Microsoft's Complicated History With the Xbox In Japan (And its Plans for the Future)

2020, as most of us are aware, is one of the most challenging years in living memory. The worldwide impact of COVID-19 has derailed globally-anticipated events like the 2020 Summer Olympics in Tokyo into next year. This week, the Tokyo Game Show has gone virtual for the first time since it was founded in 1996, transforming the usually public event that draws over 250 thousand people annually into a streaming event – like every other game show before it in 2020. By the time you read this, Microsoft and its Xbox platform will have embraced the challenge in Japan head-on, with a TGS-tailored introduction to the Xbox Series X and S courtesy of Phil Spencer, Executive VP of Gaming at Microsoft. Despite past struggles to win over the Japanese video game consumer, Microsoft has a plan to course correct.

This generation, it will try to win over Japanese gamers with its most powerful (in the case of the Series X) and most affordable (in the case of the Series S) consoles ever, in combination with a comprehensive big picture strategy and a bundle of value-conscious services it hopes will lure Japanese gamers to the platform like never before. Whether or not it will succeed, however, depends on how much Microsoft has learned from past mistakes – most recently and notably with the Xbox One. While Microsoft’s brand in Japan has always been strong, the Xbox brand has never been more than a niche concern, and it’ll take a lot to overcome the idea that it’s anything but. ,  Having spoken with key players involved in Microsoft’s plan to address the company’s shortcomings in Japan, it’s clear they understand what’s at stake.

Xbox’s Complicated Relationship With Japan

Let’s first look back at the history of Xbox in Japan. That it never caught on outside of a group of dedicated niche players is an understatement, with the Xbox 360 being the most successful in the console family. It helps to remember that in the early days of the original Xbox, Japanese game publishers dominated the console landscape, from the early days of the Nintendo Entertainment System, all the way through to the halcyon era of the Dreamcast and Gamecube. Microsoft understood this and desired to be part of the conversation.

Microsoft thought it was so important to lure Japanese developers to the original Xbox (and it was) that it threw around huge amounts of money to cultivate a wave of bespoke, exclusive, Japanese-made games, many of which still trigger fond memories to this day. Jet Set Radio Future, Ninja Gaiden, the Dead or Alive series, Otogi, Panzer Dragoon Orta, Phantom Dust, