After a difficult quarter for GREE with profit declining year-over-year, the Japanese gaming company is having layoffs in its U.S. offices. The company just came off a very poor quarter where it was hurt by a stricter regulatory environment in Japan and the rising costs of its campaign to expand internationally outside of Japan. The company saw net profit dip by about 4 percent to $110.3 million after several quarters of dramatic sequential increases.
Buried in a release today about a new venture effort to fund gaming companies was a paragraph describing “redundancies.” It said:
“As part of the company’s internal US reorganization, a majority of the GREE games platform team will be transitioned to new departments with redundancies in some areas. The overall GREE Platform business will begin transitioning to its operations in Tokyo as a part of this change.”
GREE hasn’t added any additional statements on how many layoffs there were, but we’re hearing of more than 30. We’re also hearing that most of them came from the OpenFeint team or were direct hires for GREE’s U.S. efforts. We’re not hearing of any layoffs for employees who came from the $210 million acquisition of Funzio.
GREE paid $104 million for mobile-social gaming network OpenFeint back in 2010 but it hasn’t really used much of the technology. The company recently announced it was closing OpenFeint, which rankled many developers. Shutting the platform down would break many popular games if the studios behind them don’t move fast enough to push updates.
Both GREE and DeNA are pushing abroad as they face slower growth and other pressures back home. Not only is there a changing regulatory environment over the types of game mechanics they use, their margins are hurt by rising adoption of iOS and Android devices. In the feature-phone era, they retained a higher share of gaming revenues because they paid less than the typical 30 percent platform cut to mobile carriers. But now, any games their platforms support on Google Android or iOS have to hand over a 30 percent share to the platforms. Plus, Apple has designed its ecosystem in such a way that it’s difficult for any third party to have much distribution power.
That said, both companies are astronomically more profitable than U.S. freemium gaming companies like Zynga. The company made $110.3 million in profit on $460.7 million in revenue in the last quarter.