When it comes to video games, the entire world market catches pneumonia when the Japanese market so much as sneezes. So what happens when the Japanese market gasps for air?
Game sales are down in Japan… way down. The industry is so down that companies generally considered successful are posting dangerous losses. Sony Computer Entertainment and Square Soft, two companies that posted record profits only a few years ago, both reported big losses. Namco had a tough time in its arcade business last year and closed its Wonder Eggs theme park. Sega has also closed several arcades, including its Shinjuku Joypolis theme park.
Walking around Akihabara, Tokyo's electronics district, you can't help but notice that a few bellwether game stores have closed, new DVD stores have opened, and at least two stores are now specializing in selling used copies of recently published games. And arcade & home hardware and software sales have dropped over the last few years. According to research published by the Computer Entertainment Software Association (the Japanese equivalent of America's Interactive Digital Software Association), Japanese video game software sales are down nearly 10 percent since 1998, and hardware sales are down by more than 21 percent.
"The game business is not as good as it was last year," said Sega Enterprises COO Hideki Sato. "One reason may be [that people are waiting for] the upcoming platforms."
As Sato and many analysts point out, the game business is cyclical. The cycle begins slowly with the launch of new game consoles, which are generally purchased by early adopters and hardcore game enthusiasts during their first year on the market. Despite Sony's overwhelming success with the original PlayStation and the huge publicity garnered by the launch of PlayStation 2, many Japanese consumers may want to wait until Nintendo and Microsoft launch their new consoles before committing.
Not all companies are suffering, however. "You cannot just generalize and say that the entire game industry is going down the tubes," said Keiji Honda, president and COO of Enix. "Because of the improvements in the consoles, people no longer need to go to arcades to play good-looking games anymore."
Companies such as Enix, which maintains low operation costs by working with outside developers and not investing in location-based games, are doing well. Having sold more than four million copies of Dragon Quest VII this year, Enix takes a more bullish stand than many of its competitors.
"With consoles, a lot of good hardware and software companies are going bad as well," said Honda. "Enix, however, is about to announce that its largest profit margin ever was in this fiscal year. Capcom and Nintendo are doing really well as well. "Software companies that are making good games are selling a lot of games."
Sega's Sato agrees. "Microsoft has huge money and I have heard that Bill Gates plans to spend a couple hundred million dollars [advertising] for the Xbox. That is huge money!"
"And Nintendo is a rich company, too, and of course they are succeeding with Game Boy. And Sony is a huge company. So they will all spend a huge amount on advertising, and that should make things better.
But new consoles and Japan's continuing economic struggles may not be the only factors affecting the game market. A new factor and previously unforeseen competitor has also entered the Japanese electronics scene — cellular telephones.
NEW GAME IN TOWN
"Millions of people are getting cell phones and they are spending huge money, like $10,000 yen ($90 US) per month or more," Sato said. The latest numbers show that one-in-four Japanese high school students owns a cellular telephone, and monthly bills topping $100 are not uncommon. Last March, a teen-ager in Osaka kicked his ailing mother to death when she complained to him about his telephone bill.
Of course, Japanese cell phones do more than dial telephone numbers. The telephones in question are Internet-enabled, display graphics, allow users to play limited video games and can be used to send e-mail. "The kids send friends messages, then they call their friends to see if they have gotten the messages," one game company executive explained. "And (Japanese phone company) DoCoMo charges them on the call and the e-mail."
But two of Sega's top game designers see opportunity in cellular technology. "The center of interest among young people is diversifying," said Hisao Oguchi, whose Hit Maker team is responsible for such games as Crazy Taxi and Top Skater. "Cell phones are very big in Japan, and so unless the game industry comes up with different types and concepts of games, like for example network games, we will suffer. Game graphics definitely are improving, but the gameplay itself hasn't changed."
Tetsuya Mizuguchi, whose United Game Artists studio may be Sega's most innovative team, sees a growing union between cell phone and games. Claiming that engineers will be able to place technology such as Sega's recently defunct Dreamcast into cellular phones, Mizuguchi sees hybrid communications devices in the not-too-distant future.
"I'm very excited about the future of cell phones. I don't intend to provide games for cell phones; I just want to provide some sort of medium to provide communication to gaming."
SOURCE:
www.msnbc.com
