Tom

I pretty much agree with you. Certainly, I don't think it's an unwise move to position someone like Mena Kato as Microsoft's liaison with Japanese publishers. You would think she surely can't be the first person to enter that position with those sorts of connections, but if she is (ie: they either had people who weren't industry specialists and/or brought in from abroad), that's pretty telling of the approach they've ostensibly adopted until now.

The thing about the Xbox and Japan is that, in terms of raw, transactional business relationships, it's obviously in a better place overall then when it first entered the scene back in 2001, right? For all of its generally avoidable foibles within Japan proper, the sheer demographics are such that, in the era of 4K game development, most Japanese developers and publishers looking to go international obviously put their games out on Xbox out of necessity in order to recoup their costs. The Xbox now is such a business reality within the international industry that we're even seeing some companies like Sega/Atlus who are less afraid to heavily promote their games under that particular banner via things like Game Pass or even the general showcases without fear of offending Sony in particular. That's genuine progress compared to two generations ago, where quite often the only way Microsoft could get that sort of buy-in was when they purchased platform exclusivity outright, permanently or otherwise.

But it's those domestic prospects that are a hazier. As things stand right now, the Xbox's presence isn't invisible here. You can walk into the big electronics stores like your Yodobashi Cameras and find at least a modest promotional display. They're largely there to promote Game Pass, but you can get both consoles and a handful of the big ticket titles like Forza and Starfield. It's more of a crap shoot once you go to smaller, more dedicated game shops, but they're still not impossible to find. Likewise, as some people may have also heart, Xbox was also one of the big sponsors of this year's TGS; there were games on those banners that were promoted as Xbox games first and foremost. There is a base level aware of the Xbox in this country and, yeah, on some level, they really only can go up in terms of their market share. How much further up, though? That's the big question.

It's natural for Kato to be bullish about the Xbox's future in Japan. That's her job and I'm sure if she didn't believe she had what it takes to improve things, she wouldn't be doing what she's doing right now. However, the Xbox itself occupies an especially weird position within this country, partly of its own making, partly due to circumstances beyond Microsoft's own control right now, and I struggle to see how much better it can feasibly do than keep treading water where it's currently at in the mid-term. For one, Japan being the domain of Nintendo and (albeit to less and less of a degree over time) Sony isn't simply a matter of people blindly favoring native brands; they're brands that are much more closely in touch with Japanese consumers when it comes to everything from aesthetics and UI/UX design preferences to overall price tolerances relative to the markets that they're pursuing. Put another way, they're two companies that are a lot more used to successfully bringing Japanese electronics to global markets than Microsoft is going the opposite way. They've improved in the 20 years that the Xbox has been around, yes, but the other two still have decades more of experience, both in games and beyond it. For a lot of reasons I won't go into right now, I reckon that, once the relevant kinks are worked out, it is generally easier to make Japanese electronics like consoles appealing and marketable overseas than it is to bring western electronics into Japan and have them stick, and the ones that have likely had to eat a lot of humble pie along the way when it comes to their assumptions about what works and doesn't work here.

But I think arguably more pressingly in this economy especially, the Xbox outside of Game Pass just doesn't really represent a tremendous amount of bang for most consumers' buck. In this inflationary environment where the yen continues to be extremely weak against the dollar, both the Series S and the X are rather pricey options. The same issue absolutely applies to the PS5, which is why its adoption rate continues to hover in the single digit millions, yet Sony still has the benefit of its existing online ecosystem that just about any gamer in a multi-platform household here will be on, plus, of course, Japanese publishers releasing games specifically targeting Japanese players on it out of a similar inertia. Even as Sony has frustratingly turned its focus towards other markets, once you don't factor in price, logistically, a PS5 just makes a lot more sense to buy for people looking for a 4K system to purchase in addition to their Switch that they might very well already have.

Contrast that with the Xbox, which, yes, does have pretty universal Japanese developer and publisher support... in international markets. Some of them go to the trouble of releasing Japanese Xbox SKUs, but it's noticeably less often compared to the 360 days and you'd be very hard pressed to find any actual Japanese games lining those store displays I mentioned. Digital sales are absolutely on the rise here like everywhere else and from what I understand, a good amount of Xbox sales here are driven specifically by Game Pass. But I do think that diminished availability and promotion of domestic games at retail majorly contributes to the impression that the Xbox is mainly a platform catering to otaku types who prefer western games. Combine all of that with, again, much less overall audience penetration for Xbox Live in particular compared to PSN and even Nintendo's own offerings and you have a recipe for very muted successful. I don't think it's inherently impossible to improve the situation very long term, but I hope Microsoft is prepared to retain people like Kato for the long haul because if the efforts like her are ever going to bear real fruit, I think it's going to take years and years.

In a lot of ways, even as the potentially most expensive option of all, a gaming PC is in many ways a much more attractive second platform to have in a Japanese household. That, too, will likely always remain a niche in Japan, but awareness in the last five-ish years has definitely increased substantially and there are enough Japanese YouTubers/Vtubers out there playing PC games for their audiences that I think PCs now feel a lot more approachable and attainable than they often used to in decades past. If you really want to put the Xbox's current position here into perspective, I can tell you that those same big electronics retailers here tend to have way bigger promotional areas for all things gaming PCs and streaming than their piddly Xbox sections. I also don't think it's lost on people that, unlike an Xbox, if they invest in a well-specced PC then, y'know, obviously that machine will be handy for plenty more things than just playing games and may very well intersect with other interests that they have.

