mobcast inc. (3664)

Transcription

mobcast inc. (3664)

SR Research Report
2013/11/8
mobcast inc. (3664)
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is
to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an
accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and
findings. We will always present opinions from company management as such. Our views are ours where stated.
We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at
[email protected] or find us on Bloomberg.
mobcast inc. (3664)
SR Research Report
2013/11/8
Contents
Recent Updates .......................................................................................................4
Highlights ............................................................................................................4
Trends & Outlook .................................................................................................5
Business ............................................................................................................... 13
Business Description ........................................................................................... 13
Market and Value Chain ...................................................................................... 21
Strategy ............................................................................................................ 25
Historical Financial Statements................................................................................ 27
Income Statement.............................................................................................. 29
Balance Sheet .................................................................................................... 30
Other Information ................................................................................................. 31
History .............................................................................................................. 31
News & Topics ................................................................................................... 32
Major Shareholders ............................................................................................ 34
Top Management ............................................................................................... 34
By The Way .......................................................................................................... 34
Company Profile .................................................................................................... 35
http://www.sharedresearch.jp/
Copyright (C) 2013 Shared Research Inc. All Rights Reserved
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Income Statement
(Thousand Yen)
Total Sales
YoY
Gross Profit
YoY
GPM
Operating Profit
YoY
OPM
Recurring Profit
FY12/08
Par.
334,411
FY12/09
Par.
202,610
FY12/10 FY12/11 FY12/12 FY12/13
Par.
Par.
Par.
Est.
402,067 2,022,313 4,932,004 5,000,000
16.9%
-39.4%
98.4%
403.0%
143.9%
226,090
48,895
190,428
1,399,162
3,414,066
-
10.1%
67.6%
-78.4%
24.1%
289.5%
47.4%
634.7%
69.2%
144.0%
69.2%
793
-151,612
36,376
521,097
1,127,205
-680,000
0.2%
-74.8%
9.0%
1332.5%
25.8%
116.3%
22.9%
-
1,633
-157,031
31,794
510,213
1,117,455
-640,000
-37.3%
0.5%
-77.5%
7.9%
1504.7%
25.2%
119.0%
22.7%
-
Net Income
2,992
-346,094
16,832
484,234
648,114
-750,000
YoY
Net Margin
-89.5%
0.9%
-170.8%
4.2%
2776.9%
23.9%
33.8%
13.1%
-
7,682
-46,085
0
0
-3,888
10,682
1,777
0
0
17,028
10,882
45,117
0
0
65,808
6,474,000
106
102
0
288
YoY
RPM
Per Share Data
Number of Shares
7,258
EPS
412
EPS (Fully Diluted)
0
Dividend Per Share
0
Book Value Per Share
40,649
Balance Sheet (Thousand Yen)
Cash and Equivalents
119,183
Total Current Assets
360,548
Tangible Fixed Assets, net
1,839
Other Fixed Assets
36,209
Intangible Assets
103,121
Total Assets
501,718
Short-Term Debt
43,037
Total Current Liabilities
124,729
Long-Term Debt
81,959
Total Fixed Liabilities
81,959
Total Liabilities
206,688
Net Assets
295,030
Interest-Bearing Debt
124,996
Cash Flow Statement (Thousand Yen)
Operating Cash Flow
Investment Cash Flow
Financing Cash Flow
Financial Ratios
ROA
0.6%
ROE
1.0%
Equity Ratio
58.8%
13,913
65,346
1,359
19,935
65,244
151,885
44,674
102,270
79,480
79,480
181,750
-29,864
124,154
-55
0
193,315
656,836 1,593,919
310,837 1,237,744 2,548,101
2,355
1,984
14,437
7,990
47,053
145,768
39,569
42,269
116,035
360,752 1,329,052 2,824,343
35,166
77,760
28,456
115,392
499,960 1,046,419
63,472
112,970
16,688
63,472
112,970
16,688
178,864
612,930 1,063,107
181,887
716,121 1,761,235
98,638
190,730
45,144
-
61,871
-50,890
168,419
424,165
-102,510
141,865
-
6.6%
22.1%
50.4%
57.3%
67.6%
53.9%
934,900
-227,717
229,900
31.2%
37.1%
61.9%
Note: Consolidated data from FY12/13.
Figures may differ from company materials due to differences in rounding methods.
1-to-500 stock split in March 2012 resulted in 6,322,500 outstanding shares as of June 30, 2012.
Source: Company data, SR Inc.
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Recent Updates
Highlights
On November 8, 2013, mobcast inc. released Q3 FY12/13 consolidated results: click here to go to the
results section.
On November 1, 2013, the company announced a downward revision to its full-year FY12/13 earnings
forecast.
For the full-year FY12/13, the company stated that the reasons for the downward revision to its
consolidated earnings forecast is due to the following: 1) delays in introducing new games developed
in-house, 2) delays in introducing new games developed by partners, 3) delays in its overseas business,
4) increase in advertising expense, 5) increase in personnel expense, and 6) impairment write-offs of
software.
The company revised full-year FY12/13 earnings forecast as follows:
Sales: 5.0 billion yen (initial forecast of 8.0 billion yen)
Operating Loss: -680 million yen (1.8 billion yen operating profit)
Recurring Loss: -640 million yen (1.7 billion yen recurring profit)
New Loss: -750 million yen (1.0 billion yen net profit)
The first three problems mentioned above were caused by an overly optimistic schedule management.
The company has already taken measures such as changing its organizational structure, as to avoid such
delays in scheduling from ever happening again in the future. In addition, the company has implemented
several measures such as a massive overhaul of its advertising organization, and focusing resources on
future growth businesses.
Furthermore, in an effort to accelerate its overseas expansion by its group companies, the company
announced on the same day that it will merge with mobcast global inc. and become the surviving
company.
For corporate releases and developments more than three months old, please refer to the
News & Topics section.
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Trends & Outlook
Monthly Membership Trends
Customer count is on a steady rise, and as of the end of October 2013, the company had 4.5 million
members. Membership increases tend to be highest in April and May each year, when the professional
baseball season starts and the company conducts its most aggressive promotions. In Q3, the number of
members increased 320,000 to 3.7 million in Japan, while the number of members increased 130,000 to
exceeded 700,000 in Korea.
Number of mobcast Members
130,000 members
added in Q3
Number of
members in Korea
Number of
members in Japan
290,000 members
added in Q2
260,000 members
added in Q1
320,000 members
added in Q3
380,000 members
added in Q2
250,000 members
200,000 members
added in Q1
added in Q4
Source: Company data, SR Inc. Research
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Quarterly Trends & Results
Quarterly Performance
(million yen)
Sales
YoY
Q1
1,082
FY12/12 (Parent)
Q2
Q3
1,201
1,250
Q4
1,399
Q1
1,303
FY12/13 (Consolidated)
Q2
Q3
1,297
1,308
-
-
-
-
-
-
791
816
830
978
817
771
702
73.1%
67.9%
66.4%
69.9%
62.7%
59.5%
-15.4%
53.7%
542
661
544
539
707
821
908
-
-
-
-
-
-
66.7%
SG&A / Sales
50.1%
249
55.1%
155
43.6%
286
38.5%
438
54.3%
110
63.3%
-49
69.4%
-206
YoY
OPM
23.0%
12.9%
22.8%
31.3%
8.5%
-
-
248
147
284
438
110
-57
-164
22.9%
12.2%
22.8%
31.3%
8.5%
-
-
143
84
167
254
46
-44
-138
13.2%
7.0%
13.4%
18.1%
3.5%
-
-
GP
YoY
GPM
SG&A
YoY
OP
RP
YoY
RPM
NI
YoY
NPM
Q4
FY12/13 (Consolidated)
% of FY
FY Est.
52.0%
5,000
4.6%
-
-680
-
-640
-
-750
Note: Consolidated data from FY012/13
Figures may differ from company materials due to differences in rounding methods
Q3 FY12/13 Results (announced on November 8, 2013; please refer to the table
above)
Cumulative Q3 sales were 3.9 billion yen (the company started reporting consolidated accounts from
FY12/13, and therefore, does not disclose year-on-year comparisons), operating loss of 144 million yen,
recurring loss of 110 million yen, and net loss of 135 million.
In Q3 (July to September), sales increased 0.8% compared to Q2 (April to June), due to 1) delays in
introducing new games developed in-house, 2) delays in introducing new games developed by partners,
and 3) delays in its overseas business.
Its games developed in-house, such as native application games “Dragon Spin”, “Gekito! Bokura no Puro
Yakyu!” (Fierce Game! Our Pro Baseball!), as well as a browser game, “Mobile Grand Prix”, were delayed
from Q3 to Q4. In addition, eight of the ten scheduled release of partner game titles in Q3 were delayed
to Q4.
Overseas business was effected by various delays such as a browser game titled “Yakyu no Tatsujin –
Mobapro Korean version” (Master of Baseball – Mobapro Korean version) released in October, native app
games delayed to Q4 from Q3, and the delay in opening of the company’s social gaming platform to other
game providers in November (for release of “NBA2K Basketball Master”).
Furthermore, increases in advertising and personnel expenses contributed to an operating loss of 144
million yen. Advertising expense as a percent of overall sales increased, mainly due to the company’s
inability to control ad placements given that its advertisement media are organized on a long term basis.
Personnel expense increased as a result of enhancing operations such as strengthening its open gaming
platform, and embarked on new operations such as developing native games, providing an opening
platform and developing native apps in Korea, as well as conducting media marketing.
Furthermore, the company recorded extraordinary charges of 200 million yen related to loss on disposal
of fixed assets, namely discarding of software, and 100 million yen in relocation expenses to a new office.
The company expects that the various delays seen in the Q4 such as introducing in-house and partner
developed new games, and developing its overseas business will likely be resolved in Q4, and
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consequently, it feels confident that it will be able to achieve its revised earnings forecasts.
Earnings outlook for FY12/14
For FY12/14, the company forecast operating expenses to be reduced by approximately 1.3 to 1.4 billion
yen over the previous term, mainly due to halting long-term advertising contracts, reducing depreciation
of software due to the total write-off of impairment losses in the previous term (FY12/13), in addition to
reducing outsourcing expenses (development of new projects to be completed within the year).
SR Inc. believes that the company will likely record increased sales and profit (become profitable) during
the term, supported by full contributions from new titles introduced during FY12/13, and new game
releases (two browser games, two native application games, and 15 to 16 partner games are planned).
