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    Konami is a well-known Japanese video game company, famous for series such as Castlevania, Silent Hill, and Metal Gear Solid.

    Does Konami's long term strategy make sense? Not to me.

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    bigsocrates

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    Edited By bigsocrates

    A lot of people are upset by Konami's recent decision to abandon big game development and focus on mobile and pachinko. i am too, but beyond being upset, I'm also kind of confused.

    While the big video game market is difficult, it can also be extremely profitable for the big players, and it's an expanding market that will continue to grow for the forseeable future. Konami also has a lot of intellectual property that resonates with long-term gamers and allows them to generate huge hype for big projects, like MGS V and Silent Hills.

    The Pachinko market, on the other hand, is by all accounts shrinking. Not only is Japan a shrinking society, with negative population growth, but pachinko is falling out of favor there, I believe, as slots are in the United States. All the U.S. slot manufacturers are trying to get into other businesses, like skill games, because the market for slots is getting smaller, and my understanding is that Pachinko is similarly contracting. Meanwhile all of Konami's vast IP are pretty meaningless in the world of pachinko as far as I know. The game is primarily played by old people, and what do they care about a Castlevania? I imagine this is also like the U.S., where slot machines are often licensed with big names that the old people liked when they were young, like Beverley Hillbillies or Friends (which isn't that old but was watched by a lot of geezers.) Who does Silent Hill's new Erotic Violence machine appeal to? Not Silent Hill fans that's for sure, and I can't imagine pachislot fans are super excited either because they likely do not know the property.

    Meanwhile mobile is a huge market, especially in Japan, but also a total crapshoot. Unlike in the big console market where the big publishers can guarantee big hits with enough money and marketing, mobile is full of one hit wonders and weird games that viral their way to the top. No company seems capable of consistent hits and the big Japanese console developers seem to have struggled compared to other companies that were born in mobile (and generally focus on just one game or type of game.) This doesn't seem like a market that is conducive to a big lumbering old company like Konami, especially since it has a very old-school fuddy duddy way of thinking internally. And mobile gamers might like Kondami's big IP, but will they want to play Metal Gear Solid Cell Phone?

    It seems to me that Konami is focusing on two markets it is not super well positioned to dominate (though I know it already has a lot of success in Pachinko) and abandoning a big lucrative growing market to do so. At the very least they are probably leaving money on the table by not licensing out their old games/IPs AND failing to keep those IPs fresh. People are obsessed with Metal Gear now, but how much will they care after 10 years of no new console games and a bunch of degrading mobile stuff?

    I don't get it. I realize that I don't really know the Japanese market let alone the internals at Konami or what they're exact strategy is, but I do not get it.

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    mikemcn

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    #1  Edited By mikemcn

    I think the margins are just larger on pachinko machines and the risk is way lower. In the long run this might cause problems for them, but I don't think any of us would say that videogames are an easy business to be in. Gambling attracts lots of addicts who will pay to play everytime they can.

    I know nothing about japanese phone habits but I imagine there is plenty of money in free to play games in Japan, like there is in the US.

    So I think Konami is just picking the option with more consistent profits in the near future. They should license out their IP to companies that still make games though. It would be really silly to just sit on it. Why not let microsoft pay a few million to make an xbox one exclusive Metal gear spinoff? Or a new castlevania?

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    Novis

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    #2  Edited By Novis

    They aren't looking to dominate, they're looking for a way to make money cheaply, quickly, and easily. Triple A game development is not that. They've been struggling for years to keep up with the industry, and they've been pretty middling at best.

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    ShadyPingu

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    #3  Edited By ShadyPingu

    1. You may be overestimating the health and growth potential of the AAA video game market.

    2. The nature of public companies often pushes them to think short-term.

    3. I suspect neither you nor I have the data necessary to contradict Konami's assessment of the mobile/health club/pachinko market.

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    Shindig

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    Also, legalised gambling. That, in many ways is there long term strategy.

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    bigsocrates

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    @mikemcn said:

    I know nothing about japanese phone habits but I imagine there is plenty of money in free to play games in Japan, like there is in the US.

    There's a ton of money in the Japanese phone market, I just think it's very tough to reliably tap it. Have any of the big console publishers other than Square Enix had success? And Squeenix has the advantage of having IP that work very well in mobile. I haven't seen news that any big hits in the U.S. OR Japan have come from the old guard. They're all from these new startup companies focused on mobile. And even still those companies don't seem able to produce consistent hits unless it's just iterations on one franchise.

