Puzzle & Dragons studio told to ‘up its game’ by angry shareholders

A group of shareholders has told the publisher and developer of mobile hit Puzzle & Dragons to “up its game”, laying the blame with its president.

Puzzle & Dragons was originally released in 2012 and became the first ever mobile game to gross $1 billion in review, a number that had grown to $6 billion by the end of 2017.

However, as spotted by Automaton, investment advisor Strategic Capital sent a 32-page report to GungHo Online on behalf of its shareholders, entitled ‘Proposal for GungHo Online Entertainment Inc to up its game’.

The report accuses GungHo of continuing to rely on the success of Puzzle & Dragons in the 13 years since its release, and failing to build on that with new successful products.

“Despite releasing around 20 games since Puzzle & Dragons, including titles linked to popular IPs such as Disney and Yo-kai Watch, they have all missed and the Company has not been able to exit their dependence on Puzzle & Dragons,” it argues.

The report estimates that GungHo has spent more than ¥100 billion ($645 million) developing new games other than Puzzle & Dragons, but that those games have earned less than ¥10 billion ($64.5 million).

“Even compared to consoles that have longer development periods, and few trials, 13 years is a long time and cannot be explained away by saying ‘developing games is difficult’,” it argues.

It also claims that compared to Nintendo, Capcom, Konami, Sony, Bandai Namco and Square Enix, GungHo is the only company with a negative investor return over 10 years, saying that in terms of market capitalisation it’s much smaller than all of them.

“Why do we compare GungHo to game companies that are several magnitudes larger?,” the report asks. “It is because of President Morishita’s remuneration.”

The group argues that company president and CEO Kazuki Morishita’s pay has risen drastically over the past 10 years from ¥120 million ($775,000) to ¥340 million ($2.19 million), despite market capitalisation dropping 78% and operating profit dropping 69% over the same period.

“Comparing President Morishita’s remuneration with the presidents of major game companies, his pay is close to Nintendo, one of the world’s leading game companies,” it argues. “Over the last 10 years the amount has never been less than Capcom or Konami’s.

“By almost any measure GungHo would usually not be in the same league as Nintendo, except for some reason the amount of remuneration for the top management is comparable.”

It adds: “While the president of GungHo and Nintendo make similar salaries, as far as profits are concerned, with less than 1/10th that of Nintendo, we would say that GungHo is not even playing the same game.”