How the Japanese lost video games

When I was in Japan (2008-2009) I started work on a cynical article about the Japanese video game industry, inspired by some of my first-hand observations in the country. My basic conclusion was that the Japanese were running the industry almost entirely for themselves, which made absolutely no business sense since Japanese developers rely so heavily on international sales. This irrationality was in turn symbolic of the larger spirit of irrationality that governs so much of Japanese life, a culturally-ingrained small-mindedness that seems to be dooming the country to an era of increased irrelevance in the ever-more interconnected global order.

The article was never completed, alas. I wanted to release it before the dawn of the new decade but never quite got around to it. Still, in reading some of the disappointed coverage of this year’s E3 gaming expo, I was reminded of some of the critiques I had originally made, and thought it might be worthwhile to just publish the half-finished piece. It’s hopefully entirely readable, though I apologize if some ideas seem half-developed or insufficiently supported. I also wrote this to be accessible to all, so if you’re a hardcore gaming type person and find some of the tone patronizing, a thousand pardons.

How the Japanese lost video games (2009)

Are the Japanese any good at making video games? The clichéd answer would be yes, but the clichéd answer would also declare that the British are polite and the Chinese are poor, when anyone who has read the headlines recently knows that’s not the case. For a stereotype to be worth anything, it has to be rooted in some sense of present reality, and one particular dilemma of living in the 21st Century is that all of our favorite national stereotypes remain rooted in the 20th.

The 20th Century was good to Japanese video gamery. The country single-handled helped resuscitate the entire fledgling racket in the late 80s, then rode high off the hog for the next dozen or so years, churning out blockbuster title after blockbuster title that still largely clutter up lists of “The Best Video Games of All Time“.

But then things went sour, and Japanese video gaming entered a quiet, but marked decline in the late 1990’s. The first decade of the new millennium is now coming to a close, and the Japanese gaming industry has surprisingly little to show for it. An analogy could be made to the so-called “lost decade” that plagued the Japanese economy in the aftermath of the great Asian recession of the early 90’s — a decade in which precious little was accomplished, largely due to the fact that the Tokyo mega-corps of the 80’s had no “second-act” strategy.

Japanese gaming firms have similarly fiddled away the last 10 years accomplishing surprisingly little of substance, other than a steady stream of ever more elaborate attempts milk as much value as possible from the legacy of past glories.

Japanese gaming was great. But what has it done for us lately? Not much, and things seem unlikely to change.

What is Japan making?

The most successful video games of the last decade have almost all been American. The Sims, which the Guinness people now recognize as the single most commercially successful video game in the history of the world, was developed by Maxis labs in Emeryville, California. Guitar Hero, which continues to colonize campuses across the planet, owes its existence to Santa Monica-based Activision. The Californian town of Irvine churned out World of Warcraft, which has presently ensnared over 10 million players worldwide in its tentacles, while the infamous Grand Theft Auto series, which revolutionized the do-anything, go-anywhere “sandbox” genre, was created by Rockstar Games in New York.

In terms of critical acclaim, the national-origins record is just as homogeneous. IGN, the net’s largest and most influential website for all things video games, has picked an American-made title as their overall “Game of the Year” six out of eight times since the award’s 2001 founding (perhaps even more tellingly, their “Games of the Year” for Sony’s various platforms have, almost without exception, been entirely American). The no-less-prestigious international Academy of Interactive Arts and Sciences has similarly not named a Japanese-made game as their “Game of the Year” in over a decade (the last time being 1998, when Nintendo’s Legend of Zelda: the Ocarina of Time got the nod).

When Japanese-made games do receive rare critical acclaim, they are almost always a sequel of some sort. Games like Super Mario Galaxy, or the latest incarnation of the Zelda franchise, whose familiar characters and settings actively pander to the nostalgic childhood memories of the late-20s males who dominate the video game commentariat.

Have a sequel. Better yet, have fourteen!

The pandemic sequelization of video games is not an unknown phenomenon on this continent, of course, but only in Japan does it so thoroughly represent the gaming industry’s bread-and-butter. Visit a video game store on the streets of modern Tokyo and you’ll find shelves crammed with sequels, prequels, interquels, updates, reimaginings, resets, and all sorts of other dust-ups of the decaying corpses of the last decade’s hit franchises.

