CHIBA, Japan – Tokyo Game Show might be a shadow of its former self, but Japan's gamemakers are whistling past the graveyard.
An optimistic view of the future of the Japanese game business was the overarching message of the keynote sessions that opened Japan's biggest gaming expo on Thursday.
Shin Unozawa, chairman of the Computer Entertainment Suppliers Organization, an umbrella group representing Japan's gamemakers and the organizer of Tokyo Game Show, used his opening address to illustrate the profits being made by traditional game companies through downloadable content and free-to-play software.
"Up until now, we have been looking at the game industry by tracking only the sales of packaged games," said Unozawa, who is also executive vice president of Namco Bandai. "It is clear now that this is not the only indicator [of success]."
Nintendo's new 3DS cartridge game Fire Emblem Awakening, launched earlier this year in Japan, has sold 1.2 million items of downloadable content for 380 million yen, or about $5 million, he said.
Mobile Suit Gundam: Battle Operation, a free-to-play robot combat game that Namco Bandai launched on the PlayStation 3 in June, has so far accumulated 700 million yen (nearly $9 million) of in-game item sales, Unozawa said, adding that the game's development costs have already been covered by these sales.
Japan's game industry, long focused on packaged goods, has been squeezed from both ends as of late. Western game developers have eclipsed Japan's ability to create the most technologically dazzling big-budget adventures. And the availability of cheap smartphone social games has eaten into the market for inexpensive diversions on traditional portable game machines. Nintendo had to slash the price of its Nintendo 3DS handheld after only a few months on the market; Sony has yet to move a million units of the portable PlayStation Vita here.
Unozawa's optimism stood in stark contrast to a scaled-back Tokyo Game Show floor. Microsoft, which has had a large Tokyo Game Show booth since it got into the console games business, has bailed out of this year's show. Square Enix, maker of Final Fantasy and Dragon Quest, downsized its booth dramatically.
Meanwhile, more and more of the show is being taken over by smartphone and social games. In 2010, mobile gamemaker Gree had no presence on the Tokyo Game Show floor. This year, its booth is as large as, and sitting right next to, Sony's. Social games have been one of the biggest success stories in the Japanese game business, despite government attempts to curtail certain sales methods of in-game items.
Gree's founder Yoshikazu Tanaka, Japan's youngest billionaire, took the stage after Unozawa and spoke openly of his own company's accomplishments. Gree has tripled the number of employees compared to last year and currently operates eleven offices in ten countries around the world, he said.
Tanaka sees the future of gaming as one of extreme convergence.
"With Windows 8, the line between PCs and mobile has become blurry," said Tanaka. "This trend will continue... and the traditional PC will disappear. Smartphones and PCs will converge to form a new platform."
After that, game consoles will blend into the mix and everything you currently do across three devices will all be done on a single console/PC/smartphone hybrid, he said.
"A trend towards a cross-device is definitely happening," Sony Computer Entertainment Japan president Hiroshi Kawano said to Wired on the show floor. "The trend will accelerate more in the future."
Sony hedged its bets at its PlayStation press conference on Wednesday prior to the show, announcing new initiatives for its traditional game hardware but also putting emphasis on PlayStation Mobile, a development environment and digital game library for Android mobile devices.
As might be expected, Kawano disagreed that one device could do everything.
"Would you want to do everything with a smartphone? No, because smartphones have some strengths and some weaknesses. And PCs have different features that smartphones do not," he said.
Kawano said that what was more likely was software convergence, the ability to play the same game across a wide range of devices.
"We also think a single piece of software can be played on a smartphone, or a dedicated game device, or a PC, or iPad ... or a Sony tablet, I should say a Sony tablet," he said, laughing.