Q2 (1H) FY12/13 Results (Announced on August 9, 2013; please refer to the table
above)
Consolidated sales were 2.6 billion yen (no YoY comparison due to first year of consolidated results) in 1H.
Operating profit was 60 million yen, recurring profit was 50 million yen, and net income for 1H was 2
million yen.
In Q2 (April–June), although sales were flat compared with Q1 (January–March), results for the quarter
were affected by such factors as a temporary shortage of certain sales items and a delay in the opening of
the company’s social gaming platform to other game providers.
The shortage in sales items stemmed from a delay in the preparation of player cards during the
changeover to the updated 2013 edition of “Mobapro,” which resulted in an opportunity loss. From June,
sufficient player cards have been available and the number of paying members appears to be rising
(please refer to the chart titled “Number of Paying mobcast Members and ARPPU”).
Driven by aggressive advertising campaigns, in Q2 (April–June) the number of mobcast members grew at
a rapid pace, with 380,000 members added (versus an increase of 250,000 members in Q1 FY12/13
(January–March)). Such strategies as enhancing sports media services and aggressively marketing to
light users appear to have been successful.
SG&A expenses in Q2 (April–June) rose to 820 million yen, reflecting aggressive advertising campaign
expenditure in preparation for 2H. The SGA-to-sales ratio increased to 63.3% (55.1% in Q2 FY12/12)
In 1H FY12/13, the company released five game titles developed in-house and nine game titles developed
by third parties. In 2H FY12/13, the company plans to release a total of 41 titles: 11 developed in-house
and 30 third-party titles. At the start of FY12/13, the company said it planned to release at least 20
third-party game titles during the fiscal year, hence under the current plan the number of third-party titles
is likely to surpass the initial forecast by a large margin.
Among in-house game titles scheduled for release in 2H, the first native-application game title, “Dragon
Spin,” is due to be released in August, auto-racing game “MobaGrandPrix” is set for release in September,
full-fledged 3D professional baseball simulation game “Everyone’s Pro Baseball” (native application) is
scheduled for release in October, and “Mizuguchi Puzzle” (tentative name), a social puzzle game, is
planned for release in December.
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Tetsuya Mizuguchi is the company’s creative designer, and the games he has been involved in producing to date
have sold a total of eight million units and the number of applications installed exceeds 16 million.
In addition, to further accelerate development of the company’s overseas business, the release of
“Mobapro Korea” is scheduled for autumn 2013. The company is also planning a major international
rollout of its “MobaSoccer” professional soccer simulation card game in 2014 ahead of the staging of the
FIFA World Cup. By summer 2014, the company is aiming to release the game in approximately 20
countries.
Although 1H results were low versus the company’s full-year estimates, based on the aggressive level of
activity planned for 2H, the company maintained its forecasts.
Q1 FY12/13 Results (Announced on May 8, 2013)
Sales were 1.3 billion yen (no YoY comparison due to first year of consolidated results) for the quarter.
Although sales declined compared to the preceding quarter (Q4 FY12/12), taking into account the impact
of the off-season, performance was generally in line with expectations. In Q4 FY12/12, ARPPU was high,
at 6,733 yen, driven by such factors as year-end promotional campaigns (please refer to ARPPU chart).
Membership topped three million people as of the end of March 2013, driven by aggressive advertising.
Q1 FY12/13 saw rapid growth in membership, with 257,000 new members joining during the quarter (vs.
208,000 new members in Q4 FY12/12). Strategies such as enhancing sports media services and
aggressively marketing to light users appear to have been successful.
COGS was 486 million yen and GPM was 62.7% (FY123/12: 69.2%), reflecting rises in platform
commissions and labor costs related to PC-related services. As a result, gross profit was 817 million yen.
Within SG&A expenses, labor expense was 90 million yen (labor expense / sales: 7.0%; FY12/12 3.9%),
higher on the back of the media services launch. Advertising and promotion expense was 370 million yen
(advertising and promotion expense / sales: 28.7%; FY12/12 29.1%), reflecting efficient media buying at
the start of the year and to coincide with the World Baseball Classic (WBC) and the start of the Japanese
professional baseball season. As a result, Q1 FY12/13 operating profit was 110 million yen. Although
up-front investment rose, this was mainly in line with expectations. Recurring profit was 110 million yen,
and net income for the quarter was 45 million yen.
The company revised up its full-year consolidated sales forecast by 1 billion yen to 8 billion yen based on
favorable progress in the first quarter that was mostly in line with assumptions, and reflecting the
expected impact on operating performance from Q2 onward due to the increase in the number of new
members.
In Q1 FY12/13, the company launched several strategic initiatives. As part of enhancements to media
services, the company began mobcast Sports and “VivaSpo!” in partnership with TV Asahi Corporation.
Further, to pave the way for overseas expansion, the company acquired mobcast ec inc. (former
EnterCrews Co., Ltd.), and executed a third-party allotment of shares to Dentsu Inc. (Please refer to
Strategy).
On April 22, 2013, the company fully opened the beta versions of its “mbc connect” and “mbc wallet”
services, which had been available to a handful of companies since October 2012, and officially opened its
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“mobcast development partners site,” hence marking the launch of the mobcast social-game platform. By
opening its platform to other game providers, the company aims to distribute third-party content, thereby
increasing the diversity of content and services available to users. In Q1 FY12/13, seven third-party game
titles were launched on the platform, and the company forecasts more than 20 third-party game titles to
be available through the mobcast platform by the end of FY12/13.
The company announced a 1-to-2 stock split (record date: May 31, 2013) for the purpose of increasing
share liquidity and further broadening its investor base.
FY12/12 Results (announced on February 5, 2013)
Sales were 4.9 billion yen (+143.9% YoY; +9.6% vs. forecast) for the year. Sales grew steadily on strong
performance of existing mobile social game titles, such as “Mobapro” (professional baseball simulation
card game) and “MobaDerby” (horse race simulation card game). New title “Mobasoccer” (professional
soccer simulation card game) also contributed to robust results. In fact, the launch of “Mobasoccer” in
late-July 2012 led to rapid membership growth. As of the end of FY12/12, Mobcast membership reached
2.8 million with paying members totaling 85,000 (79,000 as of the end of FY12/11).
COGS (mainly royalties related to social game development and operation) was 1.5 billion yen, and gross
profit was 3.4 billion yen. SG&A expenses were 2.3 billion yen. As a result, full-year operating profit was
1.1 billion yen (+116.3% YoY), largely in line with forecast (+0.2% YoY). The operating profit margin for
the year was 22.9%.
Full-year recurring profit was 1.1 billion yen (+119.0% YoY) after deduction of stock delivery expenses,
and net income was 648 million yen (+33.8% YoY). Net income growth YoY was relatively small due to
the effective tax rates leveling off.
In the Q4 (October-December 2012) alone, operating profit grew 54% on the previous quarter, climbing
the highest level ever. “Mobapro,” marking the second anniversary since launch, saw significant sales
growth, while “MobaDerby,” one year since launch, enjoyed a steady user increase. The operating profit
margin in the Q4 was 31.3%, much higher than the 22.8% in the previous quarter, mainly due to solid
performance of “Mobapro” and “MobaDerby” and contributions from new “Mobasoccer” and year-end
promotional campaigns. Despite an increase toward the year end, advertising costs were 290 million yen,
down from the 330 million yen in the previous quarter.
In mid-October 2012, Mobcast officially announced the beta-version platform opening to third parties.
The company had plans to provide the beta-version platform (official name: “mbc connect”) to only
several partners (as of December 2012), and intends to start official platform operation in March 2013.
On the beta-version, Konami Digital Entertainment Co., Ltd. (a subsidiary of Konami Corporation; TSE1:
9766) launched “J.LEAGUE Dream Legends” (Konami) as the first game on the platform. The new title
was seeing a steady user increase, according to the company.
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Full-Year (FY12/13) Outlook
FY12/13 Forecast
(million yen)
Sales
FY12/12 Actual
1H
2H Full-Year
2,283
2,649
4,932
YoY
CoGS
Gross Profit
YoY
GPM
-
-
Company Estimates
1H
2H Full-Year
2,600
2,400
5,000
143.9%
-
677
1,607
841
1,808
1,518
3,414
1,012
1,588
70.4%
68.2%
144.0%
69.2%
61.1%
SG&A
1,203
1,084
2,287
1,528
SG&A / Sales
52.7%
40.9%
46.4%
58.8%
403
724
1,127
61
17.7%
27.3%
116.3%
22.9%
2.3% -
394
723
1,117
53
17.3%
27.3%
119.0%
22.7%
2.1% -
227
421
Operating Profit
YoY
OPM
Recurring Profit
YoY
RPM
Net Income
YoY
-
-
648
2
33.8%
-
-
-741
-
-693
-
-752
-
-
-680
-
-640
-
-750
-
On November 1, 2013, the company revised consolidated earnings forecast for the full-year due to the
following: 1) delays in introducing new games developed in-house, 2) delays in introducing new games
developed by partners, 3) delays in its overseas business, 4) increase in advertising expense, 5) increase
in personnel expense, and 6) impairment write-offs of software.
The company revised full-year FY12/13 earnings forecast as follows:
Sales: 5.0 billion yen (initial forecast of 8.0 billion yen)
Operating Loss: -680 million yen (1.8 billion yen operating profit)
Recurring Loss: -640 million yen (1.7 billion yen recurring profit)
New Loss: -750 million yen (1.0 billion yen net profit)
The first three problems mentioned above were caused by an overly optimistic schedule management.
The company has already taken measures such as changing its organizational structure, as to avoid such
delays in scheduling from ever happening again in the future. In addition, the company has implemented
several measures such as a massive overhaul of its advertising organization, and focusing resources on
future growth businesses.
Furthermore, the company intends to write-off the full amount of impairment losses for its capitalized
contents in development, namely “software development-in-progress", and contents already developed
and depreciation has begun, namely “software”, in order to strengthen its management structure. As a
result, it intends to take a 300 million yen extraordinary charge in the current term, and consequently, its
depreciation burden is expected to be reduced from next term.
The prospects for introducing its delayed in-house developed new games, new games developed by
partners, and delays in overseas business looks brighter in Q4, and its revised earnings forecast is
considered the minimum achievable level.
Major titles to be release in Q4 are as follows:
In-house developed games
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Browser games

