What's behind the success of Japan's big video game companies?

Since launch, Call of Duty War Zone on mobile has grossed around $17 million in revenue. But Call of Duty Mobile made more than that last month alone. The likes of Kami and Capcom, they didn't have a choice. They had no choice but to be extremely focused and to prove their limited resources on their biggest opportunities. And their biggest opportunities and strengths were their existing [Music] brands. Hello and welcome to the game business show with me, Christopher Dream. This week, we review some video game company financials. Call of Duty: War Zone is no more. Curve Games has been acquired. Netflix ramps up his ambitions in the kids game space. And Doom: The Dark Ages has released, but how well has it done? But before we get to all that, it's best to introduce our co-host for the show. It is Jean Benoir Rukquette. Have I got that right? Hello, Jean. Welcome to the show. Yes, you did. Thank you very much for having me, Chris. It's an honor. Been following your work for quite some time. your oh a positive force for the for the industry. So very happy to be be here. Oh, you can

come back. You used to be senior vice president of investor relations at Ubisoft for 17 years. Over 17 years, I believe. Yes, that long indeed. And now you sort of advise other companies in things like investor relations, shareholders, general financial reputation. That's sort of your your remit now. Exactly. With a continued passion for for the video game industry. You're here to help us navigate conversations around the recent financial results uh from some interesting video game companies. But before we get to that, there are a few other news stories that are breaking out there from the world of video games. One of them I find quite interesting is Curve Games. It has been acquired by India's biggest public games company Nazar Technologies for 21.7 million pounds. The UK publisher is best known for Human Fall Flat and for the King was part of Group. The deal includes Curve's in-house development studios, Rana Duck, and Iron Oak. But it's been a bit of a journey for them because Curve, they had a lot of success early on, particularly with Human Fall Flat, which I think has done 55 million units now. It's it's a

mega hit. The founder was Jason Perkins. He founded the company initially as a developer. Key leaders of the business around the Human Fall Flat time was Simon Byron who led the firm's publishing efforts. Anyway, sort of come to 2019, they've had this big success and Catalis, which is the parent company of Curve, was acquired by a private equity firm called North Edge Capital, who invested 46.6 million into that business. And Catalis also owns as well as Curve, they also own Ku and the QA firm Testronic. Anyway, North Edge private equity, they're looking for a return, right? So, Curve went for a bit of a transformation as a business. They brought in new leadership to sort of make it a little bit more corporate, a little bit more, you know, sellable, make it look a little bit more professional. Not that it wasn't professional in the first place, it was very indie. It brought in a bunch of folks including a chap called John Clark who was the former leader of Sega Europe, was in charge of publishing at Sega Europe, and he was a leader at Tencent as well. So, he came in as the CEO. Jason and Simon ended up leaving. Uh, I think there's a bit of regret around that. Simon actually went to Yorkcast Games and had another hit in

the game Plate Up, uh, which I think did around one and a half million units. But that's the sort of side story. The company was looking to scale up. It was signing more expensive projects. It was acquiring businesses. It wanted to be one of the things it used to say in interviews to me. They wanted to be the next Idos, like a big UK superpower. But ultimately, it was looking to a situation where it might float. But obviously, the market had other ideas. Uh the industry took a downturn. Some of the games curve sign didn't didn't work out. John left the business. It's now being led by Stuart Denzy, who's actually my old boss at MCV. They still publish Human Fall Flat, but the sequel went to Devolver. So, it's been a bit of a battle for Curve over the last few years. Um, they're sort of focusing more on what they were known for. Um, sort of smaller indie games, a bit like the ones they used to work on, you know, from before, but but there's good people there. They have some decent IP for The King is a great little series. It's just the dream of 2019 didn't come to pass. I mean, that's true of everybody, I think, but I think this seems like a decent win for Curve. Um, Nazara is an interesting company. They own a number of esports businesses. is they have a $100 million fund. They're looking to invest in

expanding development and publishing uh particularly in the PC and console space. They've not really done much there. They only already own another UK team called Fusebox which makes the Love Island game. They have an ad tech company. They've got all loads of bits and bobs. But obviously the things didn't work out and it is a bit of a shame like this is not the UK superpower that um was being dreamed about um back in 2019. But yeah, they found new home. It's nice that they have managed to find a exit for some of the people involved. You know, it is a cyclical industry. So there are ups and down and it's always an opportunity in the in the current situation where the mood is a little bit more gloomy I would say that valuation are going down. It's an opportunity for people investors either strategic investors or or funds who want to invest in the industry because valuation are lower today. Yeah. For some companies than they were a few years ago. Yeah. There's certainly some deals to be had. Another story that's sort of came out, we've been talking about this a lot on the game business show, which is Netflix, they've started to act on its

