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Xbox seeks foothold in Japan

By Desmond Hutton
Bloomberg News

CHARLES PERTWEE / BLOOMBERG NEWS A customer tries a demo game on a Microsoft Xbox console in an electronics store in central Tokyo.

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That's partly because Japanese Xbox owners have about 160 games to choose from, compared with more than 6,000 for the PlayStation 2. Microsoft, the world's biggest software maker, plans to gain on Sony by releasing new games tailored for Japanese users with the next version of the Xbox, said Norman Cheuk, head of Microsoft's game-development division in Tokyo.

"It's too late to be No. 1 on this version of the console," said Cheuk, 35, who moved to Tokyo from Microsoft's Redmond headquarters in September and oversees a team of 100 game developers. "A lot of what we're doing today is to position ourselves. We're looking at the future generations where we'd like to be successful."

Microsoft hasn't said when it will release an updated Xbox console.

Japanese consumers bought about 60,000 Xboxes last fiscal year, compared with 2.9 million PlayStation 2 consoles, according to Tokyo-based market researcher Enterbrain. The Xbox ranked third by sales behind PlayStation 2 and Nintendo's GameCube. The companies don't report console sales by country.

Xbox sales in Japan — the world's second-biggest market for video-game consoles and software after the U.S. — slid by two-thirds in the year ended March 31, according to Enterbrain. Sales dropped even after Microsoft cut the console's price by a third to 16,800 yen ($153) in November.

To grab market share from Sony and Nintendo in Japan's $3.8 billion market for game consoles and software, Microsoft must persuade Japan's biggest game publishers to make more titles for the Xbox, said P.J. McNealy, an analyst at American Technology Research in San Francisco. Microsoft's own Japan-based game developers plan to release just three new games over the next year, according to the company.

Konami, Japan's biggest independent game maker, released flight-simulator game Air Force Delta 2 exclusively for the Xbox when the console debuted. The follow-up version of the game will be exclusive to the PlayStation 2, said Hitomi Nozawa, a spokeswoman for the game maker.

Capcom, Japan's third-biggest game maker, has turned down offers from Microsoft in recent months to help pay distribution and development costs in return for more exclusive games for the Xbox, said Kazuhiko Abe, head of Capcom's corporate-strategy division, without giving details.

Square Enix, Japan's No. 2 game maker, publishes none that can be played on the current Xbox. It's considering making titles for the next Xbox, said Michiro Sasaki, general manager for corporate planning. Tokyo-based Square Enix's Final Fantasy series for the PlayStation 2 has sold 60 million copies worldwide.

Microsoft has allied with smaller Japanese partners. Tecmo, a Tokyo-based game developer whose 52.6 billion yen in sales last fiscal year were a quarter of Capcom's, makes the two best-selling titles for the Xbox in Japan, according to Enterbrain. They include Dead or Alive, a fighting game centered on a martial-arts tournament.

The Xbox trails in Japan because players have a smaller choice of locally designed games, said Peter Moore, Microsoft's vice president of retail sales and entertainment — especially popular role-playing titles such as Final Fantasy.

The Xbox has performed better outside Japan. Microsoft said last month it was on track to sell between 13.5 million and 16 million of the consoles worldwide by the end of its business year on June 30. That's roughly on par with the 14.5 million GameCube consoles Nintendo had sold as of March 31. Sony had sold 70 million PlayStation 2 machines as of March 31.

Copyright © 2004 The Seattle Times Company

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