Behind the Line: Konami, Kojima, P.T., and “Mobile First”

Last week I spoke a fair amount of praise for Satoru Iwata’s statements regarding Nintendo’s approach to entering Mobile. This week, Hideki Hayakawa has gifted me with some wonderfully contrasting statements about Konami moving to a “mobile first” policy.

 

Konami’s apparent internal discontent

Three big things happened with Konami recently. Two that most game fans probably already know about, and one that may have gone unnoticed, but reaches deeper.

You know, he has made other games...

You know, he has made other games…

First, there are the stories of the strains in the relationship between Konami and Hideo Kojima. Hideo Kojima is a beloved game developer, and it is shocking to hear that there is friction between him and Konami, but it’s understandable that there can be rifts that develop between an individual and a company.

Of course Daryl could get out of that hallway!

Of course Daryl could get out of that hallway!

Second is the shocking announcement that Konami has ceased development on Silent Hills, and pulled P.T. from PSN. Silent Hills had significant interest drummed up with P.T. and Guillermo del Toro being attached to it. Losing both of those things is probably more shocking to fans than the news with Kojima, but there are numerous other projects that either have trouble, get stuck in development hell, have bad contracts behind them, or any number of other reasons to get cancelled. Silent Hills seems a bit far along, considering P.T., but it’s not so uncommon.

Third, and less obvious, is that Konami has also removed their listing on the New York Stock Exchange. While the NYSE was not a large portion of their trading, 0.3% compared to 2% in London and 97% in Tokyo, I doubt that changing stock listing is something that’s done without considerable deliberation. Given that there is a cost associated with being listed on an exchange, and 0.3% of their trade volume is not a large portion, this may be primarily a symbolic move, or rather, an attempt to simplify and focus some efforts. In any case, it is the loudest indicator to me that something big has been going on at Konami. It is something that has to be made on a high executive level, something that has to be done with the board of investors in mind. Add all three of these things together and it looks like something serious is up for the company that gave us the Konami Code, and something I wanted to write about on its own…

Then Hideki Hayakawa, whom I’ve seen referenced as President, CEO, or “Representative Director” for Konami Digital Entertainment, spoke about their future plans, and I read what he said, and then I thought about what he said, and then my brain exploded.

 

Mobile First

The available financials from Konami group things strangely, but from what I can gather, Konami has been seeing smaller and smaller returns on console game development for a while, and better returns on Mobile. Some of you might ask: “What mobile games does Konami have?” You would be right to ask that. Konami’s mobile successes appear to be almost exclusively Japanese market successes. Does this mean that they are going to try to replicate that in other markets?

The answer is: almost certainly not.

This strikes me as an example of a very Japan centric, maybe even isolationist view that some Japanese companies seem to have. The home market is the important one and nothing else matters.

I could be wrong about that, but there’s more to be taken from Hayakawa’s statements. It’s difficult to find clips from his statements to illustrate this, but this one should demonstrate the point:

“Recently I hear the phrase ‘mobile first’ a lot, but for our company, ‘mobile first’ doesn’t mean just doing mobile. Rather, it means that we will combine the use of mobile, the platform which is closest to our customers, with consoles, arcade games and card games, construct a portfolio, expand the styles of play and our customer base.”

This sounds like a lot of fluff talk, with vague assertions and plenty of buzz words. If we give some benefit of the doubt, perhaps Mr. Hayakawa is not being translated well, or, more disturbingly, perhaps Mr. Hayakawa does not understand Konami’s direction as keenly as Mr. Iwata does of Nintendo’s. If that’s the case, is there anyone who understands Konami’s direction well enough to explain it better?

This looks to me like a company that is going through significant internal turmoil, either some internal power shifts, or pressure from investors to get into that hot new mobile market. That is what I see that fits these facts.

Konami

Digital Entertainment is getting smaller, and that’s what includes console games.

Others theorize that this is because Konami has many other businesses in Japan, and the console games division is on its way to being phased out as it may not be so significant compared to pachinko machines, casino systems, and health & fitness divisions. These people have good arguments, but it still doesn’t add up to me.

konami1

Video games are going down…

konami2

…while casino machines are going up… but the scale is still so much lower!

 

 

 

 

 

 

 

 

 

The “Digital Entertainment” portion of profits, even if it is shrinking, is still nearly half. That is not all console games, though. It includes arcade games, mobile, and probably other things. Exactly how much is consoles, I don’t know. BUT, if you are good at business there are two principles that this apparent shift seems to violate. One is abandoning a market that is still profitable. If the market is shrinking and can’t sustain your current levels, there are certainly more graceful ways to divest yourself from it than this. Second, is to avoid bad investments, or rather to not allow investments to go bad. Hideo Kojima’s name has value. Ideally there should be some way to keep the relationship with him together. Guillermo Del Toro’s name holds weight, and P.T. was completed and released. All of that is being tossed now without a cent of revenue to show for it, despite the clear interest the market has in the product.

