TOKYO -- Japan's mobile game industry is thriving at home, but plodding along globally due to the industry hitting a dead end in its efforts to make its fee-charging schemes more palatable to users. Widely seen to be suffering from the Galapagos effect, a tendency of certain business sectors to focus solely on the needs of domestic users, the industry's current state of affairs bodes ill for overseas expansion.
Five years ago, a monetization scheme for mobile games caused a furor as addicted users began shelling out sizable sums to support their gaming habits. Known as "kompu gacha," or complete gacha, the system induced users fixated on their games to pay real money to receive virtual tokens or other rewards.
As addicts tapped away for more useless gratification, the amounts spent kept rising, sometimes as high as several thousand dollars a month.
Gacha is the practice of paying money to receive a small item, often delivered via vending machine.
Kompu gacha was subsequently outlawed, but mobile game providers still depend on similar monetization models that use a less addicting version of the banned system. Call it gacha light.
While Japan's mobile game market has grown to nearly 1 trillion yen, reliance on this form of monetization could spell disaster in the international market.
This is not to say the domestic market is declining. "Fire Emblem Heroes" -- a mobile version of Nintendo's Fire Emblem series that the company released with content distributor DeNA -- remains a big earner.
The same goes for Konami Digital Entertainment's "Jikkyou Pawafuru Puroyakyu," a baseball game, and "Yu-Gi-Oh! Duel Links," a virtual trading card game. The two are popular with users in their 20s and 30s who are already familiar with the long-running series and who spend big on mobile entertainment.
Gacha not gone
While the success of these games is testament to the companies' creativity, invariably there is some form of gacha involved. The 10 top Japanese iPhone games in terms of gross earnings as of May 17 all use this type of system.
According to a recent report on mobile game apps by Tokyo publisher Kadokawa Dwango, Japan had a 970 billion yen mobile games market in 2016 -- less than China, but on par with the U.S. And when it comes to spending on games, Japan leads the pack, with users forking over $24 monthly compared to $6.6 in the U.S. and $2.9 in China.
In May 2012, Japan's Consumer Affairs Agency declared kompu gacha illegal. Prior to that, some of the worst cases involved children playing games nonstop unbeknownst to parents, who finally caught on after seeing the enormous fees.
Although game companies were forced to give up the lucrative system, stripped-down versions still exist, along with the same problems.
In January 2016, game developer Cygames was suspected of having fudged the probability of rewards in one of its mobile games.
To allay users' fear of getting fleeced again, an industry association laid down monetization guidelines. Still, doubts remain.
Square Enix, another game company, is facing a class-action suit over charges of "dishonest representation that intentionally misleads users" regarding one of their role-playing games. The claimants have demanded refunds of all monies spent on the game. They have yet to receive a satisfactory response from the company, and will not accept a settlement that includes a confidentiality clause.
Suspicious, demanding users
People increasingly distrust the way companies monetize their games, testament to the lingering affects of the kompu gacha mess.
And whenever technical troubles temporarily render a game unplayable, the companies -- mindful of their past problems -- often give away in-game currency or other forms of credit to placate irate users, who are quick to hit the comments boards with scathing criticism.
But memories in the industry are short.
Recently, some company executives have made comments that indicate a longing for the days when kompu gacha was king.
Bandai Namco Entertainment President Satoshi Oshita said, "Smartphone games are a data business," while Eiji Araki, vice president of Gree, remarked: "By applying the system of successful games, we will be able to create new titles with lower costs."
There are, however, indications that the industry would like to eliminate gacha completely, especially as companies try to make further inroads into international markets.
Colopl, for example, plans to introduce a different fee system for one of its new games, according to President Naruatsu Baba, who realizes that gacha eventually drives people away.
Nintendo's "Super Mario Run," which debuted last December and instantly became a global hit, charges a one-time fee of 1,200 yen. Capcom has introduced a system for its "Toraware no Paruma," charging 360 yen for the initial download but additional fees if the user wants to enter a different level.
According to the two companies, these new ways to monetize are not as profitable as gacha, but user satisfaction has noticeably improved.