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Under threat of regulations, Gree announces plans to self-police its social games

Under threat of regulations, Gree announces plans to self-police its social games

May 8, 2012 | By Eric Caoili

Gree has announced plans to promote "proper use of social games" and to better address user concerns on its mobile social game network, as it faces impending crackdowns on its random virtual goods.

The company made sure to emphasize these upcoming efforts while revealing its third quarter financial results on Tuesday, a day after reports emerged that Japan's Consumer Affairs Agency will regulate how platforms like Gree's sell virtual goods.

CAA is said to have found the common social game practice of "kompu gacha" -- selling random virtual goods, and rewarding players with a prize after they collect a complete set of certain items -- illegal. The agency is expected to restrict the practice, and punish companies that do not comply.

Though mobile social game network operators like Gree and DeNA haven't directly commented on the matter and are waiting to hear an official comment from CAA, Gree revealed several initiatives today to improve the platform and address user concerns.

Those plans involve the creation an internal User Environment Improvement Committee, which will "discuss and plan measures for improving services, promoting proper use of social games," and other matters.

It's also started an advisory board to review ideas for improving the service with consultants. Furthermore, as part of a Social Game Platform Contact Conference, Gree is working with five other network operators to agree on and announce guidelines for how they handle social games later this month.

Other efforts include increased monitoring on prohibited real-money trading in its social games, improving how it handles customer care, and recent restrictions limiting how much younger social game players can spend per month on virtual goods.

"We want to make our game environment as worry-free as possible to ensure the greatest number of users," said Gree CEO Yoshikazu Tanaka, according to the Wall Street Journal.

Gree could see its business impacted considerably if CAA decides to ban "kompu gacha" from the social games on its service, as the majority of the company's revenues come from virtual good sales.

And those sales are significant -- today the operator reported revenues of ¥46.2 billion ($578.9 million) and profits of ¥25.5 billion ($320 million) for its third quarter ending last March, with both up by nearly 200 percent compared to the same period in 2011.

But Gree took a hit at the stock market yesterday after reports about CAA's investigation began to circulate. The company and other social network operators saw their share prices on the Nikkei index fall dramatically. Developers for those platforms, like Konami and Capcom, were affected, too.

The news also comes at an inopportune time for Gree, as it will begin rolling out its new global mobile social game platform, which extends its service beyond Japan and to the West (Gree's current network has 230 million registered users), later this month.

Gree hopes to match its success in Japan with the new platform overseas, and has invested heavily in the service with big developer acquisitions, the opening of a San Francisco studio, and exclusive deals for notable franchises like Assassin's Creed.

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