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disruption games native smart phone games smart phone games Urban

Pokemon Go – everybody loves Pikachu…

Pokemon Go is great – but will it bring another Nintendo boom as in 2009? or even exceed 2009?

Google spin-out Niantic Labs’ augmented reality smartphone game booms to the top of charts

Niantic Labs is specialized on augmented reality games. In a previous game, Ingress, players selected about 15 million memorable locations globally. Niantic picked about 5 million of these crowd source generated locations, placed characters out of 740 Pokémon characters at such Pokéstops. Using smartphones, GPS, cameras and their avatars, players hunt Pokémon characters placed at Pokéstops, bring them to arenas/gyms and let their Pokémon characters fight for arenas/gyms. Thats just the beginning, and we can imagine many ways to expand this basic game structure, for example Pokéstops and Gyms sponsored by stores or corporations.

Overcoming Galapagos

Pokémon Go’s success is also significant, because the fundamentally Japanese Nintendo and The Pokémon Company are overcoming the Japan-Only Galapagos Syndrome by cooperating with Google and San Francisco based Google spin-out Niantic.

At the same time, Pokémon Go is also an indication of the power Nintendo can achieve in the smart phone sector. Will Nintendo dethrone current smart phone game kings Mixi and Gung-Ho in Japan?

Everybody loves Pikachu… No. 25 of currently 740 Pokémon characters

For the open day at my older son’s high school, kids made posters introducing their country: the highest mountain, the most characteristic flower, and the most famous person.

One Japanese student writes: “The Prime Minister is the most famous person in Japan, because he decides everything”.

Another Japanese student writes: “Pikachu is Japan’s most famous person, because everybody loves Pikachu”. Which of the two Japanese students knows more about his own country?

Pikachu is No. 25 of currently 740 Pokémon characters, and represents electricity with his zig-zag lightening bolt tail, and bright yellow color.

Pokémon character developer The Pokémon Company estimates the global market for Pokémon characters to be US$ 48 billion.

Nintendo market cap increases from US$ 20.3 billion to US$ 31.5 billion from 6 to 13 July, 2016

Nintendo shares rise from ¥14,055 in the morning of July 6, 2016 to ¥21,830 at close on July 13, 2016

Nintendo market cap rises from ¥ 2.56 trillion (US$ 20.3 billion) in the morning of July 6, 2016 to ¥ 3.09 trillion (US$ 31.5 billion) at close on July 13, 2016

Nintendo boomed around 2009 by disrupting the game world with motion sensing Wii and two-screen handheld DS game consoles. Smartphone disruption reduced Nintendo to pre-2006 size in sales, and profits did not yet recover to pre-boom levels.

Nintendo revenues peaked in 2009, and are now back to where they were before 2006
Nintendo revenues peaked in 2009, and are now back to where they were before 2006
Nintendo income peaked in 2009, and just recently recovered from losses - has not yet reached pre-2006 levels
Nintendo income peaked in 2009, and just recently recovered from losses – has not yet reached pre-2006 levels

Unexpected consequences- The Bank of Kyoto booms, and Bank of Kyoto’s 4.5% holding in Nintendo is worth more than 1/2 of Bank of Kyotos market cap

The Bank of Kyoto owns 4.5% of Nintendo, at close on July 13, 2016, this holding is worth YEN 139 billion (US$ 1.4 billion).

The Bank of Kyoto (TSE Code 8369) at the close on July 13, 2016 has a market cap of YEN 274 billion (US$ 2.64 biliion)

Thus Bank of Kyoto’s holding in Nintendo corresponds to more than one half of its value. This also means that Nintendo is worth about 10 times as much as the Bank of Kyoto.

The Pokémon Company – global market size estimate for Pokémon characters estimate: US$ 48 billion

The Pokémon Company manages and develops the currently 740 Pokémon characters.

The Pokémon Company is a private company owned in equal 1/3 parts by Nintendo KK, KK Game Freek and KK Creatures. KK Game Freek and KK Creatures are both privately held game development companies

More details and analysis in our Report on Japan’s game markets and makers.

Niantic Labs

Niantic Labs, focused on augmented reality games, is a Google spin-out founded in 2010, headed by John Hanke, one of the founders of Keyhole, which is at the basis of Google Earth.

Niantic Labs had staged initial funding of US$ 90 million equally from Google (1/3), Nintendo (1/3) and The Pokémon Company (1/3), and since then an additional Series A round in February 2016, plus we assume that Founder John Hanke, maybe Google at spin-out, other founders likely also own equity. So its not clear to us how much exactly Nintendo owns of Niantec, either directly or via its holding in the Pokémon Company.

There was a augmented reality company in Japan, Tonchi-Dot 頓智ドット株式会社(トンチドット) which created a augmented reality app called Sekai-Camera during i-Mode and Galake-Phones, but it ended all services on January 22nd, 2014.

Japan game market disruption market report:

Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

Categories
games smart phone games SNS Software

Smartphone games disrupt Japanese video game industry

24 new listed smartphone game companies achieve net income twice as high as all top 8 traditional video game companies combined

Its not just Nintendo being disrupted, its the whole Japanese video games industry

In the most recent version of our report on Japan’s game industry, we added 24 publicly listed new smartphone game companies (listed on the Mothers market or the second or first sections of the Tokyo Stock Exchange), and we also added not-yet-publicly-traded LINE, and we will add more in future editions.

Japan game market report (398 pages, pdf-file):

There has been much media focus on Nintendo and how it is affected by the rise of smartphone freemium games, and how it will react. But our analysis shows that its not just Nintendo thats affected, but the whole traditional Japanese video game industry.

