How Cultural Authenticity Powered Japan’s Global Gaming Resurgence
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Image courtesy of Square Enix
The global video game market is poised to expand to a staggering $227 billion in 2023, according to PwC’s Global Entertainment and Media Outlook 2022-27. For perspective, that’s more than five times the size of the global cinema industry. On track to exceed $312 billion in 2027, gaming shows no signs of slowing down.
In this article, the English version of 日本のゲーム産業はグローバルでどう輝くのか, Saga Consulting contributor Shiho Baisho extracts my thoughts on Japan’s place in the global business behemoth that is the video game industry. Japan’s story unfolds just like the narrative of your favorite role-playing game, complete with triumphs, defeats, and hope for the future. Join us as we explore the successes, failures, and limitless potential of Japanese gaming on the global stage.
“If you are not recognized globally, you are not in business.”
—Yosuke Matsuda
What can you tell us about the global video game market?
What should be of particular interest to Japanese companies is that the largest global gaming markets are abroad, with the United States being the largest or second-largest market, depending on the data source. If we look specifically at the console game segment, the Japanese market is the fourth largest in the world, accounting for only 7% of the global market. As AAA game budgets continue to balloon, it has been more and more critical for Japanese game companies to prioritize foreign markets.
As former Square Enix President Yosuke Matsuda stated in a 2022 interview with Yahoo Japan (via VGC): “Nowadays, the games market is globalized . . . The domestic market used to be big, but now it is behind China and the US. If you are not recognized globally, you are not in business.”
How would you describe the presence of Japanese companies in the global game market?
As we can see from massively popular Japanese gaming hardware such as the PlayStation 5 and Nintendo Switch—as well as intellectual property, such as Mario, Zelda, Elden Ring, and Final Fantasy—now is one of the best times in history for Japanese brands abroad. However, this wasn’t always the case.
According to GameIndustry.biz, during the 2000s—for the first time since Nintendo revived the industry with the NES/Famicom in the early 1980s—Japanese companies faced fierce competition from Western rivals. This came about as game consoles, such as Microsoft’s Xbox, started to share hardware architecture with PCs, causing a boom in open-world games and first-person shooters: genres that Japanese studios weren’t proficient at making.
As Castlevania: Symphony of the Night creator Koji Igarashi said during a MAGIC 2023 panel interview, “By the time there was no longer a big difference between developing for console and for PC, Japanese developers could no longer rely on their specialty as console developers and had to master PC development.”
In a knee-jerk reaction to this industry shift, Japanese studios rushed to imitate Western-style games, often with poor results. As Matsuda explains, “If Japanese developers try to imitate Western games, they cannot make good ones. The designs of the monsters, and the visual and audio effects, are all still somewhat Japanese. And players around the world know that this is what makes Japanese games good.”
Fortunately, most Japanese companies eventually caught up with the technological and cultural shift in the industry, realizing that western gamers did not want western-style games from Japanese companies. They wanted authentic games infused with Japanese culture and storytelling. Hironobu Sakaguchi, famed creator of Final Fantasy, said during the aforementioned panel discussion, "Even when Western games became mainstream, I didn’t feel the need to be inspired by them. I believe that cherishing my Japanese cultural background is what attracts people towards my games in the first place.”
“A simultaneous global ship date allows Japanese games to make a bigger, more immediate impact than ever before, which can create more lasting interest in not just a single game but its whole franchise.”
—IGN
What are some of the ways Japanese game companies are expanding their markets overseas?
A lot of Japanese companies expanded by acquiring western development studios during the early 2000s. However, time has proven that this generally hasn’t been a successful strategy. As someone who has followed the industry since it’s inception, I’ve noticed two consistent things that successful Japanese game companies have done to expand overseas:
Investing in international infrastructure (local offices, marketing teams, etc.)
Improving and expediting authentic localization
The latter point is especially important. Until relatively recently, a Japanese game was released in Japan first and then other markets. Around the turn of the century, this delay was often a year or more. Now, Japanese companies are making significant efforts to release titles with simultaneous global release dates. As stated in this IGN article, “A simultaneous global ship date allows Japanese games to make a bigger, more immediate impact than ever before, which can create more lasting interest in not just a single game but its whole franchise.” Releasing games simultaneously can also make marketing more efficient: messaging can be synchronized and assets can be shared globally.
It is more important than ever before to invest in localization and release games simultaneously across the globe, as the Japanese console market continues to shrink while the international market continues to grow. According to Daniel Ahmad, senior analyst at Niko Partners (via IGN), "Japan accounted for 20% of PS1 sales, but PS4 sales in Japan only reached 8% of the global total . . . Higher development costs for PlayStation games and lower sales potential than prior generations has led to Japanese developers taking a global approach for HD console titles.”
“The first step toward international success is realizing that Japan creates so much value and that consumers around the world are eager to engage in authentic Japanese experiences.”
What is a winning strategy for Japanese companies in the game and entertainment industry in the modern digital world?
Recognizing, leveraging, and protecting internationally beloved Japanese intellectual property is one of the best ways to ensure success. Fortunately, it seems like Japanese companies are starting to realize this. We can see this with the successful transition of the Sonic the Hedgehog and Mario brands into lucrative movie franchises, accomplished through quality control, careful intellectual property management, and the leveraging of advancements in visual effects technology.
Looking back over nearly 15 years of living and working in Japan, I’ve noticed that most people I speak to severely underestimate the international appeal of Japanese culture and intellectual property. The first step toward international success is realizing that Japan creates so much value and that consumers around the world are eager to engage in authentic Japanese experiences.
To give a practical, affordable example of how to do this, companies can reveal how they are preserving the authenticity of their games by producing social media content that highlights how carefully the localization process is being handled, for example.