Mobile Grand Prix

“Yakyu no Tatsujin – Mobapro Korean version” (Master of Baseball – Mobapro Korean version)
Native application games

Dragon Spin

“Gekito! Bokura no Puro Yakyu!” (Fierce Game! Our Pro Baseball!)

“Galaxy War S” (Korea version)

“Dice Adventure” (Korea version)
Partner games: eight titles
Major game title releases planned for Q4
Browser games
Mobile Grand Prix
Master of Baseball (Yakyu no Tatsujin)
Mobapro Korean version
Source: Company data
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Business
Business Description
Business Model
mobcast inc. (hereinafter “Mobcast” or “the company”) provides sports-focused social games using its
own platform.
Social Game Services
Social games are available on social networking service (SNS) platforms, which enable users to play
games while communicating with other users—often via smartphone. In 2007, Facebook, Inc. (NASDAQ:
FB) released the Facebook Platform for application development, and since then many developers have
launched games on the platform. In Japan, the mobage platform (run by DeNA Co., Ltd.; TSE1: 2432) had
about 50 million users as of March 31, 2013.
Mobcast’s focus is on sports games. Specifically, its titles include “Mobapro” (a professional baseball
simulation card game for smartphone users), “Mobasoccer” (a soccer simulation card game for
smartphone users), and “MobaDerby” (a horse race simulation card game for smartphone users). These
games are free, but users must pay for some services available within the games. To win, users
sometimes choose to use those paid services (see Social Games for details).
Mobcast sets a monthly average revenue per paid use (ARPPU) target of 4,000-6,000 yen. The company
set this target referencing the console video games which sell for a similar price (and buying a console
game once a month is not unusual). Furthermore, Mobcast games prevent users from spending too much
(i.e., curtailing an excessive ARPPU rise) by limiting the use of in-game “agents” (employing certain
agents costs money) to scout in-game sports players (see Social Games for details).
The company develops games using its proprietary “mobcast Social Game Engine” (MSGE). Using this
engine, customers can enjoy a full season of a virtual sport in just a week and do not have to set their own
season schedules (so called Fast-Rotation feature). The engine’s Auto-Promote feature automatically
processes game progress (e.g., creating match-ups, determining player actions). This allows users to
focus on the fun of organizing and directing their teams. Division-Ranking, another feature, ranks users
against other users playing the same game.
Mobcast games use the names and images of actual professional athletes. To make this possible, the
company pays licensing fees to such rights holders as Nippon Professional Baseball Organization (NPB),
Japan Football Association (JFA), Major League Baseball Players Association (MLBPA), and Fédération
Internationale des Associations de Footballeurs Professionnels (FIFPro). NPB takes about 25% of related
sales in licensing fees; FIFPro takes roughly 20%; and MLBPA takes around 20%. Because there are no
holders of rights to racehorse names and photos, the company does not have to pay licensing fees related
to “MobaDerby.” The company generally renews its licensing agreements once a year or three years. The
company also pays commissions (about 10% of sales) to collections agencies (telecom carriers and
payment-settlement agents).
Customers pay for services in several ways, including bundling the charge with their other communication
charges from their telecom carriers, buying prepaid cards prior to service use, and using credit cards.
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The company’s primary activity is providing self-developed games on its own platform. Offering games on
third-party platforms, such as GREE (run by GREE, Inc.; TSE1: 3632) and mobage (run by DeNA Co., Ltd.;
TSE1: 2432), incurs platform-usage fees (about 30% of related sales), but this is obviously not the case
for Mobcast.

Game Development
One of the company’s primary competitive advantages is its developer expertise. The company’s
development activities began in March 2004, when Mobcast president Koki Yabu (then director at
Bell-Park Co., Ltd.; JASDAQ: 9441) partnered with experienced game producer and creator Shinji Wachi
(current Mobcast director) who produced hit titles at Square Enix Co., Ltd. (now part of Square Enix
Holdings Co., Ltd.; TSE1: 9684). Together they launched a business to create and offer mobile
entertainment content.
Many game planners, designers, and programmers have joined Mobcast to learn from Shinji Wachi, an
icon in the game industry, forming an exciting development team at the company. The team consists
primarily of developers involved with the historical role-playing games “Nobunaga’s Ambition” and
“Romance of the Three Kingdoms” at Koei.
The company claims that games developed by full-fledged creators—like those at Mobcast—are more
intriguing than those created by general Internet game developers. According to the company, its
developers are industry gurus who created the algorithms in many renowned console games from the
past.
The company develops almost all of its games in-house. A development team has five to seven members,
each acting as a director, planner, designer, or programmer. Once development is complete and the
company launches a game, an operation team (four to six members), headed by a producer, forms.

