Freemium crackdown prompts DeNA and Gree share nosedive

Freemium crackdown prompts DeNA and Gree share nosedive
Will Freeman

By Will Freeman

May 8th 2012 at 9:37AM

Japan's Consumer Affairs Agency questions IAP practices; wider national games sector hit by trading caution

The share value of Japanese social gaming giants DeNA and Gree have been decimated after the legal status of the in app purchasing models they employ have come into question.

Shares in DeNa and Gree dropped in value by 20 per cent and 23 per cent respectively, after the two organisations fell by the daily limits set by TSE stock market regulations, reports Nikkei.

Japan's Consumer Affairs Agency has announced an investigation into how social games firms sell their microtransactions in Japan, prompting the pair of company's share nosedive. The CAA's concerns stem from an IAP monetisation model known as the 'complete gacha', which that encourages users “to purchase multiple virtual items from an in-game vending machine in the hope of winning a rare item as a prize”.

It is possible that these methods contravene regulations concerning sales which involve random prizes.

"This raises questions about whether the sector's growth in Japan is sustainable," Tokai Tokyo Research Center analyst Yusuke Tsunoda told Nikkei.

Recently Gree has enjoyed substantial financial success, seeing third-quarter profits almost triple earlier this year. Net income in the three months leading up to March 31st totaled 13.4 billion yen – the equivalent to $166 million – reports Bloomberg. That figure is in contrast to the 4.7 billion yen the company generated in net income a year earlier. The organisation revealed that sales rose from 16.4 billion yen to 46.2 billion yen a year previously.

According to Bloomberg, the CAA's concerns have also impacted the wider Japanese games market, with other studios in the country seeing their Tokyo trading value fall. Konami saw a 18 per cent fall, reportedly as a result of its interest in the social gaming space.

As a result of these events high-profile businessman and Japan’s youngest billionaire Yoshikazu Tanaka saw $702m wiped from his personal fortune.