Interesting news coming out of Japan today regarding a certain game mechanic that they have just ruled as illegal. Due to this new ruling, the stocks of some major social gaming companies like GREE, DeNA and others have plummeted drastically to upwards of a 23 percent loss.
A 23 percent loss on stock value for any size company is pretty major but to put it into a better perspective Gree's founder, Yoshikazu Tanaka, lost a staggering $700 million dollars after GREE's stock dropped 23 percent. Other companies like DeNA, Capcom and Konami saw a similar hit to their stock value although not as high as GREE. So what is all of this about? It is about a ruling by the Japanese government over a game mechanic called 'gacha'.
For those of you unfamiliar with what 'gacha' is, also known as 'kompu gacha', this game mechanic is sort of like a randomized crafting lottery feature. In a game that uses 'gacha' where you want to get a rare item in the game, you will need to get other items first, all of which are random rolls. So for example, if you want to get a rare sword, you would have to get Item A first, then Item B, then C. After you get all three items you would then be rewarded with the sword you want.
This particular game mechanic has been around for a long time, especially in Japan where you find coin-operated toy vending machines everywhere. In regards to video games, you actually don't need the first three items to 'craft' the rare item you want, it is more of a prerequisite. This leads to people spending a lot of money in order to have extra chances at getting the initial items so that they can get the rare one that they want.
Almost every single game from GREE and DeNA contain this game mechanic which is why they have taken such a hit in stock value. Other companies still saw a good sized hit to their stocks as well with Konami's stock dropped 18 percent,; Namco-Bandai's stock declined 9.5 percent, and Capcom's stock was lowered by 6.6 percent.
Even though the 'gacha' game mechanic has been ruled illegal, what the action taken to remove to mechanic from social gaming have yet to be determined. This could range from no new games can be developed using the mechanic to having the mechanic pulled from all existing games. As you can guess, this would absolutely devastate companies like GREE and DeNA since all their games have the 'gacha' system in them. It could something as simple as posting the probability of getting the rare items in-game.
While major companies like GREE and DeNA can weather a storm this size and a profit hit of this nature, smaller developers who use this mechanic could be in trouble. For right now this is only for Japanese-based game development companies but this could spread to other countries as well.
Last year GREE bought OpenFeint for $104 million and last week acquired Crime City developer Funzio for $210 million. GREE also just released their first English localized Android game last week. DeNA is also heavy into the Android gaming scene in Asia with plans to push into the English market.