SoftBank Deploys ‘Clash of Clans’ to Tap $3 Billion Game Market

November 5, 2013 Leave a comment

SoftBank Deploys ‘Clash of Clans’ to Tap $3 Billion Game Market

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. (9984) 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. (3765), which is led by the SoftBank President’s younger brother Taizo Son, its flagship title skyrocketed to among the country’s top ten 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 Oct. 31 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. (3632), that tapped an earlier generation of handsets and relied on online platforms to download titles. Tokyo-based Gree offered buyouts to some of its workers last month.

Mass Market

Sales of game titles played on game-specific players fell 17 percent to 95.1 billion yen ($964 million) in the six months ended Sept. 30 from a year earlier, the lowest in nine years, according to Kadokawa Corp. (9477), a Tokyo-based publisher of game magazine “Weekly Famitsu.”

“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 made by Gree. The Japanese market will probably triple to $3 billion of revenue this year, outpacing the global market’s growth, it said.

Smartphone Content

Kyoto, Japan-based Nintendo Co., the creator of the Mario and Zelda franchises, has failed to capture the consumer shift to smartphones and tablets. The company’s titles can only be played on its own hardware, like the Wii U and 3DS handheld device.

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 Oct. 31 in Tokyo after SoftBank announced sales will reach more than 6 trillion yen in the 12 months ending March.

Paananen said what attracted him to SoftBank and founder Son is their long-term vision for growth.

“We really want to create a new type of gaming company that people would look back in twenty, thirty, forty years and say the company was loved by both of its employees and players,” said Paananen. “But creating history takes time.”

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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