Japan's electronics multinationals

SONY profits: 56% of profits are from selling life insurance and financial products (manuscript invited by BBC)

Games are 11% of SONY’s sales

SONY profits: Currently 56% of SONY’s profits come from selling life insurance and financial products

Games are 11% of SONY‘s sales – and currently 56% of SONY profits come from selling life insurance, consumer loans and financial products in Japan. Games are important, but are not going to make or break SONY at this time.

Technical specs of the next Playstation need to be fantastic. Specs alone however have not been the main focus for quite some time now. Smart phones, social games, smooth linking of all “screens” are disrupting the games sector. In Japan, the social games market is already twice the value of the traditional game console market (excluding software): in anticipation of their global success, GREE and DeNA combined have climbed to half the market cap of all of SONY.

SONY’s game business model also faces disruption by free and $.99 “snack-type” games, downloaded to mobile phones and tablets – to win in this sector SONY would have to beat Rovio’s Angry Birds brand and their galactic and Starwars games among others. Its hard for SONY to please both hardcore gamers, and the much larger audience of casual gamers looking for quick in-between low cost or free game “snacks”.

If I was CEO of SONY, another fact I would worry about is that there are currently about 800 games on Playstation, while here are about 130,000 games on iOS, and more than 100 new games submitted to Apple everyday. Now if Apple would take this enormous developer support to a next generation Apple-TV ecosystem, I would have sleepless nights about my whole game business division if I was SONY-CEO.

I like SONY’s acquisition of the cloud game platform Gaikai

Personally, I like SONY’s acquisition of the cloud game platform Gaikai. It will be key for SONY to keep a great team at Gaikai. Ultimately Gaikai might become SONY’s most important game platform. Improving the specs of SONY’s Playstations is necessary for SONY to remain a console player – however for business success SONY needs to drive disruption instead of reacting to others like Apple or Rovio. Gaikai could give SONY that chance. SONY’s own studios could also be a more important weapon in the game.

SONY is often taken as a poster child for Japan’s stagnation

over the last 15 years, SONY showed essentially no revenue growth and close to zero average profits and margin. However, CANON proves that even a Japanese electronics company can deliver consistent growth and good margins, but copying CANON of course is not the way to go. SONY will need to create its own way.

Read our report on Japan’s electronics industry sector:


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

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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):

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Assessing Japan’s Gaming Sector (CNBC TV interview)

More in our J-GAMES report:

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