Reports that the government may regulate or out-right ban a sales technique called "Complete Gacha" sent social game company stock prices falling yesterday. Comments from analysts suggest that there's good reason for this "Gacha Shock."
Gacha, where you pay money to obtain an item at random, is the primary means of revenue for social gaming. Credit Suisse analysts told NS Journal that it makes up 60 to 70% of the social game industry's overall sales.
Complete Gacha, which requires that you obtain a certain set of items through Gacha in order to get a "grand prize" item, makes up the majority of Gacha-based earnings, according to the Credit Suisse analysts. A ban on Complete Gacha tactics could result in sales drops of 20 to 30% and operating earnings drops of 40 to 50%.
Complete Gacha games appear on various social game networks, including DeNA's Mobage platform and GREE's GREE platform. Games that could be affected by regulations include Namco Bandai's Idolmaster Cinderella Girls, and Konami's Dragon Collection. Konami has cited the latter as a bright spot in its recent earnings reports.
The social game operators themselves may see the biggest effect. Item transactions account for 92% of GREE's operating profits. For DeNA, the figure is 80%.
Social networks such as Mixi make 36% of their operating profit through item transactions, with other revenue coming through advertising and other means, so they may see more limited effect from a policy shift.