kids ambitions. So Netflix games boss Alan Tascan, who we interviewed back in March, he said at GDC as well that they wants Netflix to become a destination for kids. And they have two developments around this all happened this week. And first is the game The World of Peppa Pig. It's exclusive to Netflix. It's got puzzles and mini games, coloring books, all in a mobile app. It ties in with the Peppa Pig series that's sort of going out on Netflix at the moment. So, that's one of the things they've done. They've launched a Peppa Pig game. And alongside that, they also announced they've signed Sesame Street, not as a game, but as a well, actually as a game, but also as a as a TV show that all the episodes will be on Netflix. New episodes are coming. As say Netflix also has the right to develop video games for both Sesame Street and Sesame Street Mecca Builders. There's obviously big big kids brands. You don't get much bigger than that. And I actually kind of like this. Netflix isn't wading in with like we're going to make some big shooters or a massive like online RPG or whatever. They're going what's our role? What's our audience? How what can we do here? Their pitch seems to be I I wrote about this about 6 weeks ago. It seems to be a little bit more like a Wii. They've got party games

on there. They're targeting kids games. And as a parent, I kind of like the idea of Netflix being in this space. It's a safe space. They're not going to be bombarded with microtransactions or dodgy marketing or anything like that that makes me nervous in the other spaces. And I think it's quite interesting that they're they're doing this. I do think there might be a little bit of a threat to Nintendo if it managed to work out. But yeah, that's a that's Netflix's uh you take you don't game on Netflix, do you? Uh John, do you don't I don't but the the season is is true. It's it's it seems to be a good move for them creating goodwill and among among parents. It's a superb show, a superb brand and everything is positive about it. Yeah, it's good that they they did that. Yeah, certainly doing something different, which I think's, you know, growing the audience is what they're trying to do. I'm actually the biggest fan of Peppa Pig as a franchise. Out of all the shows the kids watch, Blueie, I love a Bluey, but Peppa Pig um is can be Yeah. Anyway, the kids love it. You're more into towards the train, I'm sure.

Um a couple more stories. Uh Call of Duty War Zone, the game is no more. Well, it's no more on mobile. The game is being sunset despite the fact that Microsoft initially had talked about it as being a major major play for them in the mobile space. There's been a lot of chatter on this sort of connecting those two things, but you said to me on the email that it's just really difficult mobile. It's um you know just they might want Call of Duty War Zone to be the biggest thing in the world. But if it isn't then you know I don't think it's an indicator of Microsoft's wider ambitions in mobile. It just speaks to how difficult it is because you know we talk the take two financials and the amount of amount of impact Zinger has had on that business and and the challenges and the money involved in that. Yeah. No, it's a it's interesting mobile stuff business right now over the past two to three years and it's clear that if you look at I was mentioning the fact that in tech two recent earnings they are depreciating it's a depreciation of over 3 billion of dollar related to the Zinga acquisition. So

yeah the mobile business has not gone as well over the past two years and people might have expected to. It's improving is doing better. Last year was really tough, but it's clearly not doing as well as again two to three years ago. I actually jumped in on the app magic data. So, Call of Duty War Zone on mobile. It had 3 million players in April, which sounds like a lot. I think I think I've read this right, but Call of Duty Mobile had just shy of 14 million. So, Call of Duty has these two Call of Duty mobile games. One's obviously a lot more successful than the other. Since uh launch, Call of Duty War Zone on mobile has grossed around $17 million in revenue. But Call of Duty Mobile made more than that last month alone. And ultimately, War Zone's a battle royale game and it powers in comparison to the other battle royale shooters in mobile. PUBG did around 50 million does around 50 million users a month. Free Fire has just shy of 60 million players in April. Even like recent games like Bloodstrike from Netis, which is on a smaller level, even that did more than double what War Zone was doing. So, it hasn't been a success. War Zone will be fine on other

platforms, but it just hasn't really worked out there. And I think, you know, maybe scaling back from that, moving back from that, focusing more on the Call of Duty Mobile or potentially trying something new is is probably the the better bet. I don't think it's an indicator. In fact, I'm guarantee it's not an indicator of any scaling back of ambitions from Microsoft in mobile. Just that that one hasn't worked out. And finally, Doom: The Dark Ages came out last week and I've got some early data to see how well it's done. A pair analysis has given us some uh figures. The game has done around just over three million players up until Sunday. So that was uh uh May 18th. So the end of Sunday, May 18th, we had about three million players. Just under 2 and a half million of those players were on Xbox because of because obviously it's in Game Pass and that obviously helps that. Whereas just over half a million sales were on uh PlayStation platforms. This doesn't include PC. Obviously, I'd be really really strange to suggest that 3 million players is bad. It is not bad in any level, shape, or form. I'd be be mad to even suggest that. But I have to say I always maybe maybe it's my expectations. I was expecting a bit more and the reason for that is Doom was

announced at Summer GameFest uh last year during Xbox's summer showcase and it was one of the standout games at that showcase. So many people were talking about it. It was generating so much hype and excitement. It topped the IGN wish list uh uh poll that they do where fans get to select what games they're most excited for that PlayStation and Xbox that that topped the poll on. So therefore, I was quite anticipated quite excited about it. I thought it might be a big hit. I know it's Doom. It's it's not exactly Elder Scrolls. It's not Fallout, but I was still expecting um a big big moment for it. And I don't know, it's the to put it into context, I think um Expedition 33, I don't have the exact numbers in front of me. I think it did something like 5 to 6 million players in its first week. Not Expedition 33, sorry, Oblivion, Bethesda's other game. Now, it's a shadow drop. Remasters do a lot better. It was also on sale earlier. It came out, I think, Tuesday, so it had more more time on the market and stuff. But even so, I don't know. It's obviously a great result and maybe my internal expectation clock is is off there, but I I thought maybe it might be a bit bigger than that. The game reviews were good. Three million players is