Take the Osaka-based Capcom Corporation, for example. They have reinvented their famed Mega Man franchise no less than seven times since the original Mega Man debuted on the Nintendo Entertainment System back in 1987. And this, it’s worth noting, comes from a franchise whose original series, before any reinventions at all, had already spawned eight sequels all on its own.

But it’s not just Capcom, of course. 2009 saw Tokyo’s Square-Enix release the paradoxically-titled Final Fantasy XIII, and number 14 has already been promised. Nintendo is currently rumored to be working on Mario Party 9, and Sega’s Samurai Showdown recently churned out Part 11 for the X-box 360. Even Sega’s Puyo Puyo, an incredibly uninspired puzzle game that literally consists of nothing more than lining up colored blobs, released its seventh sequel earlier this year.

Whose industry is it?

All these rehashes do make some business sense, of course. Japanese gaming companies remain sensitive to the demands of the Japanese market, a demographic with a well-documented tendency to uncritically gulp down any game with a familiar franchise tie-in, quality be damned. But myopic nationalistic pandering is just that. The Japanese market is not the be-all and end-all of video game sales as it was in the days of yore (if ever actually was). Indeed, by all evidence it is quietly drifting away into irrelevance, a victim of its own bizarrely esoteric tastes and weakening numerical importance.

According to the Top Global Markets research group, in 2008 the Japanese share of the global video game market declined by 13%, while the American share rose by 15% and the British(!) share by 26%. And this simply marks the latest development in a steady trend that has already been well under way for at least the last decade: year after year the US/European markets record growth, or at least stability in their global share of video game sales, while the Japanese numbers slide sluggishly downhill. By some accounts, Japanese consumers now only consume a pitiful 20% slice of the global electronic gaming pie.

The numbers aren’t great even if we look at Japan in isolation. Overall game sales within the Japanese Empire dropped by a much-reported 20% in 2008, and it looks increasingly likely that the ‘09 numbers will be even worse. Like movies, video games tend to play with a very risky profit margin, since both industries share a panache for overspending and bloated budgets. Even modest sales losses become extremely serious in such a climate, especially in a nation as rapidly-aging and childless as Japan, where an endless, stable stream of young consumers cannot be taken for granted.

Growing apart

At a time when the world economy is globalized like never before, it seems odd to imagine the video game market remaining rigidly divided on crude national lines, yet that’s very much the reality. Compare the annual “best seller” lists of North America with those of Japan and you may as well be looking at different planets. Grand Theft Auto 4, which sold a combined 9 million titles in the UK and US sold a measly 250,000 in the Land of the Rising Sun, while Call of Duty: World at War, which sold almost six million copies in the Anglosphere, was not even released in Japan at all. Japan’s best-sellers, in contrast, still tend to be esoteric fantasy-based role-playing games, like Dragon Quest IX, Monster Hunter, or reincarnations of some tried and true franchise like the Mario Brothers or Pokemon. A fine example would be Shin Sangoku Musou 5, which is the third-best selling Playstation 3 game of all time in Japan, but would generate little more than blank stares if mentioned anywhere else on the planet.

This stark divergence in taste represents a serious problem for the future of the Japanese gaming industry. If their developers cannot break out of this masturbatory cycle of nativist indulgence, then they may as well abandon the export pretense altogether. Yet if you read the majority of North American gaming websites and internet forums, you’ll walk away with the impression that the problem is somehow on our side, and that the limited American appeal of, say, Kirby Super Star Ultra (Japan’s ninth-best selling game in 2008, which has yet to crack the American top 30) is somehow indicative of a profound flaw in the US psyche.

Much of the American gaming media and extended subculture is still dominated loud Japanophiles, but their influence is vastly disconnected from actual market trends, making the tastes of your average convention-going cosplayer woefully unrepresentative of the very industry he professes to so proudly appreciate. So much as the guy on the message board may claim otherwise, there is no real demand for a game where Sonic and Luigi travel back in time to stop the Double Dragon brothers from kidnapping Dr. Light. The world’s most popular games of recent years tend to be set in the real world, featuring realistic graphics, Hollywood-esque characters and plots, and fast, violent action. America makes these sorts of games. Japan doesn’t.

