Further Research on
Game Market in Japan
Organization Members
Research and Consulting Division,
Japan Research Institute
2-18-1 Higashi-gotanda, Shinagawa-ku
Tokyo...
2	
Japanese
Gaming
Market
Overview
The gaming market size in Japan is
about € 5,712 M and accounts for 13 %
of the global ...
3	
Efforts of the
Japanese
Government
There are various problems to be
solved in the social gaming market and
smartphone g...
4	
Impact on
the Game
Industry in
Japan by
Smartphone
It was very difficult for feature phone
gaming makers to enter home ...
5	
“Galapagos
Phenomenon”
of Home
Video Gaming
Market
It is difficult for foreign gaming makers
to enter the home video ga...
6	
Action of
Smartphone
Game Maker
Gung Ho translated its popular
smartphone game called "Puzzle &
Dragons" into home vide...
7	
Action of
Hone Video
Gaming
Maker
SQUARE ENIX has done various efforts
to enter smartphone gaming market
earnestly sinc...
8	
Impact on
Game
Terminal
Maker by
Smartphone
In January 2014, Nintendo has
announced operating profit for the fiscal
yea...
9	
Implications
to enter
Gaming
Market in
Japan
At first, foreign companies enter
smartphone gaming market with a
coalitio...
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Team Finland Future Watch Report: Further research on game market in Japan

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Team Finland Future Watch Report: Further research on game market in Japan

  1. 1. Further Research on Game Market in Japan
  2. 2. Organization Members Research and Consulting Division, Japan Research Institute 2-18-1 Higashi-gotanda, Shinagawa-ku Tokyo 141-0022 JAPAN PHONE:+81-3-6833-0900 FAX:+81-3-6833-9480 Project Leader Koji YAMAURA (Associate Senior Consultant) yamaurakoji@jricojp +81-3-6833-5369 Adviser Hideyuki ASAKAWA (Senior Consultant) asakawahideyuki@jricojp+81-3-6833-2815 Project Members Yohei KOTAKE (Consultant) kotakeyohei@jricojp +81-3-6833-6333 Yuki KUWABARA (Consultant) kuwabara.yuuki@jri.co.jp +81-3-6833-6587 Assistant Takako IMAI (Assistant) imai.takako@jri.co.jp +81-3-6833-1562 Contact information Tekes – the Finnish Funding Agency for Innovation Tekes is the main public funding organisation for research, development and innovation in Finland. Tekes funds wide-ranging innovation activities in research communities, industry and service sectors and especially promotes cooperative and risk-intensive projects. Tekes’ current strategy puts strong emphasis on growth seeking SMEs.
  3. 3. 2 Japanese Gaming Market Overview The gaming market size in Japan is about € 5,712 M and accounts for 13 % of the global market. The personal expenditure for game in Japan is about € 44.69, which is nearly two times higher than the other regions at least. In Japan, the feature phone gaming market accounts for about 45% of the whole market, but there is a possibility to shrink rapidly in the future due to the spread of smartphone. The smartphone gaming market is growing rapidly and is expected to be the largest market in Japanese gaming market in the future. [Figure] Market Overview (Source) The Japan Research Institute summarized from public information Positioning of Japanese gaming market Japan, €5,712M, 14% North America, €13,623M, 33% Europe, €12,911M, 31% China, India, Korea, €9,208M, 22% Gaming market by region (2011) Personal expenditure for game (2011) 44.69 25.77 17.47 3.49 0.00 10.00 20.00 30.00 40.00 50.00 Japan North America Europe China, India, Korea EUR "Personal expenditure for game "= "Gaming market" / "Population" 2012 Market Size (M€) Composition Ratio 1,937 27.8% -1.3% Feature phone game 3,108 44.5% 55.7%   (*) Smartphone game 918 13.2% about 300% 1,014 14.5% 1.1% Type of game Growth Rate (y/y) Home video game Mobile phone game PC online game * There isa possibility to shrinkrapidly inthe future due tothe spread of smartphone. GamingMarket by type of game in Japan