great. Um half a million on PlayStation. I don't know. I thought maybe it would have done a bit better than that, but um but I guess one of my Yeah. Go. No, no, I was just going to say that Metacritic is good also. If I'm correct, it's wrong for 85. Yeah. So, it's good. And the prior titles also were successful. So no, it's going to be interesting to see how it goes after a few weeks. The word of mouth is going to be very important. It is indeed. And and you know, Doom is a has a certain audience who will go in from the start, but maybe the rest, you know, it's worth noting that I compared it to Oblivion there and Oblivion has an established audience straight from the day one, right? You know, whereas I mean Doom does as well obviously, but it but as it was a remake, a remaster, you're less likely to get people longer term. So hopefully it does really well. Bethesda's launched three games in like the space of a month. the Indiana Jones on PlayStation 5, Oblivion on all platforms, now Doom. Of course, there's all quite different. Um, Oblivion was a shadow drop, a surprise launch. So, there was no real PR marketing campaign before that moment. Indiana Jones was a known quantity. Came out on Xbox and PC back in December. This one was the sort

of the full-on sort of big traditional game launch for Bethesda. But still, I I I do wonder sometimes why companies do this. You got to um put too many of their games at the same time. I did interview with Strauss Sit last week and I asked him why because when they announced the delay for GTA I pondered on this show would they delay Mafia the Old Country because originally it was due out in the summer. They hadn't set a date yet and I wondered if they'd release it maybe at the end of the year now that there's a big open space there for them to play in. Summer is quite congested. It's quite congested with just games generally but it's congested with 2K games. There's Borderlands at the beginning of September. There's an NBA game. There's always NBA around that time. They've got a load of titles coming out on Switch 2, including Civilization 7. So, I thought it's quite a busy schedule for the 2K team. Maybe get a give them give them an opportunity to focus more on Mafia. Give Mafia a bit of a focus. But then they announced a date shortly after we aired that podcast and it was out and that's coming out in August. So, I asked Stra Selnet, you know, Take Two CEO. What's the thinking

behind that? Why did you, you know, why have we gone with that spot? I I genuinely interested to know. I'm not challenging. I genuinely wanted to know why did you go for that spot? And his answer, I didn't even run it. His answer was, um, we don't spot titles. We we create perfection and then we release them. And I and I didn't quite know how to follow that up without just saying, but surely not. The um but I'm not saying that obviously their games aren't perfect. I'm just saying surely you do think a little bit about when you're releasing your games. Anyway, but there's a busy time for TK and I just wondered maybe why they don't spread it out and I'm sure there's financial result. You might have an answer. Go. Well, maybe it's the part of the answer. It's also they want to use their talents on other games. So yeah, the game is over. You don't need to to push to push it further and the people that are working on it if you're not moving them to another game. Well, yeah, it's potentially value that is left on the table. So you want to put them out. Yeah, but and then to to have the team move to something else. I sort of meant

from a PR and publishing team point of view, if the game's finished, the game's finished. You know, the team can move on to something else. But you don't have to launch it just because it's finished. Like you can always wait a couple of months. You can always push it back. I guess as somebody said to me that maybe with Bethesda and all those games launching from Microsoft at the moment might be to do with when Microsoft's financial period is coming to an end. And there'll be loads of different reasons for it that I don't know. But I actually if anyone's listening to this who might be able to give me a little bit of insight, I just want to know. I'm not trying to cause any controversy or cause any problems. I'm just really fascinated to understand release date strategy around some of this stuff because sometimes it surprises me. I still don't know why uh Sega thought it was a good idea to launch Sonic Superstars the same week as the Mario Brothers Wonder. I think that was still one of the most mad release date decisions I've ever seen. There must have been a reason for it. Um but I I don't know what it was. Well, let's move on to our main topic, which is it's financial season in the video games industry. We not had every financial result come in. There's still some more to arrive, but we have had quite a few. And John is here to help me uh sort of

find some trends, spot some interesting data in them. We're not going to go through every financial result otherwise we would be here no for hours. Well, do you want me you've given me a list of the ones that you think were most interesting and the one that you've launched here is with PlayStations Sony's numbers. What's your take on those? So, what I try to do is to intentionally select companies that had a good set of numbers. I know that for some of their others obviously things are a bit tougher. There continues to be layoffs and asset sales across the industry. So, it's not all great. obviously uh but it is interesting to see that in this environment uh many companies are actually doing quite well. So that's been my focus. So as you were saying I starting with on the first party front with Sony uh they had a pretty strong annual figures for their game network and service division revenues were up 9% which is already quite good and operating income increased by an impressive 43%.

