A Look into Konami’s Expansion in Gaming
Konami has been on a retreat from their video games to focus more on amusements such as Pachinko not forgetting gambling operations as well. This started out about 4 to 5 years ago. However, it appears things didn’t go as planned as is evident from the company’s financial results showing a dip in revenues, mostly attributed to the amusements.
Reported by Rachael Price from GamblingNews.com, the first quarter of 2019 showed an overall increase in revenues of $63.8 million, translating to a 7.3% increase year-over-year. However, the same cannot be said about the period starting from April to June where Konami raked in ¥56.5 billion representing a 3.4% drop.
As mentioned earlier, the main cause of this is the amusement category, which saw a drop of a whopping 50.6% – ¥6.6bn to ¥3.3bn. sports also had something to do with the drop-in revenues.
This category posted a 3.7% fall, although the Digital and Gaming & Systems segments both posted increased revenues – this goes to show that the gaming and gambling sector might have saved face for Konami despite the drop in the amusements category.
Expanding Horizons – Konami Venturing into Gaming and Gambling
The numbers in the results speak for themselves and the Digital Entertainment and Gaming & Systems categories are the clear winners, with increased YoY revenues. Recurrent user spending, as many companies would like to call it, is what is driving an increase in revenue for Konami, particularly in Digital Entertainment.
The same applies to the company offering mobile titles. In this case, the company continues to see increased spending on titles such as Pro Evolution Soccer 2019, Duel Links, and Yu-Gi-Oh!
The latter continues to lead in the global market while the former has hit over 200 million downloads worldwide. Other titles such as JIKKYOUPAWAFURU PUROYAKYU and Professional Baseball Spirits continue to show increased performance in Japan.
In-game purchase spending is also touted to be a great pillar for Konami, especially with the home-console market. Loot-boxes, for instance, in Pro Evolution Soccer 2019’s myClub mode. More success comes in the form Arcade Classics dubbed as “Anniversary collection” such as Contra and Castlevania. Overall, this category raked in ¥31.5bn in revenue. The profits stood at ¥9.7bn.
Gaming & Systems, which also covers the gambling aspect of Konami, also continues to be an asset for the company.
However, the category posted low profits but that is attributed to low high-margin item delivery not forgetting the increased cost of slot machines where the company is in partnership with various operators. The revenue for this category stood at ¥6.8bn, with ¥0.3bn being a YoY rise but the profits dropped to ¥0.2bn from ¥0.9bn.
The gaming market continues to see massive growth globally, with the highest growth seen in Europe. Integrated resorts and new casino facilities are also on the rise. In addition, young people (millennials) are the target audience for most gaming companies and with good reason. As a result, many companies are strategizing to woo this market.
Going into the future, Konami seeks to add more titles in its Digital Entertainment category including games such as Pro Evolution Soccer 2020 and a brand-new title to the Contra series to improve from this year’s revenues.
That’s not all because according to Konami, they plan to make a worldwide release of Professional Baseball Spirits, that’s on top of a new additional title in the Yu-Gi-Oh series. The titles may not be expansive but Konami is betting on the success of their long-standing titles.
Moving over to the Gaming & Systems, Konami expects its results to go up steadily in the next year. However, if Konami decides to unveil the cabinet system as previously planned, then they are bound to experience a massive boost in revenue.
In addition, the company is in full-gear preparation for the SYNKROS casino management system rollout as well as increased agreements with other partners through services and games expansion.
Failing Pachislot and Pachinko
The Amusements segment, as mentioned earlier, continues to post diminishing returns. Pachislot and Pachinko are the main culprits here and it’s not just in Konami alone but also other Japanese companies due to government regulations.
While this may be the case, the company is gearing toward adding seven other machines that will be launched at the end of the quarter that will see bolstered revenues and profits.
The sports section, on the other hand, is on a steady decline despite efforts from the Japanese government through multiple initiatives that seek to push the citizens into health and fitness. Konami doesn’t seem to benefit as expected from this massive effort.
In fact, this is the seventh time in a row that the sports segment, previously health and fitness, has posted declined revenue. According to the company, the decline in revenue is due to a shutdown of their facilities, which they manage directly.
What Next for Konami?
Konami has several video game titles lined up for release and this is expected to generate substantial revenue for the Digital Entertainment category. This will be so if the company decides to use their most popular IP’s including Castlevania, Silent Hill, and Metal Gear Solid.
Apart from that, Konami also expects increased revenue from the Amusements category after they introduce seven additional machines. Gaming & Systems, on the other hand, is also expected to provide a healthy income for the company after they launch the Concert Opus in Europe.
In fact, after its success in North America and Latin America, Konami has also seen increased demand in Europe and is banking on it to bring in more revenues.
With all these expected launches and releases, Konami projects it next annual revenues to hit ¥270 billion, with profits at ¥47 billion.
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