TOKYO -- For decades, the sprawling entertainment universe of Japan's Bandai Namco Holdings has relied on Gundam sci-fi anime and toy models as its main moneymaker.
But after 40 years, Gundam's star has dimmed and the group is trying to reinvent itself even as it releases new hits that continue to drive earnings to record levels.
Gundam's lost luster first surfaced at the end of fiscal 2017, when a senior executive told the board that Gundam sales for the year totaled 68.3 billion yen ($6.27 billion), less than revenue from the group's Dragon Ball anime franchise, which hit 97.9 billion yen.
It was the first time Gundam had slipped as the group's top earner, though it was not unexpected. "I had anticipated this for some time," said a senior executive.
Gundam sales picked up in fiscal 2018 to 79.3 billion yen, but still lagged Dragon Ball's 129 billion yen. "Dokkan Battle has turned out to be a far bigger hit than we expected," says Bandai Namco President Mitsuaki Taguchi, referring to "Dragon Ball Z: Dokkan Battle," a mobile game that launched in 2015.
"The Dragon Ball smartphone game was an enormous overseas hit, beating Gundam on a global basis," another company official said.
The group is the product of a 2005 merger between Bandai, famous for its stable of popular action figures, and video game developer Namco.
Bandai Namco saw sales in fiscal 2018 grow 8% from the previous year to 732.3 billion yen while operating profit rose 12% to 84 billion yen. Net profit surged 17% to 63.3 billion yen, hitting a record high for the third consecutive year. Driving growth were Dragon Ball and plastic Gundam models called Gunpla, which have become popular overseas.
The company will join Japan's blue-chip Nikkei 225 Stock Average on Aug. 1, reflecting its rising fortunes. For fiscal 2020, it is targeting 750 billion yen in sales and 75 billion yen in operating profit, the latter of which was already achieved in fiscal 2017.
But Taguchi wants more.
After Dragon Ball and Gundam, the group's other big earners include the Idolm@ster franchise, which evolved from a game developed by Namco in 2005 in which players train girls to become pop stars, and Love Live!, a multimedia project launched in 2010 featuring a fictitious group of schoolgirls who aspire to be idols.
"The Idolm@ster Cinderella Girls: Starlight Stage" -- a spinoff of the original Idolm@ster game -- continues to attract new fans and has been among Japan's top 10 smartphone games for four consecutive years.
The popularity of the Love Live! franchise rocketed after its voice actors showed off the same dance moves at live events as their anime characters. A festival marking the ninth anniversary of the franchise is set for January 2020, featuring all the franchise's characters to date, while a "Love Live!" mobile game will launch this fall.
Despite its stellar performance, Bandai Namco is wary of complacency. "We will be fine for at least 10 more years," said President Taguchi. "But if we don't start [creating new content] now, our future beyond then may be at risk."
This year marks the 40th anniversary of "Mobile Suit Gundam," the TV anime series created by subsidiary Sunrise that marked the beginning of the Gundam dynasty. And despite its wavering appeal, the group is trying to squeeze as much mileage out of Gundam as possible.
"We will hold new Gundam events, including music shows," Sunrise President Makoto Asanuma told Nikkei in a recent interview. "We are also planning a comprehensive Gundam Expo for 2020, and this winter will release the first film based on "Mobile Suit Gundam: Hathaway's Flash," he added, referring to a three-volume set of Gundam novels.
Asked the reason for Gundam's success, Asanuma explained that the original anime series led to a wide range of related products and attracted creators who were actual fans.
Sunrise is working with Legendary Pictures of the U.S. to make a new Gundam film, Asanuma said, but he stressed that the company will continue producing works that mainly target the domestic market. "Most Japanese anime that become popular overseas were created for mainly Japanese audiences," he said.
He added that the Gundam brand is still relatively weak outside Japan and that the company is considering stories that will resonate more with consumers unfamiliar with the franchise.
With the domestic smartphone game market already saturated and competition fierce, Bandai Namco is aware of being overly dependent on mobile games. It also realizes the importance of creating content with global appeal. The group has earmarked 25 billion yen over three years for this task, and has already spent 6 billion yen in fiscal 2018.
"We want to become [Japan's] leading entertainment company," says Taguchi.
A worthy goal, indeed, but one that requires more than new smartphone games and leaning on the past glory of Gundam.