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Konami halts questionable virtual goods as social game revenues soar

Konami halts questionable virtual goods as social game revenues soar

May 10, 2012 | By Eric Caoili

Konami has joined a number of major mobile social game companies that are abandoning a questionable virtual goods sales practice that's been the source of controversy in Japan lately.

The publisher and many other game companies took a hit at the stock market on Tuesday, following reports that Japan's Consumer Affairs Agency will regulate "kompu gacha," a popular method for selling random virtual goods in mobile social games. Some have criticized "kompu gacha" for resembling gambling.

Two of Japan's biggest mobile social game networks Gree and DeNA, responded before the agency could announce its decision, and said they're removing "kompu gacha" from games on their services. Developers like Namco Bandai, KLab, and now Konami have also pledged to give up the practice.

Konami claims that it will not see a significant impact in its earnings after removing "kompu gacha" from its social games, according to a Nikkei report translated by Andriasang. The publisher says that sales from the practice accounted for just 5 percent of its social game revenues.

Social games contribute a significant portion of sales to Konami's Digital Entertainment segment, which just reported revenues of ¥140.4 billion ($1.76 billion) for the fiscal year ending March, compared to ¥133.1 billion ($1.66 billion) in the previous year. Its profits also grew from ¥12.9 billion ($161 million) to ¥23 billion ($288 million).

Konami notes that its social games accounted for nearly a quarter o those revenues, or ¥36.7 billion ($459 million), up from ¥15.8 billion ($198 million) during its 2011 fiscal year. That jump isn't surprising, considering the total number of registered users for Konami's social games grew from 5 million in March 2011 to more than 20 million now.

The company says it will continue to take advantage of the growing popularity of smartphones and tablet PCs, as it has so far with hit mobile social games like Dragon Collection and Sengoku Collection. It points to Zynga as a model it's pursuing, in releasing games to a wide range of platforms.

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