Gross margins remained competitive and growth in sales was expected.
The company did not report any earnings for December 2013 and only provided a one-sentence release to investors who were already planning their dividend. Investors should be in no doubt about GungHo’s direction GungHo’s business strategy is to move from creating high-quality games to creating high-quality software that appeals to a wider audience with higher revenue. While not surprising given that the company has been so diligent in improving the quality of its games’ visuals within the last three years, this is not a trend I would expect to continue much longer. . . .
Even though GungHo is looking to focus more on new game titles, it remains to be seen how long that will last in terms of revenue. Its recent games, such as The King of Fighters XIV, are not only among the bestselling games of 2013, but also the second bestselling of the year. While they are not breaking records like they did between 2010 2015, they do have a decent shot at that and are a testament to the continuing ability of the company to bring original titles here on the global stage that appeal to new gamers while introducing new and unique gameplay mechanics that are unique to the genre. In terms of the long-term impact of the strong sales of these products, I think that it’s going to be a while before they are as big a factor as more famous titles of the same genre. It is also likely that the company will have to adjust their strategy to look beyond the core business.
But from their point of view, it’s all a matter of time until we see the long-term impact of this industry shift not the latest title, but the titles for the foreseeable future. At GungHo, we are still very proud of the quality of our games, the diversity of our players, and the fact that we have reached more than 400 million gamers around the world. With the development of a new title every time we release a new title, we will keep releasing high-quality titles. But as long as our games remain relevant, we will continue to improve them. But I don’t think that long-term success is a given. GungHo is very fortunate to be a company that makes games and does very well from its production of games; it’s a very diverse company, and I don’t think we will have to get a bit bigger once the new titles start to turn the company from an entry point into a worldwide juggernaut.
Looking at the other two companies, Game Freak and Namco Bandai, we don’t have much insight on these companies’ business situations. We certainly weren’t expecting any significant revenue increases in 2013, but with Namco Bandai making similar improvements the company is gaining more momentum as both its games are already being promoted very heavily - which does not bode well for Game Freak:
Namco Bandai’s future, like that for GungHo, is hard to understand. While the company hasn’t announced whether it plans on having another game developed on its own after The King of Fighters XIV, the fact that GungHo announced plans to develop new games on its own is very telling. The games will obviously be for both current generation consoles (PS4, Xbox One, etc.), but the fact that the company will be developing new games for new platforms (Xbox 360, PS3, etc.) shows a level of confidence in its ability to make high quality games and has opened up its market to potential competition. Since the release of The King of Fighters 14 in Japan, Namco Bandai has increased its market share from only 32% to 61%. Its software has also been featured in video games magazine publications and their combined sales are higher than Game Freak’s combined titles.
But what are the chances the titles will come to Japan? With Namco Bandai operating out of a smaller, less developed country in Japan, Namco Bandai owns the licenses to all of its games, which makes them a very significant player in the industry.
The games that will be revealed when Tournaments Next is released, however, will be different from previous Namco Bandai titles. While some are developed by Hideo Kojima and others are written by Hideki Kamiya, both of these companies will be developing their games on new platforms: the Wii U and the NX. With the Wii U being Nintendo’s most recent console platform, this will be a massive challenge for both Namco Bandai and GungHo but this also means that in a way, the companies are already ahead of GungHo as both companies can expect to launch their games on this very platform very soon. This does not bode well for Game Freak, who would have to adjust its plans to work within those constraints:
In another interview with Famitsu, GungHo producer Tomonobu Itagaki made it clear that while Kojima is the primary dev for KOF XIV, the game will not be