Why millions are gung-ho for this gaming company; With Puzzle & Dragons, GungHo Online Entertainment has a monster Japanese hit

Why millions are gung-ho for this gaming company

By JP Mangalindan, Writer January 27, 2014: 5:00 AM ET

With Puzzle & Dragons, GungHo Online Entertainment has a monster Japanese hit.

FORTUNE — Few know about it stateside, but in Japan, you’d be hard-pressed to find someone who hasn’t heard of Puzzle & Dragons.

Part puzzler, part dungeon crawler, part monster-collecting adventure, GungHo Online Entertainment launched the mobile game in 2012, and it now claims over 20 million users — roughly 1/6 of the Japanese population — who have downloaded the free-to-play game and bought into its ecosystem of virtual goods. Puzzle & Dragons‘ success has, in turn, sent GungHo’s own fortunes soaring: The company has generated $700 million-plus in profit on revenues of over $1.2 billion so far during its fiscal year, ending this month. Its stock spiked a whopping 775% in 2013.

Gamers have CEO Kazuki Morishita largely to thank. Before GungHo, Morishita worked as a manzai artist, a comedian specializing in a traditional style of Japanese stand-up comedy, for little over two years. “I genuinely enjoy entertaining people — I get a thrill out of it,” explains Morishita, who argues being a comedian actually bears some commonalities with developing games. “Game companies should entertain their fans and users. It can never just be about the business-to-business aspects of the industry.”

When he joined GungHo in 2002, it was still an Internet auction software developer. But Morishita, who grew up pouring hours into traditional console games like Super Mario Bros., saw more business potential in online gaming even then, before contemporary broadband speeds were common in his country. He helped draft a 10-year company plan, which included developing games like Ragnarok Online. The Norse mythology-inspired multiplayer role-playing game, released for the PC in 2002, has 80 million registered users in 70 countries, and spawned several successful sequels.

Still, it’s Puzzle & Dragons’ virtual overnight success that has made GungHo the veritable Rovio of Japan. Puzzle & Dragons Z, a spin-off for Nintendo’s 3DS handheld, topped Japanese software sales charts during its first two weeks on sale after it launched in December, selling 800,000-plus copies. According to Morishita, GungHo has at least 10 more games in development, although he declined to give specifics. Says Morishita simply: “Whatever they [gamers] experience the first time they pick up a GungHo game will leave a lasting impression.”


About bambooinnovator
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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