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1 Japanese Video Game Industry Japanese Economy Division

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1 Japanese Video Game Industry Japanese Economy Division Industrial Reports (c) JETRO, 2007 Japanese Video Game Industry Japanese Economy Division Summary In 2005, shipments of home video games increased for the first time in four years, bolstered by launches of the Nintendo DS and Sony PlayStation Portable. Next-generation game consoles, such as the Nintendo Wii and Sony PlayStation 3 to be marketed from the end of 2006, are expected to further expand the home video game market into 2007. Since the release of Nintendo’s Family Computer (Famicon) in 1983, Japan’s electronic game industry has come to depend on home video games to such an extent that it can be interchangeably called the game console industry. In recent years, the spread of broadband, flat-rate telecommunications services has enabled new platforms for games, such as online and mobile, further broadening the industry’s base. This report, however, covers only the home video game industry, which still accounts for a significant portion of the industry. 1. History of video game industry Japanese video game companies have been overwhelmingly competitive in the international market, but competition in the hardware sector has intensified in recent years, following the entry of Microsoft. A. Desktop game consoles The industry dawned with the runaway success of the Atari 2600, a home game device with a plug-in ROM cartridge, which was launched by Atari in the U.S. market in 1977. Third-party software could be developed freely, because Atari made the programming specifications openly available. As a result, numerous software packages appeared and were well received by users. Over time, however, user support steadily weakened as inferior software also began to circulate. The market for the Atari 2600 rapidly declined due to stiff competition during the 1982 Christmas season, and the U.S. market remained in the doldrums until the arrival of the Nintendo Entertainment System (NES) in 1985. In Japan, on the other hand, the video game market expanded rapidly from the time Nintendo released the Family Computer in 1983. Many manufacturers launched home game units around this time, but from 1983 to 2000 competition mainly involved three companies: NEC Home Electronics (NEC), Nintendo and Sega Corporation. Since 2000, however, the major players have been Microsoft, Nintendo and Sony Computer Entertainment (Sony) (Fig. 1). 1 Industrial Reports (c) JETRO, 2007 Fig. 1 M ile stone s in Home De s ktop Game s 1977 TV Jack1000, 1200, 1500, 2500, 3000 (Bandai) 1978 Visicom (Toshiba) Video Computer System (made by Atari, sold by Epoch) 1979 Supervision8000 (Bandai) Cassette vision (Epoch), Pyu-Ta (Tomy) 1981 Game Pasocom M5 (Sword / Takara) Max Machine (Commodore) Family Computer (Nintendo), SG-1000, SC-3000 (Sega) PV-1000 (Casio), OseroMaltibision (Tsukuda) 1983 TV Boy (Gakken), My Vision (Kanto Denshi / Nihon Bussan) Cassette vision Jr. (Epoch) SG-1000 II (Sega), Super Cassette vision (Epoch) 1984 RX-78 (Bandai), Pyu-Ta Mk II (Tomy) 1985 Sega Mark III (Sega) 1986 DiscSystem (Nintendo), Twin Famicom (Sharp) 1987 Master System (Sega), PC Engine (NEC) 1988 Megadrive (Sega), CD-ROM (NEC) 1990 Super Famicom (Nintendo), Neogeo (SNK) 1991 MegaCD (Sega), PC Engine Duo, Super CD-ROM (NEC) 1992 Wondermega (Victor) 1993 Laser Active (Pioneer) PlayStation (SCE), 3DO Real (Panasonic) 3DO Try (Sanyo), Saturn (Sega), PC-FX (NEC) 1994 Playdia (Bandai), Neogeo CD (SNK) Super 32X (Sega) 1996 Nintendo 64 (Nintendo), PiPPiN@Atmark (Bandai) 1998 Dreamcast (Sega) 2000 PlayStation 2 (SCE), Psone (SCE) 2001 Nintendo GameCube (Nintendo) 2002 X box (Microsoft) 2003 PSX (Sony) 2005 X box 360 (Microsoft) 2006 Family Computer (Nintendo), SG-1000, SC-3000 (Sega) SCE = Sony Computer Entertainment Source: Computer Entertainment Suppliers Association, 2006 CESA Game White Paper. 2 Industrial Reports (c) JETRO, 2007 1) From 1983: 8-bit CPUs Nintendo released the Family Computer and Sega the SG-1000 in 1983. Both consoles contained eight-bit CPUs and games were played using proprietary plug-in cartridges. The major difference between the two consoles was that Nintendo offered a large lineup of games developed under license by third parties, while the SG-1000 only accepted games developed by Sega. Over time, however, Nintendo began licensing to third parties due to its limited capacity to develop competitive games. As a result, by 1984 outside companies were producing hit games for the Family Computer, such as Galaxian by Namco, the leading arcade game manufacturer, and Lode Runner, a smash hit that sold 1.2 million cartridges, by Hudson Soft, a major PC software developer. As a result, the Family Computer’s wide variety of games helped it lead the market with 62.91 million units shipped, including 19.35 million in Japan and 42.56 million overseas. 