MUSINGS: On the Situation at Konami

Wednesday, April 29th, 2015

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To quote from one of my favorite movies, “What in the wide world of sports is a-goin’ on here?”

Weird things are happening at Konami. I’m sure you all know that, what with the “God-of-vania” games, the Ground Zeroes fiasco, the E3 no-show, the managerial overhaul, recent turmoil surrounding two high profile games and now the delisting from the NYSE. All this from a company that was considered a top 5 gaming company in terms of revenue just a few years ago.

It’s been a rather wild few weeks following Konami, which will all be culminating in the removal of P.T., the playable teaser for the now-cancelled Silent Hills. Interesting fact, this article was going to focus on that before the most recent news. Obviously, this will be more about Konami as a whole rather than one franchise, though I’ll get to it later on.

Konami | oprainfall

The past few years, Konami has been in a free fall, specifically on the video game side of its business. Back in 2011, Konami Digital Entertainment, Co. — the video game arm of Konami Corporation — brought in about $1.75 billion in revenue. Last year, that number had fallen to $1.02 billion. This year, it is expected around $840 million. Assuming these numbers hold up, that will be a 52% drop in just a few years for the holding company’s biggest revenue-earning business.

Now, compared to other top third-party Japanese gaming companies, this doesn’t look too bad. Konami is still in front of SEGA at $735 million and Bandai Namco at around $680 million while being behind Square Enix by about $100 million. However, for a company that seems to have Triple-A aspirations for franchises like Metal Gear, Silent Hill and Castlevania, that revenue number is unacceptable. For what Konami is trying to do, they would need to make that $1.75 billion from 2011 consistently, which would put them in the neighborhood of Ubisoft.

The silver lining for Konami seems to be this: as a holdings company, they are making money. The revenue in other areas such as gambling, fitness and other ventures seems to be helping the overall numbers stay relatively even. Overall revenue has been just above $2 billion, total assets over $3 billion and liabilities hovering around $1 billion. These things have been pretty consistent over the past four years.

THQ | oprainfall

Shown here: A vestige of gaming’s past, not to be confused with Konami’s future.

So, it’s not like they’ll be THQ, a $2 billion video game company that went belly up quickly when their video games didn’t find favor with people. Konami has enough of a cushion with their other ventures that a potential end won’t be nearly as drastic. But, if things don’t change for them with video games, an end will become more and more probable, whether it’s the whole holdings company or just the video game business.

Early last year, the gaming world was critical of Metal Gear Solid V: Ground Zeroes, a 30-minute proof of concept that was priced at $30. Gamers and critics alike cried foul that a major publisher would charge for something that was essentially a demo for The Phantom Pain. And the reason for the release: they needed to raise money to finish The Phantom Pain.

Moving into June, Konami had a counter that went to absolutely nothing. No presser, no trailer, no welcoming to E3. Combined with the low blow delivered to Sony by releasing The Phantom Pain trailer one day before Sony’s conference, this lead to me calling them the biggest losers of E3. On top of essentially becoming the E3 trolls that we all loathe, I was critical of Konami for having nothing else ready for the biggest event of the year — including not utilizing any of the old Hudson Soft IPs — and their actions tarnished what was once a great company, making it difficult to trust them again.

Konami Press Conference | oprainfall

Should we even bother getting one of these ready for this year?

Truth be told, some time after E3, I expressed worry for the company to a number of contributors on the site. While I was angry about what happened, my mind started to wander, wondering if Konami was pooling all its money into one game because they were losing it elsewhere.

But things seemed to be looking up as P.T. (known as Playable Teaser) was announced and released during Gamescom 2014. This was not only a great proof of concept but was a teaser for the next game in the Silent Hill series, known as Silent Hills. It would be developed by Hideo Kojima, directed by Guillermo del Toro and star Norman Reedus from The Walking Dead. In our yearly wrap-up, I called this a positive step towards rebuilding themselves. This was something that Konami could build upon to recapturing their glory days from long ago.