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    MrWakka

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    AAA titles are expensive, take years to see returns, if any, and are a huge risk.

    Mobile titles are low risk, low cost, relatively quick to see a return.

    Pachinko is a staple and profitable for Konami, and Konami seems to be getting behind more legalized gambling in Japan, where if such changes come to pass, they are well positioned for some major moves.

    If there is no new metal gear for 10 years, then Konami comes out and announces a new AAA Metal Gear, there will be hype. Takes longer than a decade of inactivity to kill a franchise, and sometimes the distance is beneficial. Remember how all those really bad pacman phone ports really caused everyone to not like championship edition? I don't either, because no one cared about how bad the phone versions were or even remembered them, so I doubt that will affect the long term health of the franchise. The easiest way to kill it would be to flood the market or make really bad AAA sequels, neither of which seems to be happening.

    Is it ideal for long time fans of Konami IP, no. Is it going to really hurt Konami in the long run, maybe, but it is a big maybe that doesn't have all of the internal Konami information that might disprove it.

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    Zefpunk

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    #7  Edited By Zefpunk

    The fact that AAA game development is so hard to make a profit in says more about the industry than Konami. This isn't a new idea, but something needs to happen to change this reality, and has for a while now.

    That said, I just want more Metal Gear, I don't care how it happens.

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    GiantLizardKing

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    As long as games are going to look the way we expect them to and be as deep as we come to expect they will be very expensive to make and thus risky. No two ways about it.

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    musubi

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    Konami is going to make an ass load of money off of Metal Gear Solid V but the game also cost an estimated 80 Million Dollars to make. And sure they will make their money back on it. Hell, they will most likely see a profit. Thing is why spent 80 Million when you can spend 10 thousand on a mobile game with built in hooks and make a comparable amount for way less money.

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    Gaff

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    #10  Edited By Gaff

    @shindig said:

    Also, legalised gambling. That, in many ways is there long term strategy.

    This is probably the thing that most people don't know about.

    This is Konami chairman Kagemasa Kozuki's blurb on Forbes:

    Founder and chairman of software game developer Konami is expanding his slot machine business in Las Vegas while eyeing opportunities for a casino tie-up in Japan, should a law allowing casinos pass later this year. His new games are also soaring, with high marks for Pro evolution Soccer 2015 and Metal Gear Solid V: Ground Zeroes. Kozuki got his start repairing jukeboxes.

    Japanese legislators have been trying to legalise gambling in Japan.

    Konami manufactures pachinko and, more importantly, gaming (of the gambling kind) machines.

    I wouldn't be surprised if Konami is aiming to be Japan's major casino holder. Heck they may even move into opening all-in resorts: Go to a Konami hotel with a Konami health and fitness club, and relax during the night in a Konami casino.

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    ArtisanBreads

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    @gaff said:
    Heck they may even move into opening all-in resorts: Go to a Konami hotel with a Konami health and fitness club, and relax during the night in a Konami casino.

    Outer Heaven Casino and Resort.

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    ch3burashka

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    #12  Edited By ch3burashka

    You're lying to yourself when you try to justify AAA development as more profitable than the mobile or pachinko market. Unless you're Call of Duty or GTA, the risk-to-reward ratio is too damn high. That's why the middle ground of AA games has disappeared, and why the AAA is being phased out - there are brief sparks of profitability, but even when the money's pouring in it would have been more profitable to spend 10 dollars to make a F2P mobile game built around addiction mechanics.

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    kasaioni

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    The only thing that won't make sense is if they don't out-source their IPs or the Fox Engine to any one else. The Silent Hill name sells, but not pachinko machines.

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    Shindig

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    @gaff said:
    Heck they may even move into opening all-in resorts: Go to a Konami hotel with a Konami health and fitness club, and relax during the night in a Konami casino.

    Outer Heaven Casino and Resort.

    The men with the dragon tattoos will show you to your rooms. Don't ask them about their business.

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    GaspoweR

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    #15  Edited By GaspoweR
    @shindig said:
    @artisanbreads said:
    @gaff said:
    Heck they may even move into opening all-in resorts: Go to a Konami hotel with a Konami health and fitness club, and relax during the night in a Konami casino.