Same ol’, same ol’

The world also likes games that are creative and fresh, and by and large Japan doesn’t make many of those, either. Japanese innovation, or the lack thereof, is a serious problem.

Consider Wii Ware, Nintendo’s popular online channel that allows users to download not-for-resale games directly to their consoles. In theory, because of the service’s comparatively low barrier to entry, Wii Ware should allow the unrestrained imaginations of developers to go wild, churning out innovative titles that might be too quirky, or otherwise “risky” for primetime retail. And that’s just what has happened — in America. Games like 2D Boy’s World of Goo (c/o San Francisco) or the Canadian-made Defend Your Castle have leaped to the top of the charts, both commercially and critically (World of Goo was even named IGN’s game of the year in 2008).

In contrast, Japanese developers have resorted to simply digging deeper into their own musty closets, churning out titles such as the intentionally primitive Mega Man 9, or the geeky Final Fantasy IV: The After Years, that offer yet more retreads of Regan-era franchises.

The great American games of recent years, Grand Theft Auto, Guitar Hero, the Sims, etc, were successful precisely because of their creativity. All were paradigm changers in some way; games that offered players liberating new ways to explore digital worlds (controlling a mobster who could lie, cheat, and steal his way through life), interact with the action on screen (centrally managing the lives of an entire neighborhood), or immerse oneself in an increasingly vicarious, virtual-reality experience (playing the rock songs on a life-size, guitar-shaped controller). In Japan? Well, Ryu has over a dozen different outfits in Street Fighter IV.

Too big to succeed

Though Japan’s declining relevance may be primarily a cultural problem, there is a significant structural component as well. It’s impossible to understand why the Japanese make the sort of conservative, staid games they do without also appreciating the decidedly un-western way the Japanese manage their entire national economy.

As part of its postwar economic consensus, Japan’s elites have traditionally favored a heavily-subsidized private sector dominated by a handful of mega corporations able to single-handedly control entire sectors of the GDP. Government meddling, along with active behind-the-scenes colluding and collaboration between nominal corporate rivals helps ensure long-term financial stability.

The Japanese video game industry is not exempt from any of these traditions. Of the 20 titles that comprise Japan’s 2008 and 2007 best-sellers, 16 were made by just one company — Nintendo — while the remaining four spots were split evenly between Square-Enix and Capcom. Even discounting Nintendo’s lopsided dominance, the Japanese video game market is still overwhelmingly controlled by less than a dozen companies, and the number seems to get smaller every year.

Tokyo-based role-playing game giant Square merged with its longtime rival Enix in 2003, then purchased Taito (historic makers of Space Invaders, and, more recently, popular franchises such as Cooking Mama) two years later. Namco (of Pac Man and Tekken fame) merged with Bandai (the creators of Tamagotchi and licensers of the Gundam games) in 2005, the same year Konami became the controlling shareholder of Hudson Soft (Bomberman). The less well-known (at least in the US) Tecmo and Koei likewise concluded a merger earlier this year, and in doing so helped ensure that 70% of the Japanese gaming market is now controlled by just six companies. That puts the Japanese home-console software industry firmly in the realm of American “Big Tobacco” and Russian oil in terms of cartel-like dominance of a single national market.

And even when they’re not actively gobbling each other up, incestuous relations abound. Nintendo has published titles jointly with Square, Namco, and Sega where iconic corporate mascots like Mario and Sonic playfully cohabitate as if lifelong friends. Perhaps feeling left out, Namco and Capcom have engaged in a bit of corporate footsie of their own, churning out a 2005 fighting game with the bluntly unsubtle title of Namco X Capcom, as if the corporate mash-up was itself a sufficient selling point (it was, at least in Japan).
The whole situation reached a bizarre climax earlier this summer when Capcom and Namco signed a formal partnership to jointly produce a series of new arcade machines featuring characters licensed from Nintendo, from a series (Mario Party) developed by Konami.

