For its third fiscal quarter ending 12/31/22, Konami Group (9766.T-JP: Tokyo) (KONMY: OTC) reported a year-to-year revenue increase of 4% to ¥78,519 million. The digital entertainment division responsible for video games reported a 3% decline in revenue to ¥53,721 million (68% of total revenue).
For the nine months ended 12/31/22, overall revenue was up 5.5% over the previous year and digital entertainment revenue was up 1.6% to ¥153,959 million. Profit for the nine-month period declined 35% to ¥27,571.
Analysis
Konami is a Japan entertainment company that provides home video games (Digital Entertainment), arcade games (Amusement), casino games (Gaming & Systems) and sports facilities in Japan (Sports). In recent quarters the digital entertainment division has accounted for over 70% of revenue. Other divisions were significantly impacted by Covid stay-at-home orders.
The most significant growth for Konami was in its Gaming & Systems division which saw 49% year-to-year revenue growth in the first nine months of the fiscal year. However, this division (which has a subsidiary office in Las Vegas) accounted for only about 12% of revenue.
The home video game business is the most exciting growth area for Konami. The company has had solid success in Japan but has some classic video game franchises that are well-known to older consumers in North America and Europe.
Konami had largely retreated from Western markets but appears to be looking to make a comeback. In the 1980s and 1990s, Konami made arcade and video games based on the hit cartoon The Teenage Mutant Ninja Turtles. In August 2022, Konami released Teenage Mutant Ninja Turtles: The Cowabunga Collection, primarily for Western markets.
Konami has also been bringing back the hit late 1990s Yu-Gi-Oh! transmedia manga series. Like Nintendo’s Pokemon, Yu-Gi-Oh had a collectible trading card game that is perfect for the mobile free-to-play digital age.
Konami was also a leader in soccer/football games, especially in Japan and Europe. For several years, Konami’s Pro Evolution Soccer was a strong competitor to EA’s FIFA series. In fiscal 2009, Konami sold over 8 million units of Pro Evolution Soccer. However, FIFA eventually dominated the market.
In 2019, Pro Evolution Soccer was rebranded as eFootball PES. In 2021 this became just eFootball. As the name implies this indicates a focus on online eSports. Unfortunately, the quality of the recent eFootball products has been lacking and Konami has a long way to go if it wants to reclaim its space in sports.
There are other Konami franchises that have the potential to make a comeback in the modern era. Konami’s Castlevania games of the 1980s/1990s have inspired a whole genre of Metroidvania games. Konami also owns Metal Gear Solid, Zone of the Enders, Bomberman, and Frogger, even if star developers like Hideo Kojima have left the company.
One classic franchise that is definitely coming back is the horror video game franchise Silent Hill. In DFC Intelligence consumer surveys Silent Hill has high recognition, despite not having a major release since 2012. Last October, Konami announced they were bringing the franchise back across multiple products.
Konami is in the position of many Japanese publishers. With the rise of first-person shooters and Electronic Arts sports titles, they retreated from Western markets to focus on the domestic Japanese market. As growth in Japan has become challenging Konami is looking to once again expand globally.
