Konami posted its financial results for the first quarter of fiscal year 2017, and while revenue dropped by 3.5% year on year, profit figures were all significantly higher than in Q1 FY2016.
We also got a detailed analysis of the performance of the company’s businesses, including a mention of “high expectations” that the gaming industry will be revitalized by the popularization of virtual reality, increasing business opportunities.
“The business environment surrounding the Konami Group in Japan remains weak personal consumption despite solid employment conditions and personal incomes. While the basic conditions of the rising yen and declining stock prices continued since the beginning of 2016 owing to concerns over an economic slowdown in emerging countries and unstable financial markets, the trend sharply accelerated in June, 2016 due to concerns over the U.S. economy and “Brexit,” the vote in the U.K. to leave the European Union (EU). There have been concerns in the global economy regarding the economic environment, with fears of long-term volatility and further global uncertainty owing to Brexit.
In the entertainment market, along with the development of information and telecommunications infrastructure and enhanced various device functionality, including mobile devices and video game consoles, game contents continue to diversify. There are high expectations that, as device markets utilizing virtual reality (VR) grow and become more popular, the game industry will be revitalized and business opportunities will increase.
In conjunction with the changing times, the preference for “enriching daily life through full and abundant experiences” in personal spending has been strengthened. In that context, game industry is also placing emphasis on providing opportunities to share experience, such as video distribution services and e-Sports. Points of contact between customers and games are expanding further, and game contents are contributing to the increasing popularity.
In the gaming industry, opportunities of gaming business are expected to grow as the casino market worldwide continues to see the spread supported by development of resources related to tourism and opening new casino facilities.
In connection with the health and fitness industry, there is a growing health consciousness throughout society, especially among senior citizens and women, who year after year have shown an increasing tendency to focus their leisure activities on improving health and physical strength. W
e continue to see growing a preference for sports, health-consciousness and an interest in preventing the need for nursing care in old age. In addition, we are seeing a steady increase in customers engaging in exercise to improve personal appearance, and other diversification of needs. Markets for new household training machines continue to grow. This is because household health and fitness equipment has dropped in price, and because a wide variety of machines were released by primarily overseas manufacturers.
Against this background, in the Digital Entertainment segment of the Konami Group, mobile games, including JIKKYOU PAWAFURU PUROYAKYU, the World 5 Soccer Collection series and PROFESSIONAL BASEBALL SPIRITS A (Ace), continued to enjoy steady sales.
As for card games, to commemorate the release of the cinematic version of Yu-Gi-Oh! THE DARK SIDE OF DIMENSIONS, we produced and sold related merchandise and cooperated in measures related to the film. This received favorable reviews from a lot of users. As for computer and video games, we released JIKKYOU PAWAFURU PUROYAKYU 2016 and UEFA EURO 2016/Winning Eleven 2016 (known in overseas as PES 2016 – Pro Evolution Soccer -) in April 2016.
These titles are available to provide long-term enjoyment through continuing operation. In our Health & Fitness segment, we continued to develop our pricing and membership plans. These plans enable customers to select a pricing plan based on the number of times they use our facilities and to use more than one facility. We have intended to promote and spread the Konami Sports Club’s services supporting the concept of “sustainable fitness.”
As for products related to health and fitness, we began to develop new products with the aim of enhancing its degree of recognition and increasing its market share in the health and fitness equipment market. This market is expanding centered on household machines.
In our Gaming & Systems segment, we have promoted sales of the new cabinet Concerto of the video slot machine as well as the Podium cabinet series and the SYNKROS casino management system mainly in the U.S. and Australian markets.
While business in the pachislot and pachinko machines was conducted in an unusual environment, including the nationwide self- imposed moratorium on replacement of pachislot and pachinko machines due to the impact of the G7 Ise-Shima Summit, MAGICAL HALLOWEEN 5, a pachislot machine released in the previous fiscal year, was sold with additional orders. It maintained a top-class level of operation among the pachislot machine market.
In terms of the consolidated results for the three months ended June 30, 2016, total revenue amounted to ¥49,417 million (a year-on-year decrease of 3.5%), operating profit was ¥9,089 million (a year-on-year increase of 40.2%), profit before income taxes was ¥8,419 million (a year-on-year increase of 22.7%), and profit attributable to owners of the parent was ¥5,814 million (a year-on-year increase of 35.8%).”
Following, the press release included a detailed analysis of the Digital Entertainment business, that includes video games for console and PC. Incidentally, it’s the only one among Konami’s businesses to see an increase in revenue year on year.
“As for mobile games, JIKKYOU PAWAFURU PUROYAKYU, surpassed 25 million downloads, and PROFESSIONAL BASEBALL SPIRITS A (Ace), reproduced the real experience of a professional baseball game with top-quality graphics, continue to be available to provide long-term enjoyment. Moreover, the WORLD SOCCER COLLECTION series and the Professional Baseball Dream Nine series are enjoying strong performance.