So, it's a bit counterintuitive because you know that PlayStation 5 has been uh sales have been declining. You know, also that the PS5 is selling a little bit less well than the PS4, but the growth has been driven by uh sales of third party games as well as revenue from their network service. Okay, they didn't release a lot in the last financial year. Concord was a miss and then Astrobot as great as it was is and Lego Horizon Adventures they were on the smaller they wasn't like a Spider-Man or a God of War or anything and as a consequence of their very strong financial performance their SH price is at at an alltime high for the past 25 years it's at 3,600 yen okay but it's interesting and we've been there a long time you and I and 12 years ago back in 2013 things that were clearly less rosy for for Sony. Just before the release of the PS4, there was a lot of doubt among the industry that Sony could continue as a

standalone company. They were heavily inducted. They had dropped the ball with the PS3 generation if you if you remember. So there was this feeling well that the company may not be able to continue as a standalone company. And then the PS4 arrived, the digital transformation and it changed Sony's future for for the better. And so at 3,600 yen today, it's 20 times better than 12 years ago. So it's it's not bad. Yeah. There was a few things with PlayStation. I remember talking to them quite a bit. And at one point they had this ambition that their first parties game business, their publishing business, basically their studio business was going to be up to half of their platform business. So as in half of their revenue was going to come from their games, the other half was going to come from their platform business. That was that ambition. I don't think they are. I think they've gone backwards a little bit on that goal at the moment. Part of that is cuz live service is quite key to that, I think. And it's not Hell Divers 2 was a hit, but Concord wasn't, and I think they're scaling back a little bit in terms of what they're trying to do there. Um, I think one of

the things that was concerned last year is they're worried about their margin, right? And they seem a little bit more happy with where the margins are on PlayStation as a business. So it does seem to have um um it yeah it was definitely a positive result for them. I think it's clearly better. Yes. The one that out of all the results that made me go oh that was really good and I wasn't expecting it to be really good was EA. Mhm. Because their previous results were concerning particularly around EA Sports FC. You must have a view on EA. Yes. It was a strong finish for the year for for a year. Their numbers did meet both analyst expectations or the analyst consensus and their own guidance. Okay. So uh a strong performance and most importantly you just know it at the football club level uh last year when they released it. You probably remember the release was not as good as expected and it prompted to do a rarely do profit warning. So it was one of this rare instance and the update they brought to the game at the beginning of January if I'm correct uh seems to have turned

things around. So that's very positive because football trap is so important for them. On another note and very interesting that split fixure was also a positive element. I mean they sold 4 million units uh since March which is amazing. Of course for is not as meaningful because such a big group but it's another interesting positive data point for the industry so that when you're bringing a high quality game with a strong differentiation it can deliver a materally positive performance. So it's another interesting element. Yeah. Yeah. And what was good about that is obviously I know it wasn't the biggest thing. Football club was the biggest thing but in their profit warning from before their concerns before Dragon Age had missed right it hadn't done anywhere near as well as they'd hoped it would. It certainly you know I don't think in the Europe it barely broke out of the top 70. It was a bit of a disappointment and so to have a I know this isn't you know this is an independently made game. It's not EA's owned IP or title or anything like that. But it's nice that they've got a new IP here in a sort of

um slate and it's not just relying on those tent pole digital games. Exactly. And it's and it's another again positive comment or positive data points across the industry. So it's yeah it was quite interesting. The only cost sale for EA so you mentioned Dragon Age of course but for more the long-term performance is that Apex Legend revenue continues to decline and for next year of course the big release that everybody is going to watch is Battlefield 6. Uh they seem to be dedicated to ensure enough time is spent balancing testing the game after a few disappointing entry in in the franchise. So it's going to be very interesting to see if they can bring back momentum to this amazing brand. They got a lot of new developers on it and Vince Sampella who um Respawn sort of leading the charge there and I'm I'm quite interested in it. It's just Battlefield's taken a bit of a hammering in in recent iterations. Yeah. But at one point it was it was scaring Call of Duty. So um is whether or not we can get back there. Yeah. And you you know this

this idea that everything that Vince Zampella touches transform turns into gold. So we'll see if it works again. Yes. Except for Titanfall 2, but we'll forget about that one. But it was still a great deal. I once asked somebody at uh I won't name who the person was um may have been Vince may not have been and um I asked uh about why Titanfall 2 was launch you remember Titanfall 2 was launched in between a Battlefield game and a Call of Duty game was sandwiched between these two juggernauts games and I thought there's got to be a reason for this. What is the reason for this? And there was a few reasons but one of the ones that he he said to me was maybe a bit of arrogance was the and I quite liked that. It was just um you know we felt we could take them on. Um but um here's the thing. Time for two did find an audience. It's done very well. Unfortunately we doesn't look like that franchise is on pause for for the foreseeable future. But I always look at these numbers and I sort of I don't really I feel almost intimidated by them is Roblox. Uh if I'm right that's another thing that looks like it beat everyone's expectations. Yes. And it's

