TOKYO Shares of social gaming companies Gree Inc and DeNA Co Ltd fell more than 20 percent on Monday after a media report that Japan's Consumer Affairs Agency may clamp down on online games that contain aspects of gambling.
The Yomiuri newspaper said on Saturday that the mobile gaming industry is likely to face scrutiny from the government bureau over practices in which users pay extra for a chance to win special items.
The practice under the spotlight is referred to as "complete gacha", a system that encourages gamers to spend a few hundred yen at a time for a chance to win virtual "rare" cards. Completing a set of the cards lets gamers win additional prizes.
On Monday, shares of Gree fell 23.3 percent and DeNA was down 20.1 percent, both by their daily trading limit, compared to a 2.8 percent fall on the benchmark Nikkei. Rivals Mixi Inc shed 10.3 percent and CyberAgent Inc lost 19.8 percent.
As of last Wednesday before the start of Japan's Golden Week holiday, Gree boasted a market cap of $6.2 billion, more than struggling television maker Sharp Corp.
Forbes magazine had dubbed Gree CEO Yoshikazu Tanaka as Asia's youngest self-made billionaire in 2010, worth $1.3 billion and one of only three billionaires in the region under 35.
Monday's 23 percent fall, however, will wipe out about $406 million of Tanaka's personal worth based on his 49 percent stake in the social gaming site.
The Yomiuri report, without citing sources, said the government agency would first contact the companies through industry groups to stop the practice. If they do not comply, the agency would then send a cease and desist order.
"We are investigating the 'complete gacha' case and whether it violates the law. And we are currently still reviewing in this direction," said Kazuyuki Katagiri, an official at the consumer bureau. Katagiri said the agency had not yet reached any decisions on what actions it may take.
Spokesmen for Gree and DeNA said they had not yet received notice from the government agency.
Gree said it would respond if and when it is contacted by the agency, but declined to say how much it makes from the products being reviewed.
Yuki Nakayasu, a research analyst at Credit Suisse in Tokyo, estimated that average revenue per paying user of domestic social networking games to total 20,000 yen ($250).
"The key point is that we do not know how much of a share the additional charges or 'gacha' contribute to revenue per user, but we do not think it is a small amount," said Nakayasu.
($1 = 79.8800 Japanese yen)
(Additional reporting by Tim Kelly; Editing by Matt Driskill)