JIN-495 -- Nintendo continues dominance in shrinking market

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J@pan Inc Newsletter
The 'JIN' J@pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 495 Wednesday January 7, 2009, Tokyo

One industry that appeared to have been doing fairly well at the end
of last year was the video game industry - as the economic outlook
turned bleak, more people were buying video games and staying safely
inside rather than going out for their entertainment. But recently
Famitsu magazine's 2008 yearend sales report for the Japanese video
game market, put together by the Enterbrain publishing house, painted
a better picture of the nation's gaming industry. Not so surprisingly,
Nintendo continued to dominate, but in a shrinking market.

The combined market for hardware and software declined by a
considerable amount – 15 percent from 687.95 billion yen in 2007 to
582.61 billion yen in 2008. It was hardware not software that took the
real hit, though. The hardware market fell 23 percent from 327.41
billion yen to 250.5 billion yen.

This was not all due to everything that happened at the end of last
year – in part, this can be attributed to price reductions in the
consoles – remember that last year there were no new home consoles
released. While Nintendo's Wii had various add-ons released the basic
console remained the same. Also there were no new Sony consoles
released or any other new contenders from other manufacturers.

There has been talk of a successor to the Wii being in development and
of course there is but when will it be released? Nintendo's Satoru
Iwata admitted in July last year that Nintendo was working on it's
next hardware release and in October some evidence emerged that
Nintendo were working on a Wii HD that would be ready for release
possibly in 2011. So, that means no new hardware releases for Nintendo
next year which means that prices will drop further, probably. And no
PS4s by the looks of it either. That could be a very far way away with
Sony saying early last year that it was locked into a ten-year
lifespan for the PS3.

So how about software sales? They only fell 8 percent compared to the
previous year, dropping from 360.54 billion yen to 332.12 billion yen

But the one thing that seems to remain constant is the fact that
Nintendo dominates the different categories. The majority of money
spent was on Nintendo hardware and software - 4,029,804 units of the
DS, Lite and the new DSi were bought in Japan while the Wii took the
top spot in the home console market with 2,908,342 units sold in 2008.
In software, Nintendo games took four of the five top spots – Wii Fit,
Mario Kart Wii, Pokemon Platinum and Super Smash Bros Brawl took
places 2 to 5. Sony did however manage to take the top spot with one
of its PSP games, Monster Hunter Portable 2nd G, selling 2,452,111
units. The game, however, was produced by a third-party developer. But
it played a significant role in helping to push up the PSPs sales. The
handheld console came in second in total sales with 3,543,171 units

How the industry fares in 2009 will be interesting to see.
Manufacturers have been hit hard by a combination of weakened overseas
markets and strong yen. The domestic gaming market remains relatively
strong at least, even if it has shrunk in the past year. The hardware
market will continue to shrink until new hardware is released but will
software developers still have a rewarding 2009?

Michael Condon


Speaking at MIDEM / MidemNet 2009

* David Eun, VP Content Partnerships, Google Inc
* Jay Marciano, President, Madison Square Garden Entertainment
* J.Y. Park, Founder and President, JYP Entertainment
* Jim Balsillie, co-CEO, RIM/Blackberry
* Amit Kapur, COO, MySpace
* Dr. Tero Ojanpera, EVP, Entertainment and Communities, Nokia

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