Smartphone games disrupt:

During financial year just ended, 24 publicly listed Japan’s smartphone game companies earned twice as much income as all top 8 traditional video game companies combined.

Combined net income in FY2014 (which for most companies ended on March 31, 2015) for 24 publicly listed Japanese new smartphone game companies is about YEN 200 billion (about US$ 2 billion), compared to a combined net income of about YEN 100 billion (about US$ 1 billion) for all top 8 traditional Japanese video game companies:

net income of Japan's top 8 traditional video game companies is about US$ 1 billion in FY2014
net income of Japan’s top 8 traditional video game companies is about US$ 1 billion in FY2014 (source: official company financial reports)
net income of 24 listed Japanese new smartphone game companies combined in FY2014 is about US$ 2 billion
net income of 24 listed Japanese new smartphone game companies combined in FY2014 is about US$ 2 billion (source: official company financial reports)

Japanese smartphone games have global impact and capture global value

Japanese smartphone game companies are in leading positions on global scale (Source: AppAnnie):

  • The globally No. 1 ranked top grossing company for iOS and Google-Play app stores combined is a Japanese company: LINE
  • 2 out of the top-10 top-grossing smartphone game companies globally (iOS plus Google-Play app stores combined) are Japanese companies
  • 5 out of the top-10 top-grossing apps globally (iOS plus Google-Play app stores combined) are Japanese apps

Learn more about Japan’s games industries

Japan game market report (398 pages, pdf-file)

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Categories
disruption games mobile games smart phone games

Nintendo smartphone pivot?!

Nintendo partners with DeNA

Taking Nintendo intellectual property and characters to smartphones

Nintendo was founded on September 23, 1889 by Fujasiro Yamauchi in Kyoto for the production of handmade “hanafuda” cards. Nintendo Headquarters are still located in Kyoto (you can see the Nintendo headquarters building from the Kyoto railway station).

The Chinese characters used to write Nintendo’s original Japanese company name in Japanese mean something like “leave the responsibility to heaven or to god”.

Nintendo has been through many pivots during its more than 100 years history, and Nintendo can afford to take its time to do things right, and it did when smartphones started disrupting industry sector after industry sector, and did not stop disrupting the games industry.

Nintendo has a home advantage – the epicenter of the global games industry is in Japan, and not surprisingly, Japan is by far the world’s No. 1 biggest smartphone games market by cash income (other markets are bigger in terms of free downloads, but Japan is No. 1 globally in terms of cash revenues). So Japanese game companies have a big home advantage.

The No. 1 company ranked by gross revenues of the combined total iPhone + Android app market is also a Japanese company.

Yesterday, March 18, 2015, Nintendo announced to join forces with DeNA to jointly develop smartphone games including subscription based game services as a platform to leverage Nintendo’s iconic intellectual properties and characters.

Do you understand the big picture of Japan’s games industries, which drive the global game market? Make sure you do – and read our report:

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Categories
games Mobile mobile games smart phone games

Japan iPhone AppStore: 10 out of the 25 top grossing apps in Japan are by companies of foreign origin. Can you guess which?

Japan is No. 1 globally in terms of iOS AppStore + Google Play revenues, bigger and faster growing than USA

10 out of 25 top grossing apps in Japan are of foreign origin

Japan game market report (398 pages, pdf-file)

AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies, and 10 out of 25 top grossing apps in Japan are of foreign origin!

Japan’s iconic game companies created many game categories – this tradition carries over to mobile gaming now.

Building a business in Japan is not trivial

Many foreign game companies have failed and given up. Foreign game companies that have recently given up in Japan include Zynga and Habbo Hotel. EA has given up twice, and is now undertaking the third entry to Japan. To understand some of the key mistakes foreign companies make in Japan, read our blog about why Vodafone failed in Japan.

Lets have a look at the list of top grossing games in the Apple iOS AppStore today. Out of the 25 top grossing games in the AppStore, 10 are by foreign originating companies. Can you guess which these are by reading the list below?

So Japan is certainly not a “closed market”. Actually, it is obvious that Apple does not discriminate in any way against foreign companies in Japan.

Interestingly, neither Nintendo, nor Rovio’s games, such as Angry Birds appear among the 200 “top grossing games” in Apple’s iOS Japan AppStore.

Apple iOS AppStore-Japan “Top Grossing” games ranking – 10 out of the 25 top grossing apps in Japan are by companies of foreign origin

Can you guess which 10 are by companies of foreign origin?

(read the rankings on July 13, 2014 here)

February 4, 2014:

  • No. 1 Puzzle & Dragons by GungHo
  • No. 2 Quiz RPG Witch and black cat quiz (by Colopl)
  • No. 3 Dragon Quest Monsters Superlight (by Square Enix)
  • No. 4 Monster strike (by Mixi)
  • No. 5 LINE Pokopang (by Naver Japan)
  • No. 6 Pro yakiyu PRIDE (by Colopl Inc)
  • No. 7 Tsuri Suta (by GREE)
  • No. 8 Sengoku Enbu (by Sumzap Inc)
  • No. 9 Puyo puyo!! Quest (by Sega Corporation)
  • No. 10 Gunzei RPG aoi no sangokushi (by Colopl)
  • No. 11 Bousou retsuden tansha tora (by Donuts Ltd) (a motobicycle race game)
  • No. 12 Dragon league X (by Asobism Co Ltd)
  • No. 13 Clash of Clans (by Supercell)
  • No. 14 Love life! School Idol Festival (by KLab Inc.)
  • No. 15 Candy Crush Saga (by King.com Ltd)
  • No. 16 LINE (by Naver Japan)
  • No. 17 Dragon poker (by Asobism Co Ltd)
  • No. 18 Gundam Area wars (by NamcoBandai Games Inc)
  • No. 19 Brave frontier (by Alim Co Ltd)
  • No. 20 Chain cronicle. Original scenario RPG. Chencro (by SEGA Corporation)
  • No. 21 LINE Play (by Naver Japan)
  • No. 22 LINE Bubble! (by Naver Japan)
  • No. 23 LINE Disney tsumu tsumu (by Naver Japan)
  • No. 24 World soccer collection S (by KONAMI)
  • No. 25 Hay Day (by Supercell)