uh so for so it's more on a platform at a platform level. Mhm. Their numbers were really impressive outperforming analyst expectation across the board. Revenue were up 31st%. Engagement TAUs continue to be on the roll and up 26% versus the prior year. And it was not the annual numbers. It was the first quarter figures should have said at the beginning monetization and profitability also surprise on the on the upside. And when you follow video game companies across the globe, it's a bit more muted for the western companies. I will talk a little bit later later on about the Japanese ones. But for western companies, the equity stories are a little bit less engaging for investors. And Roblox is really rare western video game company with a strong momentum among investor. There is I went through the reports from the analysts after the publication and there is this shared feeling among them that Roblox is just

starting to tap into their overall potential and so the shar price re boo post boo post boo post boo post boo post boo post boo post boo post boo post boo post boost earnings has been has been very strong I want to try and see if I can find it get a quote up from uh Matthew B where he talked about some of these startling statistics around it like so the top two games on Roblox Bloxs Fruits and Brook Haven RP those two games have roughly 60% of the monthly hours of engagement of the entirety of EA. They are 60% the size of Fortnite Battle Royale. They're 75% the size of all of Blizzard. They're 85% of the size of Counter Strike. These titles are, you know, already larger than some of the most dominant, biggest video games that exist out there. It's actually terrifying. You know, it has some I think he he estimates there 425 million monthly active users. I don't know if Roblox put a more recent number with that, but they're delivering, you know, more hours of engagement than the entirety of Steam, right? And and sometimes when I see numbers like that, I'm like, I don't I can't I can't compete. That is what the kids are playing. Yeah. And I'm not a specialist

on Roblox, but from what I understand, what they have been doing very well is in fact to go beyond the kids. And I I don't have the data in mind, but they have been really uh successful in reaching an older generation. Okay. So 15 years old, 20 years old etc. And it's of course a generation maybe that engages a little bit less uh because there is less time available but they have more they have more money. Yeah. And so it's one it's it's part of their success and overall potential. Yeah. And the problem that's the problem with Roblox's main audience of children is that they don't have the credit cards. But it's a good thing if you're a parent. I'm talking purely purely purely from a business point of view. I say that sentence. Well, let's talk about some of the smaller names because you've been looking at some of the smaller companies as well, right? Yes. So, um we'll start with Steel Front, the the Swedish company. They published their Q1 numbers. Their valuation is still very far from their alltime high, but their share price reacted very well uh last

week following their publication. I think it was up 30%. I've not checked this week, but reaction was very positive among analysts and investors. As a matter of fact, their revenue was down. Uh their Q1 revenue was down 12% year on year, but their operating income was up 12%. Okay? And that was related to good P control. And they published a pretty good set of cash flow generation as well. At the same time, they announced that they had hired financial advisors to conduct a strategic review of their assets to see if there are some non-core assets to be sold or to be dis to be to be closed. And the idea here for the industry and it's a theme, a recurring theme that you hear across the industry, the need to focus the company on its existing strengths, on its best opportunities. And it's another proof that after a few years of overinvestment across the industry, you've been talking about that in your prior interviews, the rationalization phase is still ongoing

in the in the industry. H and the other one's pull-up, which is one that you know intimately. Yes, exactly. So, Pullup Entertainment, a French company which used to be known as Focus Entertainment, published very strong annual numbers. So, full disclosure here as you mentioned, they are one of my clients. Okay. But it does not change the fact that our numbers were were very strong. Uh their sales figure doubled versus their prior record. Okay. So they did two times better than in their best ever before. Amazing. And they they only publish their annual figures or revenue. They will publish their earnings. uh but they expect operating profit to also uh approximately double versus their prior record and that's expected to lead to a significant uh decrease in in net death that okay which is good and it's an interesting story because they have had a major shareholder new major shareholder over the past four years which has done many things to transform the company and notably hire a new

highly experienced team and all this work translated into the remarkable release. You you've talked about that a lot about 4,000 Space Marine 2 with over 6 million players which was one of the surprise of last year. One of the interesting element is that yes there is space marine but if you look at the other releases of the year trening world dro and void crew they also sold better than expected and their back which is revenue coming from games released in prior fiscal year also did better than they expected. So really an across the board performance even if of course space marine is the biggest contributor for for the company and what is interesting here I think there's two texts that are interesting for the industry is first pullup entertainment is highly focused on doublea and indie games and if you look at the recent data published by steam the indie market has

been growing very nicely over the past two years so there is all this talk about the difficulty of triple A segment you mentioned earlier Dragon Age and there has been others of course but the double and in this segment has been overall as a segment doing better over the past two years and the second element which is very interesting is that pul they are very focused on games that are targeting a very specific audience which end up to be highly engaged and are highly passionate they don't try to please everybody they come with game play that they call uncompromising. So, you know, game play that can be really going very far and just a train sim world is you're managing a train. So, it goes very far in terms of simulation. But it is this is what gamers want today. They want games and that's the same with speed fiction that are high quality, uncompromising in terms of game play and very differentiated. One of the things that worries me a little bit about these

