Konami Corporation

KONAMI CORPORATION (hereinafter, "KONAMI"), headquartered in Tokyo, Japan, (http://www.konami.com/ and http://www.konami.net) describes itself as a "global entertainment company" whose mission is "to continue to provide pleasure to all ages and to maintain a high level of competitiveness within each business." The company is comprised of four subsidiaries, Konami Computer Entertainment Studios, Inc., Konami Computer Entertainment Tokyo, Inc., Konami Computer Entertainment Japan, Inc. and Konami Online, Inc. KONAMI will merge into one company effective April 1, 2005. However, this entertainment conglomerate had a humble start.

The 1990s proved to be a decade of phenomenal growth for KONAMI. The company changed its name from Konami Industries Co., Ltd. To Konami Co., Ltd. on June 1991. Konami (Hong Kong) Ltd. (currently Konami Marketing (Asia) Ltd. was established in Hong Kong on September 1994. On April 1995, Konami Computer Entertainment sets up two separate companies, one in Osaka and one in Tokyo. Konami Music Entertainment Co., Ltd. (currently Konami Media Entertainment, Inc.) was established on December 1995 and by April 1996 KONAMI had created Konami Computer Entertainment Japan Co., Ltd. (currently Konami Computer Entertainment Japan, Inc.). On May 1996, KONAMI had grown so large that it shifted to an organization based on business divisions.

With KONAMI's new Amusement Business plant in operation for a year, the company began exporting production components of video slot machines to Australia on March 1998. By June 1999, Konami Parlor Entertainment, Inc. (currently KPE, Inc.) was set up to sell pachinko and pachinko slot machines. In December 1999, KONAMI moves its official headquarters to Tokyo, Japan. Konami continued to realize its dream of becoming a global entertainment company in the current decade. On January 2000, KONAMI obtained a license by the state of Nevada to manufacture and sell gaming machines and, by October, expanded its business to Mississippi and California and two months later to New Mexico. March 2002 proved to show more expansion in KONAMI's gaming machine business in both the U.S. and in Ontario, Canada, but the company would continue this expansion well into the next two years.

KONAMI moved into China by creating Konami Software Shanghai, Inc. on June 2000. BY August 2001, KONAMI had invested in several key companies, creating a strong affiliation for future expansion, especially in its sports life entertainment sector. On March 2002, Konami Sports Corporation opened its first facility under the brand name GRANCISE in Tokyo.

On October 2001, Konami Mobile Online, Inc. (currently Konami Online, Inc.) was established. As of December 2004, KONAMI has begun its full-scale entry into the online business field. Having obtained listings on numerous stock exchanges, KONAMI succeeds in being listed on the New York Stock Exchange (NYSE: KNM) on September 2002, raising more revenue for its continued expansion. In commemoration of its 30th anniversary, KONAMI adopted a new brand logo on February 2003.

KONAMI develops, publishes, markets and distributes video game software products globally. Konami also makes card games (such as YuGiOh!), character goods, toys, compact discs (CDs) and other merchandize products, many of which use characters seen in movies, television, comic books, video games, advertising or other media. In addition, it publishes, produces and services software and hardware for amusement arcade games. The Company also produces software for liquid crystal display (LCD) units used in pachinko machines, and produces video games and token-operated games installed in amusement arcades and other entertainment venues in Japan, as well as gaming machines for casinos in the United States, Australia and other overseas jurisdictions.

KONAMI dominates the gaming industry. The company develops, publishes, distributes and markets computer and video game software, primarily for use on home and handheld game console systems, and has recently entered into Internet and mobile phone platforms on a worldwide basis. Most of the company's software consists of video games designed for use with video game platforms, including Sony PlayStation and PlayStation 2, Nintendo GameCube, GameBoy and GameBoy Advance and Microsoft Xbox. Since the fiscal year ended March 31, 2000, Konami has released over 539 titles, which includes 130 Sony PlayStation titles, 173 Sony PlayStation 2 titles, 106 Game Boy Advance titles, 30 Nintendo GameCube titles, 16 Microsoft Xbox titles and 15 personal computer (PC) titles.  
 
