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How 'complete gacha' controversy contributed to Gree's disappointing earnings

How 'complete gacha' controversy contributed to Gree's disappointing earnings

August 15, 2012 | By Eric Caoili

"It's difficult to say how much of an impact the complete gacha problem had on our earnings. What we do think is that this has slowed down our game development."
- Gree CEO Yoshikazu Tanaka explains how "complete gacha" problems earlier this year contributed to the mobile social game developer and network's disappointing fourth quarter earnings (despite record sales for the fiscal year).

Virtual goods sales from Gree's games and network fell for the first time in a while, which the company blamed on a shortage of major IP titles and new releases. It said this was the result of the developer focusing on launching its new global platform and improving its user environment.

An important part of those improvements came from the Japanese government's ban on a controversial virtual goods sales technique, complete gacha, which some compared to gambling. Players were encouraged to purchase random virtual goods, and received a prize when they collected a set of items.

Seeking to avoid punishment, Gree devoted resources to removing the feature in its games, as well as to developing guidelines to avoid any issues with the now prohibited practice.

During the April-to-June span, the Japanese company's revenues reached ¥40.1 billion ($507.6 million) while profits hit ¥12.3 billion ($155.7 million). That's about double the numbers reported during the same period last year, but around a 10 percent drop over the third quarter and below market expectations, according to Reuters.

Gree's chief rival, Tokyo-based company and Mobage operator DeNA, faced similar problems earlier this year, but its recently reported quarterly earnings -- ¥47.6 billion ($603.5 million) in revenues, and ¥10 billion in profit ($126.8 million) -- beat market forecasts.

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