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DeNA pulls back from China as game profits fall 95%, but there’s optimism for Q4

DeNA’s games made a loss in Q3, though its livestreaming revenue is on the rise
DeNA pulls back from China as game profits fall 95%, but there’s optimism for Q4
Date Type Companies Involved Key Datapoint
Feb 7, 2024 report DeNA Co.,Ltd. 95% profit fall
  • DeNA's third-quarter financials have released, revealing a challenging time for its gaming revenues
  • DeNA remains optimistic about Q4 after the previous fiscal year's final quarter proved its best performer by far

The release of Japanese game maker DeNA’s latest financials offers a clear look at one microcosm of the broader games industry. From falling revenues and profits to difficulties expanding within China, DeNA’s third quarter fits the trend of today's increasingly challenging market.

And while there are game makers out there who went through worse in 2023, DeNA’s 17% fall in game revenues isn’t exactly great news either. Nor is a drastic profit fall over the past nine months, with April to December seeing a 95% decline in gaming profits.

A challenging quarter

DeNA generated ¥12.7 billion ($85.7 million) in Q3 games revenue, down 8% from Q2’s ¥13.9 billion ($93.8 million) but up from Q1’s ¥12.5 billion ($84.3 million). This was a 10% decline year-on-year, however, and comparing the wider nine-month period in 2023 to 2022, this decline was by 17%.

The fall in game profits paints an even bleaker picture, as DeNA actually lost money in Q3. During the quarter, DeNA made a loss of ¥0.2 billion ($1.4 million), decreasing from the small profit margins of Q1 and Q2; in each of those earlier quarters profits of ¥0.2 billion ($1.4 million) were made, or roughly 10% of the profits made in the same periods of 2022.

And taking the three quarters as a whole, gaming profits have fallen from ¥5.6 billion ($37.8 million) in 2022 to a mild ¥0.3 billion ($2 million) in 2023, representing a 95% fall.

"Contribution from new titles was limited in Q3, and there was impact from amortisation, marketing, and other related expenses," DeNA explained.

Recalibrating

DeNA has been looking to strengthen its portfolio for some years now, and has recently reviewed its strategy and progress to better achieve this. As a result, the company is making "major changes" to its gaming operations in China, such as a significant downsizing of its China office, due to "environmental changes and increasing issues". This is likely in reference to the unpredictable licence approval system in the region and the recently proposed ban on gacha mechanics, log-in bonuses and more.

Centring on its Japanese teams, therefore, DeNA is currently working on three new titles planned for the 2024 fiscal year. And as the 2023 financial year wraps up, the developer expects "typical seasonal strength" to bring bolstered earnings; given Q4 was its strongest performer in 2022 by a wide margin, there is certainly room for such optimism around a strong quarter to come.

DeNA has also been earning income from other activities like sports and even healthcare, and its livestreaming revenue actually came in close second to gaming in Q3, generating ¥10.8 billion ($72.9 million).

Of course, mobile games remain DeNA’s core area of earnings and the company firmed up its new digital services enterprise with Nintendo in 2023, the results of which are still unknown. DeNA’s licenced Pokémon game, Pokémon Masters, has also continued to succeed through the difficult year, with the title recently reaching the $300 million revenue mark.