DeNA, Gree Rise After Agreeing to End Sales Method: Mover

DeNA Co. (2432) and Gree (3632) Inc., Japan’s two biggest social-gaming operators, rose in Tokyo trading after agreeing to stop offering a feature scrutinized by regulators, who said charges to use it were in some cases excessive.

DeNA climbed as much as 9.9 percent to 2,127 yen, while Gree advanced as much as 8.9 percent to 1,623 yen. The two Tokyo-based companies were among six Japanese game operators who announced yesterday they will abandon the “complete gacha” system by May 31.

Gree and DeNA each plunged more than 22 percent in the previous three trading days as Japan’s Consumer Affairs Agency said it may impose regulations restricting the sales method. The decision to abandon the feature eases concerns that the industry will be subject to new regulations or legal risks, Credit Suisse Group AG said in a report.

“This resolves the market’s major concerns at present, so we expect a sense of reassurance,” Yuki Nakayasu, a Tokyo-based analyst at Credit Suisse, wrote in the report.

The consumer agency plans to issue an opinion on “complete gacha” next week at the earliest, Hirohiko Fukushima, secretary general of the agency, said yesterday. The agency has said games with the feature entice users with an appeal that’s similar to gambling.

Virtual Tokens

“Complete gacha” users pay about 300 yen ($3.76) apiece for virtual tokens that can be converted to a more valuable virtual item if the player obtains the right combination or a “complete” set.

Gacha is the Japanese word for vending machines that dispense miniature toys or prizes in plastic capsules without showing the contents beforehand. Buyers take a chance they will receive a desired item after inserting coins and turning a knob.

One “complete gacha” user’s charges totaled 4 million yen in two months, according to the minutes of the consumer agency’s panel meeting in February. Some users also offer virtual items on auction sites, the panel said.

“There may be a need for some regulation, as children get charged hundreds of thousands of yen a month” to obtain special virtual items, Fukushima said yesterday.

A ban on “complete gacha” could reduce Gree’s net income by 18 percent and DeNA’s by 6 percent, according to David Gibson, a Tokyo-based analyst at Macquarie Securities Ltd.

New Revenue Sources

Gree said this week it almost tripled profit in the three months ended March 31 as it drew users to games, including those with the “complete gacha” feature, on its own online social network.

The company forecasts net income may total between 44 billion yen and 50 billion yen in the year ending June 30. Although the impact of ending the sales method may be limited, Gree may revise earnings estimates if necessary, it said in a statement yesterday.

“With the move to scrap the highly profitable complete gacha games across the entire industry, companies need to find new sources of revenue as a matter of priority,” Credit Suisse’s Nakayasu wrote.

DeNA’s revenue may not decline this fiscal year from last year, President Isao Moriyasu said yesterday.

Japan’s social-gaming market may expand 33 percent from a year earlier to about 343 billion yen this fiscal year, Yano Research Institute Ltd. forecast in January. That would be 70 times the 4.9 billion-yen market in 2008, according to estimates by the researcher.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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