Gamers turn into Investors

[Shiori]

This article appeared in the International Herald-Tribune newspaper
last week. (my dad subscribes to it, and I often read it)

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Gamers turn into Investors


Japan puts the kind of energy and money into the production of video
games that other countries plow into the movies. And no wonder. The
Japanese video-game industry in 2000 pulled in revenue of 623 billion
yen (US$4.9 billion).

So it is not too surprising that Japanese investment bankers have
come up with an ingenious way to let individuals provide seed capital
to develop video game software--and at relatively little risk.

Konami Co. has sponsered a fund, the first so far, that financed an
update to a best-selling series of video games. Analysts say more
funds are likely, given the popularity and capital needs of an
industry in which one game can cost billions of yen to develop.

The Konami fund raised 770 million yen in 2000 for a new version
of "Tokimeki Memorial", a role-playing love story simulation game
that was first introduced in 1994. In the game, the player attempts
to win the heart of a schoolgirl ("tokimeki" means "heartbeat") by
choosing from among several phrases to ask her for a date.

Often described as a game for nerds, it was an instant hit and sold
530,000 copies. The second game in the series, released in late 1999,
was also a hit, with more than 370,000 copies sold in just six months.

The fund that Konami sold takes the form of a foreign registered
investment trust (it is registered in Bermuda) that is sold to
Japanese residents in yen. The foreign registry confers tax
advantages. Investors buy the fund in units of 10,000 yen, with a
minimum investment of 100,000 yen. The funds raised were slated to
develop and sell the third of the Tokimeki Memorial series and
another love simulation game designed for girls (where the player
seeks to win the favor of a male character).

A matrix drawn up by the company determines the level of return the
investor reveives. Roughly speaking, investors recive more than they
invested if both games sell more than 200,000 copies each. Meanwhile,
their loss is capped at 5000 eyn per 10,000 yen investment. A copy
of the matrix is printed in the prospectus.

Shigeki Hayashi, a vice president in the structured finance division
at Mizuho Securities Co., which worked with Konami on the product,
said that the investor-return matrix was constructed in such a way
that the investor's risk and the amount of loss would be minimized.

While the company shoulders some risk itself, the return it gets
comes in the form of publicity and the opportunity to expand its base
of customers and investors, said Shinobu Naito, general manager of
asset planning at Monex Inc., an online securities firm that served
as the sales channel for the Konami fund.

The game fund has broken new ground in that it has linked an
investment vehicle to game players who are usually not buyers of
investment products, with the online broker acting as a bridge,
Hayashi said. "Game players may not be familiar with investing," he
said. "But they are with the Internet."

As developing video games becomes a more complex and riskier venture
requiring greater amounts of capital, Konami was eager to diversify
its source of funds, he added.

The new version of Tokimeki Memorial hit store shelves last December
and sold 190,000 copies as of the end of March. The other game is to
be introduced soon. Konami has a deadline of June 2003 to settle the
fund's account and determine the level of return to investors, but a
cushion of up to eight months is built in, the company said.

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Just to put the numbers into perspective, be aware that the Japanese
potential consumer base for video games is about half as great as the
American consumer base since there are only about 120,000,000 people
in Japan compared to more than twice that in the United States.

[Cless]

nice article shiori.