And this is all without going into macro-level shifts in population demographics and how much that also probably limits the amount of room there is for a true third pillar in the console space. My basic take is that given Japan has 1/3 the number of people of countries like the US, I'm skeptical that the monetary size of the market outside mobile games can really grow much further. Which is to say, I don't think the Xbox will be able to find more success by carving out a new lane and inviting people to join it in addition to whatever other platforms they have. They're going to have to claw at the market share that currently exists by dissuading people away from other platforms and I suspect that needle will only truly begin to move if Sony really cedes its grip here even more than it already has. Nintendo has the budget-conscious and family markets more or less on lock and, like I said, the PC has enough unique selling points of its own to make it significantly more appealing than an Xbox to many people, meaning it's going to have to chip away at the PlayStation's share in order to ever get anywhere. That, in turn, means addressing all of those fundamental issues I've pointed out and that's a ship that can't likely be entirely righted within the rest of the time we have left on this generation. Any shifts that happen I think only have the potential to start being tangibly felt by the start of the next generation at the earliest depending on how the rest of this one plays out domestically.

To finally wrap this thing up, I'll also just say that whenever this subject comes up, Microsoft is often eager to mention their intention to have more exclusive Japanese games like they used to. But that's also much easier said than done. For established IPs, the stakes in terms of market size and sheer money are drastic; likely too much so in most cases. A one-off release permanently exclusive to Xbox all but torpedoes Japanese sales and therefore market interest, damage that would then have to be recovered from for any future, non-exclusive installments. This means Microsoft would then have to essentially "adopt" those IPs outright so that they could be rehabilitated as Xbox games over multiple years and games in order to attain Japanese consumer acceptance and start to encourage people to switch to Xbox as their preferred higher end console option.¹ Otherwise, you'll get more of what we saw with companies like Bandai Namco, who did produce a handful of notable 360 exclusives, only to then either eventually port them to PS3 to achieve full success like with Tales of Vesperia, or make future games multiplatform and never look back, as they did similarly quickly with Idolmaster.

New IPs as Japanese-developed Xbox exclusives are therefore probably more tenable on the whole, but then how do you encourage your average Japanese customer to care and give Xbox a chance in light of all of its other issues I've gone over if that's the only way to play them? I don't know that they can without either willingly publishing those games on other platforms at least initially or, essentially, being willing to take the momentary loss and build up a whole stable of such IP over time so that they can slowly win over hearts and minds that way. It's tremendously complicated calculus and I don't envy anyone on the Microsoft side who has to work out that math.

All of these things also essentially apply to any Japanese or publishers they might mull purchasing. Quite frankly, they got lucky with Tango Gameworks being a part of Bethesda; they were always one of the very, very few Japanese developers whose dependence on Japanese could, as far as I'm aware, be described as truly minimal given their general output. Just about every other candidate people like to float for possible acquisitions like Sega, Capcom, or Square Enix derive significantly much more income from Japanese sales and also quite often are actually conglomerates with business interests that extend beyond the developing and publishing work that's most publicly visible. Sega, for example (or Sega Sammy to be more precise), is also a major distribution company for games in Japan, including other third-parties, as well as being entrenched in the pachinko industry; Square Enix has music and manga publishing labels; the list goes on and on. That makes acquisitions of a lot of the sorts of Japanese companies Microsoft would most plausibly be interested in a lot thornier than a lot of the other ones they made pre-Activision. Either Microsoft suddenly has to get into a lot of other businesses it might not otherwise want to enter, or it has to find a way to parcel out the portions that they want while leaving the remainder enticing enough to convince the other side to sell. For my part, I regularly mull who else in Japan could be appealing to Japan that doesn't run into these sorts of hurdles and time and time again, I come up short. The ones who wouldn't be so problematic logistically simply tend to lack the size and global IP prominence to serve as potent salvos in a Japanese-driven arsenal, in my opinion.

All of this is to say that I think someone like Kato can be effective in her position to some degree within her means. But in order to truly get anywhere in Japan, Microsoft has to not only confront the skeletons that it's willingly put inside the closet for the past two decades, it has to contend with consumer trends and economy realities specific to this country that it might not feel so acutely over in Redmond, but its Japanese partners certainly are, even the cream of the crop. Whatever she can deliver will have to be incredibly incremental over a period of multiple years, if not a decade or more, and require tremendous patience on the part of Phil Spencer and the rest of Microsoft's leadership to genuinely bloom and sustain itself. I have to imagine the conversations she's having with Japanese companies here have to be the frankest her company has had since the days of the original Xbox and any progress made is going to have to be hard won. Not earned by sidelining the existing dynamics with Nintendo and particularly Sony, but genuinely won. Japan still has plenty of money to spend on video games, but not enough for a proper third pillar like what we saw in western markets during the 360 era. They'll have to fight for a piece of that second pillar and I reckon it's not going to be Nintendo's pillar they'll be able to shave off.

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1. This is less unprecedented than it might sound. Recall that in the Wii U days, Nintendo actually engaged in this exact sort of strategy to a fairly prominent degree. Bayonetta is the most famous example of this, but they also similarly swept up the platform rights to Konami's Momotarou Dentetsu, which has since gone on to be one of the Switch's best-selling games in Japan, period.