Japan officially declares lucractive kompu gacha practice illegal in social games
As widely anticipated, Japan’s Consumer Affairs Agency has officially declared kompu gacha illegal. According to a report in the Yomiuri Shimbun, any developers using the controversial monetization mechanic in their games after July 1 will be subject to fines.
Kompu gacha, or “complete gacha” is a monetization mechanic in social games that heavily incentivizes the practice of gacha — paying a small amount of money to get an item at random, similar to purchasing toys from a vending machine.
Games that use kompu gacha typically promise rare “grand-prize” items to players who can manage to amass a set of specific items, which encourages players to spend more money on randomized gacha draws in order to complete their collections. Although extremely lucrative for Japan’s social game companies — some developers see half their sales coming from gacha — the kompu gacha system had come under fire recently for encouraging gambling, particularly in children. According to industry watcher Serkan Toto, the ban does not affect gacha, just kompu gacha.
The Yomiuri Shimbun’s explanation of kompu gacha.
As predicted, the ban is covered under Japan’s Act against Unjustifiable Premiums and Misleading Representations and the Law for Preventing Unjustifiable Extra or Unexpected Benefit and Misleading Representation. During a press conference announcing the ban, Jin Matsubara, Japan’s minister of state for consumer affairs and food safety said “significantly increasing the passion for gambling is not appropriate to the education of children.”
Although not technically illegal until July 1, most companies are not waiting until the government deadline to remove the practice from their games. After the Yomiuri Shimbun broke the news that the Consumer Affairs Agency was considering banning the practice, GREE, DeNA, Mixi, CyberAgency, Dwango and NHN Japan all announced they would phase out the mechanic from their games and games on their platforms by the end of May. Affected developers include Konami, Bandai Namco, Sega, Zynga and Klab.
It remains to be seen what impact the ban will have on the earnings of Japan’s social gaming companies, but with analysts predicting the companies will see net sales decrease by at least 6 to 18 percent, both companies stand to lose millions of dollars.
During their most recent quarters, GREE and DeNA both posted record earnings results. GREE’s net sales hit 46.2 billion yen ($578.1 million) while net income climbed 186 percent year-over-year to 13.4 billion yen ($167.6 million). Rival DeNA saw its net sales hit 42.2 billion yen ($529 million) and net income of 10.7 billion yen ($134.5 million).
Both GREE and DeNA’s stocks declined on the news. GREE’s stocks fell 5.93 percent to close at 1,365 yen ($17.20) while DeNA’s dropped 2.46 percent to 1,945 yen ($24.51)
For more information on kompu gacha and how the ban might affect U.S. companies, read our feature report on the issue here.
May 21st, 2012 at 8:53 am
[...] Japan officially declares lucractive kompu gacha practice illegal in social games [...]
May 25th, 2012 at 5:50 am
What is “complete gacha”?…
Gacha is a Social game monetization mechanic where a player purchases a random item. So for example – you could buy a Super Chest for £1, which once opened could contain either: Dust or a Diamond. Obviously the weighted probabilities of producing the …
May 25th, 2012 at 10:02 am
[...] gambling for Japan’s Consumer Affairs Agency, which banned the practice on May 18th. In addition, concerns were raised that the mechanic exposed gambling to children under the age of [...]
May 31st, 2012 at 11:09 am
[...] month ($26 million) in revenue from in-app purchases. While that figure was likely increased by the now-banned kompu gacha sales tactic (which greatly incentivized users to purchase randomized packs of additional cards), the app is [...]
June 15th, 2012 at 6:00 pm
[...] it will see earnings increase to 17.5 billion yen, up 10 percent year-over-year, despite the banning of the lucrative Kompu Gacha sales tactic, which took effect June 1. CEO Isao Moriyasu had [...]
July 30th, 2012 at 4:19 pm
[...] blamed its profit decline on the banning of the kompu gacha sales tactic — a practice that encouraged players to purchase randomized [...]
August 9th, 2012 at 9:41 am
[...] far Japanese mobile-social gaming giant DeNA seems to have emerged largely unscathed from the ban on the kompu gacha monetization mechanic, reporting its highest ever quarterly revenues for Q1 2012. Sales climbed to [...]
September 12th, 2012 at 2:58 pm
[...] As was the case with many developers making mobile games in Japan, Zynga was affected by the recent ban of kompu gacha [...]
September 12th, 2012 at 3:14 pm
[...] As was the case with many developers making mobile games in Japan, Zynga was affected by the recent ban of kompu gacha mechanics. Inside Mobile Apps [...]
November 8th, 2012 at 10:14 am
[...] social game market which has been growing rapidly lost some of its momentum partly because of the ban to the kompu gacha monetization method. Social games under Capcom’s Beeline brand like The [...]
December 7th, 2012 at 12:27 pm
[...] profit were hamstrung by the high costs of international expansion and the kompu gacha ban by Japan’s Consumer Affairs Agency. Kompu gacha is a practice that heavily incentivized the [...]
December 31st, 2012 at 9:00 am
[...] May, Japan’s Consumer Affairs Agency declared kompu gacha illegal in the country, going into effect in July. Kompu gacha is a monetization mechanic in social games [...]
December 31st, 2012 at 4:00 pm
[...] with huge moments like the legal battles between Zynga and developers like EA and Kixeye, the shutdown of kompu gacha mechanics in Japan and the expansion of major game brands onto these platforms. As the year comes to a [...]
January 10th, 2013 at 8:07 am
[...] revive monetization techniques that are proven but not permissible with pure virtual goods, such as Kompu Gacha. Kompu Gacha is a monetization mechanic in social games that heavily incentivizes the practice of [...]