Japan game market report

(398 pages, pdf-file)

Copyright (c)2014 Eurotechnology Japan KK All Rights Reserved

Categories
disruption games Mobile

Japan game market disruption: GungHo + DeNA + GREE overtake Japan’s game icons

Japan game market disruption: new smartphone game companies overtake Japan’s game icons like Nintendo in income

[日本語版はこちらへ]

Since last financial year (ended March 31, 2013), three newcomers (GungHo, DeNA, and GREE) combined achieved higher operating income and higher net income than all 9 iconic Japanese game companies (Nintendo + SONY-Games + SegaSammy + BandaiNamco + Konami + TakaraTomy + SquareEnix + Capcom + TecmoKoei) combined.

While the newcomer’s revenues are increasing (except for GREE), the traditional 9 game companies’ revenues peaked in 2008, and have been falling rapidly ever since.

Clearly Japan’s the 2003-2005 mergers in Japan’s game sector did not make the sector “future proof” – more dramatic changes will be either initiated by the iconic incumbents, or imposed on them from newcomers such as GungHo.

Note that the position of foreign entrants remain weak in Japan’s game market overall.

Read more in the article below or in our report on “Japan’s game makers and markets”, and in the following post “Brutal disruption of Japan’s Game Markets”.

Three new game companies (GungHo, DeNA, GREE) overtake Japan's 9 iconic game companies in operating profits
Three new game companies (GungHo, DeNA, GREE) overtake Japan’s 9 iconic game companies in operating profits (note that the last data point for 2013 for GungHo is only for the first 6 months, i.e. full year results will show that the “new” game companies are doing even better compared to the “old” game companies than visible in this figure) Source: https://www.eurotechnology.com/store/jgames/
Three newcomers (GungHo, DeNA, GREE) achieve higher net profits than all 9 Japanese game icons combined
Three newcomers (GungHo, DeNA, GREE) achieve higher net profits than all 9 Japanese game icons combined (note that the last data point for 2013 for GungHo is only for the first 6 months, i.e. full year results will show that the “new” game companies are doing even better compared to the “old” game companies than visible in this figure) source: https://www.eurotechnology.com/store/jgames/

Japan game market disruption: online and smartphone came company GungHo with Puzzle and Dragons

GungHo started as OnSale KK, a joint-venture between SoftBank and the US company OnSale Inc., the purpose of this JV was Japan market entry for this US company, an ecommerce company.
OnSale KK pivoted from ecommerce to games and started to distribute the Korean game Ragnarok and others, and changed its name to GungHo.
GungHo’s breakthrough came with “Puzzle and Dragons” – Jan-June 2013 operating profits increased 4050.1% (four thousand fifty percent) compared to the same period one year ago. GungHo is part of the SoftBank group.
More in our report on “Japan’s game makers and markets”

Japan game market disruption: GREE

GREE on the other hand – although a successful new venture in Japan’s game sector – is not doing so well currently: reported revenues and income have both been falling. Essentially, GREE has difficulties to implement the plan to build a global business based on their Japanese methods and business models. The factors are both “hard” and “soft”, i.e. business models, and human factors.
Details on GREE’s performance, and reasons for GREE’s current issues in our report:

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
games Mobile

Japan game sector disruption

Japan’s iconic game companies (Nintendo, Sony, Sega-Sammy, Bandai-Namco, Konami, Takara-Tomy, Square-Enix, Capcom, Tecmo-Koei) see brutal disruption by smart phone games

Japan game sector disruption: Three newcomers (GREE, DeNA and GungHo) achieve higher operating income than all top 9 incumbent game companies combined

Japan’s top 9 iconic game companies, Nintendo, Sony, Sega-Sammy, Bandai-Namco, Konami, Takara-Tomy, Square-Enix, Capcom, Tecmo-Koei created much of the world’s games markets, and many of the world’s most loved game characters.

They are now seeing brutal disruption.

Japan game sector disruption

With the Financial Year ending March 31, 2013, for the first time, just three Japanese newcomers (GREE, DeNA and GungHo) achieved higher operating income than all top 9 Japanese iconic incumbent game makers:

In FY2012 combined operating income of all 9 incumbent game companies was YEN 67.6 billion (US$ 700 million), combined operating income of the 3 newcomers was YEN 174 billion (US$ 1.8 billion) – even though for GungHo only the first 6 months of 2013 are included in the calculation.