financial results and it don't worry me as I understand it is that a lot of these are the results of peak companies that have been decided to focus in some of them have scaled back. You know revenues I think a lot of companies aren't necessarily up but it's the costs are down. There's a lot of the results the last couple of years sort of playing out. But I'm I'm just a little concerned about, you know, with the economic situation that we've got coming up. The industry is sort of banning. Well, you know, well, I say I'm concerned. There's a there's an opinion piece written by Rob Fe on on Games and Shoppers, which I sort of agree with about people batting down the hatches and publishers being cautious and and focusing in on franchises and not necessarily investing in new things. I do think sometimes we can be a little bit blinkered. You mentioned you talking about small companies here. we can be a little bit obsessed with the big companies and if Take 2 aren't investing in a lot of new IP or if EA aren't investing in a lot of new IP and let's be clear they are they've just launched some uh that means the whole industry is going through this this problem but actually the way the industry is built now that new IP those new hits those mega games Hell Divers 2 was actually a Sony title but it came from an independent studio and is is in

these other parts of the industry these new emerging companies these smaller publishers they're the ones doing these things that might break out exhibition 33s of exactly who is going to enjoy it. These are coming from different companies and I think that's kind of okay and in fact think it's an opportunity if if the big companies are just focusing on their big games then that gives an opportunity for everyone else to try and be the alternatives and the new things and to push the market forward. So although I understand why people might be concerned at seeing these big companies being conservative and cautious and what that might mean for the future of the industry, I think I think with the way the way we're built up now as a business industry, we're not completely reliant on them anymore. In fact, I was looking at some of the companies that are going to Summer GameFest in in June and my initial reaction was, "Oh, there's a couple of big companies missing." But I looked at the number of companies there. Then I started looking at the games they were showing and I was like, I think maybe I'm a little bit old school in my thinking in terms of where where the industry lives now. Um and I read the uh it is from Rob. He mentioned the fact that a lot of these companies have

revenue down. In fact, there are also many companies that have revenue up in all the companies that are mentioning except for STR all of them their revenue that is going up. So well you can focus a lot on the revenue going down across the industry but it's not really in fact the case for everybody. And I think also the fact that people are focusing more on their strengths is also a positive element and that's something that is rewarding for gamers ultimately because of the quality of the experience that they get and it's also a reflection of overinvestment. It's not the first time that it has happened in the industry that happened many time phases of overinvestment then suddenly too many games are coming at the same time. Some of these games are not coming with a quality that is expected because there are too many things going on at the same time as well within these companies and so there is lack of interest out of lack of interest from gamers and then you need to go into a phase of rationalization and rationalization for

some of this company implied going back to your strengths and to your existing IPs but it's also a phase where then you're building the financial strengths again that is going to help you build the future and to inve invest possibly into new IP and things. H good response. Well, let's let's Okay, let's talk about Japan then. This is where you're seeing a lot of positives, right? I mean, I know the Japanese market itself might be a little bit stagnant, but Japanese games companies are not. So, go on. What have you you've seen some great numbers there. Yeah. So, when you asked me to to do this review, I checked the I checked the sh price of the of the Japanese names and I was like, what? Uh Capcom Square, I mentioned Sony earlier. I think that's the same with Nintendo. All their sharp prices is at alltime high. Okay. So, it was very surprising. I come back to that later, but focusing on on Colony and and Capcom, economy just posted excellent numbers, annual figures with revenue up 17%. Year and operating profit up 27%.

And this is even more impressive that the prior year was excellent as well and growing strongly versus two years ago. So, it's an ongoing performance. And this is notably the consequence of a strong performance from e football which has gathered up to over 800 million downloads across platform and if you remember I remember that very well where they released that game in 2021. It was quite a rookie release I would say. Yeah. Saying something and so it's quite a well and they did an excellent job here. Capcom also had an excellent set of earnings. Yeah. Wow. for the year as well. Revenue and that income were up 11%. So it's strong. But what is exceptional is that and they they put it into their headline and they deserve it of course that it is their 10th consecutive year of over 10% growth for operating profit. So a remarkable recurrence of strong performance from from them. They built of course on the

amazing release of Monster Hunter Wilds which are so mind-blowing 10 million units in just one month. Okay. So, it's quite impressive and you know the industry as it is the case where there is so much anticipation for a new iteration of an existing brand older title tend to benefit from this attention momentum and monster world uh was one of them and it has now sold close to 29 million units live to date. Okay. So huge and kept they have been very very good at maximizing and coming back to our discussion very good at maximizing the value of their existing portfolio. Okay, not only existing IPS but existing portfolio and their resident remakes are a perfect demonstration of that. If you look, Resident Evil 2 remake. So life to date over 15 million units and Resident Evil 4 is already close to 10 million. And as a consequence, their

overall sales from games released prior fiscal year amounted to 39 million units. They sold 39 billion units of old games. Okay, that's huge. And that was up 9% euro and which is quite not bad in a market that was mostly fat last year. Nice. So a very strong showing from them alltime high share price and this is very far from the groove of the industry. Capcom is amazing. Um, but one of the criticisms they get, I guess, is that it's very Resident Evil and Monster Hunter focused as a business. And often when they do try and do something new, it doesn't always do as well or, you know, there was that game Exop primal live service game they tried with and but you know, they are still doing a little bit on the new IP and new development side of things and they did Dragons Dogma 2. I know it's not new IP, but they brought that back last year, which sort of did all rightish. Um, and then they've got Pragmata and a few other games coming up. So they are sort of investing a little bit in your IP,

