Traditional Japanese publishers striking gold with social games

Traditional publishers like Namco Bandai and Konami have adapted to Japan's shrinking retail video game market by increasing their focus on mobile social games, and those efforts are starting to pay off big. Namco Bandai and Konami, two of the biggest game companies in Japan, have both released earning reports for their last fiscal quarters (ending June) that show considerable strength from their online and mobile social game categories. Exploring digital distribution channels has become critical for many Japanese publishers, as the country's retail video game industry has suffered a decline for the last five straight years -- in just 2011, software sales fell by 13.7 percent year-over-year to ¥274.6 billion ($3.51 billion). Namco Bandai managed to more than double its revenues from its "Network Content" segment to ¥14.7 billion ($187.9 million) during the recent April-to-June quarter, compared to ¥5.6 billion ($71.6 million) in the same period last year. That growth, along with smaller gains made from the publisher's "Game Software" segment, helped push Namco Bandai's revenues for its overall video games category to ¥57 billion ($728.7 million) for the quarter, a big jump from the ¥35.6 billion ($455.1 million) it made last year. Konami saw notable decreases in quarterly sales for its overall video games category, down from ¥26.1 billion ($333.7 million) to ¥22.8 billion ($291.5 million; as well as in its quarterly profits, which fell from ¥6.1 billion ($78 million) to ¥5.2 billion ($66.5 million). But the publisher's losses would have been even bigger were it not for social games, which generated ¥7.9 billion ($101 million in revenues) for the three-month period. While revenue growth in that segment for Konami was minimal year-to-year, its quarterly sales for traditional games have fallen dramatically from ¥7.7 billion ($98.4 million) to now ¥5.1 billion ($65.2 million) as the publisher has scaled back its retail releases. Both companies forecast even more growth for their social games for the remainder of their current fiscal year (ending March 2013).