Operating income of Japan's top 9 games companies declined steadily since 2009 - combined operating income for FY2012 was YEN 67.6 billion (US$ 700 million)
Operating income of Japan’s top 9 games companies declined steadily since 2009 – combined operating income for FY2012 was YEN 67.6 billion (US$ 700 million)
In 2013, three newcomers (GREE, DeNA, GungHo) achieved higher operating income than all nine established Japanese game makers. Combined operating income for FY2012 was YEN 174 billion (US$ 1.8 billion) 
In 2013, three newcomers (GREE, DeNA, GungHo) achieved higher operating income than all nine established Japanese game makers. Combined operating income for FY2012 was YEN 174 billion (US$ 1.8 billion) 

The incumbents: Nintendo, Sony, Sega-Sammy, Bandai-Namco, Konami, Takara-Tomy, Square-Enix, Capcom, Tecmo-Koei

Because of its size, Nintendo has the greatest weight in the overall performance of Japan’s traditional game sector. Nintendo has been dramatically affected by the shift from traditional game consoles to smartphones. Still, Nintendo (as all other Japanese iconic game companies) has tremendous resources, tremendous creativity, globally loved characters and brands, and huge cash reserves. I don’t think that Nintendo (and other Japanese game companies) risk as much to follow Nokia and RIM/BlackBerry’s fate, but may be more resilient. However, there has been substantial consolidation in Japan’s games sector of recent years, and the current challenges could lead to more M&A in Japan’s games sector.

The disruptors

We have only picked three important new market entrants – there are many more in Japan’s vibrant mobile game venture scene.

DeNA

DeNA initially started as a mobile auction group, and sees continuous strong growth and high margins.

GREE

Of these three, GREE is currently suffering some set-backs originating from GREE’s business model. GREE started as a SNS and social game platform on Japan’s “galake” (Galapagos Keitai) relying on Japan’s mobile internet services i-Mode, EZweb and Yahoo-Mobile, where operators traditionally take 9% commissions. Initially GREE tried to transfer this “platform on platform” business model to other countries, but this does not seem to work out. So GREE is now pivoting to original games, and has seen setbacks.

GungHo

GungHo started as a joint-venture with a US company, the purpose of this JV was Japan market entry for this US company. GungHo then pivoted away from this joint-venture to become a games company, and produced a series of games, which all did well, but not extraordinarily well. That is, until GungHo created “Puzzle and Dragons”, which is growing spectacularly well: Jan-June 2013 operating profits increased 4050.1% (four thousand fifty percent) compared to the same period one year ago, and net profits increased 2507.8% (two thousand seven percent) compared to Jan-June one year ago.

The disruption

The shift to smartphones is hitting Japanese traditional iconic game makers from all sides:

  • the shift from TV to tablets and mobile phones
  • the shift from dedicated game consoles to smart phones and tablets
  • the shift from Japan’s “galake” feature phones to smart phones
  • the shift in business model from traditional US$ 40-60 game cassettes-type to free game downloads with in-game purchases and advertising
  • …and more

Japan’s game sector report

Learn more: read our report on Japan’s game makers and markets
(approx. 400 pages, pdf file)

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Categories
games

Future of Video Game Sector (CNBC Airtime: Thurs. Jul. 30 2009)

Read more about Nintendo and the games sector: http://www.eurotechnology.com/store/jgames/

Read more about Japan’s electrical industry sector in our Japan’s electronics industry report (pdf file)

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games

Do mobile app-stores and online games disrupt Nintendo’s blue ocean?

Japan introduced the mobile internet with i-Mode in 1999, while i-Phone and friends are now getting the rest of the world hooked onto the mobile internet.

Games used to be played in game parlors, and some of Japan’s game giants were originally and still are game parlor machine makers – a round of Dance-Dance-Revolution anyone? Next came consoles, cassettes and handhelds, taking the growth momentum out of game parlors, and establishing a pattern of growth by generations (today we are in the 7th Generation). Nintendo broke the cozy generation pattern where pixels and MHz increased in predictable ways from Generation to Generation without much other fundamental change. Nintendo took games sideways into the blue oceans of motion sensors and to the silver generation, women and other previously non-gaming majorities, while Xbox and SONY kept slugging out the generation game.

We have been analyzing the Tokyo Game Show for many years – at the 2004 Tokyo Game Show, when SONY gave previews of the PSP – actually, I was personally much more interested in DoCoMo’s huge exhibition village setting a stage for about 15 mobile phone gaming partners.

Since i-Mode started mobile phone games in 1999, online and mobile phone games combined have essentially outgrown the video game software sector in 2009, and are certain to grow much more in coming years – the iPhone is not slowing mobile phone based gaming down…. Those who only count video game cassettes and consoles, certainly don’t see the rapid mobile and online growth – and complain about shrinking markets.

Is Nintendo now being blind-sided by mobile phones and app-stores?

I don’t think so: not blind-sided – but strongly affected. Actually, Nintendo’s CEO and games developer Shigeru Miyamoto tell us they want to make their DSi’s central to everybody’s lives – with built in cameras, payments, app-stores, navigation. Essentially everyone on planet earth has a mobile phone, or will soon have one, or two. Many of todays phones in people’s hands can’t yet play games nicely – but DoCoMo’s phones do – and iPhones do also. Thats why we already see a lot of mobile gaming in Japan. Imagine the day when most mobile phones on planet earth can play games nicely? Will that day come?

Will people upgrade to a DSi? or to a PSP? or to a better mobile phone? Apple and DoCoMo are both proof that people do pay for downloading games from i-Mode or i-Tunes app-stores – and that’s exactly the growth we see in the Figure – you don’t see that growth if you count only the number of game cassettes and consoles sold. In any case we may not see an 8th generation console – people might upgrade their phones instead – or use Skype on their PSP.

