No secrets exist when it comes to increasing net income. Either fixed or variable costs are reduced, or sales increase. In this chapter we will look at how to achieve both. The videogame business is the business of intellectual property. As such, what publishers need to do is leverage that property as best and efficiently as possible in order to regain market share. Japan is in dire need of a new strategy, one which will be long-term focused.
With each passing year, videogames are becoming more respected as an art form and entertainment medium. From packed eSports arenas to massive coverage by mainstream media and indulged by society as a whole, videogames are ever more present in our lives (for better or worse). With the industry getting close to the anticipated $100 billion market valuation (which would put it in the big boy’s league), many people fear Japanese companies are not very well positioned to get a slice of that cake. The reason? Decreasing console software sales year by year for the past decade.
Publishers in general (not just Japanese) need to be careful as the need for them is diminishing dramatically. Mostly because of the rise of digital which allows game developers to bypass them completely and release their game on digital platforms for almost no cost. But also because the big names are leaving their respective publishers at great speed. Most of Japan’s famous game designers have already split from the publishers they were with, opening studios of their own. Capcom’s powerhouse producers Shinji Mikami (Resident Evil) and Keiji Inafune (Mega Man) are long gone. Tomonobu Itagaki (Ninja Gaiden) is no longer with Koei Tecmo. Castlevania chief Koji Igarashi left Konami a few years ago.
This loss in market share as we saw in the introductory chapter, transferred to the videogame industry as well. At the start of the 1990s, Nintendo owned about 90% of the videogame market. Boy have things changed… The chart below from Newzoo dating from September of 2017, shows who the main players in today’s global videogame field are, and Japan has all but fallen by the wayside.
To think that a mere two decades ago, most of the foreign corporations listed on the chart did not even exist yet, and that the chart was composed of mostly Japanese firms, is mind boggling. There are now two Chinese companies present. Times have indeed changed, and although Nintendo may again show up on this chart in the near future because of their new console the Nintendo Switch (which looks promising), things are nevertheless looking extremely dire for the Japanese videogame industry.
My belief is that publishers are still very much relevant today as they provide the necessary funding for costly game ideas in the console sector and have the necessary resources and experience to successfully promote games. As such, it would be unwise to abandon publishers just yet.