2) From 1988: 16-bit CPUs and CD-ROMs The market for 16-bit consoles, which offered improved graphics and sound over 8-bit models, began in 1987 with the NEC PC Engine, which featured an 8-bit CPU but 16-bit-equivalent graphics and processing. The first true 16-bit models were the Sega Mega Drive in 1988 and the Nintendo Super Famicom in 1990. Although the 16-bit Super Famicom was the successor to the Family Computer, games for the latter were not compatible with the former. Nevertheless, the Super Famicom was superior to the NEC and Sega models in terms of audio-video performance, so it captured an overwhelming market share amounting to 49.10 million units shipped, including 17.17 million in Japan and 31.93 million overseas. Sega’s Mega Drive was the first console with a true 16-bit CPU. As the successor to the Sega Mark III and Master System, the Mega Drive could accept games for these earlier models via an optional adapter. Games were also available from third parties. Despite these features, however, Sega was unable to take the lead in 16-bit models due to the Super Famicom’s overwhelming popularity. Following the launch of 16-bit consoles, manufacturers released outboard CD-ROM drives to play software. Sega released the Mega-CD for its Mega Drive, and NEC the CD-ROM2 and Super CD-ROM2 for its PC Engine. CD-ROM software offered far better graphics and sound, as well as more capacity, than cartridge software. They also could be produced faster and at less cost. Soon CD-ROMs were the standard medium for game software. Interestingly, Nintendo was engaged in developing a CD-ROM drive for its Super Famicom, but never released it. 3) From 1994: 32-bit and 64-bit CPUs A series of 32-bit game consoles came out beginning in 1994, offering yet again higher performance than existing models. Most of these consoles used CD-ROMs. The 3DO Real, based on specs developed by the 3DO Company of the U.S., was released by Matsushita Electric Industrial. The unit price was undercut significantly by the subsequently launched PlayStation and Sega Saturn, so 3DO faded from the market. The 32-bit game console market was divided between the Sony PlayStation and Sega Saturn, but the PlayStation seized an overwhelming share based on the success of hit titles, particularly Final Fantasy and Dragon Quest, both by Square Enix. Sony shipped 102.49 million PlayStations, including 21.59 million in Japan, 40.78 million in North America and 40.12 million in Europe. Two years after the launch of the PlayStation, Nintendo released the 64-bit Nintendo 64, but the model was unable to break the PlayStation’s stranglehold on the market. Worldwide shipments totaled 32.93 million units 4) From 2000: PlayStation 2 After the introduction of 32-bit consoles, Sony released the PlayStation 2 (PS2), Sega the Dreamcast and Nintendo the GameCube. Microsoft then entered the market with the Xbox. The PS2 is compatible with the PlayStation, but the other consoles are not compatible with their respective predecessors. The PS2 helped to popularize DVDs for gaming, since it accepts DVD- ROMs, and can even play DVD videos. The PS2 quickly grabbed an overwhelming share, largely because it could use the huge number of games people had already purchased for the some 100 3 Industrial Reports (c) JETRO, 2007 million PlayStations sold worldwide. Worldwide shipments of the PS2 have amounted to 101.37 million, 22.83 million in Japan, 40.99 million in North America and 37.55 million in Europe. Sega’s Dreamcast shipped only 9.13 million units, so the company dropped out of the hardware market. Microsoft’s Xbox, plagued by initial product glitches and a glaring lack of appealing software, was unable to succeed in Japan. 5) From 2005: Next-generation consoles Microsoft, despite its initial failure with the Xbox in Japan, stole the lead on sixth-generation models with the Xbox 360, launched in December 2005. Sony released the PS3 in November 2006 and Nintendo the Wii in December 2006. B. Portable game consoles The first portable game devices were the Game & Watch series, which Nintendo launched in 1980. Games were built in, and the consoles could not accept external software. Nevertheless, the series was very popular, with some 13 million units shipped in Japan. The Game Boy, however, revolutionized the portable game device market in 1989 (Fig. 2). Fig. 2 Milestones in Portable Game Consoles 1980 Game & Watch (Nintendo) 1989 Game Boy (Nintendo), Lynx (Atari) 1990 Game Gear (Sega), PC Engine GT (NEC) 1994 Game Boy Bros. (Nintendo) 1995 Virtual Boy (Nintendo) 1996 Game Boy Pocket (Nintendo) Game Boy Light, Game Boy Color (Nintendo) 1998 Neogeo Pocket (SNK) 1999 WonderSwan (Bandai), Neogeo Pocket Color (SNK) 2000 WonderSwan Color (Bandai) 2001 Game Boy Advance (Nintendo) 2002 Swan Crystal (Bandai) 2003 Game Boy Advance SP (Nintendo) Nintendo DS (Nintendo) 2004 PSP (SCE) 2005 Nintendo DS Lite, Game Boy micro (Nintendo) Source: Computer Entertainment Suppliers Association, 2006 CESA Game White Paper.
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