Development Costs
According to the company, developing native applications (a group of applications, often mobile
applications on smartphones, that are designed using codes that are processable and executable on
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terminals’ CPUs) for the App Store (the official online application distribution system of Apple Inc.;
NASDAQ: AAPL) and Google Play (the official online Android application distribution system of Google
Inc.; NASDAQ: GOOG) costs about as much as developing online PC games. In contrast, developing social
browser games requires little more than licensing fees.
As mentioned, Mobcast games use MSGE-based engines: a new game uses an existing game’s engine in
the same genre, with some modifications. This makes newer games cheaper and faster to develop. For
example, if “Mobapro” (themed on the Japanese professional baseball) cost 10 million yen to develop
over the course of a year, “Majorpro” (themed on the Major League Baseball) would thus cost half as
much money over 2-3 months.
Open Platform
The company opened its gaming platform to third parties in April 2013. Once it opens, third parties can
begin providing social sports games, as well as various other sports-oriented content and services on
Mobcast platform, attracting a larger user base. Mobcast estimates that opening the platform could
expand its sales by roughly 30% via usage fees from partner developers (27% after paying 10%
commission fee to collection agencies).
Native application games
The company started providing native application games in October 2013, in order to cater to the growing
number of users searching for games on application stores such as App Store (iOS) and Google Play
(Android), spurred by the greater diffusion of smartphones.
Its games are free-to-play, with an items charging system (i.e., items purchased while playing the game),
available on both iOS and Android systems. The company plans to launch in Japan first, and intends to
launch in Korea, North America, and Europe.
Native application games: games that require downloading or installing dedicated game software, mainly for
iPhone and Android devices.
Native application games, for example, a user can download the company’s game free-of-charge from the
App Store, and can purchase items while playing the game. Native application games
Coins used for native app games differ for each game. The purchased coins are recorded as debt
(deposits) by the company, while items purchased are recorded as revenue at the time of sale. The
company pays 30% of sales as a platform usage fee to the market (i.e., App Store, Google Play).
Furthermore, the company is not burdened by settlement fees since these fess are usually credit card
handling fees, which are paid for by App Store and Google Play. Fixed expenses are development costs,
which tend to be higher than browser games.
Social Media Services
As of October 16, 2013, the company implemented a global strategy to focus its Media Department operations on
“domestic and overseas marketing initiatives”, and decided restructure its organization by renaming its “Media
Department” to “Marketing Department.” In social media services, the company until now had planned to
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become the media themselves, but has taken on the role of becoming an engine attracting customers through
marketing initiatives of its game contents.
Facebook and Twitter are the foundations of social media today. One post spreads throughout the
Internet and can eventually create an online community. In particular, users can report real events on
social media, which has made social media a standard communication tool of today.
The company’s social media services include basic SNS features, such as e-mail, bulletin board system
(BBS), and news distribution, as well as additional features (see Social Media Services for details). Though
game development is a mainstay, strengthening its social media services is a core strategy at Mobcast,
and the company plans to launch a sports news program for smartphones (see Strategy for details).
The company’s social media platform is also an advertising medium, and accordingly the company sells
online advertising through ad agencies, media reps (primary agencies for Internet advertising), and ad
networks (companies that connect advertisers to websites). Mobcast’s platform takes several ad formats,
such as banner ads (linked to advertisers’ websites), affiliate ads (which generate commissions for
bringing customers to businesses), and tie-up ads (whereby Mobcast and advertisers place ads on social
game displays for joint campaigns).
Advertiser
Sell Ad Spaces
Pay
Advertising Fees
Sell
Ad Spaces
Pay
Advertising Fees
Ad Agency, Ad Network
mobcast
Game
Increase Advertising Value
Source: Company data processed by SR Inc.
Main Businesses and Services
Social Games

“Mobapro”
“Mobapro” is a mobile baseball simulation card game launched in December 2010. As of September 2012,
the game had more than 1.9 million cumulative users. Users manage a virtual Japanese professional
baseball team and try to lead the team to the championship. Along the way, they collect and use three
types of cards (player cards, field-manager cards, and roster cards). The game incorporates current and
past professional baseball players and field managers from all 12 teams.
Users can have up to 20 player cards (13 fielder cards and seven pitcher cards). They acquire new players
by hiring agents (“rookie,” “veteran,” or “ace” agents). To hire agents, users must either spend “gold” (the
purchase of which is added to their service-usage fees) or points earned in the game (these are free).
Hiring an agent provides access to better players, which incentivizes users to purchase “gold.” Users can
use rookie agents as many times as they want, but veteran and ace agents only work for a specified
number of times—a way to curtail an excessive rise in ARPPU.
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Because actual pro players appear in “Mobapro” game cards, the game does not allow users to create,
manipulate, or merge player characteristics, a feature often seen in competing fictional games. The
company believes that such restrictions increase the importance of users’ skill and increase users’
enjoyment. Furthermore, the NPB appears to like the company’s approach, and the two parties maintain
a sound relationship, according to the company.

“MobaDerby”
“MobaDerby” is a horseracing card game that launched in October 2011. Users create racehorse cards by
combining stallion and mare cards. Users then register their racehorses and join a racing stable. They
employ trainers, assistant trainers, and stable keepers to raise their horses, and their horses enter races
to win cash awards. Stallion and mare cards include famous, real-world horses.
To acquire stallion and mare cards, users either spend in-game currency “gold” (added to their service
usage fees) or use points they earn in the game (these are free). Users can purchase “mid-rank,”
“first-rank,” and “thoroughbred” cards. They also need “gold” or points to hire “rookie,” “veteran,” or “ace”
trainers, etc.
As mentioned, the stallion and mare card combinations determine the abilities of the racehorses and are
based on actual racehorse breeding theory. Therefore, users need to identify optimal stallion-mare
combinations. Also, the combination of a trainer, assistant trainer, and stable keeper influences horses’
development. So, to win, users must know how to manage their horse and staff cards.
Unlike “Mobapro,” “MobaDerby” allows users to create, manipulate, or merge horse characteristics. SR Inc.
believes that this is possible because in this game users mainly compete against opponents run by
computer programs.

“Mobasoccer”
“Mobasoccer” is a mobile soccer simulation card game that launched in July 2012. Because the company
has licensing agreements with JFA and FIFPro, the real names and images of more than 1,800
professional soccer players in Japan, Spain, England, Italy, and other nations appear in the game. As of
September 2012, “Mobasoccer” had more than 150,000 users.
As the virtual owner of a team, the user tries to lead his or her team to the Japanese championship,
sometimes by acquiring star players and coaches.
A user can have up to 18 player cards (11 as a starting lineup and 7 substitutes). Like “Mobapro,” users
acquire new players by spending “gold” or points. Hiring agents requires “gold.” There are three key
positions on every team, and putting the right players in key positions according to their technique, speed,
and power makes a team function better. Also, each player has a preferred position, just as the actual
players do. Users earn points as they complete league matches. Like “Mobapro,” “Mobasoccer” does not
have a card-modification feature.
Team supporters—a feature not seen in other soccer-themed games—affect the game’s progress.
Specifically, they enable stadium refurbishments. This and other features increase the enjoyment and skill
involved in realistic team management.
“Mobasoccer” is relatively new. However, SR Inc. believes that the company has extensive knowledge
about the soccer genre; it operated the social game “Web Soccer” (launched in February 2010; service
ended in September 2012), which did not use the names and photos of actual players. “Mobasoccer” user
counts appear to be growing steadily, possibly due to its use of actual names and photos.

“Majorpro”
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“Majorpro” is a mobile baseball simulation card game that debuted in September 2012. Largely similar to
“Mobapro,” users act as virtual team owners and scout Major League Baseball players for a World Series
Championship team.