The North American gaming press, for its part, tends to avoid deeper analysis of such arrangements, and the disturbing trends they reveal about the nature of Japanese corporatism, in favor of giddy delight at the promise of ever-more inter-franchise crossovers. And indeed, whenever the latest merger, partnership, or “special relationship” is unveiled between two of the Japanese gaming giants, one always hears many solemn corporate promises about how everyone’s favorite flagship franchise will be well “respected” under the new arrangement. While it may be delightful to watch Bomberman fight Chun-li, or whoever, it’s a shame that so few fans bother to mourn the death of competitive innovation that allowed such unique franchises to arise in the first place. As anyone over the age of 20 can remember, the only reason we have a Mario and a Sonic at all is because Nintendo and Sega were once pitted in an brutal existential war for industry supremacy, frantically churning out rival titles and new franchises left and right in the battle to win fresh converts to the cause. There’s really no incentive to do any of that today, if we’re all buddies now.

The future

There are some positive signs for Japan amidst all these depressing trends, of course. Despite their increasing hegemony, Nintendo has, at least timidly, spawned a creative renaissance of sorts with the super-interactive controllers of their Wii platform (which can be swung, shook, stepped on, and slammed, rather than merely pressed, to affect on-screen action). Games that make heavy use of this technology, like Nintendo’s own Wii Fit and Wii Sports tend to do well in both the Japanese and American markets, which led to a predictable flurry of competitor copycat devices at this year’s international Electronic Entertainment Expo. Handheld gaming — also Nintendo’s near-exclusive domain — is a field similarly untested enough to offer opportunities for genuine innovation, through touch screens, motion sensors, and various peripheral add-ons. The flamboyant and eccentric nature of Nitendo’s leadership, personified best by perennial risk-taking producer Shigeru Miyamoto, is the company’s greatest asset, though vastly at odds with Japanese corporate norms. Their success may thus be the exception that proves the rule regarding the dire state of the national industry as a whole.

Simultaneously, America is experiencing problems of its own. The phenomenon of the indolent gaming megacorp is also growing in the United States (though cartel-like collaboration between nominal competitors remains distinctly Japanese). Slate magazine’s Evan Van Zelfden penned a cutting editorial earlier this year in which he argued that the increasing Hollywoodization of video gaming, where enormous corporations release epic games with multi-billion dollar budgets, neither makes economic sense (as investments inevitably become that much harder to recoup) nor is any good for product innovation (since it promotes a neurotic obsession with staying “safe”). Which, of course, are basically the same problems, albeit in embryonic form, that have already poisoned the Japanese industry.

Creativity is not an instant formula for success, and there’s always a case to be made for sticking with what works. But the very definition of “what works” in gaming has changed tremendously over the course of the last decade, from the perspective of producer and consumer alike. Games are more adult, more interactive, and more thematically diverse than they were ten years ago, and also more aggressively western in style and appeal. It was a shift that much of the globe eagerly embraced, but an evolution that Japan had very little to do with.

The challenge is whether or not the Japanese gaming elders will concede this, and readapt to a new zeitgeist that has arisen in brazen spite of their conservative inertia. The alternative would be to go the way of the French auto industry or British shipbuilding; historically significant, but inescapably destined for eclipse.

Selected references:

Japanese games market down a whopping 25% (Kotaku, July 2009)

The best selling game of 2008 was… (Voodoo Extreme, February 2009)

Japanese games global industry share plunges below 20% (Sankaku Complex, January 2009)

Wii Play is the best selling game of 2008 (IGN, January, 2009)

Totals, statistics, and analysis of the 2008 world videogame market (VgCharts, January 2009)

Capcom of Japan corporate report, 2009 (PDF)

Top 5 best-selling PS3 games since its launch in Japan (Joystiq, December, 2008)

Japanese 2008 sales statistics (Dengeki Online, December 2008)

Japan getting bored of videogames? Sales down 21% (Business Insider, November, 2008)

NPD Fallout: best selling games of 2007 (1Up, January 2008)

Top 100 best selling games in 2007 in Japan (Digital Battle, January 2008)