In overseas markets, Star Wars™: Force Collection and Winning Eleven CLUB MANAGER (known in overseas as PES CLUB MANAGER) continued stable operation. In regards to arcade games, our e-AMUSEMENT Participation system titles, centered on MAH-JONG FIGHT CLUB ZERO and music genre games, continued to operate steadily.
As for the online match quiz game Quiz Magic Academy Tokyo Grimoire, QMA JAPAN TOUR 2016 was held in June 2016. This tour was to determine the best player of the video game in Japan. We have given official certification to a variety of competitions that in the past were held individually at amusement facilities nationwide. Combining this with proactive support for such official matches, we will work to raise the motivation of customers to play.
As for card games, the Yu-Gi-Oh! TRADING CARD GAME series continued to develop in the global market. In Japan in particular, to commemorate the release of the cinematic version of Yu-Gi-Oh! THE DARK SIDE OF DIMENSIONS, we produced and sold related merchandise and cooperated in measures related to the film. This continues to receive favorable reviews from many customers. In addition, qualifying rounds of the annual tournament for the Yu-Gi-Oh! TRADING CARD GAME are gaining in excitement in each country, with an eye toward participation in the global tournament, “Yu-Gi-Oh! World Championship 2016,” to be held in the U.S in August 2016.
As for computer and video games, we released JIKKYOU PAWAFURU PUROYAKYU 2016 in April 2016, a long-awaited the latest title in the series, as well as started the simultaneous distribution of JIKKYOU PAWAFURU PUROYAKYU SUCCESS 7 SPECIAL, an online-only title that is free of charge for basic functionality. Also, we released UEFA EURO 2016/Winning Eleven 2016 (known in overseas as PES 2016 – Pro Evolution Soccer -) in April 2016, featuring UEFA EURO 2016, one of the pinnacles of soccer competition worldwide, with national soccer teams representing Europe’s various countries and regions competing. In terms of financial performance, total revenue for the three months ended June 30, 2016 in this segment amounted to ¥25,162 million (a year-on-year increase of 5.6%) and segment profit for the three months ended June 30, 2016 amounted to ¥8,661 million (a year-on-year increase of 34.3%).”
Last, but not least, Konami published the outlook for the current fiscal year, and a list of titles in the pipeline.
“With the spread of smartphones and tablet PCs worldwide, the available means of providing games continue to diversify, and opportunities to reach an even greater audience for games are increasing. Against this background, we intend to develop ways of playing games that match the characteristics of each device.
As for mobile games, the total number of registered users of all contents we developed continues to increase steadily. JIKKYOU PAWAFURU PUROYAKYU, surpassed 25 million downloads, and Winning Eleven CLUB MANAGER (known in overseas as PES CLUB MANAGER), being distributed worldwide, are expected to continue to contribute toward our earnings. We are further focusing our managerial resources on the development of content that we believe will become major hits in order to produce more hit content, especially in the native application market.
Looking ahead, we will continue to expand our lineup, utilizing previously established production and operational expertise and rich content resources. In addition, we are currently preparing the new titles JIKKYOU POWERFUL SOCCER and Yu-Gi-Oh! DUEL LINKS.
As for arcade games, Konami Group intends to work to revitalize the amusement arcade industry by providing new entertainment that can be enjoyed only at an amusement facility through “interpersonal communication” using the e-AMUSEMENT system. This will involve promoting the continual development of equipment compatible with the PASELI e-money service and e-AMUSEMENT Participation, as well as enhancements to and the expansion of various services. We also continue to promote medal games that are enjoyed by wide range of users including the release of TwinkleDrop JUKE!, additional lineup of the single medal FEATURE Premium series, and Frozen Tower.
As for card games, we will continue aggressive promotion of various measures for the Yu-Gi-Oh! TRADING CARD GAME series, to provide the enjoyment to players, not only in Japan, but in various regions of the world, with this year marking the twentieth anniversary of the start of the Yu-Gi-Oh! manga series. As for computer and video games, we released Yu-Gi-Oh! Duel Monsters: Saikyo Card Battle! for free download in July 2016. This is intended to introduce the Yu-Gi-Oh! TRADING CARD GAME series to beginners, to provide them with opportunities to experience the fun and increase the number of players.
In September 2016, we also intend global introduction of Winning Eleven 2017 (known in overseas as PES 2017 – Pro Evolution Soccer -), the latest title the Winning Eleven series (known in overseas as the Pro Evolution Soccer series). The game mode myClub, adopted for the Winning Eleven series, is expected to provide a sustained enjoyment to our customers. As we continue to move with the times and take on new challenges, we aim to create and provide “Valuable Time” to customers, including through the production of new games that utilize virtual reality (VR) and the serious development of e-Sports.”