret to mind control and we are all unwitting victims pulled into their deceptive master plan. I say mind control because we don't have a choice right? As soon as one installs a F2P game on our device of choice it's over. Their spell takes hold, I become enthralled and fast forward a few months and I'm homeless and naked on the streets selling by body for IAP.

Either that or F2P isn't mind control, it doesn't magically take away one's decision making process, and isn't some magic trick of mental domination.

It's FREE TO PLAY. FREE! And if one doesn't like the IAP model by golly one does not have to make a single purchase, ever.

As much as I want to believe there is more to this world than death, taxes, paperwork, and chaos... Telepathic Overlord F2P developers are not. It would be awesome but alas... they are not.

Luis Blondet
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Nice strawmen, bro.

How about you read the article, specifically the parts where P&D uses exploitative game design.

David Takishi
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Sorry, but you're wrong Luis. The article you mention has a clear agenda to push Wargaming in favor of other F2P companies. I have to agree with the others in this pointless debate that the point-of-view of the CEO of GungHo is much more legit than someone from a rival company trying to spin their competitor's game as evil and exploitative.

Until you have legit research on the topic from someone who has nothing to gain and is out to teach/inform rather than someone with an agenda that is based on hunches and a narrative that is purely beneficial for the individual or the company they work for, I suggest refraining from trying to spin it as a positive in your light as your bias has shown through and there's no convincing you otherwise as you are dead set on pushing an agenda, too.

If you feel lost, re-read the interview with a clear mind rather than thinking about the propaganda from Wargaming.

Rosstin Murphy
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Freemium is a reality of the gaming world right now. I appreciate Morishita's positive take on it.

Ara Shirinian
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It's great to have a positive take on things, but Mr. Morishita's comparison of monetization in PAD to a tutor service is not really an accurate way to describe the dynamic.

People generally pay money to tutors in order for them to learn skills faster than they would be able to accomplish on their own.

In PAD, people pay for the premiun currency to advance in the game faster than they would be able to accomplish on their own.

However, the critical difference that is missing here is that when you pay the tutor and do the hard work, you have increased your own intrinsic skill and ability further as a result.

When you buy things in PAD with real money, you are increasing statistical values that effectively permit further progress, but that is an artifact of the statistical structures of the game, and you have not increased any of your own skill and ability at all.

I do not believe that Mr. Morishita is deliberately trying to mislead however. I do believe that many developers who have devised successful F2P games have in fact done so without fully understanding all the psychological effects and consequences of the resulting dynamics, perhaps even Mr. Morishita.

Edward Magee
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I really think this is a good article. It gives me a lot of detail as to why the game looks good. One question I have for you would be: Is there going to be a time for you selling this game in Europe and China as well as U.S. and Japan?