However, as of today, all of that — Silent Hills, Kojima, del Toro, Reedus, and even the playable teaser for the game — will all be gone. Silent Hills has been cancelled. P.T. is getting removed from PSN today. Reedus’ contract has been allowed to expire. del Toro has been let go. And Konami has been distancing themselves from Kojima, not only removing him from management but also removing his company’s logo from any material for either the Silent Hill franchise or The Phantom Pain. Moreover, the move to cancel was a pretty costly one, though numbers for that are not available at the moment.

Silent Hills

Silent Hills, now forever a memory of what could’ve been.

Combine that with the delisting of Konami from the New York Stock Exchange — which has been called a money saving measure since less than 1% of investors are from the U.S. — and you seriously have to wonder whether Konami is in trouble.

How exactly did we get here? Well, all we can do at the moment is speculate. Kojima probably has a non-disclosure agreement somewhere in his contract with the company, which means that any answers from him will be long down the line. We might get some answers from Konami, since their financial report for last year will be coming in a couple of weeks.

They’ve already thrown him under the bus once. What’s another time?

But is it really his fault? From what I can see… not completely. Konami still needs to be held accountable for his actions, since those happened while he was part of the board as well as part of a subsidiary to the company, Kojima Productions — which has been separated and turned into a contractor in the past couple of weeks. The money still comes from Konami. They could’ve stopped him from spending it.

Hideo Kojima

As for Kojima… It’s kind of tough to say. From afar, he seems like the Japanese version of David Cage. He seems like someone that follows an auteur style of development and is completely full of himself — which seems counter to what you would imagine a Japanese developer to be. You look at most of those guys — the Miyamotos, the Onos, the Aonumas — and they seem like they’re rather humble guys just having fun. And even for other auteurs like Swery and Suda, they don’t really seem like they really care too much if a game is super successful. They all just want to have fun and create awesome games — even if it’s only awesome in their mind.

So where do we go from here? Well, I think we can say for certain that the era of Kojima is over. No more Konami as “Kojima and Friends.” But what their next move is will determine how Konami — the gaming company — moves forward.

My suggestions for you, Konami:

  1. Think Small. Triple A budgets aren’t worth the hassle if you can’t bring in Triple A revenue. Have your people work on many smaller projects instead of on one big game. Not only do you get more shots at getting money but you can also see what the market wants from you. Which brings me to my other suggestion…
  2. Open Up the Library. You do know that you’re more than Castlevania, Silent Hill, and Metal Gear, right? You do know that you have other franchises like Gradius, Rocket Knight, TwinBee, and Contra — just to list some easy games you could make with little translation needed — right? You do know you have the Hudson Soft library — which includes the likes of Bonk, Adventure Island, the Milon games, Far East of Eden, Bloody Roar, Star Soldier, and Bomberman — right? Why not make some game for those series? I’m certain people will buy them.
DoReMi Fantasy Milon's DokiDoki Adventure

More of this, please.

But this is just one opinion of a company that looks bad in one part of it while the others look fairly healthy. Again, they’re not THQ. The end will not be swift. And who knows, maybe these changes will bring a renaissance to Konami. Only time will tell.

For now, the Konami that we loved and hated is gone — much like Silent Hills. In it’s place, uncertainty with Konami Digital Entertainment walking a tight rope over a big cushion — a cushion that’s marked Konami Sports & Life Co.

…situated right next to a Pachinko machine.

…and a big screen T.V. showing the Yu-Gi-Oh! anime on loop.

About Jeff Neuenschwander

Jeff has been a supporter of the website and campaign since the beginning. Joining in for E3 2012, he worked his way up the ranks quickly, making it to the Editing Manager post at the beginning of 2013. Jeff has a wide variety of tastes when it comes to gaming and pretty much likes anything that is quirky, although his favorite genres are Action, Platforming, and RPG. Outside of gaming, Jeff is a musician, being trained as a trombonist for Jazz and Classical music, and holds a degree in Sound Recording.

  • PanurgeJr

    The first thing I’d do is make another Symphony-style Castlevania for 3DS; the GBA and DS titles are still well-regarded enough that I think the market would still be there, and handheld budgets are a fraction of what console budgets are.

    • Tara

      Honestly, I’d take a 3DS port of Symphony, if they were in real dire straits and were afraid to put the money into it. I mean, yeah, I own the original, and the PSP remake, but I’d buy it again.

