4 out of 6 major Japanese video game developers see decline in profits
Four out of six of Japan’s major video game companies have experienced declining profits in their game sectors in the past year, as reported by GameBiz. The analysis is based on financial results published by Bandai Namco Entertainment, Sega, Koei Tecmo, Capcom, Konami and Square Enix for the first three quarters of FY 2023 (April to December 2023).
Bandai Namco saw their operating income from their digital business sector fall by 96.5% to 1.6 billion yen, experiencing a dramatic decrease in profit. This is partially a reactionary drop caused by the hit past title Elden Ring, but it is also the result of a new online game falling short of expectations. Furthermore, the company reported that the cancellation of more than five new titles and other factors led to a loss of 21.0 billion yen.
Sega Sammy posted a 58% decline in operating income from their entertainment sector. Despite a boost in sales coming from the acquisition of Rovio Entertainment, the company’s new titles underperformed and were unable to make up for the decline in sales of existing titles. Sega has also decided to cancel the development of Hyenas and other unannounced titles.
Koei Tecmo saw operating income from their entertainment sector fall by 10.6% to 20 billion yen. Despite the release of Fate/Samurai Remnant, their earnings were mainly driven by sales of past titles and mobile games. On the other hand, Koei Tecmo declared that they would be focusing on major titles, and they have Rise of the Ronin’s launch slated for March 22, which is expected to influence profits.
Square Enix likewise reported a drop in income, seeing a 20% decline in profits from their digital entertainment sector. Sales were boosted by the release of bigger titles such as Final Fantasy XVI, the Final Fantasy Pixel Remaster series, Dragon Quest Monsters: The Dark Prince and others, but MMO and mobile game-related sales dropped in comparison to the previous year, while advertising and development costs were more pronounced.
The analysis by Gamebiz also reports that the big guns were not the only ones affected – other Japanese video game-focused companies, such as Marvelous and Nippon Ichi Software, also saw losses.
On the bright side, Capcom saw their game sector’s profits grow by 37% to 47.3 billion yen. The biggest contributors to these figures were Street Fighter 6, which sold 2.98 million units, and sales of existing Monster Hunter titles (stimulated by the announcement of Monster Hunter Wilds). Sales of Resident Evil 4 also grew, and the company is getting ready to release the highly anticipated Dragon’s Dogma 2 in the fourth quarter. Incidentally, Capcom recently announced that they will be increasing their starting salaries for new graduates significantly, as well as giving raises and bonuses to existing employees.
Konami Group Corporation reportedly saw profits of their digital entertainment sector soar by 49% to 55.9 billion yen. The company successfully launched the Japan-exclusive Momotaro Dentetsu World: Chikyuu wa Kibou de Mawatteru! and Metal Gear Solid: Master Collection Vol.1, while their mainstay titles such as eFootball 2024 and Professional Baseball Spirits A remained strong.
With the exception of Capcom and Konami, Japanese companies have seen their video game sectors diminish in profit in the past year, with main causes being underperformance of new titles and losses due to cancelled projects. The past year has seen the video game market in Japan “normalize,” with demand coming down from the high it reached during the Covid crisis. This background, combined with worldwide economic conditions worsening, could be contributing factors to what developers are experiencing.
Amber V
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It’s kind of deserved at this point. While it is true you can blame a lot of this on previous successes like for example Bandai Namco’s Elden Ring or cancelled titles and COVID. would argue a 3rd issue as an underlying one, going for Blue Ocean with “Modern Audiences” that do not seem to exist and getting caught when the market normalizes and that these audiences never stick around at all. You can easily attribute this to all the problems in the Japanese industry as a whole on top of it. For example
1. SEGA/Atlus catered too much to the Persona audience because they thought Persona 5 was the rising success of a franchise to exist, they release numerous titles and even ones that look similar hoping for the 7-8 million sells. But all of them bomb or barely make their money back. P3 REloaded even had to embarrassingly push out the Aegis expansion pack for 40$ right after everyone paid 70$ for the original game. Like A Dragon even has NG+ behind DLC and has caused massive backlash. The financial report of them even saying they are going all in on GAAS with their legendary franchises, makes me think that this is going to tank themselves massively. The easiest victory would be to remake them, but SEGA has not made good decisions in the West in decades.
2. Marvelous, NISA, thought that the Western/Global Mass Market would be bigger than Japan but did not realize that their main audience is the Global Niche that is similar to the Japanese audiences in the East, all of us consume the same products because we like them for the same reasons Japanese audiences do. They are currently being punished over here sells wise. Marvelous for not bringing us Senran Kagura as a franchise, and going away from fanservice. NISA due to the translators admitting that they do censor things that they think are bad. Arksys is going to be in the same boat as well soon in the AA sector because of their infamous fiasco with Bridget and the Blazblue team leaving for catering to “modern audiences” and the people here are beginning to see what is happening within regards to translation and censorship.
The only companies that understands who their true audience is the Global Niche is IFI Factory/Compile Heart with this link https://www.famitsu.com/news/202310/05319425.html and your article about SNK which i think is sad and unfortunate, because Global Niches can grow over time. Sure they may not make a lot of money, but they are sustainable and long term growth.
3. Square Enix will turn it around easily, Kiryu going all in on AI Translations, getting rid of the ethics department last minute to help with FF7 Rebirth outfits, and even consolidating their own studios for their AAA titles for more manpower with a revitalized focus on PC should be hugely beneficial for them and should be the path all other companies take. My belief is that Verum Rex will finally be out untouched and have creative freedom to be the game Nomura always dreamed of.
As for the rest it’s an entirely different subject.
A. Capcom i can say is in the clear for now and barely, but they do need to worry about their budgets and profits because the AAA industry is experiencing a common understanding that they might have reached peak budget and might need to be more conservative with it due to sells no longer reaching high enough to offset it even with DLC etc. Also hopefully Capcom can pivot over to stylized games again and move away from generic Quixel Bridge face scans to having their artist work again to make some top beautiful characters again. Capcom is starting to get stale without their artists and their games are looking on the same side.
B. Koei Tecmo i will say is having an off year to prepare for everything else, my hope is they focus on Nioh moving forward and Strangers Of Paradise 2 potentially. Even if SOP can not be made at the very least make a nice side series for it because the gameplay and mechanics are absolutely a blast and it will make money.
C. Konami is in a temporary position and they know that. They do not have much of their talent left due to going all in on Pachinko like some companies foolishly chasing all in on Gacha.
I believe the Japanese Gaming Industry is great, but they kind of misunderstand things and deeply trust things that are bad for them as a whole which does lead to backlash.
Hopefully everything should reverse back to Main audiences, Fanservice, AI Translations that move away from localizers and censorship. Because if it does, i guarantee the money will be 4X what this is and it will be a huge turnaround.