Editorial: Adios Japan?

Last week gave us yet another piece of evidence about the disconnect between Japan and the rest of the video game industry. It should be no surprise that the two companies in the news last week, as reported by the foremost Doctor of Feminism, Julian Taylor, were Nintendo and Capcom, two companies that have fallen behind in recent years. The western shift in gaming is by no means a recent development, but it appears that many of our favorite Japan-based companies are still shell-shocked over the realization that their homeland is no longer the center of the gaming universe.

Gaming’s shift westward first became clear back in the sixth generation, when the PS2, Gamecube, and Xbox were fighting for dominance. Microsoft’s entrance into the console scene marked the first time a western company successfully challenged Japan’s console dominance since the North American video game crash of 1983. Before the sixth generation, Japan was perceived as the king of video games, a perception that was a bit off. Although nearly every console was developed by a Japanese company, as were many of the popular games, North America still accounted for higher sales figures, often by a large margin. Of course many factors, like population differences, could have been in play, but it is still clear that North America was not the distant second that Japan would have us believe.

This early dominance set Japan up to come crashing down as the gaming exploded in popularity in North America, and much of the country has had trouble adapting after this fall from grace. Capcom, once mentioned along the likes of Square Enix and Nintendo as the kings of Japanese gaming, has fallen extremely hard. Back in September of 2013, a report surfaced that Capcom had $152 million left in the bank, a meager amount considering the development and marketing costs of a AAA game. Capcom has been briefly saved from bankruptcy thanks to Monster Hunter 4, but it will need to make drastic changes to have a further stave off a fate similar to Atlus. Capcom’s recent revelation that they believe development for current-gen consoles requires eight to ten times more work is further proof that they are still unable to adapt given their precarious situation and changing industry.

While Capcom is in dire straights financially, I now turn my attention to another company that has failed to adapt, but is still succeeding, Nintendo. While we have suspected for years that Nintendo is both ignorant to their competitors and indifferent to their third-party devs, the allegations made by an unnamed third-party developer are a bit surprising. Nintendo has marched to their own drum since they decided to stick with cartridges over disc-based media for the Nintendo 64, but to admit that their own technicians are clueless about features that PSN and Xbox Live smacks of Nintendo’s cockiness. However, for all of Nintendo’s failures in adapting with the current industry, they are not going bankrupt anytime soon. A quick look at Nintendo’s balance sheet, as reported on October, 30th 2013, reveals that they have around eight billion in cash and short-term investments.

A few Japanese companies have properly adapted to the current gaming industry. Sony is the prime example of a company that has embraced this new environment. Along with collaborating with third-party developers, Sony has maintained a strong first-party presence on its consoles because it has acquired non-Japanese development studios, like Naughty Dog. Sony’s collection of studios are spaced out among the three primary gaming continents, Asia, Europe, and North America. By doing this, Sony has diversified their non-third-party offerings, making their consoles attractive to brogamers and weeaboos alike. This diversity in developers is even more pronounced when one looks at Nintendo’s list and realizes that only five of their forty-seven first and second-party developers are based outside of Japan.

Japanese hubris has played a large role in the country’s downward spiral. Many Japanese developers still hold back certain titles because they believe they will not sell well in the West, and if the title actually gets a western release, it is done so with minimal marketing. Japan’s cockiness is not just unique to its niche titles either as Japanese developers (Capcom and Square Enix) have recently labeled some extremely successful games as failures because they did not manage to hit the grossly overestimated sales marks that were projected. What will be important for Japanese companies to remember is that people outside of Japan still want to play their games and oftentimes sales in North America will surpass the totals in Japan. They just have to remember that they will not have numbers like Call of Duty.

Japanese developers have their work cut out for them. Remaining static carries the risk of the industry slipping further out of the country’s grasp, but they also need to avoid just emulating the West. Some Japanese developers have begun to shift towards smartphone development, something that stings for many of us JRPG lovers outside of Japan, but the cheaper development costs coupled with the larger market make the motives behind the move clear. Companies like Capcom and Square Enix are trying to play both sides, but a focus solely on smartphone titles would not be surprising if they continue to overspend on their AAA titles. I still hold out hope that these companies will get their shit together, but change has to be on the horizon for them, otherwise I will have to get used to using touch controls to play my beloved JRPGs.