      … but really, would love another game like Portrait of Ruin. That was absolutely THE BEST DS Castlevania.

  • Kojima’s full of himself, but he’s earned it. As silly as his stuff can be sometimes, it’s still powerful, emotional and willing to experiment far more than most game developers. At this point, I’m pretty much done with Konami. I am, however, super excited for what Kojima can produce when he’s free of their shackles (and free of the ability/burden of yet another Metal Gear sequel)

    • Tara

      You know, I hate to be the one to say this… but while I agree that Kojima seems like he could make something fantastic without the forced structure of Konami, I worry that he’d be like Keiji Inafune… making a half-baked clone of his previous works, and dropping any of his actual “unique” projects. (I am/was a Mega Man fan, but the cancellation of Legends 3, the game I most wanted, was a low blow… and then Inafune goes and starts working on Mighty No 9, not even being subtle about the clone nature of it. Projects like Kaio: King of Pirates, that could have been good, just disappear, and then are cancelled…)

      Basically, my concern is that Kojima and Konami need each other, and without the other, they both end up falling apart.

    • Nicholas Patrick

      Excuse me, you have not even played the “half-baked clone”… hell you probably criticised Mega Man 9 for it’s lack of innovation… which is missing the point entirely. In fact it sounds like you blame Inafune for the cancelation of Legends 3 when he offered to finish it even after leaving. Seems like you’re on the side of big business, and therefore unreasonable.

    • Tara

      Getting a bit defensive, are we? And for the record, I did not criticize Mega Man 9 (or 10, even) for their lack of innovation. Inafune said his creativity was stifled at Capcom, and he’s near constantly bitched about how he felt locked into only making Mega Man games after he quit… and yet what does he focus all of his time and resources on? A game that’s a Mega Man clone. So my “half baked” statement might’ve been a bit harsh, but the fact is “Beck and Call” being the two heroes, when it was “Rock and Roll” with the Rockman/Megaman series… you can’t even say that it’s not intended.

      Do I blame the MML3 cancellation on Inafune? Honestly, yes, I do somewhat. He said it was greenlit before he left. He lied. Whether it was or not, I’m sure it would’ve been cancelled if he stayed or not, though, so in the end it doesn’t matter.

      As for the “side of big business” comment… assumptions much? First of all, I’m not on anyone’s “side”, big business or not, a lot of this stuff is crappy internal politics, and almost always is stupid as hell. But even if I was “on the side of big business”, that does not mean I am unreasonable. (But I re-iterate, I’m not on anyone’s side.) That’s a rather sweeping generalization to make about my stance. All I’m saying is, look at what Inafune accomplished in his years at at Capcom, and look what he’s done since leaving. Literally nothing, except MN9, which he’s running in the same stupid way he complained about Capcom running Mega Man. He’s trying to make a “media empire” out of a game that’s not even out yet. Save the toys and animated series until AFTER you know if it’s gonna be successful.

    • Very true! Though I’ll echo Nicholas in maybe a calmer way. Though Mighty No. 9 is pretty much the same type of game as Mega Man, for all we know it could be *fantastic*. It could also be him trying to prove that he can see a great game to completion with his own studio before he branches off into something more unexpected. We shall see!

    • Tara

      It could be, yes. And I’m a fan of the Mega Man games, or was, anyway. Honestly always preferred the RPG series (Battle Network, Star Force, Legends).

      I am mostly annoyed because Inafune was complaining about how he felt cornered into only making Mega Man games, but the first thing he does when leaving Capcom is start making a game that’s effectively another Mega Man. Doesn’t make a lot of sense to me, to be honest.

      I could be wrong, but his actions leave me jaded towards anything he’s got coming. I mean, really, he had something that could have been truly unique with Kaio, but then leaves it to die… in favor of trying to make a media empire out of MN9.

      But like I said. I could be wrong. If I am, I’ll admit it. But at this rate, he’s done very little to prove he’s not just trying to make something to say “EFF YOU, CAPCOM, I CAN DO IT MYSELF!”

    • guest

      Don’t you dare compare Kojima to that hack Inafune. Kamiya himself has stated that Inafune isn’t even a developer. He didn’t actually make Mega Man. He’s just a businessman.