Those who argue that this is just a big company changing its priorities would ignore those two points in favor of the principle of “not throwing good money after bad”. There may be some truth to that, perhaps things were going poorly on these projects, but let’s take a closer look at what this means with respect to P.T.

Not only that, but P.T. was a serious investment for all parties. As a stealth reveal for Silent Hills, it is now intrinsically tied to that title. The existence of P.T. is essentially a promise that Silent Hills is coming. With Silent Hills cancelled, keeping P.T. available would be embarrassing for Konami, knowing that the promise can never be fulfilled. So, they pulled it down from PSN, and if they could I’m sure they’d want to delete any installed versions. They see taking things away from consumers as preferable to fulfilling their promise of Silent Hills.

This is not a good way to handle public relations. This is also not a good way for Konami to look like a reliable business partner. Silent Hills had P.T., but Guillermo del Toro the projects fall out from under him and is considering never trying again in games again. If someone like del Toro can’t get respect from your company, why should I believe that I could?

With all of that in mind, no, I do not think that these moves were carefully considered, and I don’t think Konami doesn’t care about this because their other businesses outweigh this one. I think whatever internal turmoil they are going through is boiling over in these sloppy moves, and half baked statements to the press, which brings me to another interesting point.

 

Konami or Nintendo

Hideki-Hayakawa-05-14-15-1

Hideki Hayakawa of Konami

iwata

Satoru Iwata of Nintendo

 

 

 

VS

 

 

 

 

 

 

What I find fascinating is comparing the statements made for Nintendo’s entry into mobile with those of Konami.

In his statements for Nintendo Mr. Iwata laid out actual business directives. They may not have been in extreme detail, but they didn’t have to be. They were made to give people an understanding that Nintendo had a direction, a vision that was being worked toward. To make people believe that Nintendo was not simply jumping on to the mobile bandwagon. Looking at it, I could see a business leader I could believe in, a company that has been around, made adjustments, and come back stronger while never going against their core principles. Perhaps I romanticize this a bit, but that is the kind of feeling that a good leader can instill. Mr. Iwata showed us a direction, and I looked at what they had done, and believe I can now see where they are going, and I believe they can make it there.

Konami on the other hand… While I don’t want to be unfair to Mr. Hayakawa, his statements are vague. While Mr. Iwata spoke of using mobile platforms to keep consumers engaged with Nintendo’s characters, and creating desire for the console experience, Mr. Hayakawa says things like:

“Through this, we’ve seen that customers who have bought packaged software also have a latent motivation to buy extras. In a mobile game, we generally know what areas to change or what prices to raise in order to raise user retention, user monetisation, our KPIs. It’s the case that when we use that know-how well, we can sense a good response from customers.”

If you can get through that, it certainly sounds like someone who buys into the inherently flawed “Let’s put purchasable items in games and make more money!” school of thought. There is nothing here that gives me any sense of direction for the business. It’s like they want to use the micro transaction tactic without having a market strategy to back it up.

 

What will happen with Konami?

Konami has certainly burned up a lot of good will that it had garnered with consumers. People never react well when it looks like something is being taken away, and while Silent Hills was never given enough to be taken away, P.T. is still something that there’s a demand for, and that absolutely was taken away.

As for Hideo Kojima, there is almost certainly far too much invested in Metal Gear Solid V for that to be cancelled now. The project will limp to the finish line, and be released to the eager masses. I suspect that how that game does will do a lot to dictate Konami’s continued involvement in console games. If it is a failure, I doubt we will see another major release from Konami in quite some time. If it is a moderate success, we may see continued projects that are the investment equivalent of dipping a toe in the water. For continued genuine support, MGS V would need to be such a huge success that it would obliterate any reasonable objection to continuing in the market, a success so huge it repays all costs associated with it at least 20 times over. A success so big that investors will be angry if Konami does not continue.

I expect the reality is that the days of Konami having big budget games is over, and the productions will scale back significantly. We may have some Castlevania here or there. DDR will survive in some form. Maybe an HD remake of some old classic like Contra every other year will show up.

Who doesn't want an HD remake of Bayou Billy?

Who doesn’t want an HD remake of Bayou Billy?

Whatever happens, I hope that Konami doesn’t wind up doing the things that Capcom does, simply sitting on their properties and letting them rot. I hope that if Konami wants nothing more to do with making the games, that they will be willing to at least license out their properties, or keep the alive in some form.

 

 


 

Kynetyk is a veteran of the games industry.  Behind the Line is written to help improve understanding of what goes on in the game development process and the business behind it.  From “What’s taking this games so long to release”, to “why are there bugs”, to “Why is this free to play” or anything else,  if there is a topic that you would like to see covered, please write in to kynetyk@enthusiacs.com

One Response to Behind the Line: Konami, Kojima, P.T., and “Mobile First”

  1. Baron Fang says:

    One vote for Bayou Billy here. I actually gave this a mild recommendation on a Point Streak LOL.

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