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Thursday, November 10, 2005

Can the Xbox 360 Pull a 180 in Japan?

Can the Xbox 360 Pull a 180 in Japan?

By: ac

Microsoft swung into full-scale marketing mode last week, opening its stylish and swanky Xbox 360 Lounge in Tokyo. Dozens of celebrities were limo'ed in for the evening unveiling – including legit industry heavy-hitters like Metal Gear's Hideo Kojima and Capcom's Keiji Inafune – as well as the usual gaggle of game journalists and members of the media. Cameras rolled, industry insiders grinned, and Yuji Naka seemed oddly giddy throughout the whole thing. It was the kind of affair that seemed trite and phony – yet tinged with the undeniable, unbiased excitement that always seems to accompany the imminent launch of a new console.

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Just a controller's throw from the pricey, upscale shops of Harajuku, the Lounge is part of Microsoft's effort to drive sales of the upcoming Xbox 360 in Japan, a market where its predecessor was humiliated. In 2002, Microsoft's Xbox (released in late February) sold 327,699 units in Japan. That same year, Sony's PS2 moved a whopping 3.7 million units. In terms of software market share, Xbox tallied a measly 0.5 percent, compared to 55.2 percent for PS2 and 12.4 percent for Gamecube. Even Sega's flagging Dreamcast outpaced Xbox, earning 0.8 percent of the software market. And things only went downhill from there. In 2003, Xbox sold about 97,000 units – only marginally better than the ancient PSOne (61,000) and JVC's WonderSwan Crystal (47,000). In 2004, that number dropped to about 40,000 – or, just 10,000 more than Nintendo's non-SP Game Boy Advance. Over this three-year period, Microsoft sold roughly 464,000 units in Japan, compared to 9.2 million for PS2 and 2.59 million for GameCube. It's no wonder that not a single Xbox game has ever managed to crack the Japanese yearly top 50.

However, Bill Gates' chunky, black box has performed much better in America. Microsoft claimed 468,000 consoles sold in November 2002 alone. And in the two-year period from 2003 to 2004, Xbox sold over 7 million units in the U.S. Compare that to PS2's 10.9 million over the same period, and one can see that – in America, at least – Microsoft's got it going on. So, why the collapse in Japan?

"Games like Halo and Splinter Cell don't really appeal to me," said Matsuo Taiki, 20, a student observing the crowds outside the 360 Lounge. "However, some people like them. I would like to see more variety for Xbox 360. Games that will appeal to more Japanese players."

Indeed, the very games that propelled Xbox sales in America turned off Japanese gamers in droves. In a land where shelf space is dominated by anime-style RPGs and dating sims, Western-flavored first-person shooters and the latest iteration of Madden aren't just unusual, they're unwanted. And while Xbox Live was (and is) certainly a hit with American gamers, offering a robust, well-engineered online service that trumped Sony's similar efforts, it was a non-factor in Japan, where online gaming – outside of a cell phone – simply isn't very popular. Finally, there is the typical Japanese gamer's historical bias against Western games. Aside from the few non-Japanese titles that enjoy moderate success there (GTA comes to mind), the majority of American and European titles either flop or are simply never released. For a system engineered in the U.S. and whose library consisted largely of U.S.-developed games, this was a problem.

But in this, the latest battle of the never-ending "console wars," Microsoft seems prepared to come out blasting. Redwood recognizes the importance of conquering Japan, the industry's second-largest game market.

"The Japanese market is the most important key for the Xbox [360]'s global strategy," said Yoshihiro Maruyama, general manager of the Xbox Division in Japan, at a recent press conference. "Microsoft is committing fully to its success in Japan."

Any missteps the 360 might make in Japan could spell doom for Microsoft's "global strategy." Fewer hardware sales mean fewer 3rd party titles in development. Lackluster 3rd party support means lackluster consumer interest. And if Japanese gamers are reluctant to pony up their yen for the 360 (which will reportedly retail for the equivalent of $350), then Microsoft may once again find itself with a console that soars in the U.S., but stalls in Japan.

In a recent interview with, Maruyama commented: "Unlike the U.S., the Japanese market has always been a winner-takes-all market. My goal is to be number one in the Japanese market. Unless you become the number one console, you cannot keep making money."

The potential lack of sales in Japan may be comparatively small versus the Xbox 360's almost certainly strong performance in the U.S. But when you're talking about a "global strategy" and fighting for every dollar on an industry-wide, $25 billion battlefield, a few percentage points can mean a great deal.

This time, however, Microsoft has taken care to sidestep the landmines encountered during the first go-round in Japan. Most importantly, the 360 will boast a stable of Japanese developers from the get-go. Koei, Konami, Square Enix and some 40 other developers have signed on to develop games. Director Tetsuya Mizuguchi, head of Q Entertainment and creator of United Game Artists/Sega's Space Channel 5 and Rez, will release the 360-exclusive Ninety-Nine Nights. Japanese developer support seems solid. The 360's library should have enough non-Western flavor to pique the interests of Japanese gamers. And while Microsoft is (smartly) sticking firm to its commitment to online gaming in Japan, the company has taken a decidedly different tack with the design of its new system. Co-developed by a firm in Osaka, the system's shell is slim and curvaceous, not at all like the oversized, utilitarian frame of its forerunner. It's hoped that the new design and the soft, white color will appeal to Japanese gamers.

"It looks cool!" squeals Yumi Nanaho, 19, when asked about the system's appearance. "It seems like they want to take a sexier approach this time."

Perhaps most importantly, the new system will flaunt one feature that Sony can't hope to match: a head start. With Microsoft launching in Japan on December 10 and the PS3 launching sometime in "Spring 2006," the Xbox 360 looks to have up to a six-month cushion before the competition hits store shelves.

For now, though, Microsoft's immediate focus is on locking down a blockbuster launch and keeping the drinks flowing at the Lounge. In these early days of the next-gen war, Microsoft still enjoys the luxury of buoyant optimism. But even with a six-month lead and a healthy roster of Japanese titles, most analysts predict the 360 will have a tough time keeping up with Nintendo's Revolution, let alone the PS3. Japanese gamers seem similarly pessimistic. In a damning Infoplant survey, just 5.8 percent of respondents said they had an interest in buying the Xbox 360, compared to 72.3 percent for the PS3. It's going to take quite a few trendy videogame lounges (and maybe a Katamari Damacy exclusive?) to change that number.

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