  4. 4. 3 Efforts of the Japanese Government There are various problems to be solved in the social gaming market and smartphone gaming market, because the major company and business model of two gaming markets are very different from ones of home video gaming market. Consumer Agency, METI ( Ministry of Economy, Trade and Industry ), MIC ( Ministry of Internal Affairs and Communications) have efforts for environmental arrangement, industrial promotion and consumer protection. The common point of the efforts of METI and MIC is that they try not to set penalties for malicious company but to construct environment where users can select safe apps and games themselves. There are many foreign companies in smartphone and social gaming market, and if the government set penalties for malicious foreign companies, it will be a little impact on those companies, so they are forcusing on to construct environment for users. [Figure] Efforts of the Japanese Government (Source) The Japan Research Institute summarized from public information Smartphone game and social game are provided on the Internet. When user play them, they are always connected to the Internet There are various problems about environmental improvement, consumer protection and industrial development The major company and business model of the two gaming markets are very different from ones of home video gaming market Efforts of the Japanese government Agency: Consumer Affairs Agency, Government of Japan Overview efforts, Project name: The Regulations Banning "Complete Gacha" (2012/07) Purpose, Details: In order to prevent high demand by social game, it banned "Complete Gacha" which was the most popular billing system in social gaming market Agency:Ministry of Economy, Trade and Industry Overview efforts, Project name: Research study about development of Network-based gaming environment Purpose, Details: Clarifying the problems of social game, Study about development of environment where people can play the game safely Agency: Ministry of Internal Affairs and Communications Overview efforts, Project name: Construction of database and validation system of smartphone apps Purpose, Details: Construction of mechanism to inform user the evaluation result of safety of smartphone apps, Construction of the environment where users can select safe apps themselves Protection of consumer Business environmental arrangement, Industrial promotion Efforts1 Problems of social game and smartphone game Efforts2 Efforts3
  5. 5. 4 Impact on the Game Industry in Japan by Smartphone It was very difficult for feature phone gaming makers to enter home video gaming market and, on the contrary, it was very difficult for home video gaming makers to enter fearture phone gaming market. Due to the spread of smartphone, structure of the game industry in Japan changed as below. [1] “Development environment” and “Operating terminal” of mobile phone game changed significantly. These two elements come closer to ones of home video game. “Development environment” changed to have high flexibility of development which means the makers are allowed to use many kinds of development languages and functions of mobile phone. The interface of mobile phone turned into touch screen, this change enables for users to play game which requires complicated command. [2] Due to the two changes, some game makers can release full-fledged games for smartphone and some of the games can be released at a high price. "Users", "User Needs" and "Business model" come closer to ones of home video game. [3] So it become easier for smartphone gaming makers to enter video gaming market and, on the contrary, it become easier for home video gaming makers to enter smartphone gaming market. [Figure] Change of business environment of mobile game by smartphone (Source) The Japan Research Institute summarized from public information Feature phone game Home video game Development Environment Low flexibility of development Business Model Free-to-Play( item charging ( micro transaction ), advertising revenue) Small screen, 12 keyboard for one- handed operation, Low spec terminal Operating Terminal User Needs Killing time, Enjoying easy game Very casual users which want to play game for free Users Development Environment High flexibility of development Business Model Package Sales( High price) Big screen, Proprietary controller, High spec terminal Operating Terminal User Needs Enjoying full- fledged game Casual users, Heavy users Users × [0]significant hurdle to market entry -> each markets are independent Smartphone game Development Environment High flexibility of development Business Model Free-to-Play( item charging(micro transaction), advertising revenue), Package Sales( middle price) Middle screen, Touch screen, High spec terminal Operating Terminal User Needs Killing time, Enjoying full- fledged game Very casual users ,Casual users, Heavy users Users [1]Development environment and Operating terminal change significantly [2]These changes have impact on "Users", "User Needs" and "Business model" [3] It become easier for the companies in each market to enter each market "Big Wall"
