Microsoft needs a comprehensive Japan strategy. Now is the time to strike. Suggest your strategies

Xbox has never been a strong brand in Japan and Microsoft has never really tried. Phil Spencer’s new aggressive Xbox strategy has done a lot to turn the brand’s fortunes around the world except Japan. It’s time to change that.

These days, Sony is faltering in Japan. A Japanese analyst summarized the situation there as follows:

  1. The PS4 launched in 2013, but Japan’s release came afterward.
  2. After fall 2018, Sony implemented its own regulations on depictions in games, which has censored content aimed at Japanese users
  3. The PS5 reveal video had no Japanese narration, while there were issues with the font used for the subtitles as well as their Japanese translations
  4. The confirm button was changed from O to X in order to set a global standard
  5. Due to manufacturing issues, the initial launch allocation for PS5 in Japan was barely above that of the PS3, preventing the system from reaching early adopters

It’s not mentioned in that article but the PS4 is also being phased out in Japan with only one model being sold there with low stock. Long time customers in Japan are not happy.

This is a golden opportunity for Microsoft and could not have come at a better time. The ball is in Microsoft’s court now. This is from an article posted in November.

Microsoft is betting its Xbox Series S, the smallest Xbox ever, will help turn the tide. Previous consoles were criticized as being too large for Japanese living rooms, Ace’s Yasuda said.

The U.S. company has been stepping up discussions with Japan-based game developers about releasing titles on the Xbox, said Sarah Bond, who oversees relations with game creators across the Microsoft gaming ecosystem.

Koei Tecmo Games Co. is one of those firms. Hisashi Koinuma, president of the Japanese publisher, said he’s willing to consider releasing more games for the Xbox if the U.S. company shows continued interest in Japan.

It seems that Microsoft isn’t resting on their laurels, however.

On top of that, there’s evidence Microsoft is seeking to make acquisitions in the country, though it hasn’t yet landed a deal with a big name there. Several Japan-based game developers, from small to big, said it had approached them about buying their businesses. They asked not to be identified as the talks were private, and declined to give details on how the discussions went.

When asked about potential purchases of Japanese companies, Jeremy Hinton, head of Xbox operations in Asia, said Microsoft is always open to discussions with creators that are a good fit. He said acquisitions are a possibility but there are no announcements to share at this time.

“Japan has long been an isolated part of the Xbox world, but it appears Microsoft is changing that landscape,” Katsuhiko Hayashi, representative of Famitsu Group, said of Microsoft’s efforts to target the country.

With confirmation that Microsoft is seeking acquisitions in Japan, you might think that might be enough to change things. I think they need to do more than that and have a comprehensive long-term Japan strategy. What do I mean by that? Let’s shift gears and look at Unreal Engine.

During the Xbox 360 gen, Unreal Engine 3 was the most popular engine in the west. It was used in everything from Bioshock, Mass Effect and Borderlands to the Arkham Series and Mortal Kombat. It was seldom by Japanese developers though. At the time, the market penetration for Unreal Engine in Japan was at a similar place to where Xbox is today. Epic Games opened an office in Tokyo in 2009 and by 2015 became the market leader being used in everything from Street Fighter V and Tekken 7 to Kingdom Hearts 3 and Final Fantasy 7. From what I understand the main reason for this is having great documentation and a dedicated Japanese engine support team for studios to call. Success didn’t happen overnight in 2009 but after years of hard work and investment. This is the result of a comprehensive long-term strategy.