“Mobapro Scout”
“Mobapro Scout,” released in March 2013, is an online game in which the user recruits virtual baseball
players and trains them for the Major Leagues. The user trains the ballplayers to get them into various
leagues with the goal of eventually making it to the highest leagues. The user creates virtual ballplayers
of his or her choice, such as a powerful home-run hitter or fastball slugger. The user can also transfer
these ballplayers to a bigger platform—online card game “Mobapro.”
Mobapro
MobaDerby
Majorpro
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Through its SNS platform, Mobcast provides various sports-related contents. On top of basic SNS features
(e.g., news distribution), the platform has a “Sports Forecasts” section (an online community space),
where users can predict the outcome of a baseball match, etc. In “Jikkyo Live!” (real-time sports-related
information feeds), users can send messages to favorite players and teams during a match. The
“Dictionary” section allows users to search sports-related terms.
"Jikkyo Live!" Images
Profitability Snapshot, Financial Ratios
Profit Margins
FY12/08 FY12/09 FY12/10 FY12/11
(Thousand Yen)
Par.
Par.
Par.
Par.
Gross Profit
226,090
48,895
190,428 1,399,162
Gross Profit Margin
67.6%
24.1%
47.4%
69.2%
Operating Profit
793
-151,612
36,376
521,097
OP Margin
0.2%
9.0%
25.8%
EBITDA
36,376
521,097
EBITDA Margin
9.0%
25.8%
Net Profit Margin
0.9%
4.2%
23.9%
Financial Ratios
ROA
0.6%
6.6%
57.3%
ROE
1.0%
22.1%
67.6%
Total Asset Turnover
0.72
0.62
1.57
2.39
Working Capital
87,094
26,350
83,563
572,737
Current Ratio
289.1%
63.9%
269.4%
247.6%
Quick Ratio
200.2%
49.7%
267.1%
247.1%
OCF / Current Liabilities
0.57
1.38
Net Debt / Equity
2.0%
-369.1%
-52.1%
-65.1%
OCF / Total Liabilities
0.3
0.7
Changes in Working Capital
-26,001
-60,744
57,213
489,174
FY12/12
Par.
3,414,066
69.2%
1,127,205
22.9%
1,127,205
22.9%
13.1%
31.2%
37.1%
2.37
704,066
243.5%
241.6%
1.21
-87.9%
0.9
131,329
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Cost Structure
COGS accounts for roughly 30% of Mobcast’s sales. 25% (or 83% of the COGS) is for royalties; the
remainder is for development, distribution costs, etc. The company expected its soccer games to gain
new paying members from FY12/13 and because FIFPro (holder of rights to professional soccer players’
names and images) royalties are lower than in other sports that would lead to a lower royalties-to-COGS
ratio.
Collection agency commissions account for about 10% of sales; advertising costs are around 20% to
25%; and other costs are 5%. Naturally, the company has complete control over its spending on
advertising. Under such a cost structure, the company intends to maintain an operating profit margin of
more than 25%.
FY12/12 Results
Outlook After FY12/14
Royalties:
20-25%
CoGS:
1.5 Billion Yen
30.8%
Development & Distribution: Approx. 5%
Sales:
Labor: 0.2 Billion Yen, 3.9%
Advertising:
Others: Up to 5%
Labor: Up to 5%
Advertising (controllable):
4.9
1.4 Billion Yen, 29.1%
20%-30%
Collection Agency Commissions
(variable):
Others: 0.22 Billion Yen, 4.5%
Collection Agency Commissions
(variable):
Approx. 10%
Others: Approx. 5%
Operating Profit:
Operating Profit:
20%-25%
Sales
CoGS
SG&A
Billion Yen
Strengths, Weaknesses
Strengths:



Strong leadership at the top: SR Inc. believes one of the key strengths of Mobcast is the
leadership from its founder and president Yabu, supported by his skilled and experienced
management team.
Development team brings depth of experience in console game creation: As discussed
elsewhere in this report, the team delivers realistic games that target mainstream sports enthusiasts
and are not reliant on the gambling element of the gameplay.
Independent platform: Allows Mobcast to “save” 30% of its revenues by not paying it to large
platform providers. This contributes to its ability to generate 25% OPMs and also allows it to attempt
creating its own open sports-specialist gaming and media platform.
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Weaknesses:



Short track record and small size: The continuous operations at Mobcast under the current
business model only date back to the launch of “Mobapro” in December 2010. Despite impressive
achievements to date and the considerable collective experience of the team both with and before
Mobcast, it may simply too early to tell how much staying power the company has. Add to this the
small size compared to other listed social game platform operators, and the potential uncertainty
gets bigger. SR Inc.’s concern is whether changes in the environment could at some point make deep
pockets and overall clout more important than flexibility and wit. Building the open independent
platform with wide participation, as well as securing its place as an independent sports media outlet,
would allow Mobcast the staying power it now may be lacking.
Business model depends on access to rights (athlete personalities) outside of its
control: The main cost component for Mobcast is its royalty payments to professional athletes and
organizations representing them. As the social gaming scene grow more mature and lucrative, such
organizations as well as agents representing individual athletes may find it attractive to sign
exclusive agreements with game providers other than Mobcast or demand higher fees. Indeed,
exclusive agreements are typical for the console game industry. The company believes this scenario
is highly unlikely in the social gaming world, at least for the foreseeable future, adding that its efforts
to become an ESPN of the social media would lower the probability of it ever suffering such a fate.
Uncertain level of mass appeal: The user base of 2.5 million people suggests Mobcast has
successfully penetrated the early adopter layer. It remains to be seen, however, whether it can go
further and lure the majority users. In SR Inc.’s view, this represents a tentative weakness that
Mobcast needs to overcome in its drive to become the mass media and gaming platform specializing
on sports.
Market and Value Chain
Market Overview
According to the Japan Online Game Association (JOGA), the year 2008 saw the debut of the first social
games in Japan and overseas. These games became popular around 2010, and by 2011 the social gaming
market was 279.4 billion yen—2.7 times larger than in 2010—and roughly equivalent to the annual sales
of console-game software (excluding used software sales; source: gameage R&I Co., Ltd.). Yano
Research Institute Ltd. estimated that the market would worth about 342.9 billion yen in 2012.
Users play social games mainly to kill time, and most are infrequent users. The user base is larger than
that of online PC gamers.
According to a Mobcast survey, in Japan, professional baseball and soccer each have about 20 million
fans. Of each group, about 6 million people appear to be interested in playing sports-related video and
social games. The company intends to convert these gaming enthusiasts into users of its games. In the
long run, this translates to 6 million members each for its baseball and soccer game offerings.
The success of the Japanese social gaming industry can be attributed to “gacha,” a special element found
in almost every social game in this country. The term “gacha” was derived from “Gachapon,” a brand
trademark owned by Bandai Co., Ltd. (a subsidiary of Namco Bandai Holdings Inc.; TSE1: 7832). Similar
to the coin-operated toy vending machines seen outside of grocery stores and other retailers in other
countries, “Gachapon” machines are widely used throughout the world for their capsule toys. “Gachapon”
is Japanese onomatopoeia, made up of two sounds: “gacha” for the turning of a crank on a toy vending
machine, and “pon” for the sound of the toy capsule dropping into the receptacle. The term is used to
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describe both the machines themselves, and any toy obtained from them.
A while ago, Japanese social game providers started turning those capsule toy vending machines found in
real life into a social game mechanic, and today, virtual “gacha” is an integral part of nearly every social
game title on various platforms. In the social game sphere, “gacha” is a monetization method where
players pay for unknown virtual items. “Complete gacha” takes this a step further and promises rare items
in exchange for completing certain pre-determined sets of items.
On May 18, 2012, Japan’s Consumer Affairs Agency officially declared that the “complete gacha” method
of monetization in social games violates the Act against Unjustifiable Premiums and Misleading
Representations due to the method’s strong gambling nature. With this, it banned the “complete gacha”
method in the social gaming industry in July. This monetization method contributed significantly to the
industry’s average revenue per paid use (ARPPU).
However, the regulatory attack did not affect Mobcast’s ARPPU because it has never used the “complete
gacha” method. This was partly due to the company’s licensing relationship with the Nippon Professional
Baseball Organization (NPB). When it was planning to launch “Mobapro,” Mobcast was careful not to
damage the social image (e.g., genuine professionalism, contributions to youth development) of the
Japanese professional baseball.
Number of Paying mobcast Members and ARPPU
Billing Limits
To become Mobcast gaming customers, users must provide their age and other information at sign-up.
Users under 18 years old can use only up to 10,500 yen in services per month (tax included). Similar
services offered by GREE, Inc. (GREE platform operator; TSE1: 3632) and DeNA Co., Ltd. (mobage
platform operator; TSE1: 2432) have similar billing limits. The company has also set up the billable limits
per type of game to prevent minors from waging more than 3,150 yen per month.
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Customers
As of September 30, 2013, 82% of the company’s customers were males. Of these male members, 37%
were teenagers and another 47% were in their 20s. Compared with competitors, Mobcast appears to
have more male users thanks to its sports-centered content.
As of September 30, 2013
mobage Members
(as of September 30, 2013)
Female,
39%
Male, 61%
GREE Members
(as of March 31, 2013)
Female,
46%
mixi Members
Male,
46.5%
Male, 54%
Female,
53.5%
By age group, the company has more members in their teens and 20s than competitors. This is one of the
reasons why the company’s ARPPU is relatively low. Among Mobcast’s paying members, the majority are
in their 20s (39%) and 30s (38%). The company hopes to increase the conversion of its younger users
into paying members as they get older.
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As of September 30, 2013
mobage Members
GREE Members
(as of March 31, 2013)
mixi Members
over 40's,
13%
10's, 17%
over
30's, 45%
10's, 15%
over 40's, 10's, 22%
21%
30's, 24%
20's, 37%
30's, 24%
20's, 33%
20's, 49%
The company has splits paying members into four categories: A (those paying 30,000 yen or more per
month); B (10,000-29,999 yen); C (5,000-9,999 yen); and D (less than 5,000 yen). The A level has the
fewest customers; most paying members are D-level customers. Mobcast’s strategy is to keep the ARPPU
at a certain level while expanding sales by increasing paying members.
Barriers to Entry
SR Inc. believes that the barriers to entry in the online social gaming industry are low. A half-dozen people
can develop a decent game (as is the case at Mobcast) and, as a result, there are innumerable
sports-themed games in the market. In this environment, attracting and maintaining the user base above
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the critical mass is extremely important. Mobcast, with its team of experienced developers, seems to have
so far succeeded. However the company appears aware of the constant competitive threat. This is at least
partially why it is so keen on transforming itself into an open sports gaming platform and a media power.
Competition
The company was the first to launch a professional baseball-themed social game using actual player
names and images licensed by NPB. Konami Digital Entertainment Co., Ltd. (a subsidiary of Konami
Corporation; TSE1: 9766) and gloops, Inc. (unlisted) followed with “Professional Baseball Dream Nine”
and “Japan Pro Baseball Card Battle,” respectively. Mobcast and those competitors are Japan’s three
major providers of baseball-themed social games. The competitors’ games run on the GREE and mobage
platforms.
As a platform operator, the company competes with DeNA, GREE, and mixi, Inc. (mixi platform operator;
TSE1: 2121), among others. As a developer and individual game service provider, Mobcast’s competition
includes Konami Digital Entertainment; gloops; Tecmo Koei Games Co., Ltd. (a subsidiary of Tecmo Koei
Holdings Co., Ltd.; TSE1: 3635); Cygames, Inc. (a subsidiary of CyberAgent, Inc.; TSE Mothers: 4751);
and Sega Corporation (a subsidiary of Sega Sammy Holdings Inc.; TSE1: 6460).
Soccer Card Game
Mobasoccer
Sakatsuku S World Stars
World Soccer Collection
Baseball Card Game
Mobapro
Professional Baseball Dream Nine
Japan Pro Baseball Card Battle
Derby Card Game
MobaDerby
Hyakuman nin no Winning Post
Dream Stallion
Operator
mobcast
Sega Corporation, Cygames Inc.
Konami Digital Entertainment Co., Ltd.
Operator
mobcast
gloops, Inc.
Operator
mobcast
Tecmo Koei Games Co., Ltd.
Platform
mobcast: July 2012
mobage: June 2012
mobage: June 2012; GREE: June 2012
Platform
mobcast: December 2010
GREE: April 2011; mobage: October 2011; mixi: March 2012; Tsutaya: March 2012
mobage: August 2011; mixi: January 2012; Yahoo! Mobage: March 2012; Ameba: June 2012
Platform
mobcast: October 2011
GREE: October 2011
mobage: November 2011
At least some of these competing developers may become suppliers when the company opens its gaming
platform to third parties.
In addition, game providers of native application games include GungHo Online Entertainment, Inc.
(JASDAQ: 3765), COLOPL, Inc. (Mothers: 3668), and Klab Inc. (TSE1: 3656).
Strategy
Mobcast’s business strategy has four key elements: (1) offer open platform services, (2) launch new
game titles, and (3) expand overseas.
Offer Open Platform Services
The company opened its gaming platform to third parties in April 2013. Once it opens, third parties can
begin providing social sports games, as well as various other sports-oriented content and services on
Mobcast platform.
As part of this strategy, Mobcast indicated that it wanted to partner with leading games developers. By
opening up its platform, Mobcast wants to compete more directly with GREE, Inc. (GREE platform
operator; TSE1: 3632) and DeNA Co., Ltd. (mobage platform operator; TSE1: 2432).
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mobcast
Mobapro
mobcast
MobaDerby
News
Jikkyo
Live!
EC
(Tickets &
etc.)
Competors
Games
Competitor
Contents
Platform
Services
Platform mobcast
Mobcast estimates that opening the platform could expand its sales by roughly 30% via usage fees from
partner developers (27% after a paying a 10% commission fee to collection agencies). This would
improve profits substantially. Opening the platform could attract a wider range of users and keep users on
the platform longer, which, in turn, will likely turn them into social gamers and raise the value of the
platform as an advertising medium.
Launch New Game Titles
