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Video games are risky, expensive and a great deal

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Playing video games is an exercise in cognitive dissonance. It’s a successful business where you can never know how consumers will react. And yet, you have to invest tens (sometimes hundreds) of millions of dollars just to have any chance of success. Despite these risks and expenses, however, many companies are learning that it is riskier to exit the gaming business. It’s a lesson Konami and Disney have learned the hard way throughout the ongoing pandemic. And this is leading these companies to plunge back into the gaming market.

After spending years experimenting with its annual football franchise and mobile games, Konami is returning to the console space. The publisher plans to bring back Metal Gear, Silent Hill and Castlevania. Likewise, Disney is in talks to partner with developers and publishers for a number of games based on its properties. In particular, Lucasfilm has several public and unannounced Star Wars projects in negotiations. But we’re even seeing Disney playing well with Nintendo to bring Sora, the star of the Square Enix-Disney Kingdom Hearts co-production, into Super Smash Bros. Ultimate.

This strong tendency to return to games for Konami and Disney can easily be explained by looking at their other activities. Konami produces slot machines and arcade machines. It also operates casinos and health clubs. Disney owns theme parks and produces movies. Both Disney and Konami have seen how vulnerable these markets are to something like a pandemic. And when they looked for something tougher to invest in, they each saw video games as a clear opportunity.

Konami could have been Capcom

Konami began to withdraw from console-style games around 2014. By the time Metal Gear creator Hideo Kojima left, it was obvious the publisher was not emphasizing games like Silent Hill. But while making big-budget blockbusters is a costly and risky preposition, Konami’s decision to prioritize mobile still looks like a strategic mistake. This is especially true compared to Capcom, which is the publisher of similar blockbusters like Resident Evil and Monster Hunter.

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While Konami focused on mobile games and its entertainment businesses excluding console games, Capcom expanded into mobile while focusing and reinvesting in its most successful console projects. This has led Capcom to a steady pace of Resident Evil and Monster Hunter releases. These franchises are proven sellers, so this is where Capcom placed its bets. And gamers have rewarded Capcom for its efforts.

Monster Hunter and Resident Evil have grown as the gaming industry has grown. And Capcom just released its highest ever first quarter results with nearly half a million dollars in revenue.

Capcom’s properties are not special. He just continued to show interest in games where Konami didn’t. And it’s hard to argue that Konami couldn’t have replicated Capcom’s success with Metal Gear and Silent Hill.

So now Konami and Disney will try to make up for lost time. And that’s because as difficult as it is to make games, it’s silly to avoid a market where consumers are so emotionally invested and also so willing to spend a huge percentage of their budget on entertainment.

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