How GungHo could afford to buy Grasshopper thanks to a single mobile game

GungHo Online Entertainment is not a name brand in the Western video game market, even fifteen years after the publisher opened for business. While some of its games have enjoyed a cult following in the US and Europe, particularly GameArts titles like Grandia and Lunar, its profile has always been more prominent in Asia. The Korean-made Ragnarok series of online role-playing games especially has made GungHo the steady business it is today. GungHo is expanding now though, moving into the US with unusual releases and acquiring creative but not particularly marketable studios. Is an aging MMO franchise funding these bold moves? Hardly. The publisher’s impressive wealth comes in part from a surprisingly successful mobile game.

Japanese gaming industry analyst Dr. Serkan Toto published a revealing look at GungHo Online’s revenue stream in the mobile market. It turns out that the company is able to fund its more idiosyncratic business decisions thanks to the popularity of the Japanese mobile game Puzzles & Dragons. A puzzle game with role-playing elements not unlike the Nintendo DS cult hit Puzzle Quest, the free-to-play Puzzle & Dragons has an audience of 8 million registered players after being on the market for one year. Not the biggest crowd, but they are spending enough to earn GungHo Online a mint, generating between $54 million and $75 million every month based on multiple estimates. In January alone, GungHo Online’s sales totaled $92 million, a year-on-year growth of more than 1,000 percent, and it’s all thanks to one little game.

While the success of Puzzles & Dragons demonstrates the financial opportunity in making an Android and iOS hit, it also speaks volumes about GungHo’s creative ambitions. It seemed like the company had lost its mind when it announced in October 2012 that it was opening a branch in the US to publish – amongst other things – niche PS Vita titles like Dokuro and Ragnarok Odyssey. It also didn’t seem like a particularly fiscally responsible decision in January when it acquired No More Heroes and Killer is Dead developer Grasshopper Manufacture. The studio has a sterling reputation but its sales have never been stellar. Turns out that GungHo can afford these riskier endeavors thanks to Puzzles & Dragons. Now if it would only fund the development of Grandia 4.