For the games developed in-house, the company intends to focus on four sports: baseball, soccer,
horseracing, and auto-racing (expected to be launched in Q3 FY12/13), a new field for the company.
For games centered on each of these sports, the company could develop in four genres: team
management simulation, action, trainer, and adventure. Four genres for four sports imply 16 games. In
March 2013, the company released “Moba Pro Scout” in which the user is a trainer for baseball players.
Despite its focus on sports-themed games, multiple game genres at Mobcast mean less chance of
competing face-to-face against other companies’ games.
In addition, the company started providing native application games in October 2013, in order to cater to
the growing number of users searching for games on application stores such as App Store (iOS) and
Google Play (Android), spurred by the greater diffusion of smartphones, by aggressively pursuing a hybrid
strategy of offering browser games and native application games. The company has captured the number
one position in browser games with its sports platform, while it has begun to gain existing mobcast users,
as well as acquiring new users for its native app games.
Expand Overseas
Mobcast’s overseas expansion has progressed as scheduled in FY12/13. Mobcast released a soccer game,
“Mobasoccer” in South Korea in March 2013, and as a result, total mobcast members increased to
700,000 as of the end of October 2013.
In addition, the company entered into a basic agreement on a business alliance with "BoosterMedia BV.
(hereinafter “BoosterMedia"), an overseas pioneer of HTML5 mobile game distributor.
BoosterMedia has over 100 game channels in 25 countries, mainly in Europe and Brazil, with a monthly
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average base of over 5 million active users. Mobcast expects accelerate its globalization through the
launch of its full-scale soccer game, “Mobasoccer” in 25 countries including Europe and Brazil through its
partnership with BoosterMedia.
Furthermore, the company believes that is it crucial to strengthen marketing activities in overseas
markets to raise the awareness of social games and attract a larger share of users. Consequently, it
executed a third-party allotment of shares to Dentsu Inc. (TSE1: 4324) on March 2013. It expects to
derive synergies from its social game development and operation capabilities, together with Dentsu’s
global business network and sports marketing expertise.
The company has started aggressively advertising and marketing in South Korea since March 2013
through its cooperation with Dentsu. It intends to increase its presence in the mobile social games market
by effectively using television and the internet. Furthermore, the company intends to accelerate its social
game business to other Asian countries, after confirming success in South Korea. It plans to implement a
similar advertising and marketing strategy as in South Korea, and offer an overseas version of “mobcast”
and sports related social games to other Asian markets.
Future Vision
Although it does not disclose detailed medium- and long-term estimates, Mobcast has disclosed a rough
vision for FY12/17. The vision ambitiously calls for launching social sports games targeting the global
mobile market. The company estimates that, thanks to worldwide IT infrastructure development, by
FY12/17 the smartphones will have a global penetration rate of 50% and those international calls will be
free. If these things occur, the company plans to offer world-championship gaming events every four
years, as discussed above.
Historical Financial Statements
Q3 FY12/12 Results (announced on November 6, 2012)
Cumulative Q3 sales were 3.5 billion yen (previous year data not available). Sales grew steadily on strong
performance of existing mobile social game titles, such as “Mobapro” (professional baseball simulation
card game) and “MobaDerby” (horse race simulation card game). New title “Mobasoccer” (professional
soccer simulation card game) also contributed to robust results. In fact, the launch of “Mobasoccer” in
late-July 2012 led to rapid membership growth. As of October 30, 2012, Mobcast membership reached
2.7 million with paying members totaling 91,000 (64,000 as of October 30, 2011).
COGS (mainly royalties related to social game development and operation) was 1.1 billion yen, and gross
profit was 2.4 billion yen. SG&A expenses were 1.8 billion yen. As a result, cumulative Q3 operating profit
was 688 million yen (previous year data not available).
The operating profit margin in Q3 (July-September 2012) alone was 22.8%, a significant rise from 12.9%
in Q2 (April-June). The OPM rise was thanks to Q3 advertising costs leveling out at 327 million yen (Q2
advertising costs were 468 million yen due to aggressive spending in connection with the opening of the
professional baseball season). Operating profit in Q3 alone rose 85.0% compared to Q2 FY12/12 and was
the highest quarterly figure ever.
Cumulative Q3 recurring profit was 679 million yen (previous year data not available) after deduction of
stock delivery expenses, and net income was 394 million yen (previous year data not available).
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Mobcast maintained its full-year forecasts. New titles “Mobasoccer” (launched in July 2012) and
“Majorpro” (mobile Major League Baseball simulation card game; launched in September 2012) will likely
contribute to Q4 results, though it takes about one to two months for non-paying users to become paying
members. Also, if Mobcast opens its gaming platform to third parties in Q4 as planned, it would highly
likely benefit from platform usage fees (see Full-Year Outlook).
In mid-October 2012, Mobcast officially announced the beta-version platform opening to third parties.
The company had plans to provide the beta-version platform (official name: “mbc connect”) to only
several partners (as of November 2012), and intends to start official platform operation in March 2013.
On the beta-version, Konami Digital Entertainment Co., Ltd. (a subsidiary of Konami Corporation; TSE1:
9766) and Tecmo Koei Games Co., Ltd. (a subsidiary of Tecmo Koei Holdings Co., Ltd.; TSE1: 3635) are
expected to be partner game providers (as of November 2012). Plans include such game offerings as
“J.LEAGUE Dream Legends” (Konami), “Hyakuman nin no Winning Post for mobcast” (Tecmo Koei), and
“Cho World Soccer for mobcast” (tentative name; Tecmo Koei).
Upon the Q3 results announcement, Mobcast announced that it signed a basic agreement with South
Korea-based NeoWiz Games Corporation to discuss a business tie-up. In line with the agreement,
Mobcast plans to license its game engine to NeoWiz, and NeoWiz plans to distribute a South Korean
version of “Mobapro” baseball game for smartphones. In addition, as of November 2012, the company
was conducting market research in Vietnam, Indonesia, Thailand, and the Philippines with the aim of
establishing a proprietary soccer-game business model in these countries.
Initially, Mobcast was planning to strengthen its social media services in January 2013 as part of its
strategy. However, in anticipation of various media getting busy with covering the dissolution of the Lower
House and subsequent general election, Mobcast appeared to have pushed back the schedule.
1H FY12/12 Results
Sales and Gross Profit
Sales in this 1H were 2.3 billion yen (1H FY12/11 figure not disclosed; same applies hereafter in this
section). User numbers appeared to be growing steadily for proprietary mobile social game titles
“Mobapro” (professional baseball simulation card game) and “MobaDerby” (horse race simulation card
game). COGS were 676 million yen, and gross profit was 1.6 billion yen.
SG&A Expenses
SG&A expenses in this 1H were 1.2 billion yen, of which 825 million yen (36.1% of sales) were for
advertising. Mobcast spent aggressively on advertising as planned in connection with the opening of the
professional baseball season.
Operating Profit and Operating Profit Margin
Operating profit in this 1H was 403 million yen, and operating profit margin was 17.7%.
Recurring Profit
Recurring profit in this 1H was 394 million yen after about 7 million yen of stock delivery expenses.
Net Income
Net income in this 1H was 227 million yen for a net profit margin of 10.0%.
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Income Statement
Income Statement
(Thousand Yen)
Total Sales
FY12/08
Par.
334,411
YoY
CoGS
Gross Profit
FY12/09
Par.
202,610
FY12/10
Par.
402,067
FY12/11
Par.
2,022,313
FY12/12
Par.
4,932,004
FY12/13
Est.
5,000,000
.
16.9%
-39.4%
98.4%
403.0%
143.9%
108,321
226,090
153,715
48,895
211,638
190,428
623,151
1,399,162
1,517,937
3,414,066
10.1%
67.6%
-78.4%
24.1%
289.5%
47.4%
634.7%
69.2%
144.0%
69.2%
225,296
200,507
154,051
878,065
2,286,861
67.4%
99.0%
38.3%
43.4%
46.4%
793
-151,612
36,376
521,097
1,127,205
-680,000
0.2%
-
9.0%
1332.5%
25.8%
116.3%
22.9%
-
2,177
1,337
1,633
1,732
7,151
-157,031
87
4,669
31,794
2
10,887
510,213
955
10,705
1,117,455
-640,000
-37.3%
0.5%
-77.5%
7.9%
1504.7%
25.2%
119.0%
22.7%
-
1,649
658
189,429
291
0
29,324
-14,362
57,468
-31,488
9,395
459,945
YoY
GPM
SG&A
SG&A / Sales
Operating Profit
YoY
OPM
Non-Operating Income
Non-Operating Expenses
Recurring Profit
YoY
RPM
Extraordinary Gains
Extraordinary Losses
Tax Charges
Implied Tax Rate
Net Income
YoY
Net Margin
290
8.8%
-
-
-
41.5%
2,992
-346,094
16,832
484,234
648,114
-750,000
-89.5%
0.9%
-
4.2%
2776.9%
23.9%
33.8%
13.1%
-
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Balance Sheet
Balance Sheet
(Thousand Yen)
ASSETS
Cash and Equivalents
Accounts Receivable
Prepaid Expenses
Deferred Tax Assets
Other Accounts Receivable
Other Current Assets
Allowance for Doubtful
Total Current Assets
Buildings
Equipment
Total Tangible Fixed Assets
Investment Securities
Claims Provable in Bankruptcy, Rehabilitation, etc.
Long-Term Prepaid Expenses
Deferred Tax Assets
Trust Beneficiary Rights
Other
Allowance for Doubtful
Total Investments and Other Assets
Patent Rights
Trademark Rights
Software
Software in Progress
Other
Total Intangible Fixed Assets
Total Fixed Assets
Total Assets
FY12/08
Par.
FY12/09
Par.
FY12/10
Par.
FY12/11
Par.
FY12/12
Par.
119,183
121,536
2,194
8,175
110,782
-1,322
360,548
949
889
1,839
4,410
674
22,275
8,850
36,209
182
51,763
50,370
806
103,121
141,170
501,718
13,913
27,426
1,092
9,096
14,483
-664
65,346
761
598
1,359
12,960
2,100
374
3,000
3,601
-2,100
19,935
156
50,354
14,170
564
65,244
86,540
151,885
193,315
83,563
5,218
14,652
13,135
2,619
-1,667
310,837
1,023
1,332
2,355
4,960
2,100
10
1,000
2,019
-2,100
7,990
131
30,971
7,807
658
39,569
49,915
360,752
656,836
572,737
7,416
1,450
2,153
-2,851
1,237,744
852
1,131
1,984
8,400
464
46,007
581
-8,400
47,053
993
486
37,837
2,147
805
42,269
91,307
1,329,052
1,593,919
704,066
174,942
56,945
20,015
-1,788
2,548,101
89
14,347
14,437
50
8,400
37,800
28,720
35,166
55,121
469
515
7,059
14,398
2,663
115,392
63,472
63,472
98,638
178,864
77,760
381,784
815
4,522
29,889
5,188
499,960
112,970
112,970
190,730
612,930
28,456
403,050
3,859
504,534
51,715
9,151
45,653
1,046,419
16,688
16,688
45,144
1,063,107
154,995
26,892
181,887
181,887
83,563
98,638
-94,677
179,995
25,000
511,126
716,121
716,121
572,737
190,730
-466,106
377,372
211,702
1,159,240
1,748,315
1,761,235
704,066
45,144
-1,548,775
LIABILITIES
