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Is Japan's development scene doomed?

CVG visits the Japan Foundation in London to find out...

On the sixth floor of a typically classical-looking building in London's Russell Square, you will find the Japan Foundation.

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Essentially Japan's equivalent of the British Council, its brief is to present the best face of Japanese culture overseas. Recently, it was the setting for a fascinating debate looking into the future of games development in Japan, with talks from Takuma Endo, president of developer Acquire (best known for the Tenchu and Shinobido games) and Professor Akira Baba, from the University of Tokyo. What they said sometimes made uncomfortable listening.

Video games constitute a great starting point for a bit of UK-Japanese cultural exchange, since both countries have healthy development scenes which are more influential on a global basis than you might expect given the relatively small size of the countries. When it comes to making games, both the UK and Japan have punched above their weight since the 1980s - but Mr Endo and Professor Baba soon made it clear that there's an uncomfortable feeling that traditional games development is now in crisis in Japan.

Japan and UK: still punching above their weight

Professor Baba kicked off with some telling - and somewhat worrying - figures. Especially if you're Japanese and love videogames. First, he confirmed that the British videogames market overtook the Japanese one to become the second biggest in the world after the US a couple of years ago. Which is impressive, given that Japan's population is roughly twice that of the UK. Fascinatingly, he revealed that the average UK gamer spends almost exactly twice as much on games per year as his or her Japanese counterpart.

Baba had also devised a method of assessing how influential individual countries are on the global development scene, and according to his figures, Japan is managing to hold onto its number two spot behind the US, but in 2006, Canada overtook the UK for third place. Which is an unsurprising consequence of the generous tax breaks Canada has been throwing at developers - and provides further fuel for TIGA's campaign to chisel tax breaks out of the UK government.

Social apocalypse

Soon, though, a theme emerged which would dominate the evening. Baba's figures showed that between 2006 and 2010, annual sales of traditional console and PC games in Japan had fallen by roughly $1 billion, whereas sales of social games had risen from nowhere to roughly $1 billion. Both Baba and Endo talked extensively about how the rise of social games in Japan has directly eaten into the conventional videogame market.

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Despite the obvious parallels between the Japanese and British games markets, that doesn't necessarily spell doom for us just yet - but it does present a glimpse into a potentially apocalyptic future as far as traditional gamers are concerned. Japan has two companies who have experienced Zynga-like success in the social gaming space - Gree and DeNa - and Endo asserted that roughly 10 per cent of their consumers are prepared to pay for in-game objects on a regular basis, a much higher proportion than is the case elsewhere in the world.

He spelled out the seductive economics of making social games in Japan: "for social games in Japan, you might get monthly sales of 20 to 30 billion yen, and maybe more than half of that is profit. That profit would equate, for consumer games, to selling 100,000 to 200,000 per month. So the tide is turning, I think, in Japan, and they say now that you can get greater profits from social games than consumer games. It could be that is unique to Japan, but that's the way things are going."

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