DeNA Co., Ltd. (DNCLY)

DeNA makes games. Most of them live on your phone. The company was founded in the mid-2000s, back when the internet was still young enough that a scrappy Tokyo startup could see mobile gaming as the future and go all-in on it. Now, two decades later, DeNA publishes games in Japan, North America, and Europe. Some are free-to-play (you download for nothing, then spend money for in-game stuff). Some charge upfront. Some are live games that change every week to keep players coming back. The company also runs the Mobage platform, a marketplace and social network for games, and owns baseball stadiums and live-entertainment venues in Japan. The game part of the business is what matters, and games are subject to rules about how free games can make money, especially rules around the virtual coins and randomized loot boxes that drive spending.

Games are how most people play

Mobile games are the biggest piece of the DeNA pie. The company publishes games that range from casual puzzle games (short play sessions, simple rules) to complex fantasy RPGs (role-playing games where players build teams of characters, fight bosses, collect gear). The games run on iPhones and Android phones. The free-to-play model is standard: you download the game for zero dollars, and then DeNA makes money when you buy virtual currency to speed up progress, unlock characters, or open randomized reward chests.

This model is regulated in a way that physical products are not. In Japan, the country where DeNA is based, the Virtual Currency Act requires companies to register and maintain strict reserves if they issue virtual currency. Publishers have to be clear about odds and rates when loot boxes are involved — Japan ruled in 2017 that undisclosed odds violate consumer protection law. Other countries have similar or stricter rules. The EU, South Korea, and some US states have all taken action against the most aggressive monetization tactics. DeNA has to navigate all of this. If the company crosses a line — say, by obscuring the real cost of a loot box or targeting minors with addictive mechanics — it faces fines, bans, or customer backlash that wrecks the game.

How the money gets made

DeNA makes money four ways. First, in-game spending — that is, people buying virtual coins or battle passes or rare characters with real money. This is the core of the business. A successful game might have a million active players, and maybe 2–5% of them spend money in any given month, paying anything from a dollar to hundreds. The average is usually a few dollars per paying user per month. Games are kept alive with new events, characters, and story updates every few weeks or months, which gives players a reason to keep playing and spending.

The second source is advertising. Some DeNA games show ads to players — either banner ads or videos you watch to get in-game rewards. Ad networks pay DeNA when people see or click those ads. This is lower revenue per player than direct spending, but it monetizes the free players who don’t buy anything.

The third is platform revenue — DeNA runs Mobage, a social and content platform for games. The company takes a cut (typically 30%) of every virtual-currency sale made through Mobage games, similar to how Apple and Google take a cut of app-store sales. Mobage is shrinking relative to direct app downloads, because players prefer buying inside an app rather than through an intermediate platform, but it still generates meaningful revenue.

The fourth is real-world entertainment. DeNA owns a professional baseball team in Japan and runs live-entertainment venues. This is a much smaller part of the business, but it generates ticket revenue, merchandise sales, and sponsorship money, and it gives the company a way to move fictional game characters into real stadiums (a character from a DeNA game might appear at a baseball game, driving interest in both the game and the event).

How games stay alive and why that matters

Mobile games are not like software you buy once. They are services. A game is only worth playing if there are other people playing, if events and updates are coming regularly, and if the game still works. The moment a publisher stops updating a game, it dies. Players move on, and the game becomes invisible in app stores.

This means DeNA has to keep teams of designers, programmers, and artists working on games constantly, updating them with new content, fixing bugs, and keeping the servers running. A hit game might be in active development for five to ten years or more, and the company has to commit to that. If a game’s spending declines and it starts to look like a poor investment, the company might decide to shut it down. Shutting down a game is risky, though — fans get angry, media reports on it, and it raises questions about whether DeNA will support your favorite game. There is a reputational cost to abandonment.

This is a central tension in the gaming business: each game is an asset that DeNA owns and controls, but it is also a service to players who have invested time and money into it. Regulatory scrutiny is increasing around what happens when a game shuts down and what happens to players’ virtual items and spending. Some countries now require publishers to offer refunds or compensation if a game is discontinued, or to publicly announce a shutdown well in advance. DeNA has to balance the profit-maximization logic of a software company with the service commitments of a platform.

Competition is fierce and quick

The mobile gaming market is crowded. Thousands of games launch every day in the app stores. The top games make enormous money, but most games are forgotten within weeks. Success is not stable — a game can be wildly popular one year and abandoned the next as players move to something new. This creates pressure on DeNA to launch new games constantly and to know when to kill games that are not hitting targets.

Competitors include huge firms like King Digital (owned by Activision Blizzard), Supercell, and Zynga (owned by Take-Two). These are companies with larger budgets, sometimes larger teams, and equal or greater expertise in game design and monetization. Younger, independent studios also create hit games, and they can move faster than a larger company. DeNA’s advantages are brand recognition in Asia, a growing base of intellectual property (characters and universes from successful games), and experience in managing a large portfolio of live games. The disadvantages are legacy technology and the need to keep older games running even when they are no longer a priority.

Regulation and the future challenge

The biggest regulatory threat to DeNA and the whole industry is tightening rules on loot boxes, spending mechanics, and targeting minors. In 2023 and 2024, several countries including Belgium, France, and some US states began investigating or restricting loot boxes on the grounds that they are a form of gambling. If a game cannot use randomized loot boxes, the business model changes — designers have to charge upfront or use a different monetization system that may be less profitable. DeNA, like all publishers, is watching this closely.

A second pressure is data privacy. Games collect enormous amounts of user data (what they do, when they play, how much they spend, where they are). EU GDPR and similar laws in other countries require explicit consent and the right to delete data. Complying with this is expensive and creates friction in the player experience (constant consent screens, deletion requests).

A third is the app store itself. Apple and Google take 30% of all in-app spending, which they justify as the cost of running the store and the payment infrastructure. But game publishers see this as an enormous tax on their business. DeNA and others have pushed back, arguing that the 30% is excessive. Regulators are increasingly agreeing; the EU and some other jurisdictions are starting to force app stores to allow alternative payment methods and take lower cuts. If Apple and Google are forced to reduce their cut, DeNA’s effective revenue per player could rise substantially.

How to research DeNA

The company files annual reports and quarterly earnings reports that show revenue by segment (games, Mobage, entertainment), player numbers for major games, and user engagement trends. Look at the game portfolio — which games are new, which are declining, which are in maintenance mode. If all the major games are old and no new ones are hitting, the company has a portfolio problem. Check the average revenue per user (ARPU) — if it is declining, that signals either weaker monetization or less engaged players, both concerning.

Watch for any regulatory actions or changes. A ban on loot boxes in a major market like South Korea would force immediate changes to game design and monetization. Look also at the company’s biggest games — Puzzle and Dragons, Granblue Fantasy, and others — and track whether they are still in the top 50 or 100 games by revenue. As games age, they decline; if DeNA’s portfolio is aging without enough new hits to replace them, that is a signal of structural decline in the business. The live-game business requires constant success in launching and maintaining games; if the hit rate is falling, the company is in trouble.