Segmentation of Japan's games software industry
Segmentation of Japan’s games software industry

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
games Japan's electronics industry Japan's electronics multinationals

Japan’s games sector overtakes electrical sector in income

Japan’s games sector is booming – and net annual income of Japan’s top 9 game companies combined has now overtaken the combined net income of all Japan’s top 19 electronics giants (including Hitachi, Panasonic, SONY, Fujitsu, Toshiba, SHARP… at the top, and ROHM, Omron… further down the ranking list).

Why does it make sense to compare electronics giants with game companies? In many areas, especially home electronics and personal portable devices these two sectors compete for exactly the same consumer spending budgets and mind share.

Pressure on Japan’s electrical giants for much more fundamental restructuring is increasing. More details below and find our calculations and analysis explained in our reports: Report on Japan’s electrical industry sector and our Report on Japan’s game industries.

Figure compares the added total net income of Japan’s top 18 electrical companies (Hitachi, Panasonic, SONY…) with the combined total net income of Japan’s top 9 games companies (Nintendo, Bandai Namco…, not including SONY Computer Entertainment, because net income is not available).

The games sector – lead by Nintendo – shows stable net income all through the current crisis years. While pressure on the electrical giants for more fundamental restructuring is increasing.

Combined annual net income of Japan's game companies compared to Japan's top 18 electronics companies
Combined annual net income of Japan’s game companies compared to Japan’s top 18 electronics companies

Combined total net annual income of Japan’s games sector. (SONY Computer Entertainment is not included, since net income is not available)

Combined annual income of Japan's top game companies
Combined annual income of Japan’s top game companies

Detailed analysis in our report on Japan’s games sector.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
Japan's electronics industry Japan's electronics multinationals

Japan’s electronics companies & the crisis

Japan’s top 20 electronics companies combined are about as large as The Netherlands economically, and have big impact on the world economy. Our analysis shows how dramatically Japan’s electronics companies have been hit by the current crisis (except for Nintendo). We suggest that full recovery to 2008 (FY2007) levels may take until 2016 – about seven years in terms of income, and about 3-4 years in terms of revenues.

The crisis has thrown Japan’s electrical companies back to 2002 in terms of combined annual net incomes. It has taken Japanese electricals 7 years to climb from the 2002 crisis to the 2008 (FY2007) boom. Since Japan’s electrical companies have made relatively soft adjustments, but not a full fundamental industry restructuring yet, we think that it is likely that developments will proceed along a similar path as in the past: following such an analysis we think that it will take about 7 years from 2009 (ie. until 2016) for Japan’s electrical companies to work their way back up to 2008 net income levels. (Find detailed financial data and analysis in our report on Japan’s electronics industries)

net income of Japan's electronics companies
net income of Japan’s electronics companies

Back to FY2003:

Combined annual sales for the financial year ending March 31, 2010, are at a similar level as in FY 2003, ie Japan’s electrical industry has been taken back 6 years in terms of revenue growth. Again, since a dramatic and fundamental industry restructuring has not yet taken place, we believe that we can expect it will take about 4 years for Japan’s electronics industry to grow again to 2008 (FY2007) size in terms of annual revenues.

net revenues of Japan's electronics companies
net revenues of Japan’s electronics companies

The crisis spreads the field…

During the “good” years of FY1997 – FY2007 the differences between top and bottom performing electrical companies became steadily smaller: the field narrowed.

This figure shows that during the current crisis the spread between best and worst performing companies became more than twice as wide. The crisis clearly differentiates winners (Nintendo) from losers in terms of operating margins.

operating margins of Japan's electronics companies
operating margins of Japan’s electronics companies

Read more details in our report about Japan’s electrical industries:

Japan electronics industries – mono zukuri

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
games

Nintendo’s CEO Satoru Iwata and Games Developer Superstar Shigeru Miyamoto

Nintendo’s CEO Satoru Iwata and games developer superstar Shigeru Miyamoto presented in Tokyo on April 9, 2009 about Nintendo’s situation and future plans.

Iwata emphasized plans to move from one DS per household to one DS per person, by personalizing the DS, and by seeing that DS enriches everyday life. As examples he mentioned applications in hospitals and schools (which provoked a question from the audience what he plans to do about children who’s parents cannot afford to purchase a DS for their children), and in museums, where explanations on exhibits are given via the DS.

Nintendo plans a “My DS” experience, by including two cameras in the new DSi, and with online downloads of small non-cartridge games and other applications from a new online store to enrich owners’ daily lives.

Asked about Nintendo’s plans for the recession, Iwata answered, that key is to keep Nintendo’s products at the top of consumers’ wish lists.

Read more about this presentation and analysis of Nintendo and Japan’s games sector in our J-GAMES report.

Asked how Iwata plans to respond to the success of mobile phones, iMode and Appli games, and whether Nintendo plans to create own mobile phones or add phone functions to DS, Iwata explained his thinking under which conditions he would consider entering the mobile phone space.

Nintendo CEO Satoru Iwata and Chief Producer Shigeru Miyamoto
Nintendo CEO Satoru Iwata and Chief Producer Shigeru Miyamoto

Nintendo CEO Satoru Iwata speaks with passion
Nintendo CEO Satoru Iwata speaks with passion

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
Economics Japan's electronics industry

Investor Club: What crisis? Meet some booming Japanese companies

It’s not all doom and gloom here in Japan. Nintendo’s sales and operating profits are rising 8.8% year-on-year. KDDI saw its net profits increasing 59% year on year. Yahoo Japan increases dividends by 22%-25% for 2008. Who are today’s winners in Japan’s IT industry? Gerhard Fasol will show us how and why some great Japanese companies excel in today’s crisis.

