Smartphone gamers blow small fortune on their obsession

by

Bloomberg

Just before the New Year holiday in Japan, ads for a smartphone game called Granblue Fantasy began appearing on television and in magazines.

Granblue was already huge in Japan with more than 7 million people downloading it to fly giant airships and battle an evil empire with swords and magic. Cygames Inc., the company that makes the game, also told people about a new promotion: For a limited time, it would be easier to win a few characters, including one named Anchira.

Anchira is a rarely-seen, much-sought-after ally: blonde, scantily-clad, big-eyed. She’s the kind of partner that can mean the difference between victory and defeat because of special healing powers. Players can win access to her with mysterious crystals that cost ¥300 apiece and then cracking them open to find out what is inside. Sometimes they contain valuable characters like Anchira; other times they hold weapons or armor. Under normal circumstances, there is a 3 percent chance of locating rare characters like Anchira, but for the week Cygames was running its promotion, the chances would double.

Delirium ensued. Millions of new players downloaded Granblue. People across the country spent hours on end chasing the promoted characters.

One Japanese man, who goes by the name “Taste” online, began playing about three hours before midnight on Dec. 31, streaming his session in a game players’ chat room.

For hours he spent money in furious pursuit of Anchira. His audience swelled from a handful to more than 10,000 as the New Year arrived, and before he knew it, Taste burned through the yen equivalent of $2,665 without unlocking her. The chat room crowd alternated from mockery to pity, wondering when his credit card company would cut him off. But Taste kept going, buying hundreds and then thousands of tokens. Finally at about 3 a.m., on attempt No. 2,276, he unlocked Anchira. The crowd erupted. He had spent some ¥700,000 ($6,150).

Video of Taste’s expensive session was circulated widely in the weeks after the episode, sparking a backlash against Cygames, a subsidiary of CyberAgent Inc., and other top Japanese game-makers. Players shared similar experiences of spending thousands of dollars on Granblue Fantasy and posted their own videos of losing fortunes. One man interviewed by Bloomberg News said he sunk the equivalent of more than $7,000 into the game during the special New Year’s promotion, and Daiki Kataoka, who lost more than $800 during that period, was so incensed at what he saw as manipulation he collected 2,000 signatures for a petition calling for more regulation.

“Unless we change things from the very core, this situation will continue,” said Kataoka.

Cygames initially did not respond to criticism, then weeks later apologized. It granted credit to some customers — in virtual money — for what they spent and will begin implementing safeguards Thursday so players can get the prize they want if they go through 300 unsuccessful attempts. That would cap spending on each virtual item at about $800. It also said it will begin disclosing the odds of winning each individual item.

There could be more fallout. Shares of the nation’s mobile game-makers tumbled by a total value of more than $1 billion the day Cygames began issuing refunds. It was reminiscent of the hit stocks took in 2012 after lawmakers called some of the industry’s tactics predatory and passed tougher regulations.

The gamer rebellion threatens the status quo in one of the strangest and most profitable corners of the digital universe. Japan’s game companies have long been the envy of the industry for their ability to produce big hits. But the controversy is exposing some companies’ methods for extracting such huge sums and creating pressure for change.

“It’s the perfect fodder for people who are against the mobile game industry in Japan,” said Serkan Toto, founder of consultant Kantan Games Inc., which specializes in Japanese mobile games. “The videos are basically delivering the ammunition for people who are critical of the industry for being exploitative and greedy.”

In the fantastical Granblue world, players assume the role of a young boy or girl from a far-flung village, embarking on a quest to defeat a dark empire by traveling from floating island to floating island, teaming with other rebels and employing special talents to fight imposing overlords. But instead of wookiees, droids, and light sabers, Granblue Fantasy is filled with spiky-haired men, curvaceous women and dragons. The basic game is free to play, but players progress faster if they buy weapons and characters with real money.

The enigmatic crystals obscure what players are actually buying. Granblue employs a technique called gacha, which takes its name from Japanese vending machines that dispense prizes in plastic capsules without showing the contents. Players have to crack the crystals open — after they have paid for them — to see what they have won.

Certain forms of gacha have been banned in Japan because they are too manipulative. Granblue does not use explicitly forbidden gacha tactics, but Taste’s Dec. 31 video shows how effective the legal gacha can be. Taste, who did not respond to requests for comment, bought crystals in bulk and cracked them every few seconds. He did not bother with the game’s battles — the main attraction for most players — for hours at a time as he pursued Anchira.

