Japanese playing a new video game: Catch-Up

A supersonic hedgehog and a plumber named Mario may have been unlikely heroes, but they once dominated video games. Only the Japanese could make innovative games like those, developers here used to boast. The West just didn't get it.

Warp ahead 20 years, though, and much of Japan's game industry is in a rut.

Sonic the Hedgehog and Mario still sell games. But more recent Japanese attempts to establish franchises, like White Knight Chronicles from Sony or Monster Hunter from Capcom, have not made a mark in the United States and Europe. Instead, the blockbuster hits now come from the West: Call of Duty and Guitar Hero from Activision Blizzard, for example, and Grand Theft Auto from Take-Two Interactive.

That is why a growing group of Japanese game developers are asking a once-unthinkable question: can they learn from the West to get back on top of the $60 billion global video game business?

"I look around Tokyo Games Show, and everyone's making awful games; Japan is at least five years behind," said Keiji Inafune, 45, head of global research and development at Capcom and one of Japan's most prominent game designers.

"Capcom is barely keeping up," he said in an interview at the show, which ended Sunday. "I want to study how Westerners live, and make games that appeal to them."

From the mid-1980s through the 1990s, most big console-game franchises were born in Japan, including Nintendo's Mario and Pokémon, Sonic the Hedgehog from Sega and Gran Turismo from Sony.

But the biggest new game franchises of the last decade have been from outside Japan, including Halo by Microsoft, and the hits from Activision Blizzard and Take-Two Interactive.

Last year, the world's best-selling game by far was Call of Duty: Modern Warfare 2, which sold 11.86 million copies in the United States, Japan and Britain, according to NPD Group, the market research company.

Global sales numbers for the entire industry are hard to come by. But Japan's share of the world's video game market, both hardware and software, has fallen to slightly more than 10 percent in 2009, from estimates as high as 50 percent in 2002, based on figures from the Entertainment Software Association, the Japan External Trade Organization, and the research companies DFC Intelligence and Enterbrain.

The West's dominance was evident here at the Tokyo Game Show, which has lost much of its global clout in recent years. Despite excitement at the 2010 show over coming titles from Japanese publishers, like Ni no Kuni from Level 5 and The Last Guardian from Sony, Japan's game developers were mainly wringing their hands.

Nintendo has been the major exception, a Japanese game company that has remained dominant. The company, based in Kyoto, reinvented the industry with its Wii home console and wandlike remote, which was introduced in 2006, luring new casual players into the market while setting an industry standard in motion control.

The Wii Sports Resort game was the world's second-biggest game in 2009, selling 7.57 million copies. Its soon-to-be-released Nintendo 3DS, a portable console with a 3-D display that does not require special glasses, is the industry's most anticipated hardware release in years.

But because the best-selling games on Nintendo consoles are largely made by Nintendo, the rest of the Japanese game industry has been excluded from that action.

Meanwhile, Japan's domestic game market is shrinking, down by 20 percent since 2007, to 549 billion yen ($6.4 billion) in 2009, according to Enterbrain.

During that time, the market in the United States surged to a record $21.4 billion in 2008 before a recession-driven decline to $19.7 billion in 2009. But that was still a total increase of 10 percent over two years for the American market, according to NPD.

As Japanese development studios struggle with declining sales, analysts say they are falling behind their American rivals in sheer investment power. A budget for a blockbuster game in the United States can approach $50 million, a figure few Japanese developers can now match.

"Japan used to define gaming," said Jake Kazdal, a longtime developer who has worked at Sega in Tokyo and the American game publisher Electronic Arts. "But now many developers just do the same thing over and over again."

Part of Japan's problem, Mr. Kazdal said, is a growing gap in tastes between players there and overseas. The most popular games in Japan are linear, with little leeway for players to wander off a defined path. In the United States, he said, video games have become more open, virtual experiences.

"Smarter developers in Japan are trying to reach out to the West," Mr. Kazdal said. "They're collaborating and trying to make games that have more global appeal."

But Japanese developers have sometimes hit snags trying to tailor games to Westerners. Take Shadow of Rome, the 2005 action game Capcom made for European and American markets.

Shadow of Rome sought to recreate the domestic success Capcom had found with Onimusha, which is set in medieval Japan. But instead of samurai swordsmen, Shadow of Rome featured hulking, oversize gladiators.

Shadow flopped. And Capcom concluded that Westernizing a game took more than "turning eyes blue and changing the hair color," Mr. Inafune said.

The company has had more success with its 2006 horror action game Dead Rising, which it tailored specifically to the West. Set in a zombie-infested mall in small-town America, the game gives players more freedom to improvise. Everything in the mall is at the players' disposal. They can whack zombies with salmon, run them over with shopping carts, even pour cooking oil on the floor to make zombies slip.

Capcom is also tapping foreign talent. On Wednesday, it said it was buying Blue Castle Games of Vancouver, British Columbia. Capcom and Blue Castle Games collaborated on the sequel to Dead Rising. No financial terms of the deal have been disclosed.

Other Japanese companies are also trying overseas collaboration, but not without hiccups. Grasshopper Manufacture -- the cult game developer behind critically acclaimed, if financially unrewarding, titles like Killer7 and No More Heroes -- recently worked with Electronic Arts on a psychological action thriller due in stores next summer.

Unveiling the game, Shadows of the Damned, at the Tokyo Game Show, Goichi Suda, Grasshopper's chief executive, said the title was designed "to appeal to a global audience."

But the creative director of the game, Shinji Mikami, who was also behind Capcom's Resident Evil games, cited a culture clash between the Japanese design house and its partners at Electronic Arts.

"Japanese developers tend to work on inspiration, not so much on a set time schedule like the Americans," Mr. Mikami said in an interview. "So when EA asked about the game month after month, we felt like loan sharks were coming after us."

But there are no hard feelings, evidently. "We're grateful to EA for being so understanding," Mr. Mikami said.

Meanwhile, some Japanese game developers are paying more attention to how games are localized for overseas markets, going beyond facile translations to a more in-depth recasting of games for different markets.

Gone are the days, they say, of awkward lines like "All your base are belong to us," a notorious mistranslation from the 1991 game Zero Wing that spawned an Internet meme.

Brian Gray, a Tokyo-based freelance game translator who previously worked at the Japanese game developer, Square Enix, said he recently started working with clients to write scripts from scratch in English, rather than translating Japanese.

"Developers are saying this isn't about translation anymore," Mr. Gray said. "They're asking, how can we work together to create something that works globally?"

Others are drawing from various facets of Japanese culture. The developer Level 5, for example, is collaborating on Ni no Kuni with Studio Ghibli, the film studio behind critically acclaimed animated movies like "My Neighbor Totoro."

All the while, Japan is also racing to tap emerging game markets in China and South Korea, and a boom in casual, downloadable games on a host of new devices like iPhones.

Yoichi Wada, president of the Japanese game developer Square Enix, spoke of the challenge at the game show.

"How do you truly globalize?" Mr. Wada asked. "I think you have to work with people who grew up overseas, who grew up breathing the culture. It's impossible otherwise."

"The game industry is constantly changing," he said. "Everybody's joining the market. You just don't know what's coming next."