Microsoft needs a strong division in Japan to apply a Japanese centered approach. Here are a few things Xbox Japan can do to improve Xbox in Japan:

  • Build a strong Japanese marketing team to convince developers to put their games on the platform
  • Go to Japanese gaming expos like TGS
  • Invest in the development of Japanese games
  • Offer free technical support to studios making Xbox games
  • Waive Xbox Games Store listing fees and disc printing fees and remove requirement for minimum number of discs that must be printed (many developers cite this as the main reason not to port)
  • Try to get every small and medium sized Japanese console game onto the platform (e.g. NIS games like Disgaea and The Legend of Heroes)
  • Leverage the power of Game Pass and get those games onto the service!
  • Leave content and censorship regulations to Xbox Japan

Whichever strategy they go with, Microsoft must be prepared to lose money in the short term and consistently apply it for years before things change. We know now that the half-hearted early gen Xbox 360 Japanese approach won’t work. The aim shouldn’t be to focus only on big budget world wide appeal games from Square Enix and Capcom. Xbox should focus on the type of games that chart each week in Media Create Sales.

What do you think Microsoft can do to improve Xbox in Japan?

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Great post, really interesting!

I do think the Series S was a genius idea on different levels, including Asia. If they push it well, they could sell a ton. We’re already seeing come progress with games like Yakuza and Dragon Quest on Game Pass, and I’m sure more coming (Persona?). They definitely need to keep pushing and grab the opportunity Sony is giving them on a silver platter.

It should be an interesting generation!!

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Great post, something I’ve been really frustrated with Xbox for a while.

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Xbox being successful in Japan is never going to happen unless X-Cloud takes off. Their consoles simply don’t do shit. PlayStation has declined every generation in Japan. Switch is hot in Japan because it has the two focal points in regards to gaming in Japan - 1) Mobile and 2) Handhelds.

Microsoft simply needs for X-Cloud to be dominant in Japan as that’s literally their only shot.

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I forgot to mention that. The Xbox Series S was a fantastic idea for a couple of reasons. First, it’s small form factor is seen as more acceptable in Japanese living rooms. But the second reason that I also forgot to touch on is that Xbox’s biggest comptetitor in Japan isn’t Sony but Nintendo. All 30 games in the most recent Media Create Sales chart were Nintendo Switch games. A quick search shows me that the Series S is cheaper than the Switch.

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xCloud. I think that’s the way, the only way.

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I really don’t know man. You look at Japan, even Sony is losing its strangle there. The problem with Japan is:

  1. They prefer handhelds to consoles.
  2. The Switch is DOMINATING there
  3. Will Japanese studios make games for Xbox. Microsoft will most likely need to pay more to secure exclusives or timed exclusives.

I’ll say one thing, they shouldn’t just let Sony take big JRPGs like FF16 and Project Athia for timed exclusive for a year or two. Xbox didn’t get Nioh 2. Xbox still doesn’t have a release date for FF7R. I think they need to do a better job at just making sure games reach the platform in a timely manner (or at all) because at the end of the day, it comes down to games. Like it always does

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MS did try with the 360.

They got Blue Dragon made and Japan laughed in their faces.

To oversimplify it, I think it comes down to enabling gaming on mobile devices (e.g., phones, tablets, laptops) and making more games that appeal to Asian audiences. xCloud and Game Pass are a great combo of tech and service to bring more games to mobile devices. Xbox needs to make a big commitment to making the right games.

Sega (gaming division only) seems like a good fit for a second party-like partnership or acquisition. It fits the bill of having a long-standing relationship with Xbox and they have struggled financially in recent times. As for studios and IP, in addition to a handful of studios that could give Xbox the upper hand in the RTS genre, Sega has popular series in Japan like Yakuza, Phantasy Star, Shen Megami Tensei, Sakura Wars, and Persona. If it were me, I’d look into investing in Sega to A) bring as many games as possible from Sega’s catalog to Game Pass and Steam and B) strengthen their publishing arm to find up and coming studios that are building exciting new IP. I’d love to see Sega return to its more inventive days when they were taking risks on new IP.

