With GDC approaching next week, mobile gaming is on my mind. Truth be told, I was never much of a gamer myself, yet the industry has always fascinated me from an investment perspective.

In 2016 we witnessed numerous noteworthy events in mobile gaming: the record-breaking success of Pokémon Go, the critically debated walking start to Super Mario Run, the demise of Flash games, the return of HTML5 with FB Messenger’s explosive launch of Instant Games, etc.

Earlier last year I wrote about a looming threat to the most powerful tool in Japanese game companies’ business models. This potential disruption seemed to receive little attention in the markets, yet I contended that it represents a potential ticking bomb for the mobile gaming monetization of the industry. I’m referring to the guidelines governing Gacha mechanics, self-imposed by the Japanese online gaming association back in Q2 last year.

The monetization technique of gacha has proliferated in Japan while remaining relatively unheard of until recently in the West. (It’s a mechanic derived from the original gashapon ガシャポン in which vending machines popular in Japan would dispense capsule toys at random. Here’s a more thorough explanation of the various gacha mechanisms).

Under gacha monetization, game companies target big-spending “whales.” The dependency of certain mobile games’ business model on whales cannot be understated. According to marketing firm Swrve, the top 10% of players contribute to nearly half of all mobile game revenues, and 48% of revenues come from a mere 0.19% of all players.

Due to a controversial incident where a “whale” player spent over $6,000 during a single evening in pursuit of a gacha character, Japan’s Online Game Association sprung into action.

In an effort to stave off more draconian government measures, the Association self-imposed a new regulation that established two significant constraints on gaming monetization: a minimum 1% payout ratio, and a maximum 50,000 JPY billed per player. Technically, these industry “guidelines” are not law.

I expected most game companies to adhere to these guidelines to avoid stricter government intervention.

Adhering to such guidelines would however drive a sword into the heart of one of the most profitable monetization techniques in history. For publicly-listed firms, I expected the corresponding hit to earnings to result in stock price corrections.

It’s hard to conclude definitively that such a sector-wide stock correction is taking place. Here’s why: several of Japan’s notable mobile games companies have not adopted the new gacha guidelines.

It will be interesting to see how established mobile games companies confront the new market environment in 2017.