GREE sales and income tripled in the last year

Latest aquistion Funzio is generating $5 million per month

GREE’s acquisition of Funzio is looking like a smarter decision by the day. As the Japanese government seems set to crack down on gaming practices, GREE's global platform will go a long way with helping to keep profits up.

Quarterly numbers

Tokyo-based social gaming company GREE released its Q3 2012 earnings report Tuesday, announcing that it had 13.4 billion yen ($168.5 million) in net income, up from 4.7 billion a year ago, and 46.2 billion yen ($578.9 million) in net sales, up from 16.4 last year, in the quarter ending March 31. GREE saw all of its numbers increase quarter-to-quarter and year-to-year.

The company also added 45 million new users, and now has over 234 million worldwide.

The earnings report also states that mobile game developer Funzio, which GREE purchased last week for $210 million, had sales of $12 million in the quarter, earning $5 million in April alone. Funzio has the second largest number of apps in the top 50, right behind fellow game developer Zynga.

Funzio is the developer of games such as Crime City, Modern War, and Kingdom Age, which run on both the iOS and Android operating systems. The company has seen over 20 million downloads.

Japanese crackdown

While GREE’s numbers look good on paper, in reality things are not going well for the company at the moment.

Gree saw its shares fall 23% yesterday, with founder Yoshikazu Tanaka losing 56.2 billion yen ($704 million) in stock value, according to calculations made by Bloomberg.

This comes on the heels of the Japanese Consumer Affairs Agency announcing that they would be cracking down on the “complete gacha” sales method employed by GREE and other Japanese gaming companies.

Gacha involves players having to win a certain group of items to win a special prize. The agency wants the practice to end, as it encourages gamers to spend a large amount of money to obtain prizes.

If gacha is deemed to be illegal, it could eat into GREE’s profits, and so their decision to expand globally, and, more specifically, into the United States by buying Funzio, suddenly looks like an even smarter decision.

In fact, the purchase of Funzio was the final step in a process that began when GREE purchased gaming platform OpenFeint for $104 million in April 2011.

Then, in November, plans were announced for GREE to launch a new global gaming platform that would be released this year. GREE opened offices in the United States, China, Korea, Singapore, UK, and the Netherlands in 2011.

GREE launched Zombie Jombie, its first U.S. created app, a month after announcing that it would be setting up a 41,000 square foot office space in San Francisco.

With OpenFeint, GREE bought the platform to launch games, and with Funzio it got its U.S. developer.

“Through our acquisition of Funzio, we have acquired development and operational expertise in tactical role playing games popular in North America and Europe,” GREE wrote in its quarterly report.

With the Japanese government about to more heavily regulate their gaming industry, it seems like GREE made their move at exactly the right time.

(Image source: product.gree.net)