The talk reviews today’s status of Japan’s electrical companies, the telecommunications sector and the internet sector, and introduces seven different companies, which show rapid growth of revenues, operating income and net income despite the crisis. These seven companies we introduce turn the crisis into an opportunity.

Mr Fasol is one of the best specialists of Japan’s IT industry. After 12 years in Japan working for the most prestigious Japanese institutions and companies (the University of Tokyo, NTT, Hitachi…), he founded the strategy and M&A firm Eurotechnology Japan KK in 1996. Mr Fasol has advised some of the greatest companies, including NTT, SIEMENS, Deutsche Telekom, Cubic, Unaxis and about 100 fund managers on strategy for Japan, as well as the President of Germany. He helped a French pharmaceutical company acquire a factory in Japan.
He comments regularly on CNBC on Japan’s tech sector.

Schedule: March 24th, 2009 (Tuesday) from 18:30
The conference will be followed by a light cocktail.
Place: French Chamber of Commerce and Industry in Japan, meeting room
Iida bldg 1F, 5-5 Rokubancho, Chiyoda-ku, Tokyo 102-0085
Tel.: 03-3288-9624
Access map: www.ccifj.or.jp
Language: English
Fees: 5.000 yens (to pay in cash at the door)
Payment will be required for cancellations or no-show after this deadline.
Announcement on the website of the French Chamber of Commerce
read a report on the talk here in the monthly newsletter of the French Chamber of Commerce in Japan (in French)

Background reading: our J-ELECTRIC report about Japan’s electric companies
and our Eurotechnology Japan Blog

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
electronics component makers Japan's electronics industry Japan's electronics multinationals media Mobile TV

Wild differences in operating margins for mobile, TV media groups and electricals

We analyze the effect of the crisis on operating margins in three different sectors in Japan:

(1) electronics,
(2) mobile communications
(3) TV media groups.

In sector (1), Nintendo‘s margins are above 30% and increasing despite the crisis, while traditional electronics companies’ margins are evaporating.

(2) for mobile operators DoCoMo, KDDI and SoftBank margins are 10%-20% and increasing despite the crisis! Could mobile phone usage be crisis resistant?

(3) TV media groups had healthy margins in the 10%-20% range back around 2001- however these margins have been slowly melting away, and TV group margins are heading to cross the zero line into the red zone by 2010-2011. Watch out for a TV media crisis. Read more below.

Consumer electronics sector operating margins:

Nintendo bucks the trend: while Japan’s electronics firms’ margins are dropping into the red, and have never been much higher than 5% during the last 10 years, Nintendo‘s operating margins are above 30% and rising despite the crisis.

Margins of top Japan's electronics multinationals and Nintendo
Margins of top Japan’s electronics multinationals and Nintendo

(Find full data, fully labeled graphics and analysis in our report on Japan’s electrical companies)

Mobile phone sector margins are 10% – 20% and rising despite the crisis.

Mobile phones seem to be resistant to the current crisis. DoCoMo‘s, KDDI‘s and Softbank‘s margins are healthy and improving despite the crisis.

Operating margins of Japan's top 3 mobile operators
Operating margins of Japan’s top 3 mobile operators

(Find full data, fully labeled graphics and analysis in our JCOMM Report)

Margins of TV media groups have been melting away since their peak in 2001.

Back in 2001 Japan’s TV media groups used to enjoy healthy margins of up to 20%. Over the last 8 years these healthy margins have molten away, and Japan’s large TV media groups are likely to all simultaneously go into the red from 2010 onwards, unless dramatic action is taken. Media groups will need to grow profitable new business, e.g. mobile-TV, and other cross-media growth areas.

Could it be that recent anti-takeover measures have made the large TV media groups complacent?

Operating margins of Japan's TV media groups
Operating margins of Japan’s TV media groups

(Find full data, fully labeled graphics and analysis in our J-MEDIA Report)

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Categories
games Japan's electronics multinationals

Apple Nintendo Sony: The power of focus

Lets benchmark three iconic companies:

Apple Nintendo Sony

Apple Nintendo Sony: three iconic companies evolving along very different paths. Apple’s current physical products famously all fit onto a single mid-sized table. Nintendo’s current physical products as well, for SONY you’d need a warehouse.

  • APPLE: Wednesday October 22 APPLE announced spectacular full-year results with a year-on-year net income increase of 38%. The results are even better than they look, because iPhone sales and income are spread forward over 2 years due to accounting rules. (See our comments on CNBC here)
  • NINTENDO: on August 29, 2008 Nintendo revised the forecast for full-year net income upward by +26.2% (See our comments on CNBC here)
  • SONY: in contrast, on October 23, 2008, SONY said that full-year net income (for the financial year ending March 2009) is expected to be 37.5% lower than previously predicted (see our comments on SONY’s 1Q results here on CNBC)

Apple Nintendo Sony – Lets look at today’s market caps:

  • APPLE market cap = US$ 85.6 Billion (about 4 x SONY)
  • NINTENDO market cap = US$ 37.2 Billion (about 2 x SONY)
  • SONY market cap = US$ 19.9 Billion

Apple Nintendo Sony – Why this dramatic difference in market caps? We believe its focus.

