NEWS - Tuesday, June 29, 2004

Next Xbox Hopes For More Japanese Developers

June 29 (Bloomberg) -- Two years after Microsoft Corp. Chairman Bill Gates handed out the first Xbox game console at a Tokyo video store, the machine's Japanese sales trail those of Sony Corp.'s rival PlayStation 2 console by 48 to one. That's partly because Japanese Xbox owners have about 160 games to choose from, compared with more than 6,000 for the PlayStation 2. Microsoft, the world's biggest software maker, plans to gain on Sony by releasing new games tailored for Japanese users with the next version of the Xbox, said Norman Cheuk, head of Microsoft's game development division in Tokyo. ``It's too late to be No. 1 on this version of the console,'' said Cheuk, 35, who moved to Tokyo from Microsoft's Redmond, Washington, headquarters in September and oversees a team of 100 game developers. ``A lot of what we're doing today is to position ourselves. We're looking at the future generations where we'd like to be successful.'' Microsoft hasn't said when it will release an updated Xbox console. Japanese consumers bought about 60,000 Xboxes last fiscal year, compared with 2.9 million Sony PlayStation 2 consoles, according to Tokyo-based market researcher Enterbrain Inc. The Xbox ranked third by sales behind PlayStation 2 and Nintendo Co.'s GameCube, according to Tokyo-based market researcher Enterbrain Inc. The companies don't report console sales by country. Xbox sales in Japan -- the world's second-biggest market for video-game consoles and software after the U.S. -- slid by two-thirds in the year ended March 31, according to Enterbrain. Sales dropped even after Microsoft cut the console's price by a third to 16,800 yen ($153) in November. `Strong Support Base' To grab market share from Sony and Nintendo in Japan's $3.8 billion market for game consoles and software, Microsoft must convince Japan's biggest game publishers to make more titles for the Xbox, said P.J. McNealy, an analyst at American Technology Research in San Francisco. Microsoft's own Japan-based game developers plan to release just three new games over the next year, according to the company. ``To be successful in the Japanese market you need a strong support base of Japanese developers,'' McNealy said. ``For Sony and Nintendo, their base in Japan gives them a huge edge over Microsoft.'' Konami Corp., Japan's biggest independent game maker, released flight-simulator game ``Air Force Delta 2'' exclusively for the Xbox when the console debuted. The follow-up version of the game will be exclusive to the PlayStation 2, said Hitomi Nozawa, a spokeswoman for the game maker. Capcom, Square Enix Capcom Co., Japan's third-biggest game maker, has turned down offers from Microsoft in recent months to help pay distribution and development costs in return for more exclusive games for the Xbox, said Kazuhiko Abe, head of Capcom's corporate strategy division, without giving details. He said his company, which currently makes one game exclusively for the Xbox, isn't interested in developing more. ``There are no plans,'' Abe said in an interview. ``It's just not profitable enough.'' Of the 25 games Capcom plans to release this year, only one will be compatible with the Xbox. Asako Miyata, a Tokyo-based spokeswoman for Microsoft, declined to comment on the company's discussions with Japanese game makers. ``We can't provide details as to our specific efforts with those publishers, including financial support,'' Miyata said. Square Enix Co., Japan's No. 2 game maker, publishes none that can be played on the current Xbox. It's considering making titles for the next Xbox, said Michiro Sasaki, general manager for corporate planning. Tokyo-based Square Enix's ``Final Fantasy'' series for the PlayStation 2 console -- in which players assume roles and team up with other characters to achieve objectives -- has sold 60 million copies worldwide. `Dead or Alive' Microsoft has allied with smaller Japanese partners. Tecmo Ltd., a Tokyo-based game developer whose 52.6 billion yen in sales last fiscal year were a quarter of Capcom's, makes the two bestselling titles for the Xbox in Japan, according to Enterbrain. They include ``Dead or Alive,'' a fighting game centered on a martial-arts tournament. The Xbox trails in Japan because players have a smaller choice of locally designed games, said Peter Moore, Microsoft's vice president of retail sales and entertainment -- especially popular role-playing titles like ``Final Fantasy.'' ``You could probably argue that if we had a Japanese-centric role-playing game at the beginning of the console life cycle we would probably be in a better position today,'' Moore, 49, said in an interview last month at the E3 Electronic Entertainment Expo in Los Angeles. Better Outside Japan There are fewer than 160 Xbox-compatible games sold in Japan, compared with 6,165 that can be played on the PlayStation 2 and 191 for the GameCube, according to the companies. The Xbox has performed better outside Japan. Microsoft said last month it was on track to sell between 13.5 million and 16 million of the consoles worldwide by the end of its business year on June 30. That's roughly on par with the 14.5 million GameCube consoles Nintendo had sold as of March 31. Sony had sold 70 million PlayStation 2 machines as of March 31. Cheuk said he's replaced some of his team's 100 game designers and engineers with new Japanese talent, without giving details. In the U.S., Cheuk oversaw the development of ``Project Gotham Racing,'' the No. 3 best-selling Xbox game worldwide, which lets players virtually race cars such as Ferrari SpA's Enzo through the streets of major cities. Monk Warrior Cheuk's Tokyo studio released ``Magatama'' -- an action game featuring a sword-wielding monk warrior who fights to rid an ancient Japanese capital of supernatural forces -- in November. Spokeswoman Miyata wouldn't disclose the game's sales. The studio will release ``Sudeki,'' a role-playing game, by the end of 2004 and two more titles by mid-2005, the company said this month. Microsoft's Japan-based game developers have faced setbacks. The company said in a statement earlier this month that it canceled its ``True Fantasy Live Online'' role-playing game -- which would have accommodated thousands of players at once over the Internet -- after almost three years in development because it wasn't happy with progress on the game.


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