He was not the only one drawn by the New Year’s promotions. Another gamer said he spent about $7,200 over three days in early January to acquire Anchira. He is too chagrined to reveal his name, he said, but he is in his 20s and works in the tech industry in Osaka.

He spends regularly on games. This time, he said he was driven by his friends who had already acquired the avatar and the time pressure. Cygames’s offer of double odds for landing Anchira was set to expire on Jan. 3. He saved screenshots from his phone that document the spending spree.

Some players shelled out a small fortune and never even got the girl. Kataoka forked over about ¥100,000 within hours, but failed to find Anchira. Inspired by Taste’s video and other angry gamers, Kataoka accumulated 2,000 signatures and filed a formal complaint with the Consumer Affairs Agency. The petition claims the company led a misleading advertising campaign and potentially violated the rules passed in 2012.

“I already had my doubts about their winning percentages,” said Kataoka. “But my doubts transformed into very strong suspicions after I saw the video.”

He accumulated statistics from his own games and other users, and came away convinced Cygames did not fulfill the 6 percent winning percentage it had advertised. An official at the agency would not confirm the receipt of the complaint or explain what action the agency may take, and Kataoka said he has not heard back from the regulator yet.

Cygames denied any wrongdoing. “With regards to Granblue Fantasy, we are not aware of any operational issues or problems whatsoever,” said Sonoko Miyakawa, a CyberAgent spokeswoman.

The 2012 crackdown came after complaints about practices by the country’s leading game-makers. One tactic that is now banned was ‘complete gacha,’ which would push players to accumulate a complete set of specific items. For example, users would be prompted to gather four different kinds of wizards so they could get an extra powerful wizard. But once users had three wizards, they could be enticed to keep pursuing the fourth at very high costs, regulators ruled. More broadly, the guidelines ban manipulating shako-shin, or the gambling spirit. Companies are not supposed to take advantage of people’s emotions to extract money.

The industry set up a self-regulating arm in response to the 2012 rulings, called the Japan Social Game Association, but it was dissolved last year. Some of the oversight duties were passed back to each company while others were taken over by a broader trade association.

Since the 2012 regulations, the games industry has rolled out new gacha strategies and kept sales rising. Revenue at public companies grew by about 70 percent since 2012 to $7.5 billion last year, according to Macquarie Securities, surpassing the country’s movie industry in sales. Toto says his foreign clients study Japan for creative ways to generate money.

CyberAgent is not the largest mobile gaming company in Japan by revenue; it is third after Mixi Inc. and GungHo Online Entertainment Inc. For the industry’s biggest games, the average revenue per paying user ranges from ¥42,000 a month for Mixi’s Monster Strike to ¥6,200 for GungHo’s Puzzle & Dragons, according to Macquarie. The brokerage did not provide specific figures for Granblue Fantasy.

Toto says the new tactics are similar to those banned in the past and risk violating the spirit if not the letter of the law. Granblue’s Anchira promotion is a kind of “event gacha,” which entices players to spend quickly during short time periods. “Login gacha” gives players incentives for revisiting the game daily; “consecutive gacha” encourages players to buy in bulk and spend continuously.

David Gibson, an analyst who covers mobile game-makers for Macquarie in Tokyo, said regulators are unlikely to step in unless children are specifically targeted and abuses spread beyond just one game. Research shows that the vast majority of mobile-game players do not spend anything and he thinks that splurges by rich adults probably won’t prompt action. “It’s not the same situation,” Gibson said. “What’s more likely from an industry point of view is we might see an adjustment to the way the odds are displayed so they’re clearer and simpler and less misleading.”

Kataoka said he believes Cygames was targeting kids. He points out Granblue Fantasy advertised in manga magazines popular with children, including the Shonen weekly publications. The video ads in December featured a high school student fixated on the game and included one commercial focused on his younger brother, about 10, telling his parents he wants to play.

Kataoka feels trapped. He loves playing Granblue, but he thinks Cygames is taking advantage of its customers. “You can tell how much thought and ingenuity went into the illustrations, music and professional voice acting to make it popular, and the business side is now using that to whip consumers into a frenzy,” he said.

He vows to keep pressing the regulator to force Cygames to make public its gacha techniques and winning percentages. “Honestly, the industry hasn’t improved since 2012,” he said. “I don’t think anything has changed for consumers. They’re just looking the other way.”