Hard times: GREE continues to lose money

One of the largest publishers in the Japanese market is going through hard times. The company’s net losses for the last fiscal quarter amounted to ¥ 7.66 billion ($64.8 million). It was less only in 2008.

The story of GREE is such a sad story about a former leader who not only did not have time to adjust to the changed market in time, but also made a number of rash steps in the process, for which he is still forced to pay.

In the Japanese feature phone market, GREE, along with DeNA, dictated its own rules a few years ago, built an entire ecosystem and even tightened the leash around the neck of a local developer to the maximum, who could publish a mobile game only through him or, accordingly, DeNA (it got to the point that some Japanese developers consolidated and went to create their own initiatives).

With the arrival of new ecosystems (iOS and Android) in the Land of the Rising Sun, the situation for GREE has become more complicated. The company tried to repeat the already tested scheme: to launch a gaming platform within the framework of new operating systems, the purpose of which will be to gather a community of players around itself, which can then be easily “poured” from project to project. Based on this, in 2011, the OpenFeint gaming platform was purchased for $ 104 million.

But GREE’s plan didn’t work. As time has shown, the reason for this was not the concept, but the approach to its implementation. LINE and Kakao, who played the same card a little later, did it all.

The fact that the chosen scenario will not pass, the company’s management became clear pretty quickly. This, however, did not stop GREE, still on Olympus, from buying the Pokelabo game studio for $173.8.

By December 2012, apparently, the problems became more obvious to the company: OpenFeint was disbanded, and six months later GREE began to curtail its expansion into the western market, began mass layoffs and stopped working on almost three dozen games.

Buying Pokelabo also does not justify itself. Together with her, GREE has not had hits for several years. The only “outlet” is the American Funzio, bought for $210 million, which is now the publisher of League of War and Knights & Dragons.

Given the absence of new high-profile projects in the Japanese market, the tail from unsuccessful purchases continues to significantly affect the company’s financial results. Only due to the depreciation of OpenFeint and Pokelabo, the company lost ¥18.39 billion in the post-day quarter (the second fiscal quarter for 2015). GREE’s profit was not able to compensate for such figures. So with total sales of ¥24 billion ($205 million), as we have already noted, the company ended the quarter with a minus of ¥ 7.66 billion ($64.8 million).

Wanting to turn the situation around, GREE is now going to focus on its native market and partially curtails part of its operations with Western developers. However, the company does not plan to completely abandon support and investment in Western developers.

Is it worth waiting for a reversal of the situation? Considering that GREE’s management has become much more cautious, and also in August lured the head of Kabam game studios Andrew Sheppard, the answer to this question does not seem obvious. What do you think?

The GREE report for the second fiscal quarter of 2015 can be found in detail here. By the way, there is a very interesting analysis of what money is spent on in such large companies today.

Also on the topic:

• Tokyo Drift: a brief history of the formation of DeNA and GREEGREE believes in midcore
• Gree, Ink is a Japanese media company that creates and develops browser-based, native and mobile games; it also owns a social network of the same name.

Founded in 2004. Located in Tokyo.