Apple and Nintendo are companies with clear focus. Lets look at the details below:

Comparing revenues (sales):

SONY = 3 x APPLE
SONY = 4 x NINTENDO

Annual revenues of Apple, Nintendo and SONY
Annual revenues of Apple, Nintendo and SONY

Comparing annual operating income:

APPLE = 3 x SONY
NINTENDO = 3 x SONY

Operating income of Apple, Nintendo and SONY
Operating income of Apple, Nintendo and SONY

Comparing operating margin:

APPLE = 9 x SONY
NINTENDO = 15 x SONY

Operating margin (operating income as a ratio of revenues) for Apple, Nintendo and SONY
Operating margin (operating income as a ratio of revenues) for Apple, Nintendo and SONY

Read our report on Japan’s electronics industry sector

Japan electronics industries – mono zukuri

Copyright (c) 2008-2013 Eurotechnology Japan KK All Rights Reserved

Categories
games Japan's electronics multinationals

Today’s APPLE 4th quarter results vs NINTENDO

A few hours ago (Oct 22, 2008, 6am Tokyo Time) APPLE announced 4th Quarter and Full Year results – we are here updating our comparison between APPLE and NINTENDO. With 6.9 million iPhones sold in APPLE’s 4th Quarter (July + August + September 2008), APPLE has achieved 2.76% market share of all mobile phones globally.

APPLE strongly accelerates lead over NINTENDO in term of sales (see figure below) – even more dramatically, if we take into account that the iPhone in 4th Quarter now accounts for 39% of APPLE’s sales. APPLE accounts for iPhone sales in terms of a subscription model over two years because of free software updates for iPhones. If we would use APPLE’s non-GAAP figures, which book iPhone sales fully at the point of sale, then APPLE’s sales lead over NINTENDO would be even stronger.

In terms of margins we see the opposite trend: NINTENDO‘s lead over APPLE in terms of higher margins expands (see below).

Watch our interview about APPLE’s 4Q results today 11:50am (Tokyo time) on CNBC as a video clip.

Apple accelerated lead over Nintendo in terms of revenues.

Apple’s lead would be more dramatic if correcting for Apple’s subscription model used for iPhone sales according to GAAP rules.

Annual revenues, operating income and net income of Apple vs SONY
Annual revenues, operating income and net income of Apple vs SONY

While Apple’s lead over Nintendo in terms of sales is growing, Nintendo’s lead in terms of operating margins is expanding.

Operating margins: Apple vs Nintendo
Operating margins: Apple vs Nintendo

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Categories
games Japan's electronics multinationals

Games: Nintendo – the winner takes it all

Game industries in total are MUCH bigger than music industries… in Japan game industries are about 10 times bigger business than music industries… Last weekend we had the Tokyo Game Show – read some key points below! From 2006 Japan’s game sector changed dramatically- Nintendo created several paradigm shifts, and “took off”. Read more about Nintendo driven paradigm shifts below. US games giant Electronic Arts (EA) would rank 5th in sales, was EA Japanese. Japan’s games industries are big!

Nintendo income takes off: Nintendo broke the PC-style race for faster machines, and broke out of the limited market of hard core gamers. From FY 2007 Nintendo’s income takes off:

Operating income for Japan's electronics companies
Operating income for Japan’s electronics companies

Nintendo’s DS: braintraining instead of shooting.

SONY’s PSP goes for power, and Nintendo’s DS changed the paradigm + went for lower price. By the way, we see a shift from TV video games to portable and mobile phone games in terms of numbers: for current 7th generation game platforms portables outsell TV video consoles 2:1. DS’s success encouraged Nintendo to develop the Wii.

sales of SONY-PSP vs Nintendo DS in Japan and globally

Avoid the dinosaurs:

global sales of Nintendo Wii, SONY Playstation PS3, and Microsoft Xbox-360

“Too many powerful consoles are like ferocious dinosaurs. They might fight and hasten their own exinction” (Nintendo’s Shigeru Miyamoto in an interview). Nintendo’s Wii has much less power, lower screen resolution, and is much cheaper to make and cheaper to buy than PS3 and Xbox360. Nintendo makes money on every Wii sold.

Sales of Nintendo-Wii vs SONY-PSP vs Microsoft XBOX
Sales of Nintendo-Wii vs SONY-PSP vs Microsoft XBOX

Report: “Nintendo and Japan’s games industries” (9th edition, 181 pages, release October 15, 2008, pdf-file for download):

Eurotechnology report on Nintendo and Japan's game industry
Eurotechnology report on Nintendo and Japan’s game industry

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
games

XBOX Japan entry

XBOX still faces difficulties in Japan

XBOX Japan entry: Microsoft reduces prices by 30%

Microsoft announced to reduce prices for Xbox-360 by 30% in Japan. We believe that this price reduction will not be enough to bring the breakthrough for Xbox in Japan.

Nintendo has reinvented the game industry, created a completely new paradigm. Nintendo does not reduce prices. Xbox is still in the pre-paradigm shift world… prices are not the issue.

Japan game market report (398 pages, pdf-file):

XBOX Japan entry: CNBC interview

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
games

XBOX Japan strategy – Microsoft still struggling

Microsoft XBOX introduced XBOX to Japan on February 22, 2002

XBOX Japan Strategy – CNBC interview

Microsoft introduced the original XBOX game console in the USA on November 15, 2001, in Japan on February 22, 2002, and in Europe on March 14, 2002.

During the period January-June 2005, three years after introduction of the XBOX to Japan’s market, SONY sold about 2.4 Million game terminals in Japan, Nintendo sold about 1.9 Million, and Microsoft about 9000 XBOXes, about 0.2% marketshare.

As of August 24, 2008, Nintendo has sold about 6.7 Million Wii, SONY has sold about 2.3 PS3, and Microsoft about 380,000 XBOX-360 in Japan, a 4% share in this segment.