but their key element, their key success is like we're going to focus on making really really good horror game and a really really good Monster Hunter game and they they deliver the quality. That's the joy of it. They deliver extremely good games. They budget and they haven't they're not overexposed and well let's talk about what's the reason for this. I know the yen probably helps with a lot of this that's going on in in Japan at the moment, but is there any any structural reasons why um these Japanese companies are doing so well? So, as I said, I was surprised by their sh price. So, I dig a little bit deeper into it and that reminded me a conversation I had with an investor four five years ago. It was a he was a French investor and he was telling me about Capcom and he was telling me Capcom strategy was put on. He was feeling that they were focused on their best opportunities. delivering high quality games and then really maximizing the value of their their portfolio of games and brands. And so I I thought about it and there may be other reasons for for sure. But it seems to me that the key

word here is resource constraint. So it's a tough one to say in English. So I hope my accent is not too bad. Resource constraints. Yeah, resource constraint. I asked the CH GPD to train me a little bit. I'm not sure it was good enough. So 10 years ago and it's a bit like Sony in a way but 10 years ago the story was not so great for them. I remember very well the sh among the industry were that yes the Japanese companies they they have amazing creative teams. They are highly productive but they had missed there was this feeling that they had missed the scale pivot. Yeah. And this scale pivot started in fact with the release of the 360 and the PS3 uh back in in the mid 2000. What had happened is that these consoles were massively more powerful than the prior generation. To give you an indication of that, the PS3 processing power was 35 time more powerful than the PS2. Okay, so gigantic

additional power. And to leverage it, this power to create the best games, you needed manpower. Okay. And you had to be suddenly or had to be able to put 500 people on a given game up to 1,000 for certain game as well. And with 50 to 100 people, you were not competitive anymore. And the issue for the Japanese companies, they had been reluctant to invest massively in their production cap capabilities notably by they were reluctant notably to look for talent outside of Japan. Well, one of the challenges Japan well is one of the good things about Japan is that it's actually very hard to fire people in Japan or you know you compare it to the US where you can point at someone and say get out of the building and Europe's obviously got that sort of middle ground where there's always a process you have to go through. In Japan, it's really hard to sort of let people go. So, if you're going to hire lots of people, you need to be confident that you need them, which on

the one hand might impact, it makes it a far more stable businesses. Um, but it perhaps it might impact the opportunity to chase growth or or new areas, which is what I guess you're talking about in a way. Yeah. And if you look at the footprint of all the big companies, they all expanded in terms of studios. They all expanded internationally. The Japanese was was less their thing, I would say. H and so they were their development capacity was limited and thereby limited scale and they were resource constraint. Okay. So it was at that time all doom and gloom for for for them. But there is a theory in management books that reduce constraints oblig companies to be very innovative you know to find solutions and it seems that it is what happened here. the likes of Kumi and Kepco they didn't have a choice they had no choice but to be extremely focused and to put their limited resources on their biggest opportunities and their biggest opportunities and threats were their

existing brands. So you know it's coming back also to this idea that it's not only that maybe they don't dare to do more that they couldn't do more okay because of this conraint and it turned out an amazing decision well and why this major focus helped them to let's say that with with focus you have a stronger execution because all your strengths are making sure that you're doing a few things but you are doing a few things amazingly well that impacted the quality of the games. You mentioned it earlier with high quality games that please their audience that build their reputation and their reputation created a momentum of participation. Okay. And this antipation for the next game is a key thing not in a market that is overcrowded also at the same time and it works well well for them. Digital distribution allow them to maximize the value from their existing games. Okay. not a bit remix but again the quality of the remakes resident 2 and

resident4 have meta critique of over 90 okay it's remarkable and finally it's also an an interesting momentum across the industry I'm not sure it's discussed as much well there is part of it which is discussed but because a new generation of console the PS4 the PS5 and the Xbox series did not come with a huge jump in terms of technology. It's more an evolution. K is not not anymore a differentiation. You you regularly read that in fact all the games look the same today. They are all great and beautiful. Yes. Because in fact you're not differentiating yourself by being able to put more people on the game. So the importance of game play game play is back at the ultimate differentiator in in terms of competition among the industry. You want the best games. It's not going to be about the look. It's not going to be about the depth of the world. It's really be about the the quality of the

game play. It's true about air divers. It's true about Spit Fiction. It's true about Space Marine, etc., etc. And the Japanese, yeah, for the past 10 years, they have focused on that. They have focused on gameplay and they are very good at it. So again, it's this idea that focus brings execution and execution and quality. Yes, on one side some people say yes, but you're not delivering enough new IPs and new stuff. Okay, that's a fair point and you may well done your franchises over the long run, but in terms of quality of the experience that you're bringing to players, it's very true. You talk about sort of winding down franchise res I love because I'm a big fan of Resident Evil. It's one of my favorite video game franchises. I adore it. And when they did Resident Evil 6, it was a huge mistake in my mind. The game was not good. But not only was it not good, it felt like they were chasing Gears of War. They were chasing Uncharted a little bit in certain areas of that game. Resident Evil is supposed to be a scary game. Resident Evil 5 for me was a

