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The struggles of Xbox breaking into Japan

The current situation


Japan’s gaming market had an estimated worth of $12.4 billion in 2016, making it one of the largest in the world. Yet Microsoft’s consoles have never found true success there. For the last couple of years at the E3, Phil Spencer has proudly declared he has a new game to show borne out of a visit to Japan. But despite this, Xbox as a console brand has almost always underperformed in Japan compared to its competitors.


Even with the relative success of the Xbox 360, Xbox consoles as a whole historically sell considerably more in the West. A Famitsu report in May (English data by MSpoweruser) put the Xbox one as having sold 105,000 units in Japan. This is compared to roughly 8 million and 7 million units for the Nintendo Switch and PlayStation 4 respectively. So why does Microsoft’s machine struggle in the land of the rising sun?



Games that appeal to Japan


Having a solid library of games to appeal to consumers is essential for any console. As the new kid on the block, the original Xbox understandably had a difficult time with this. Microsoft often struggled to get Japanese developers on their side.


For example, Resident Evil director Shinji Mikami declined Microsoft’s offers to launch Resident Evil 4 as an exclusive. After being disillusioned with the PlayStation 2, Mikami spoke to both Microsoft and Nintendo. Negotiations between Mikami and Microsoft broke down due to a difference in philosophies. Resident Evil 4 was later made as a Nintendo GameCube exclusive. This is just one example of business decisions going wrong for Microsoft in Japan.


However, not all was doom and gloom for the green machine. During the Tokyo Game Show in 2001, Microsoft announced that Sega would publish around 10 games for Xbox. As a result, some Japanese developed exclusive titles made their way to the Xbox. These included cult classics such as Jet Set Radio FuturePanzer Dragoon Orta and Shenmue 2.

By having a large Japanese third-party publisher working with Microsoft, things were looking positive. Sega’s games were sure to garner interest from Japanese gamers and Sega seemed to have a strong partnership with Microsoft. Yet due to differences in online plans, the Xbox never did run Dreamcast games as they planned.


To make matters worse, games like Jet Set Radio Future and Gunvalkyrie did not sell well in Japan, despite positive reviews. Xbox exclusives could not appeal to the Japanese masses. As a result, Sega published many more games across all consoles, with PlayStation 2 receiving the most. The Xbox went on to sell approximately 500,000 units.


Impressively, the Xbox 360 built upon the small success of the original Xbox. While the original Xbox sold approximately 500,000 units, the Xbox 360 managed 1.5 million. Despite falling short of it’s Nintendo and Sony siblings, the Xbox 360 performed better than both its predecessor and the future Xbox One.


It could be argued this is due to the heavier marketing push the Xbox 360 received as well as its price compared to the PlayStation 3. But it’s worth considering that the console had more titles Japanese gamers wanted to play. Third-party Japanese role-playing games (JRPGs) were more abundant on the Xbox 360. These included games like Blue DragonLost Odyssey, and Eternal Sonata.


Difference in culture


In spite of the Xbox 360s improved sales over its predecessor, it still fell short of its competitors. This is where differences in culture become relevant, proving to be Microsoft’s Achilles heel. At first, you might think Japanese consumers are simply more likely to buy Japanese made products over foreign ones. A sense of patriotism towards home-grown console brands.


However, just by looking outside of consoles we can see this is untrue. General manager for Xbox in Japan, Sensui Takashi, echoed this sentiment. Takashi said the following on this subject: “The Xbox did not fail in Japan, is not continuing to fail in Japan, because people here don’t want to buy a product from a foreign company”. The evidence to support his view is clear.


Windows remains the dominant PC operating system in Japan and Apple phones continue to sell with resounding success (iPhone having a 51.7% market share of mobiles sold in 2016). Therefore Xbox’s failures in the East are likely related to the console itself, rather than brand loyalties. 


The perception of the Xbox brand has done little in its favor for Japanese gamers. In particular Xbox 360’s ‘Red ring of death’ made the console appear very unreliable. As a result, the PlayStation 3’s minuscule failure rate made it a sounder investment. Engaging the Japanese market requires an assurance of quality that Microsoft was not providing.


Even the JRPGs that found their way onto the Xbox 360, didn’t sell as well as you would expect. This was likely because there was no guarantee of more to come. Taken as a whole, Microsoft simply struggles to present Xbox as a console that has consistent quality.


Perhaps the biggest reason of all is Microsoft’s misunderstanding of Japanese culture. Miscommunication with publishers left them wary to work with Microsoft, such as with Shinji Mikami. This applies to consumers too. Japanese consumers want to feel like their brands are addressing their needs.


From Xbox’s short history so far, we can tell Microsoft has not truly taken Japan’s culture into account. Bundling the motion control Kinect accessory with Xbox One’s at launch is an example. Many people in Japan simply don’t have the space to place an Xbox One or use Kinect. Even worse is that it had to be kept on at all times. This clashed harshly with how important privacy is to Japanese consumers. In comparison, PS4’s larger game library, and Nintendo Switch’s handheld appeal are better fitted for the Japanese lifestyle. Xbox One was fundamentally designed for Western audiences.



Could the future be different


Knowing the issues with perception and differences in cultural value is just the beginning. So can the Xbox brand overcome its reputation in time for the next generation? To do this Microsoft will have to prove that Xbox Scarlett is a worthwhile investment, over the more culturally in-tune competitors. On the bright side, team Xbox is still trying. Phil Spencer’s numerous visits to the country may help gain some needed credibility with Japanese developers.


On the subject of Xbox Scarlett, it appears Microsoft is cautiously optimistic. General manager, Arron Greenberg, stated that “We have a lot more Japanese support than we’ve had before” and that he is “always careful about setting the wrong expectations or making claims.” Perhaps more encouraging are the recent studio acquisitions by head of Xbox, Phil Spencer. In a quote from videogameschronicle, Spencer mentioned “I think it would be nice if we found an Asian studio, in particular, a Japanese studio, to add to our studios” and that “we can do more.” Only time will tell if Xbox Scarlett will find success in Japan. Though by understanding past mistakes, perhaps Phil Spencer can guide Xbox to greater success. 

Chirag Pattni
Psychologist and long time gamer. Has a love-hate relationship with technology and loves all things Japanese.

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