Japan Game Makers Count on Mobile Gear for Growth

Fri Sep 24, 2004

MAKUHARI, Japan (Reuters) - Japanese game makers, faced with a shrinking local market and increasing competition from overseas rivals, are pinning hopes on mobile platforms such as handheld machines and cellphones to stir up demand.

Portable game gear came under the spotlight this week after Nintendo Co. Ltd. announced prices and launch dates of its dual-screen handheld game console "DS," and Sony Corp unveiled its PlayStation Portable (PSP) at the Tokyo Game Show, Japan's largest industry show for video games.

Nintendo, known for games characters such as Pokemon, Mario and Donkey Kong, will release DS in the United States on Nov. 21, followed by the Japanese and European launches. Sony's PSPs are expected to hit some store shelves by the year-end.

At the three-day Tokyo Game Show which started on Friday, 26 percent of 461 software titles being showcased are intended for either handheld machine or cellphones. That's up from 21 percent last year.

NTT DoCoMo Inc., Japan's dominant mobile phone operator, is displaying 45 mobile phone game titles for trial by visitors, compared with 36 titles a year ago.

"Mobile gear makes it possible to play games while being away from home. Changes like that entice new users into games and expand the market," said Hideki Sato, senior corporate adviser at Sega Corp., maker of popular Sonic the Hedgehog game.

"Yes, we are holding high hopes (on mobile game platforms)."

Software for the portable games market, which is currently dominated by Nintendo's GameBoy Advance SP handsets, accounted for 23 percent of the 309 billion yen ($2.8 billion) domestic game software market in 2003, according to the Computer Entertainment Supplier's Association.

Some analysts predict that Sony's PSP will expand the market about 1.5-fold by appealing to a different age group -- above 20 years old -- from Nintendo's focus, which is young children.

New platforms are a welcome move for game creators also because it gives them an additional chance to recover growing development costs just as movie studios recover huge production costs through theater showings, TV broadcasting and sales of packaged DVDs.

"In our line of business, we now need to use and re-use software as arcade games, home games, handheld games, cellphone games and online games," Namco Ltd. executive vice president Akiyoshi Sarukawa said on the sidelines of the game show.

"Otherwise, it is really difficult to collect what we have spent on development."

Ballooning development costs are weighing on profit margins at game makers as advanced consoles equipped with cutting-edge chips and other technology call for sophisticated graphics and realistic action.

The size of the Japanese video game market -- software and hardware combined -- shrank for the third straight year in 2003 to 446.2 billion yen as game makers compete with mobile phones, Internet and DVDs for consumers' leisure spending. ($1=110.72 Yen)

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