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News & Articles

2014.03.14

Trailblazer to trailing, japanese video game makers in the 21st centry

Historically Japanese game makers have pioneered and dominated the global market for video games. Over the past 10 years, however, their share has slipped to a current 30% of the US market and a mere 13% globally. Simply put they have misread the trends in gaming over the past decade and paid a steep price for not leading but following as global video game sales neared 100 billion USD in 2013.

The changes that have been seen in the global game market over the past ten years are many and fast moving. This is not an industry where a game maker can rest on their laurels or assume that things will continue as they have in the past. There are several key global trends which Japanese game makers have let pass them by but which are currently driving the massive growth within this sector.

Online and Global sales platforms

Services like Steam which offer online downloads of titles from other makers across platforms (console, PC and mobile) have exploded into massive profitability by offering the consumer what they want, immediate access to cross system games (non-proprietary), convenience, an SNS like gamers forum and the appearance of a good deal. The more traditional route which most Japanese makers still adhere to of offering their wares only through their own proprietary sites and only for single platforms (think the PS-Network) is cutting against the grain of gamers who want games from one source for all of their various platforms (console, PC, mobile). There are still also significant regional barriers to sales of even proprietary products. The mindset behind maintaining artificial scarcity and regional restrictions (based on an antiquated sales/distribution model for physical media) is increasingly self-limiting in a digital and fully net enabled global entertainment space and drives players to other sales sources.

Platforms

While a number of small domestic mobile centered game startups have achieved significant success within the Japanese market the major game makers have been bafflingly slow to embrace the highest current growth sector in the industry. There is, of course, an image thing at play where “real” game makers focus on large, triple-A games and the mobile sphere is considered the province of amateur, garage game makers. The increasing capability of mobile devices to play games and their near ubiquity among core gamer demographics make the decision to stick to console only games a very self-limiting one. In much the same vein the age of dedicated console superiority over PC has been over for years and yet the vast majority of Japanese games are never released for PCs. This is something that major US and EU makers have long recognized as an important revenue source (potentially even a chance to have players buy the same game twice) and yet Japanese makers continue to produce almost exclusively for console systems. Many makers here point out that there is limited PC gaming in Japan (and thus, in their mind, the rest of the world) but this leads to the question of chicken/egg. Is there limited PC gaming numbers in Japan because there is a real lack of interest or is it due to game makers not releasing their top tier games for the PC as well as consoles. It is certainly not a hardware issue as even todays mid-range gaming PC setups easily outperform the newest generation of dedicated consoles.

There is also a major online game gap. Japanese game makers are most noticeable by their almost complete absence from the world of online gaming. This may easily be an artifact of their view of PC based gaming in general but given the massive global popularity of standalone online games (WOW, EVE, Starcraft, etc.) Japanese game makers lack of interest is perplexing. The most popular console games of the last few years have all included an online element which is increasingly taking center stage from single player and off line play. A lack of experience in this area and capability in integrating online play beyond dedicated console systems is a significant handicap for Japanese game makers as the industry evolves further in this direction.

Finally, the themes which have proven most popular among a global gaming audience are increasingly alien to those found in Japanese games. Sandbox, hyper realistic violence both fantasy, criminal and military, gritty realism (the so-called “Christopher Nolan” effect), and apocalyptic scenario games have consistently topped sales charts around the world but Japanese makers have not produced a top seller in these genres in years. While these themes are very much targeted at the “hard core” gamer segment they include some of the biggest hits of the past five years (Modern Warfare/Battlefield series, GTA, Skyrim, The Last of Us) and tens of billions in sales. Additionally, artificial distinctions among gamers, “hard-core” versus “casual” gamers, are themselves misleading as gamer increasingly tend to play a spectrum of games across multiple platforms with little exclusivity to genre.

Japanese game makers are doing several things right. They do continue to make innovative games for consoles, principally involving legacy titles, which do sell well. There is a very large global fan base for many of the series which Japanese game makes can continue to milk for years without appreciable degradation to the brands. There are, additionally, a number of entirely un-utilized genres and publishers that could be very successful globally if they made the effort to leave the shores of Japan. Namely the ero-ge and domestic mobile game makers like GREE. Japanese game makers are also sitting atop a gold mine of legacy titles which they are not re-releasing for current gen consoles or even as mobile games (which for everything up to the previous gen console grade games would be easily managed by today’s tablets and smartphones). Releasing these titles, however, would only be a temporary boost and would be subject to the limits of nostalgia among a core gaming demographic who is increasingly disconnected from the golden age of Japanese game dominance.

A move by Japanese game makers to regain global relevance will have to include two key elements. First, they need to gain a better understanding of the trends among gamers with regard to the platforms they use, the sales and distribution channels they prefer and how these will evolve in the future. And second, they need to focus on the genres, stories and character types that hold appeal among a truly global audience.

Increasing use of multiple platforms by gamers, PC, mobile and console means that the trend towards interoperability will continue to grow. For Japanese game makers future success will depend on their not completely ignoring the two fastest growing points in the game platform triangle, namely PCs and mobile devices.

Sales and distribution must move away from physical media and geo-restriction. This is a necessary change which is not just being put off by Japanese game makers but is holding back film, TV and other media content producers as well. How are films still tied to a theater-centric release and profit model in an age of Netflix and fiber optic speed internet? How can the restrictions of physical media, shelf space and store based release for games still constrain a global, digital media? Mobile gaming has worked through many of the growing pains of this process and should be an example for large legacy game makers instead of derided as amateur hour adventurism.

Evolution of these trends all point towards a greater net based, open and global system. The age of hardware, communications infrastructure and sales point restrictions is very nearly a thing of the past. Moving to a net only model will add speed, catalog depth and ease of purchase for users and remove a rather massive chunk of the current non-development related overhead for content makers.

Recent trends in overall Japanese culture (towards Kawaii-ification and rapid demasculinazation) do not translate well to a global audience. However, no matter how Japanese culture itself changes there is no reason to believe that this will eliminate the ability of Japanese game companies to come up with stories which are appealing to a global audience. If nothing else Japanese creators need only look at what is hot abroad and follow create to those themes to remain relevant. Adding a dash of “Japanese-ness” to the mix is something that would act as a differentiator and given the popularity of their culture abroad would likely find resonance as long as it is not taken too far. For triple-A titles Japanese makers need to move past a “Japan first, rest of the world if they get it” story creation model and start to deal with global cultural needs and narratives. The flip side of this is that Japanese culture, with all of its “weirdness” as viewed overseas, has a special appeal all its own. There is no reason why Japanese makers should limit their more domestically focused games to only a Japanese audience. In an age where the limits of shelf space no longer exist why not dump older and current domestic targeted titles online and see what bites. These two tracks can and should exist side by side and could conceivably create significant genre/story synergy.

Japanese makers used to dominate the global game market because they were at the cutting edge of innovation and told stories that resonated with young people everywhere. Today, the global game market has become much more crowded and blossomed across a range of platforms and onto the global net. The rapid changes in the game industry and the more subtle changes in Japanese culture itself have seemed to all work against Japanese game makers to limit the relevancy and appeal of their games. This, however, is by no means leading towards a definite end for Japanese makers in the global market.

games for the world and little to loss by taking a more engaged and aggressive path. All that is needed is understanding of what the gaming world has become, where it is going and how the billions of global gamers can best be served.

 

 

  1. IRIS Network: The Worlds Largest Network of Market Research Institutes
  2. ESOMAR Individual Membership Information
  3. 日本マーケティング・リサーチ協会