  6. 6. 5 “Galapagos Phenomenon” of Home Video Gaming Market It is difficult for foreign gaming makers to enter the home video gaming market in Japan. And it is difficult for Japanese gaming makers to enter the global market too. These difficulties that called “Galapagos Phenomenon” are composed of the following factors. 1. Some popular games in Japan are produced based on local cartoon films, local comics and local TV programs. 2. The needs of users in Japan are very different from those of foreign users. 3. In Japan, portable games are more popular than stationary games. "Galapagos Phenomenon” will continue in the future, because factor-1 and 2 won't change. [Figure] Three factors of “Galapagos Phenomenon” (Source) The Japan Research Institute summarized from public information
  7. 7. 6 Action of Smartphone Game Maker Gung Ho translated its popular smartphone game called "Puzzle & Dragons" into home video game called "Pazudora Z". It was released on December 12 and achieved one million sales in three weeks. Success factors of "Pazudora Z" are that the company targeted children which don't have a smartphone and enabled user to play "Pazudora Z" for unlimited hours without waiting time. Other smartphone gaming makers might enter home video gaming market more aggressively because of the success of "Pazudora Z". JRI thinks that Gung Ho might release the cartoon films, comics and goods of "Puzzle & Dragons" such as “Pokemon” and the series of "Puzzle & Dragons" for home video game such as the series of “Final Fantasy”. [Figure] Unit sales and Success factors of “Pazudora Z” (Source) The Japan Research Institute summarized from public information No. Title Release date Unit sales ('000) 1 Pokemon X · Y 2013/10/12 3,977 2 Monster Hunter 4 2013/9/14 3,293 3 Animal Crossing Tobidase 2012/11/8 1,739 4 Tomodachi Collection : New Life 2013/4/8 1,580 5 Dragon Quest VII - Warriors of Eden - 2013/2/7 1,205 6 Pazudora Z 2013/12/12 1,006 Total unit sales of "Pazudora Z" The unit sales ranking 2013 of home video game in Japan "Pazudora Z" achievedone millionsale in three weeks "Pazudora Z" is locatedat the 6-position eventhough it was released inDecember 535 807 1,006 1,158 1,197 1,228 1,250 0 200 400 600 800 1,000 1,200 1,400 12/09- 12/15 12/16- 12/22 12/23- 12/29 12/23- 1/5 1/6- 1/12 1/13- 1/19 1/20- 1/26 Thousand Unit Success factor of "Pazudora Z" The company targeted children which don't have a smartphone -> Strengthening of RPG elements -> Eliminating item billing function in order to enable parents to give their children the game with ease User can play "Pazudora Z" for unlimited hours without waiting time -> Users who feel the stress to "Puzzle & Dragons" purchase the game Smartphone gaming makers might enter the home video gaming market more aggressively Next step of Gung Ho (Consideration of JRI) * Gung Ho might release the cartoon film, comic and goods of "Puzzle & Dragons" such as "Pokemon" * Gung Ho might release the series of "Puzzle & Dragons" for home video game such as the series of "Dragon Quest" and "Final Fantasy"
  8. 8. 7 Action of Hone Video Gaming Maker SQUARE ENIX has done various efforts to enter smartphone gaming market earnestly since 2013. The most notable point of their efforts is that the company is trying to establish "Package Sales" model, which is popular business model in the market of home video game. Although in smartphone gaming market, the most popular business model is “Free-to- Play”. If this "Package Sales" model will be established, other home video gaming makers will enter smartphone gaming market more aggressively. Other efforts are the release of portal application and a new title of “Dragon Quest” series for smartphone and the cooperation with NTT DoCoMo in smartphone game. NTT DoCoMo has focused on developping services of smartphone since 2012. SoftBank also acquired two famous smartphone game makers, GungHo and SUPERCELL. Japanese mobile phone operators might have a big impact on the market. [Figure] Action of SQUARE ENIX (Source) The Japan Research Institute summarized from public information Release of the past titles of "Dragon