 
 

KONAMI's game genres are impressive, ranging from its Metal Gear Solid tactical espionage action flagship series to horror (Silent Hill series), mech (Zone of the Enders series) platform (Castlevania series), RPG (Suikoden series and Ys VI), handheld games (Boktai), mobile phone entertainment, music simulation games (Dance Dance Revolution series, Guitar Freaks, Karaoke Revolution, Beatmania), sports (a variety of soccer and baseball titles as well as the Disney Sports series for GameBoy Advance), card-based strategy (YuGiOh! series), and licensed titles such as Teenage Mutant Ninja Turtles.

Effective April 1st, Konami Corporation and its four subsidiaries will merge for the realignment of its computer and video games business operations and to prepare its massive online assault. Additionally, on this date, its wholly owned subsidiary, Konami Media Entertainment, Inc., will also merge with and into the company in order to enhance its multimedia business operation in both music and publishing. KONAMI's successful mergers are, in part, a result of its failure in the marketplace as revenues fell 8% for the nine months ending on December 31, 2004 due to lower computer and video games and toy and hobby segments, a lower operating margin rate and higher interest expenses. However, the Company has steadily increased the number of titles published for home and handheld video game platforms from 55 titles in 1999 to 120 titles during the fiscal year ended March 31, 2004.

KONAMI seems to have a unique business model combined with a track record for producing multiple revenue streams as shown in its well-balanced business portfolio.

During fiscal 2004, KONAMI's computer and video games segment accounted for 33.8% of consolidated net revenues. KONAMI's amusement segment is involved in developing content and hardware for a variety of amusement-related products, such as video game machines and token-operated game machines for amusement arcades mainly in Japan, as well as software for LCD units used in pachinko machines. Konami also provides delivery and maintenance services with respect to these products. During fiscal 2004, this segment accounted for 13% of consolidated net revenues.

During fiscal year 2004, KONAMI's 208 sports clubs and 32 franchised health facilities accounted for 28.9% of consolidated net revenues. KONAMI's gaming segment is involved in developing content and hardware for gaming machines for casinos in other countries. During fiscal 2004, this segment accounted for 4% of consolidated net revenues. It sold 4,500 gaming machines and 5,600 gaming machines in North America and Australia, respectively, in fiscal 2004. Konami has expanded its gaming machines business in international markets. In September 2003, Konami introduced 22 new video slot games during the Global Gaming Expo held in Las Vegas.

KONAMI is engaged in the production, sale and copyright of a range of products and brand-related goods, including card games, toys, portable electronic games, CDs and DVDs of music from its video game software, game tip books (containing clues and strategies for playing games), game prizes for amusement arcade games and other accessories. During fiscal 2004, this segment accounted for 21% of consolidated net revenues. More than 80% of revenues from the toy and hobby business were derived from worldwide sales of card games such as YuGiOh!

KONAMI seeks to shift its business model from a "flow business" to a "global and asset business" as demonstrated in the following business plan chart.

KONAMI also seeks to strengthen its earnings base as demonstrated in this chart.

KONAMI will continue to be competitive in the video game marketplace due to its award-winning development studios that, according to the company, "are renowned worldwide for delivering quality products and innovative titles." KONAMI's worldwide studios do in fact employ thousands of talented artists, game designers and programmers. In fact, it has been game creators such as Hideo Kojima (Snatchers, Policenauts, Metal Gear Solid, Zone of the Enders, see left), which have brought life into the company's games.
Additionally, KONAMI will remain competitive in its core Health & Fitness business as it continues its efforts to create high quality and comfortable sports clubs as well as push its "Exertainment" machines with its lineup of EZ products (EZ BIKE, EZ RUNNER, EZ TWISTER, EZ BODYCROSS). KONAMI also seems to have a monopoly on the gaming machine business in not only the U.S. but overseas.