    • Tara

      I did not see this quote before, but I’m inclined to agree with Kamiya, since he likely had some sort of professional contact with Inafune… as well as with Kojima, since they did make Revengeance.

      As for my choice of comparisons, it’s all about how they’re depicted. Kojima and Inafune have always been regarded as being on the same level in the media and whatnot. So my fault for not doing my own research, in that case.

      Either way, I did not consider that Kojima pretty much has been doing his own thing for years anyway. I forgot his studio is largely “independent”, just that Konami throws the funding their way. I also forgot that he’s responsible for other series, like Zone of the Enders, and thus has proven himself more than a one-trick pony. (Also, still annoyed how ZoE3 was canned, and probably won’t see the light of day again, either. 🙁 )

  • Taiyaki

    This article is interesting for presenting a different perspective, but honestly I highly doubt Kojima’s era is over as you put it. IMO he could still do some great work either by setting up his own company or for another company (maybe Sony?).

    • Tara

      Not sure if the article’s been changed since you read it… but it definitely says that his era at KONAMI is over.

      That said, pretty sure that’s true, I think he’s done at Konami. Which sucks, for sure. While I’m skeptical on what he can really do on his own, without the structure of Konami, he could also be a success, like the former Capcom devs that went to form Platinum… because they definitely made a name for themselves, and I do think Kojima could do that, too… but I also think he needs to get with some other big-name devs to make it work.

    • Jeff Neuenschwander

      Well, to be fair to Taiyaki, this is an opinion piece. In my opinion, I believe it to be over, whether or not that is the case in the near or distant future.

  • Tara

    I honestly was none too happy about the “God of Vania” games. Don’t get me wrong, they’re okay for what they do, they do it well enough… but it’s not what I grew up with. I understand evolving the series, but I don’t know if that was the way to do it… at least, not with dumping off the whole Metroidvania style games. Honestly chose to skip out on Ground Zeroes in the hope they’d bundle it with The Phantom Pain, but at this rate, wondering if The Phantom Pain will ever be completed. >.>

    Anyway… my biggest disappointment is the fact that they haven’t even tried using the Hudson library… or even licensing it out to someone else. I remember when Microsoft announced they were bringing back Killer Instinct for the XBone, there were rumors that Sony was going to get an exclusive new Bloody Roar for the PS4. Got super excited about that, Bloody Roar has been a favorite of mine for AGES, and I have all of the games in the series… and have played all of them a ton. Needless to say, it was a huge bummer when nothing came of it. I realize they weren’t exactly big money makers, but I’d totally dig a new Robopon game, too.

    But yeah… along with Capcom, I feel Konami has lost track of what made them successful, so I don’t see this improving much. Yeah, the holding company will survive, I’m sure. But I don’t forsee the gaming division recovering, which is a damn shame. If they do “recover”, it will be as a mobile dev, and that’s not recovering at all… that’s the exact opposite of it, as I see it. Don’t get me wrong, there are actually good mobile games… but very, very few of them, especially considering how much is out there. (I realize same applies for all platforms, but I feel the consoles have a higher percentage of quality titles than mobile… or even PC. That said, the good games on mobile and PC are most always of top quality. And just so nobody gets insulted, I do a good bit of my gaming on PC. I just go where the good games are, that’s all.)

  • G45778

    Missing in this article are the following points:

    – Recent Bemani games being exclusive to Japan thanks to e-AMUSEMENT
    – Konami’s mobile games not named PES or Power Pro [Baseball] not doing well
    – Since 2012 (when the new president of Konami Takuya Kozuki was sworn in) the “beginning” of the “big” troubles for Konami Digital Entertainment “started”
    – Konami using its old but well-known IPs in its pachinko and casino gaming machines
    – Konami getting heavy-handed with Yu-Gi-Oh! the physical card game to the dismay of loyal fans (but still releasing Yu-Gi-Oh! video games every new iteration of the anime)

    • Razorfall

      Not to mention that the bemani home versions were discontinued without any sort of notice. They just slowly started dropping off one by one until there was nothing left. Then they had a poll about which console people would prefer new bemani games to be on….then nothing ever came of it.