Best known in the west for its arcade bullet-hell shoot-'em ups such as Dodonpachi Resurrection and Deathsmiles - since released on iOS - Japanese developer Cave has actually been developing mobile games for over a decade.

We caught up with Mikio Watanabe, who joined Cave in 2009 as department head of the mobile content division, and was appointed Chief Operating Officer in August 2010, to find out how he's sees market opportunities.

PocketGamer: When did Cave start making mobile games?

Mikio Watanabe: Cave's mobile contents business started in 1998 at the same time that Japanese cell phone carrier NTT began offering its mobile internet service. Cave released a simple fortune telling web page for the carrier. At that point, we were earning about 10 million yen ($130,000) a month.

Afterwards, we developed our first Java applications and began making original games, which included shooters, RPGs and action games. Incidentally, the original model for Mushihimesama Bug Panic, later released on iPhone and iPod touch, was released as a Java app.

Were you surprised at the reaction your bullet hell games when they were released on iOS?

Yes, I was very surprised. I knew we had some dedicated fans through contact via the internet and some French fans who had visited the company. But I was really happy there were people in the west who would welcome games that were played by such a hardcore fanbase in Japan. We're very happy with the reception.

How different has it been making social mobile games for casual Japanese mobile platforms such as GREE and Mobage?

Very different. There are two major differences: first is the change to the business model; and second: the question of what kind of game experience to provide to players.

One thing I would like people in the west to know is that while Cave is an arcade developer, we're also a very adventurous game company in terms of platform range. We maintain a PC-based MMO, have developed Xbox 360 and DS games, offered mobile services and more.

More recently we've opened a division which licenses popular IPs for social games, one that sells in-game advertising, and a division developing PC browser games.

However, we've also experienced the challenges that come when you have to change the way you make games to correspond with changes in the market and distribution methods. For instance, the transition from the arcade to the home console, from console to PC, from feature phones to smartphones, and so on.

In this way, we weren't sure how to approach the free-to-play model, where developer income is premised on players enjoying and sticking with the game.

Where there any places where you took inspiration?

We looked into some of the early Facebook games. What we found was players were demanding a type of fun from their games that differs from what traditional game creators have regarded as fun. Games up until now have been a 'struggle' to get past obstacles prepared by developer, which gamers would dedicate themselves to with comparatively little regard to the time or effort involved. These players would enjoy the thrill of this crisis and it was fun for them.

However what casual players are looking for is not necessarily excitement or thrills, but a service that feels welcoming.

Comparisons are say, a small café with an attentive staff, somewhere you feel you could hang out at all day at, or the toast and coffee you could eat every day and not get tired of, or the cake that you wind up buying despite being on a diet, or that small feeling of superiority when you've got a better mouse and keyboard than your co-worker

I think in this model, players not only pay for small comforts and advantages, but also to have the experience continually maintained and improved.

In other words, to start making social mobile games, we had to change over from the business of selling games to the business of providing a service. This was something bigger than the transition from one game device to the next.

Can you explain how the idea for your social, casual hit Castle Creator came about?

I had asked one of our teams who had been building games in Java to build one that could be played on the web using Flash. While Java games are great in terms of visuals, the development cost is high and since only certain devices can run them, they were not particularly profitable.

On the other hand, thanks to the combination of the web and Flash, the game would run on almost any 3G device. I wanted to give it a try since I'd heard that other companies were earning several ten million yen (several hundred thousand dollars) a month.

At the same time, Mobage was looking for thirdparties for its platform in Japan and so we decided to provide the project to them.

What was the advantage of releasing on a platform like Mobage?

The biggest reason was advertising costs. For any company without a user base, getting people to play your game may require several billion yen (million dollars). However with Mobage, we could avoid paying for advertising and get several hundred thousand people playing the game. Even if half the revenue went to Mobage, I thought we could make a profit.

So, taking into consideration what's fun about social games, we started on this project with the idea of a game you could play stress-free for as long as you wanted.

The designer in charge of Castle Creator was a guy who played strategy and card games, and he built a simulation game themed on the warring states period of Japanese history around the year 1600, something Japanese players would find identify with. The Japanese name Shirotsuku is an abbreviation of Build a castle! in Japanese (in Japan, we use a lot of abbreviation).

Why did you decide to work with EA to make a game for GREE?

This was an alliance I was really happy with. Once we had seen how successful Castle Creator was, I personally wanted to do SimCity for our next simulation project. When I was a kid, I was a huge fan of the SimCity on Super Nintendo.

Just as I was thinking that, we got an email from EA Japan indicating they wanted to make a social game, which was a slight shock. The next step was asking them to let us make SimCity, and this led to our development agreement (after a very tough negotiation).

You've just signed a new strategic deal with GREE, including investment. Why did you think you have work so closely with GREE?

Cave wants to get its content to the global marketplace and grow sales. In Japan, unlike North America and Europe, platform holders also make their own games (the same model as Nintendo). For that reason thirdparties won't be able to do better than the platform holders themselves, although there have been some exceptions.

Since growth in the Japanese market is already stalled, platform holders which succeeded on the previous feature phone model have had to adapt to smartphones and expand to the international market in keep up with the smartphone shift.

In order for Cave to do business in that market, we have to shift to smartphone development and make moves overseas. But as a single company Cave isn't that powerful, and doing that requires a lot of investment.

Mobile platform holders in general cannot put together game line-ups like Nintendo or Sony, but at the same time they don't want to lose ground to rival platforms. For that reason, their strategy for overseas expansion would include investing in a company that has an audience in the US and Europe, and also a track record in social games.

Since Cave had already put out games on GREE, once the executives of both companies sat down to discuss the matter it resulted in our new capital and business alliance.

How do you see the split between your Japan and your global mobile business playing out for the rest of 2011?

Internationally, we are going to continue providing shooters for iOS. However, one challenge we face is that only hardcore players are familiar with our shooters. From a business perspective you have to get the casual users playing as well. That means keeping the same fun, but working with price and how we get the games out so that they get out to more people.

We are also working on Android compatibility. As you know, Android has some difficult specifications limits, in terms of screen size, CPU and memory, particularly for our games. However, thanks to the achievements of our engineers I think we'll have some good news for people soon.

We'll also be bringing social games out overseas. Castle Creator is the international version of our hit social game for GREE. We've heard that samurai and ninja themes are popular in the west. This will be a bit of trial and error to get the game the same recognition as our shooters, but we're working hard on development to make it fun for everyone.

Domestically, now we have teamed up with GREE, we will be providing smartphone social games and our shooters to the GREE platform. I think this will be a big chance to have people who haven't played our shooters pick them up and give them a try.

Are casual games now the main focus for Cave?

Let me make it clear - Cave won't turn its back on our fanbase.

In Japan, there were rumors that Cave was going to back out of hardcore games and we had to go through a lot of effort to dispel that. We're very happy with the amount of support we get from our players.

We're going to keep making hardcore games, and at the same time we'll be growing our social and casual games divisions, for which the market is quickly expanding.

Cave's yearly annual sales are ¥3 billion (around $40 million), perhaps small compared to the major developers, but our modest goal is to meet our fan's expectations, both as an entertainment company and as a game developer.

Thanks to Watanabe-san for his time.

You can follow what Cave gets up via its website (English version).