A few days ago, Microsoft announced a price cut of 30% for XBOX-360 in Japan – the video below gives our comments on this price reduction on CNBC.

Here is a short summary of the CNBC-TV interview:

XBOX Japan Strategy Question: Do you think the price reduction is going to do the trick?

A: No. In other markets maybe, but not in Japan.

XBOX Japan Strategy Question: Do you think XBOX can be successful in Japan? What will it take before Microsoft will give up and say it just isn’t working

A: Of course Microsoft can be successful in Japan with XBOX. There is no law that XBOX cannot be successful in Japan. Microsoft generally is a company that never gives up. But they have to change their strategy for Japan.

XBOX Japan Strategy Question: So Microsoft isn’t doing the right things. What would the right things be?

A: Difficult to say of course, if it was easy Microsoft would already have done this. The situation is that Nintendo has completely changed the business paradigm of the game industry. Microsoft’s XBOX is still operating under the old paradigm.

XBOX Japan Strategy Question: How long do you think Nintendo’s sweetspot is going to last?

A: Nintendo have reinvented the game industry, and completely changed the business models. They also make a lot of their own software. All this puts Nintendo into a very good position.

What can we learn about strategy for Japan from Microsoft’s XBOX experience:

Global products, not adapted to Japan’s market, often do not succeed in Japan. Microsoft’s XBOX is a very good example. Microsoft has one of Japan’s most famous brands, so its not a problem of the brand.

Microsoft faces three problems in Japan:

  1. XBOX is not made for Japanese users in mind
  2. Nintendo changed the paradigm of the game industry, and XBOX is still on the old track
  3. Of three global game console companies (Nintendo, SONY, Nintendo) two are both much stronger than Microsoft in games, and both are on their hometurf in Japan. Microsoft would need to invest more and focus efforts much more on Japan to succeed in Japan with XBOX.

Japan game market disruption market report:

Japan game market report (398 pages, pdf-file):

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Categories
games

Assessing Japan’s Gaming Sector (CNBC TV interview)

More in our J-GAMES report: http://www.eurotechnology.com/store/jgames/

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
games Mobile

Tokyo Game Show TGS2004 (Sept 24-26, 2004): breakthrough for native mobile games

Mobile phone games at the center of TGS2004

by Gerhard Fasol

Docomo at the center of attention with JAVA native mobile games for i-Mode

The annual “Tokyo Game Show” sets trends and is a must for game professionals and fans. More than 100 companies exhibit.

This years highlight is the SONY “PlayStation Portable” – PSP – to be introduced towards the end of 2004. SONY prepared a huge arena with an gigantic models of a PSP hanging overhead where visitors to the show could try out advance models of the PSP.

SONY also displayed the new “Gran Turismo 4” game, the release is scheduled for Dec 3, 2004. “Gran Turismo 4” was not the only car racing game at the show, we counted at least three more in this hugely popular category.

Japan game market report (398 pages, pdf-file):

Docomo dominates Tokyo Game Show TGS2004 with JAVA native mobile games for i-Mode

The DoCoMo pavillion highlighted 15 of the most important i-Mode game partners. These 15 were selected from over 4000 i-mode content partners. Games are one of the most important sectors on the i-mode menu – many customers are driven by games to buy the next handset upgrade. Therefore DoCoMo has a great interest in mobile games. DoCoMos focus at the game show were games for the 900i FOMA/3G series.

SONY previews PSP – Playstation Portable:

SONY PSP mock up for Tokyo Game Show TGS2004
SONY PSP mock up for Tokyo Game Show TGS2004

In a stunning arena around a gigantic hyper-real model of the PSP PlayStation Portable (PSP), visitors try out the PSP. PSP is announced to be released towards the end of 2004.

SONY PSP arena previewing the PSP at Tokyo Game Show TGS2004
SONY PSP arena previewing the PSP at Tokyo Game Show TGS2004

SONY offered a preview of “Gran Turismo 4” representing the enormously popular segmet of car racing games with realistic landscapes and surroundings.

SONY's Gran Tourismo at Tokyo Game Show TGS2004
SONY’s Gran Tourismo at Tokyo Game Show TGS2004

DoCoMo presented an intense show of 15 key i-mode partners focusing on games. The map immediately below shows the lay-out of DoCoMos exhibition area, together with small pictures of the main display of each of the 15 DoCoMo partners

NTT DoCoMo exhibit at Tokyo Game Show TGS2004
NTT DoCoMo exhibit at Tokyo Game Show TGS2004

One of the most important DoCoMo game partners is Square Enix with the best selling Final Fantasy series. Final Fantasy is a “role playing game” where the player joins a group of fighters. This photograph shows the Square Enix presentation in the DoCoMo display. Square Enix also had its own presentation area – complete with models, preview area, shows etc.

SquareEnix at DoCoMo's exhibit at Tokyo Game Show TGS2004
SquareEnix at DoCoMo’s exhibit at Tokyo Game Show TGS2004

“Rumble rose” is the most spectacular representative game of sexy games – Rumble Rose is about women wrestling…

Rumble Rose at Tokyo Game Show TGS2004
Rumble Rose at Tokyo Game Show TGS2004

ATLUS shows stunning color and illumination effects.

ATLUS at Tokyo Game Show TGS2004
ATLUS at Tokyo Game Show TGS2004
ATARI at Tokyo Game Show TGS2004
ATARI at Tokyo Game Show TGS2004
ATI at Tokyo Game Show TGS2004
ATI at Tokyo Game Show TGS2004

Japan game market report (398 pages, pdf-file):

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