mis was a misfire. And it wasn't a bad game in any way stretch of the imagination. But Resident Evil was supposed to be a game where you're trapped in a corner of the world against overwhelming odds. It's supposed to be scary. And yet they started giving their characters great big guns and giving them tons of zombies to run out. I thought that isn't what Resident Evil is. wasn't what made that franchise popular and cool. And indeed, they may have got more players as a result of this, but actually they ended up taking a hit in terms of their reputation. I remember interviewing Capcom after Resident Evil 6. A guy called Michael Patterson, who was in charge of Capcom Europe at the time, said told me, it was actually a headline on MCV, which worked on at the time. It was one of the most popular stories for like years afterwards, was that Resident Evil 7, we will return to our survival horror roots. And they did. And they made a game, I think probably on a smaller budget. It was a very tight game. It was only about you probably finish in about 4 hours and in maybe not first time through but certainly second time through. It looked fantastic. They used their new re engine. Um had a really good story for it. It's very classic Resident Evil even though they switched the viewpoint to the first person view but it fans were won back. We now live

in an industry where if you win over your fans and you do a really good job for an audience that audience can share will share their experience with other people and it will bring more people in. And I don't quite know the numbers now, but I think Resident Evil 7 is now one of the most successful Resident Evil games. And it was probably made on a far smaller budget than Resident Evil 6. And it's pure Resident Evil. Don't get me wrong, they are expanding their franchises there. They're pushing to try new things with them. They're not just doing the same sort of game experience every time. But they're being a lot more focused on what does that audience want. If you do the job good job of that, you have a chance, and Capcom have proven that of breaking out. Konami is a little different. Konami's um I think they pulled out of games almost entirely for a little bit and then they're starting to scale back into it now. But the Capcom story is wonderful and I do hope it continues mainly because I I do love Resident Evil. Although I'll be interested in how they're going to top Monster Hunter Wilds. That's uh I think that's going to be a that's going to take some I think an 11th year of consecutive growth might be might be beyond them, but who knows? And it's interesting because if you look at what they did and you compare to some of the

companies that have been struggling over the past few years, the companies that have been struggling most of them have not been resource constraints. Okay. No. And so and there has been many example of that and they went on investing on too many fronts uh either organically by building their teams or through acquisition. So adding more teams for acquisition and by diluting their focus by doing too many things they diluted execution the games were not as the quality that was expected. They diluted quality they diluted player satisfaction and typically that negatively negatively impacted their own brand reputation and they sold progressively less and less of their games. So coming back to this idea because you always have you know this idea of either players are satisfied or shareholder are satisfied. But the thing with the Japanese names scarcity or resource constraint can be pretty fruitful in terms of value creation to the benefit of fans and

shareers. Wow. Fans being gamers of course. I think we could talk for hours about what's going on in the market at the moment. Exactly. Um but I'm I'm really conscious of the time. We've got a big bumper episode now. Um, and it is brilliant. We I probably I'd love to have you back on, John, to talk about perhaps uh f future numbers. Okay. With pleasure. And actually for everyone, um, I mentioned some of the sto some of the stuff that we're talking about here about the future of the industry where we're going. We're going to be live in LA on June 9th, the game business, the game business live. We're at the Grammy Museum in in in in downtown LA. Um, it's shaping up very very nicely. I h are hoping that um maybe even by the time this episode's gone live, we've got our full lineup to announce or at least close to it. But it is one of the most um in terms of names of people, we've got Dan Clansancy, the CEO of Twitch, Leslie Benzes, the game director at Build a Rocket Boy, famous for Grand Theft Auto, Lisa Burgess, who's the GM at Netflix games in charge of kids games, that story we told earlier. She'll be there. We've got John Height, the president of Wizards of the Coast. Peter Wana, the president of

interactive technology at Agbo. They are the production company owned by the Russo brothers. Matt Biscatella from Sakana is going to be talking about something a little bit a bit more gloomy. And we've got two senior executives directors at uh Blizzard as well who will be talking to us about mobile and all that kind of stuff. It's a really rammed schedule. And here's the thing, if you're listening to this then you're probably a game business reader, listener or viewer. And you can come for free as long as you're in LA obviously for that that weekend. So go to the gamebus.com, click on uh TGB live on the top bar. We still do, you know, we've got plenty of room at the minute. Um but um we have had a spike in ticket sales when I was writing this. So please do um put your name down and if you have you have to go through a little bit of a form if to prove you're an industry person but you know once you've done that um we we're happy to approve you and welcome you along. So please do come along to that. I'll be plugging this for every episode we've got until June 9th. But uh anyway thank you again John for joining us and um and thank you all for listening or watching at home. Uh until next time. Thank you for tuning in. My pleasure. Thank you Chris. Bye-bye everybody.