Japanese Gaming Industry Are Facing “Diversity and Multi-polarity” Evident from CEDEC 2009 – The Same for Other Industries Also?

Sunday, September 6, 2009 – Osaka, Japan

CEDEC 2009, the largest conference in Japan targeting Gaming Developers, was held September 1-3 in Yokohama, which clearly depicted today’s Japanese gaming industry summarized by diversity and multi-polarity, i.e. large vs small projects and global vs local. 2500+ participants and 1000 people to join student version CEDEC “Fair to research and study the industry” started this year gathered to the venue. The size of the conference expanded, expressing the sense of crisis of both the developers and management of gaming industry.

1) World is drastically changing with diversity and multi-polarity

The worldwide game industry trend was briefly explained in the opening session, which can be summarized that the game industry is expanding attributing to 2 key words, “diversity” and “multi-polarity”.

Diversity is expansion of device and community space besides gaming platform such as iPhone and social media including Facebook and Twitter. Thus, it is clear that gaming player population is increasing but majority are games they play are those that can be played free of charge, meaning negative impact on the current game device market from revenue and business aspect. Multi-polarity is about the emerging gaming market in China, India and Latin America. In these regions, market expansion is driven by net café online games and presence of Japanese gaming is extremely low.

These reveal that the business environment of Japanese gaming companies is tough, especially in China. Market size estimation of China for 2008 is 238.8 billon yen, which is almost the size of current Japanese game soft market for family use of 300 billion yen. It is possible that China’s market become bigger than Japan’s in 2009 although sales per person for China is far behind Japan. This means emergence of an enormous market.

2) Japanese gaming companies are suffering from dilemma

With Chinese government’s regulation and so forth, Japanese companies are struggling to enter Chinese market. Chinese companies are steadily improving their competitive advantage and meeting local needs to enhance their business and presence in the Chinese market. The fact that Japanese companies are struggling to adapt to multi-polarity is apparent from their foreign sales radio data. 6 game giants excluding Nintendo for 2008 first half was less than 25%.

Severe market environment in the western countries is a negative factor for Japanese companies although they know they need to expand business abroad, and consequently they are relying on Japan domestic package market. Japanese market size (hardware and software) is 600 billion yen for 2008 in total, which is less than 1/3 of the U.S. (2.1 trillion yen) and Europe (2.3 trillion yen), and is merely 12% of the worldwide market of 5 trillion yen. Therefore Japanese companies want to expand their overseas business but that is not easy because market environment of package soft in the U.S. and Europe is severe due to expansion of cheap and casual social gaming market.

3) Gaming companies face tough rival of “Casual gaming” companies that 1.25 million people enjoy

Social gaming offensive action of Japanese companies has started, such as Gree Inc. that estimated what kind of society it would be in 2010 and then developed corporate strategy. Gree estimated that market with mobile phone and mobile game devices will be created and community service would be the centre of the Internet business, and integrated SNS Usocial media) services, their main business, with game. Their killer content is casual game developed by their own Japanese developers leveraging Flash. 1.25 million members are already benefiting from their services and they aim to increase members to 20-30 million to create the biggest virtual community in Japan.

Gree is performing well financially, too, but has not announced its global strategy. Although they develop in Japan their development expense is low, and much revenue is generated by online advertising and item billing/charge. As a company of 100 employees, sales of 13.9 billion yen and operation profit of 8.3 billion yen for June 2009 is good. Gree is aiming to become No.1 in Japan local mobile market, but is planning to acquire users of home setting game market and therefore is a strong rival for gaming companies.

4) Japanese gaming companies can learn from best practices from other industry to deveop their strategy

Best practices of Capcom Co. Ltd’s case, whose gaming development is said to be functioning most effectively in Japan, may give Japanese gaming companies some clues for them to develop their strategy. Capcom restructured development organization with key words of cheap, agile and challenge to enhance the total power of development team. Cheap means efficiency by integrating game engine system. Agility means review of organization by gradual integration to 1 big development department with 600 developers, which resulted in positive effects such as reduction in developers waiting for next task and veteran staff educating new comers leading to faster learning. Challenge means challenging in the field of game that is not currently hot and/or gaming that is said to be difficult to develop in Japan in order to pursue enjoyment of gaming. This resulted in a successful game development with expense of 2 billion yen and they will invest 120 developers for the consecutive gaming development.

5) Web 2.0 social media (Twitter) is also playing a role for diversity and multi-polarity

Though their approach is different, both strategy of Gree and Capcom are based on local characteristics of Japan, which had been a hot topic throughout CEDEC. The issue is the optimum degree of applying local characteristics to the corporate strategy, but no one could estimate nor come to a conclusion because of the drastic change the global market is currently going through. However, some speakers estimated that diversity of new “input” such as motion controller, touch screen and sound recognition, and of new “output” such as hi-vision, BV (binocular vision) and AR (augmented reality) leads to “new interactive experience” and activate the market.

Diversity and multi-polarity seemed to have been occurring also among congress participants. Many of them had iPhone and were twittering by Twitter. There were some who did not know Twitter but such people also started twittering by leaning how to use word of mouth.


Japanese companies in other industry of high tech, electronics and automobile may also be experiencing dilemma of Japanese companies and diversity and multi-polarity mentioned above, and their future depends on how they adapt to changing business environment, create and/or position in the new market, and leverage diversity and multi-polarity to develop and execute their unique corporate strategy. Leveraging and benefitting from Web 2.0 would also be vital for companies to be competitive.


* Information about CEDEC is from a Japanese online article posted in Nikkei web site on September 4.