Quest" series in smartphone gaming market - Release of "Dragon Quest 7" and "Dragon Quest 1" for smartphone - Although the price of "Dragon Quest 7" was 28€ which was very high price in smartphone gaming market, the sales was strong. -> The company want to establish "Package Sales" Release of portal application and a new title of "Dragon Quest" series for smartphone - Release of portal app where the company will sell new title of "Dragon Quest" series for smartphone . -The company announced a plan to release a new title of "Dragon Quest" series for smartphone The cooperation with NTT DoCoMo in smartphone game -"Dragon Quest X" are sold at NTT DoCoMo 's game platform called "d game" Free-to-play current business model Free-to-play Package Sales Future business model
  9. 9. 8 Impact on Game Terminal Maker by Smartphone In January 2014, Nintendo has announced operating profit for the fiscal year ending March will become a deficit of 250M€ from a surplus of 714M€ . The cause of the downturn was sluggish sales of Nintendo’s terminal at the year- end shopping season. The cause of the sluggish sales was that some of light users which are primary customers of Nintendo’s terminal were changing to the smartphone users. In January 2014, Nintendo revealed a plans to develop smartphone apps for the first time by the end of the year. But Nintendo also announced that the company will continue to develop new home video game terminal and they are not only focusing on smartphone game market. [Figure] Performance and Failure factor of Nintendo (Source) The Japan Research Institute summarized from public information 714 -250-400 -200 0 200 400 600 800 Past earnings forecasts(2013/04) Updated earnings forecasts(2014/01) Operating profit forecast for the fiscal year ending March, 2014 Million EUR Significant downward revision The cause is sluggish sales of the terminal 9,000 18,000 2,800 13,500 0 5,000 10,000 15,000 20,000 Wii U(Hard) 3DS(Hard) Past earnings forecasts Updated earnings forecasts(2014/01) Billion Unit Game terminal unit sales forecast One third of conventional prediction Change of using terminal by three types of user Before the spread of smartphone Very casual users Casual users Heavy users Feature phone Nintendo's terminal Sony and Microsoft's Very casual users Casual users Heavy users Smartphone Nintendo's terminal Sony and Microsoft's terminal(PS4, Xbox One) Terminal SpecUsers Low Middle - High ->Differentiated High Middle Middle - High ->Halfway Very High Terminal After the spread of smartphone
  10. 10. 9 Implications to enter Gaming Market in Japan At first, foreign companies enter smartphone gaming market with a coalition of Japanese mobile phone operators or home video game makers because this coalition can be lower the entry barrier for them. They want to enter this market earlier as soon as possible, bcause the market is growing rapidly. Next, taking advantage of the experience which are developed in the smartphone gaming market, they enter the home video gaming marke. Finally, they release the next series of the game for home video game. They also release cartoon films, comics and goods of the game ( “Media Mix” ). “Media Mix” has a possibility to enable companies to earn a huge profit for example, the total sales of the “Media Mix” of Pokémon in Japan is € 12.1 billion. [Figure] Japanese game market entry step (Source) The Japan Research Institute summarized from public information Smartphone game market * Market size :1,927M€ * Growth Rate :about 300% * Entry barrier :low * Business model - Free-to-Play( item charging(micro transaction), advertising revenue),Package Sales(Not mainstream) * Other features - There are various new entrants such as venture companies, overseas companies and home video gaming makers . Therefore, the market is very competitive. Home video game market * Market size :918M€ * Growth Rate :-1.3% * Entry barrier :High * Business model :Package Sales Foreign company Step 1 Entry into the smartphone game market with a coalition of Japanese mobile phone operators or home video gaming makers × Step2 Entry into the home video game market by taking advantage of the experience which are developed in the smartphone gaming market Other content market * comics, cartoon films, goods Step3 * Release of the series of the game * Media mix

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