Japan's Gree vows to boost gaming controls

TOKYO Tue May 8, 2012 6:42am EDT

Visitors watch Japanese mobile social gaming company Gree's promotional event at the Tokyo Game Show in Chiba, east of Tokyo, September 15, 2011. REUTERS/Kim Kyung-Hoon

Visitors watch Japanese mobile social gaming company Gree's promotional event at the Tokyo Game Show in Chiba, east of Tokyo, September 15, 2011.

Credit: Reuters/Kim Kyung-Hoon

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TOKYO (Reuters) - Gree Inc, Japan's leading social gaming site, said on Tuesday that it will strengthen policing of its content as regulators consider a clamp down on Internet games seen to be flouting gambling restrictions.

Gree will work with other social game companies to draft industry guidelines by the end of May, the firm's CEO and founder Yoshikazu Tanaka told reporters.

Announcing a tripling of operating profit in the quarter ended March 31 to 64 billion yen ($800 million), Tanaka promised to impose a 5,000 yen spending cap on children and to post online warnings when charges for others exceeded 10,000 yen.

"Our aim is for as many people as possible to enjoy our games worry free," said Tanaka, who declined to say whether Gree would pull any games to appease regulators.

The so-called "complete gacha" games under investigation charge users around $3 to $4 to turn over virtual cards. Completing a predetermined set of up to seven cards allows subscribers to claim rare cards or other valuable online rewards.

The Consumer Affairs Agency is investigating whether gacha games violate product labeling rules.

Gree, which boasts operating margins of more than 50 percent from selling virtual cards and accessories for online gaming avatars, last week was valued at $6.2 billion - more than struggling television maker Sharp Corp.

ASIA'S ZUCKERBERG

As Japan's consumer electronics sector fades, Gree and other up-and-coming social gaming sites are attracting growing investor attention.

Forbes magazine in 2010 lauded Tanaka as Asia's youngest self-made billionaire, worth $1.3 billion, with Facebook chief executive Mark Zuckerberg the only self-made billionaire younger than him.

While Zuckerberg kicked off a cross-country roadshow on Monday to promote Facebook's $10 billion initial public offering, Tanaka has been trying to deal with his company's falling share price as shareholders worry a government crackdown is imminent.

Since Monday, Gree's shares have slumped 23 percent, wiping $1.4 billion yen of its market value and trimming Tanaka's personal wealth by around $400 million. Rival DeNA Co's stock has fallen 21 percent.

Serkan Toto, a consultant who advises investors on Japan's web, mobile and social gaming industries, said a gacha game crackdown would hit earnings severely. "Up to 50 percent of their overall revenue comes through gacha," he said. ($1 = 79.9200 Japanese yen)

(Additional reporting by Mari Saito; Editing by Edmund Klamann and Jeremy Laurence)

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