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SoftBank taps lucrative game market

Bloomberg

Supercell Oy started the year trying to break into the Japanese smartphone game market. By October, it had struck a deal with the nation’s second-richest man that valued the maker of “Clash of Clans” at $3 billion.

The Finnish game-maker is seeking a bigger slice of Japan’s market for downloaded games, which is forecast to triple to $3 billion this year, amid a shift to smartphones, Supercell co-founder Ilkka Paananen said in an interview. Billionaire Masayoshi Son’s SoftBank Corp. led a $1.53 billion agreement for a 51 percent stake, a deal that was completed last week.

Supercell’s bet on a country with a declining population is paying off as mobile users shift from feature handsets to Apple Inc. devices and phones using Google Inc.’s Android software. After Supercell began working with Gungho Online Entertainment Inc., which is led by the SoftBank president’s younger brother, Taizo Son, its flagship title skyrocketed to among the country’s top 10 mobile downloaded games, said Paananen.

“In Europe people thought we were crazy because they say Japan is just a big graveyard for a Western gaming company,” Paananen said last Thursday in Tokyo. “No Western gaming company can do well here, but we still wanted to try.”

Supercell’s “Clash of Clans” is the second-highest grossing game in Apple’s app store.

The Helsinki-based company is also filling a gap left by Japanese companies like Gree Inc., that tapped an earlier generation of handsets and relied on online platforms to download titles. Gree offered buyouts to some of its workers last month.

Sales of games played on dedicated players fell 17 percent to ¥95.1 billion in the six months that ended Sept. 30 from a year earlier, the lowest in nine years, according to Kadokawa Corp.

“We fundamentally believe games as mass market phenomenon will shift to mobile and tablets,” said Paananen. “Smartphones and tablets are so much more convenient than any other platform. Everybody can play games and everybody has one these days.”

Revenue from downloaded games on smartphones totaled $1 billion in Japan in 2012, a fifth of the worldwide $5 billion market, according to an estimate by Gree. The Japanese market will probably triple to $3 billion in revenue this year, outpacing the global market’s growth, it said.

Nintendo Co. has failed to capture the consumer shift to smartphones and tablets. The company last week posted a second-quarter loss amid sluggish sales of the Wii U.

Masayoshi Son, the 56-year-old founder of SoftBank, has said he’s seeking overseas opportunities and the company has been involved in at least 12 deals over the past year, including the July acquisition of Sprint Corp. for $21.6 billion.

“The one who wins the competition in the gaming industry will win the game of smartphone content,” Son said last Thursday.