JIN-299 -- Computer Game Industry's Creative Font Drying Up

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T H E J @ P A N I N C N E W S L E T T E R

Commentary on the Week's Business, Technology and Cultural News
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Issue No. 299
Saturday November 27, 2004
TOKYO

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CONTENTS

@@ VIEWPOINT: Computer Game Industry's Creative Font Drying Up

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@@ VIEWPOINT: Computer Game Industry's Creative Font Drying Up

From today game fans can do battle with monsters in fields, towns and
dungeons created with startling verisimilitude through state-of-the-art
graphics; for the home entertainment software Dragon Quest VIII (the Play
Station version) went on sale this morning. The first new edition in the
series in four years, it promises to be the biggest hit this year.
Although staples of the game industry such as Dragon Quest remain popular,
the industry just can't seem to produce a new megahit and has been
trotting out game arcade favorites and leveraging the appeal of animation
characters in compensation for a creative font drying up.

Almost every edition of Dragon Quest has sold more than 3 million units,
with number VII racking up sales of 4.12 million units. Square Enix Co.
Ltd., the developer of Dragon Quest, scheduled the release of the newest
edition for after 7:00 a.m. this morning to avoid the chaos that would
result from game geeks jostling for places in queues during the evening
rush hour crush.

Square Enix expects Dragon Quest to chalk up a sales volume of 50 billion
yen in the second period, roughly two-thirds of the projected total sales
volume of 73 billion yen for the fiscal year ending in March 2005.

However, a survey of the game software market discloses not a single
product of Godzilla-size sales. The market had a sales volume of 446.2
billion yen in 2003, down 10 percent from the previous year. Sales have
declined almost continuously since a peak of 758.1 billion yen in 1997.

The reason is that gadget makers are engaged in a zero sum game; for
consumers have limited time and a finite sum of disposable income. With
the diffusion of cell phones and the Internet, entertainment software
makers are faced with a shrinking consumer base. As the market has shrunk,
makers have been forced to rationalize development.

One way to reduce development costs is by converting game software to
software for home entertainment. For example, Sammy released this spring
its Hokuto no Ken (Fist of the Big Dipper) with a controller reconfigured
for Play Station 2. Meanwhile, Namco took its popular arcade game Taiko no
Tatsujin (Big Drum Expert) and released it in a console version.

Another way to rationalize development is to co-opt an animation
character. In fact, a popular animation character represents a short cut
to a game software hit. For example, this fall Namco and Bandai agreed to
the joint development of game software featuring the popular Gundam
fighting machines. Meanwhile Banpresto and Fromsoftware are jointly
developing robot-animation-based game software with a market launch of
2005.

The downside to this approach is the need for capital with which to
license rights to characters. For that reason entry to and survival in the
home entertainment software industry is becoming difficult.

Twenty some domestic makers of home entertainment software participated in
the Tokyo Game Show held at Makuhari Meese, in Chiba Prefecture. That is
10 fewer than five years earlier. Some insiders complain that the shakeout
has hampered entry to the industry by venture capital. And an infusion of
risk-embracing capital is what the industry needs to replenish the font of
creativity.

Announcement
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-- Burritt Sabin

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EDITOR
Written and edited by Burritt Sabin (editors2@japaninc.com)

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