    Outer Heaven Casino and Resort.

    The men with the dragon tattoos will show you to your rooms. Don't ask them about their business.

    Fuck it, why don't they just go all in a few years down the line and just make a Konami-themed amusement park.

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    Ry_Ry

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    All I have to say is Tomb Raider sold rather large numbers but was still called a failure. The fact anyone is independently doing AAA is quite frankly amazing.

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    Top8Gamer

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    #17  Edited By Top8Gamer

    Something people also forget is Konami puts out Yu-gi-oh which is hugely profitable as the 2nd largest collectible card game in the world.

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    Jeust

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    #18  Edited By Jeust

    Castlevania, Metal Gear Solid, Silent Hill by their fame alone will sell a crapload of mobile games, and be responsible for a lot free to microtransactions. Konami is right in moving to mobile. Also those properties have a lot of potencial in the pachinko business. And the investment is considerably lower than in AAA gaming, which will make Konami a much more solid company as their capital will be able to sustain them much longer, and be invested in the development of many more projects, with great chances of success.

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    deactivated-5ea35e2382c82

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    @kasaioni said:

    The only thing that won't make sense is if they don't out-source their IPs or the Fox Engine to any one else. The Silent Hill name sells, but not pachinko machines.

    Outsourcing the IPs maybe I understand (but honestly, who would pay to just license it? Maybe if someone buys it outright but that's pretty limited too), but if they license the engine then that puts some burden of support on them. That and as good as the Fox Engine seems to be I imagine there's a massive uphill battle to compete against things like Unreal Engine which already sees wide usage in the industry at large.

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    deactivated-5e851fc84effd

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    yakuza front

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    ghost_cat

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    Konami has their fingers in a lot more business jars than just mobile and gambling fronts. They will continue to do just fine without putting out big games.

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    williamhenry

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    All I have to say is Tomb Raider sold rather large numbers but was still called a failure. The fact anyone is independently doing AAA is quite frankly amazing.

    Tomb Raider was only a failure in the sense that it didn't sell enough to cover all the other failures the company had. The game was successful, but not enough to make the entire company successful as whole.

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    Hunkulese

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    #23  Edited By Hunkulese

    Konami is much more than just Pachinko machines and are making the smart decision. I really think we're on the brink of the next video game crash. Consumers demand bigger and better games, don't want to pay more for said games, and get mad if they're asked to pay for DLC. That's not sustainable. We're pretty much there all ready but we're just about at EA, Activison, and Ubisoft and then a bunch of indys because if your AAA game is a flop, your company is pretty much screwed.

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    Naoiko

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    It makes sense in terms of money. It seriously sucks for gamers in regards to the IP's they own.

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    wittgkatzi

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    #26  Edited By wittgkatzi

    The notion to understand is opportunity cost. Something can be inherently hugely profitable (Konami's AAA gaming engagement likely was, otherwise they would have stopped a long time ago), but still be a terrible way to go for a business with limited resources and the objective of maximizing margins. If you can utilize the same (or less) ressources to get an ultimately higher expected value (as there is less risk) in the mobile or gambling space, then that is the right way to go. No business can pursue all possible projects simultaneously.

    The real question is how the AAA market has to change in order to make the development of top-tier games a more enticing option, since selling off games at 59 - 79 USD a pop as a one-off cost clearly isn't cutting it anymore.
    DLC, Monthly Plans etc. are just some ways the industry attempts to drive up the average margin per unit sold, but there's a discussion to be had if game pricing tiers have remained static for too long. After all, that 59 USD SNES title in 1991 would correspond to ~105 USD today (obviously not a great comparison, as cartridge margins were worse, but that only compensates very little).
    If there's no consumer acceptance for transparent price increases however, it really is no wonder that alternate monetization strategies are pursued instead.

    Add to that that post-launch support is now an expected service, and it becomes even clearer why publishing MGS1 for PSX for 60 USD in 1998 may have been a good business decision, while publishing MGSV for the same price in 2015 very well may end up being a really bad decision, no matter how great the game is.

    Ultimately, it is not sustainable for an industry to be based on the passion of making big risky games. And it is easy to bash Konami since they appear to be terrible in many ways, but don't doubt for a second that similar considerations are made at every other publisher out there.

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    Gruff182

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    Konami will be absolutely fine. The only ones who lose out, are us and they don't much care.