On top the above, I’d do whatever it takes to get Game Pass on the next Switch. I’d even go so far as to create a curated version of Game Pass just for Switch to eliminate any cannibalization on Nintendo’s own digital sales. I also wouldn’t cut off PS5 from long-running IP like Persona, at least not until there was evidence a lot of that audience migrated off of the Playstation platform to Game Pass and/or Steam. With Playstation console sales dwindling in Japan every generation I think it’s a matter of time before that console is no longer important in that region.

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They should buy more japanese studios and let them make games that appeal for the japanese market, and also push more japanese developers to put their games on xbox. Just launching xcloud in japan its not going to work, in japan nintendo is king, they want good japanese games to play on the go, Microsoft need to make games that appeal to them.

I dont believe Xbox consoles will ever have a significant presence in Japan but things like xCloud and PC are good ways for Microsoft to make moves in Japan. As a western gamer I’m more concerned about Japanese games making their way to Xbox in the west. I guess Xbox being a bigger player in Japan would help that but i just don’t see a scenario where Xbox can build a significant audience in Japan through console sales.

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Even Playstation sales continue to fall generation after generation. I wouldn’t hinge my strategy in Japan on a console, but a combo of xCloud and Game Pass to jump on the mobile bandwagon would make sense.

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Would love to see Ms bringing heat to that market.

Gamepass, Xcloud are solid strategies, but they also need a good stream of tailored content. So creating new studios, XGP partnerships and acquisitions are pretty much required to do well there.

They could start by securing Itagaki’s new team, Sakaguchi, Futatsugi and Swery.

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I actually see Microsoft putting more effort into China and South Korea. They seem to be having a good start with xcloud in Korea and China is obviously a massive potential market for any company.

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Subsidies

Reduce own share so that games can be cheaper on there platform.

Given that they don’t have any sizeable market share in Japan it won’t hurt them as much as there competition.

Games going from $60 to $50 as compared to there competition can attract more players towards the platform.

They may do this wherever there market share is considerably low.

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Xcloud and Gamepass:

Microsoft needs to secure games that are beloved by the Japanese audience and release them on GPU/Xcloud day 1, specially now that nobody can buy a PS5 in this way people will spend money on the platform right now.

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Xcloud is the only way.

Switch has made this loud and clear. Japan is decreasingly interested in home consoles from what we’re seeing. Xbox doesn’t sell Jack shit there hardware wise, it’s just a wasted effort if selling plastic boxes is their metric, which is why I’m confident it’s not. Xcloud is the way to tackle that market. And perhaps a big dick move would be to buy Sega and by extension, Atlus.

Imagine the proposition: buy a whole ass PlayStation or Nintendo switch to play Persona or whatever, or just play them at a small price on a mobile phone that you already have. I’m talking out of my ass here of course, the dynamics are a lot more complex than that, but one thing I’m very clear of is the only way they’re succeeding at any level in Japan is Xcloud, and then gotta push it hard.

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China its also a very complicated context, because not every game its allowed in the region, the strong xbox catalogue its going to be killed by those restrictions, and because tencent its in the country, they will try the same with games more familiar to the chinese market. I really believe that Microsoft needs chinese and japanese studios than go and buy wbgames for example.

I think MS are currently setting up Xbox in a way where it can reach gamers in any market, anywhere in the world. Once the ecosystem is consolidated in it’s new form (PC, console & cloud) & they really get going with a steady stream of new titles across a variety of genres, then we’ll see if & how things start to change.

Besides what everyone else said about xcloud and Series S being the tickets in I want to go more specifically into the software side.

(1) Team Ninja has now openly said they would love to work on a new Ninja Gaiden game.

(2) The original Ninja Gaiden director, separate from Team Ninja, has started a new studio and said he wants to make a new game and would love to work with Xbox on a new project.

(3) Instead of saying “just acquire Sega” I propose Xbox work when them to get developers to reboot Lost Odyssey and Blue Dragon. I would love the Yakuza team work on Lost Odyssey and the Persona team work on Blue Dragon, and give them creative freedom to come up with story beats that they would want to continue in future installments.

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