Accounts Payable
34,442
1,076
Short-Term Debt
43,037
44,674
Other Accounts Payable
26,116
35,738
Accrued Expenses
353
55
Income Taxes Payable
845
572
Accrued Consumption Taxes
Deposits Received
17,753
13,959
Other Current Liabilities
2,183
6,196
Total Current Liabilities
124,729
102,270
Long-Term Debt
81,959
79,480
Total Long-Term Liabilities
81,959
79,480
Total Interest-Bearing Debt
124,996
124,154
Total Liabilities
206,688
181,750
NET ASSETS
Issued Capital
356,875
367,475
Reserves
42,000
52,600
Retained Earnings Brought Forward
-103,845
-449,939
Total Shareholder Equity
295,030
-29,864
Total Net Assets
295,030
-29,864
Working Capital
87,094
26,350
Interest-Bearing Debt
124,996
124,154
Net Debt
5,813
110,241
79,198
-8,400
145,768
881
842
50,773
62,457
1,080
116,035
276,241
2,824,343
Outstanding Shares and Issued Capital
From 2007 to its IPO in 2012, the company’s outstanding shares and issued capital fluctuated as shown in
the table below.
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mobcast inc. (3664)
SR Research Report
2013/11/8
Shares Outstanding (Shares)
February 2007
7,048
April 2007
7,148
December 2007
7,258
May 2009
7,682
February 2010
8,782
May 2010
9,818
June 2010
10,038
October 2010
10,682
December 2010
10,682
September 2011
10,882
March 2012
11,945
March 2012
5,972,500
June 2012
6,322,500
Issued Capital
(Thousand Yen)
Background
340,375
340,375 Exercise of Stock Compensation Type Common Stock Warrant
356,875
Third-Party Allotment
367,475
Shareholders Allotment
394,975
423,465
429,515
464,935
154,995
Deficit Disposition
179,995
214,525
Exercise of Common Stock Warrant
214,525
1-to-500 Stock Split
343,325
Public Offering
As of the end of Q2 FY12/12 (post IPO), the equity ratio was 60.7% (53.9% as of the end of FY12/11).
Shareholder Returns
The company plans to pay no dividends through to FY12/13, opting instead to reinvest excess cash. The
company has not disclosed its dividend plans for FY12/14 onward.
Other Information
History
As Content Business
March 2004
Established Mobile Broadcasting K.K. to plan and develop mobile content
Dec 2004
Changed company name to mobcast inc.
Launched “100 Yen Tengoku (Heaven),” a mobile gaming site on the EZ Appli
platform operated by KDDI Corporation (TSE1: 9433)
May 2005
Began providing video content for PCs
June 2005
Launched “mobGame exclusively for mobile phones,” a mobile gaming site for the
i-appli services provided by NTT DOCOMO Inc. (TSE1: 9437)
July 2005
Launched “mobGame exclusively for mobile phones,” a mobile gaming site for the
V-appli services provided by Vodafone K.K.
As Developer
Dec 2009
Feb 2010
Dec 2010
April 2011
Oct 2011
Dec 2011
June 2012
July 2012
Sept 2012
Mar 2013
Apr 2013
October 2013
Withdrew from the video content business and began focusing on game planning
and development
Launched mobile entertainment platform service “gemuppa”
Launched “Websoccer”
Launched “Mobapro”
Began offering smartphone-compatible games (iPhone, Android)
Launched “MobaDerby”
Changed platform name from “gemuppa” to “mobcast”
Listed stock on the Tokyo Stock Exchange’s Mothers market
Launched “Mobasoccer”
Launched “Majorpro”
Launched social game “Mobapro Scout”
Began offering open platform service
Began offering native application games
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News & Topics
August 2013
On August 13, 2013, the company announced that it formed a business partnership with BoosterMedia
BV., a distributor of mobile games in the Netherlands.
The company’s mobcast global inc. unit has formed a business partnership with Amsterdam-based
BoosterMedia BV., a pioneer in HTML5 mobile game distribution.
Purpose of Partnership
BoosterMedia operates more than 100 game channels in about 25 countries – mostly European nations
and Brazil – and has more than 5 million active users on a monthly basis. mobcast, by forming a
partnership with Boostermedia, plans to expand its online soccer game Mobasoccer in those countries as
part of an effort to globalize operations.
Mobcast stated that it was assessing the financial impact of the plan on the company’s earnings for
FY12/13, FY12/14, and thereafter.
July 2013
On July 17, 2013, the company announced a change in its organizational structure, as well as a name
change and capital reduction of its subsidiary.
The company, which officially opened its “mobcast” gaming platform to third parties in April 2013, plans
to distribute games developed in-house (first-party content), games jointly developed with other
companies (second-party content) and games developed by other companies (third-party content). The
company expects to distribute the first title using its native game application, which is under development,
in August. As for third-party titles, the number of games to be released this year may significantly exceed
the company’s initial plan given that its new platform has been attracting many developers.
To further strengthen its organizational structure, the company will establish four genre-based genre
departments under a new games business headquarters division, effective August 1, 2013.
The company also announced that its subsidiary, mobcast ec inc. has changed its name to mobcast global
inc. effective July 17, 2013, and initiated a capital reduction in attempt to improve its capital structure.
May 2013
On May 21, 2013, the company announced that it will develop three games using a native application
(“native app”). Given the rapid diffusion of smart phones and game players on such devices, the company
will offer its first native app games (downloadable directly onto the device) at App Store (iOS), and Google
Play (Android) online stores.
The company’s creative designer, Tetsuya Mizuguchi, will be in charge of developing three game titles.
The first title will be a social game featuring role playing scheduled to be released in the first half of
August 2013. The second title will be a social puzzle game, a forte of Mr. Mizuguchi, scheduled to be
released within the year. A third title is expected to be a new type of casual social game, also scheduled to
be released within the year. All three titles will be basically free of charge (a fee is charged only for using
added features of the game), and will be available on iOS and Android operating systems. The company
intends to release the games in Korea, North America, and Europe, after launching in Japan.
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April 2013
On April 22, 2013, the company said it opened its social-game platform to other game providers.
The company made the beta versions of its “mbc connect” and “mbc wallet” accessible to the public. The
move will allow other game providers to distribute their products using the mobcast platform, which have
been available to a handful of companies since October 2012. The mbc wallet allows game users to make
payments to game providers on the mobcast platform.
The company also made its “mobcast development partners site” available to all.
February 2013
On February 20, 2013, the company announced that it would issue new shares through a third-party
allotment to Dentsu Inc.
The capital tie-up will bring together the company’s social game development and operation capabilities
and Dentsu’s global business network and advertising and marketing expertise. The tie-up will enable
Mobcast to accelerate its social game business overseas and corporate growth.
Proceeds from Share Issue
Total amount: 20 million yen
Stock issue cost: 0.5 million yen
Net proceeds: 19.5 million yen
The company intends to use the proceeds of 19.5 million yen for advertisement and marketing to promote
social game services in South Korea.
The issue price of 2,226 yen is the average closing price of the last 30 stock exchange trading days.
Through the third-party allotment, the company will issue 9,000 common shares, and the dilution is
0.13% of the total outstanding shares (6,760,904 shares).
January 2013
On January 7, 2013, the company announced the acquisition of EnterCrews Co., Ltd. through a stock
swap.
The company intends to accelerate growth through the acquisition of EnterCrews, which excels in game
development and has development bases in South Korea and Indonesia. EnterCrews was scheduled to
become a wholly owned subsidiary of Mobcast on February 1, 2013.
Mobcast planned to allocate its 11.88 common stock to one common stock of EnterCrews while allocating
its 41.72 common stock to one Class-A preferred stock of EnterCrews. In connection with this stock swap,
Mobcast planned to issue new 279,404 shares (potential dilution of 4.2%). EnterCrews had operating
profit of 11 million yen in FY08/12.
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Major Shareholders
As of December 31, 2012
Top Shareholders
Koki Yabu
Bit-isle Inc.
Takao Kiyota
HAKUBA Photo Industry Co., Ltd
The Master Trust Bank of Japan, Ltd. (Trust account)
Makoto Yorisada
Tomohito Ebine
Takashi Sato
Koichi Takamori
Japan Trustee Services Bank, Ltd. (Trust account)
Amount
Held
42.50%
3.47%
3.08%
3.08%
2.93%
2.62%
2.56%
1.66%
1.61%
1.40%
Top Management
The company’s President & CEO is Koki Yabu (born 1970).
At age 20, Yabu made a plan for his life, assuming he would live only 50 more years. He felt he would be
good as selling things, so he became a salesperson at T&C K.K. and several other companies to reach his
life’s goals. When he was 25, he saw potential in mobile phones and became a co-founder and chief
salesman at Bell-Park, a Softbank phone distributor.
At age 29, Yabu profited from Bell-Park’s IPO and felt he needed to prioritize “what he feels passionate
about” over “what he gets in return for what he does.” He founded Mobile Broadcasting K.K. (mobcast’s
predecessor) in March 2004, as an internal venture at Bell-Park. In December 2004, Yabu bought all of
Bell-Park’s position in Mobile Broadcasting via a management buyout and went independent. He recently
“upwardly revised” his life plan to 80 years of age target.
CFO, Chief Director of Administration, and Director Takao Kiyota (born 1969) joined mobcast inc. in 2010
after working for Chuo Audit Corporation. He has served as a director at more than 30 companies,
including Bit-isle Inc. (JASDAQ: 3811).
By The Way
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Company Profile
Company Name
mobcast inc.
Head Office
6-8-10 Roppongi Minato-ku
Tokyo, Japan 106-0032
Listed On
Phone
+81-3-5414-6830
Established
March 26, 2004
Website
http://mobcast.co.jp/
IR Contact
Mothers (TSE)
Exchange Listing
June 26, 2012
Fiscal Year-End
December
IR Web
http://mobcast.co.jp/ir/
IR Phone
IR Mail
Main Consolidated Segments (% of total sales)
94.41
5.59
%
%
(as of December 2012)
Directors
Shares Outstanding
(including treasury shares)
6,474,000 shares
Shareholders Capital
377 million yen
Main Subsidiaries
mobcast global inc.
mobcast Korea inc.
Koki Yabu, President & CEO
Makoto Yorisada, Managing Director
Takao Kiyota, Director
Takashi Sato, Director
Shinji Wachi, Director
Tomohito Ebine, Director
Akira Takase, Auditor
Masahiro Mimura, Auditor
Masayuki Maekawa, Auditor
Koichi Takamori, Auditor
(as of March 2013)
Employees (consol.)
Employees (parent)
Average age (parent)
Average salary (parent)
77
33.3 years
4,732 thousand yen
Main Banks
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Finance Corporation
Auditors
A&A Partners
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