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    nkornek

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    MGSV is actually unlikely to turn a profit. It's a great game, no arguments there, and it will sell well, but ultimately Metal Gear (and most of Konami's big series like Silent Hill) appeal to a niche market. Making a game that costs 80 million (probably close to double that amount when you add the marketing budget) that will only sell to an audience of a few million just doesn't make financial sense. Does it suck to see companies priorities lean towards profit over creativity and art? Yes. But at the end of the day their goal is to ensure their survival and success as a business, not to please everyone.

    http://www.forbes.com/sites/olliebarder/2015/09/06/metal-gear-solid-v-the-phantom-pain-sells-3-million-units-but-its-not-out-of-the-woods-yet/

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    I_Stay_Puft

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    #29  Edited By I_Stay_Puft

    @gaff said:
    Heck they may even move into opening all-in resorts: Go to a Konami hotel with a Konami health and fitness club, and relax during the night in a Konami casino.

    Outer Heaven Casino and Resort.

    Aren't Native American Casinos basically Outer Heaven Casinos now a days.

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    LibrorumProhibitorum

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    I've personally never understood why people use birthrate when discussing Japanese business practices. The birthrate is low, but it is not nonexistent. That doesn't mean something as trivial as entertainment should change to accommodate the problem because the issue is economic and cultural. In this case it extra makes no sense as children do not play Konami's idea of pachinko, that's for stressed as hell businessmen who just want to smoke all night. The birthrate is also less a Japanese issue and more of an East Asian issue. South Korea has a similarly low birthrate as does China. (and China has eased up on its birth rules, too)

    Japanese mobage are what the Japanese youth tends to be into today, a game using the Love Live and Idolmaster properties tend to be extremely popular and endlessly replayable. I do not personally believe Konami's IP have even the slightest hint of charm that the two former examples have so their entry into the mobile scene would be difficult, that's probably why they're focusing on a general pachinko strategy as nobody thinks of the game they want to play when playing those.

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    OurSin_360

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    If legal, gambling machines will be where the money is. You can rig them to lose 90% of the time, and even if you don't the odds are still in the favor of the machine. It's just a shitty practice that feeds off gambling addicts, which honestly i feel most F2P games are doing the same thing.

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    conmulligan

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    #32  Edited By conmulligan

    @rasta_zergling said:

    MGSV is actually unlikely to turn a profit. It's a great game, no arguments there, and it will sell well, but ultimately Metal Gear (and most of Konami's big series like Silent Hill) appeal to a niche market. Making a game that costs 80 million (probably close to double that amount when you add the marketing budget) that will only sell to an audience of a few million just doesn't make financial sense. Does it suck to see companies priorities lean towards profit over creativity and art? Yes. But at the end of the day their goal is to ensure their survival and success as a business, not to please everyone.

    I dunno, I'd be shocked if The Phantom Pain didn't turn a profit. MGS4 sold 6 million copies on a single console that until then wasn't doing gangbusters, whereas MGSV launched on no less than 5 platforms simultaneously and features some pretty aggressive micro-transactions. Assuming Forbes is correct and it needs to sell 6 million copies to break even, I think they'll clear that bar and then some.

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    ThePanzini

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    #33  Edited By ThePanzini

    @conmulligan: 2013 Tomb Raider sold 6 million units turing a profit with the PS4/XB1 remaster's. MGSV has a much bigger budget the franchise only averages about 6-7 million units, despite all the praise stealth is a niche genre.

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    GiantLizardKing

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    Metal Gear solid V will sell a lot more copies than a PS3 exclusive.

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    avantegardener

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    #35  Edited By avantegardener

    I've absolutely no evidence of this but I would guess It's all down to margins and risk, if a low investment app fails to garner attention, its was a small investment so no big deal, conversely you create the next flappy candy fruit birds, all of sudden your making money hand over fist on your smaller investment.

    And most importantly its sustained, quick turn around and regular revenue, as opposed to highly profitable but slow to produce tentpoles games like Metal Gear, you now have the potential to flood the market with multiple cheap apps on a monthly basis if you desire.

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    THE_RUCKUS

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    #36  Edited By THE_RUCKUS

    To be honest as soon as mobile market dry's up Konami will move onto the next investment. This is more of a grab all money and salt the fields kind of plan, and short term at best.

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