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Japan-U.S. divide splits video game industry
Friday May 14, 3:55 pm ET
By Daisuke Wakabayashi and Ben Berkowitz

LOS ANGELES, May 14 (Reuters) - When Konami Corp.'s U.S. sales staff was asked to bring the off-beat, Japanese video game "Dance Dance Revolution" to American homes, they balked at the prospect of a costly flop, out of touch with local tastes.

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Kazumi Kitaue, the head of Konami's (Tokyo:9766.T - News) U.S. operations, says he had no choice but to face down the dissent: "Since there was no other way, I forced them. Reluctantly, they took about 8,000 or 10,000 copies."

Three years later, Kitaue has been vindicated -- the Konami game that challenges players to dance along to thumping music and flashing on-screen instructions has sold over a million units and inspired legions of devoted fans, the "DDR freaks."

Industry observers say Konami's saga is just one example of the difficulties Japanese game publishers face in the U.S. market, and the journey across the Pacific is equally rough for U.S. companies looking to break into Japan.

"To put it simply, cultural differences play a big role," said Hirokazu Hamamura, president of "Famitsu" game magazine publisher EnterBrain.

In the past Japanese business year ending March 31, no U.S. or European publisher was able to crack the top 20 in total titles sold in Japan's $2.6 billion console game software market, according to EnterBrain.

Conversely, only Nintendo Co. Ltd. (7974.OS) and Sony Corp.'s (Tokyo:6758.T - News) game unit cracked the top 10 for console software sales in the United States and Europe in 2003.

LOST IN TRANSLATION?

Electronic Arts Inc. (NasdaqNM:ERTS - News), the dominant player in the game publishing industry, is also the leader in the United States and Europe, but it has barely made a dent in Japan, the world's second biggest game market.

"We haven't brought the proper cultural sensitivity as it relates to the Japanese market, but we will," said Don Mattrick, president of worldwide studios at EA.

Redwood City, California-based EA plans to transfer one of its top game producers, Stan Chow, a 17-year company veteran who has worked on the "NBA Live" series, to Tokyo, where it plans to build a game development studio.

Part of the problem, industry watchers say, is that each market has different taste for what type of games it wants.

"If you make fighting games, you'll do well in the United States. If you do racing games, you'll do well in Europe and if you make role-playing games and really weird stuff, you tend to do very well in Japan," said Hiroshi Kamide, analyst at KBC Securities in Tokyo.

Microsoft's chief Xbox officer, Robbie Bach, agrees: "Japanese gaming culture has been more about the fantasy of the experience, while North American and European culture has been about the realism of the experience."

In a bid to fit in, game publisher Namco Ltd. (Tokyo:9752.T - News) often starts developing games with different end-markets in mind.

"You have to make the game for somebody, you can't make it for everybody," said Robert Ennis, Chief Operating Officer at Namco Hometek.

Japan's Square Enix Co. Ltd. (Tokyo:9684.T - News), maker of popular, role-playing "Final Fantasy" games, said the problem may lie in how companies promote themselves in various regions.

"Japanese game publishers have been bad at marketing, ourselves included," said Square Enix President Yoichi Wada.

In an effort to change that, Square Enix set up its largest-ever booth at E3, the game industry's annual trade show, and held a "Final Fantasy" concert to generate buzz for an eagerly awaited sequel due out in the next year.


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