The company runs Konami Computer Entertainment School, which aims to support the entertainment development capabilities and to foster and maintain creative talent. Many graduates of the school are employed by Konami, and there were approximately 580 students enrolled at Konami Computer Entertainment School as of June 1, 2004. Also, in order to bring talent to each of its business areas, the Company established Konami School, Inc. in August 2003 and opened Konami School in April 2004. However, KONAMI faces strong competition from Nintendo's Redmond, Washington DigiPen school of Real Time Interactive Simulation and Computer Animation, which is heavily funded by Microsoft.

The founder of KONAMI continues to retain his initial vision as CEO and Chairman of the Board, which is a huge boon for KONAMI's continual dominance in global entertainment. According to Mr. Kozuki, KONAMI will focus on both entertainment and health by establishing "a strong business foundation upon which we can build a 'High Quality of Life' full of dreams, surprises and impression for people throughout the world and in all aspects of life."

KONAMI may have some competitors though in the video game business. Square-Enix still dominates the RPG genre with both its Final Fantasy and Dragon Quest flagship franchises placing the beloved Suikoden series and Ys VI: Ark of Napishtim far behind. Metal Gear Solid also faces strong competition from titles such as Tom Clancy's Splinter Cel series while KONAMI's Silent Hill series must compete with Capcom's outstanding Resident Evil survival horror franchise. In terms of revenues, KONAMI faces strong competition with Electronic Arts, Inc. (ERTS), International Game Technology, Inc. (IGT), and Sony Corporation (SNE). Electronic Arts still dominates the video game sports market with its Madden and EA Big games such as SSX. It remains to be seen if KONAMI can carve out a competitive niche in the mobile gaming arena. KONAMI's other competitors include Sega Corporation, Acclaim Entertainment, Inc., Activision Inc., Eidos PLC, Infogrames SA, Take-Two Interactive Software, Inc., THQ Inc., Vivendi Universal Publishing, Nintendo, Alliance Gaming Corporation, Aristocrat Leisure Limited, WMS Industries Inc., Central Sports Co., Ltd. and Namco Ltd.

KONAMI has four major business objectives and strategies. Its first strategy is to "build a solid organizational structure to continually produce hit content" by strengthening both its management and sales force while maintaining its talented creators. Its second strategy is "to build a solid organizational structure to maximize earnings from each hit content" via business diversification, stable earnings, multi-use of content, and "share-use of business know-how." The company's third strategy is "to develop next generation leaders" by meeting the needs of talented personnel while creating and developing both current and next generation leaders. KONAMI's fourth and final strategy is "to establish the value of KONAMI's brand" by combining innovation and creation with quality and stability. KONAMI hopes to realize high profits and dividends through stable growth of the company.

KONAMI's new brand logo "Be Creative" will encapsulate the marketing strategies of the company as it continues to advertise in Japan, North America, Europe, and Asia. KONAMI plans to strengthen its existing content while creating and acquiring new content, maintain its top share in Japan while increasing its overseas market share, stabilize its business growth through a wide range of genres, and further enhance its mobile phone content. Additionally, KONAMI will continue to promote its core exercise entertainment business in hopes of increasing sales of its Konami sports franchise and its Konami brand fitness machines. The company's marketing strategy in this sector is to use four key words to improve customer satisfaction: "safe, clean, comfortable, efficient." KONAMI also plans to enhance its "personal trainer system" via individual customer support. Konami's health and fitness programs not only manufacture and promote its Exertainment EZ line of machines, but provide diet programs, travel agency operations, issuing proprietary integrated circuit (IC) cards (which record training and other information) and publishing a magazine for club members.

KONAMI also seeks to strengthen its cost management. KONAMI's marketing strategy is encapsulated in its values as follows: "to act as a good corporate citizen and to contribute to the development of [the] entertainment industry and the prosperity of society / economy." To date, there are no game industry issues that could pose a problem for this company nor has it had to face any recent obstacles. The following sales growth chart for the past 10 years shows the continued success of KONAMI. I look forward to being part of that success.

Links

• More Video Game Reviews by PG Editor
• Go to Dave's Gaming Domain
• Go to Dave's Slaves
• Konami Official Site
• E3 Expo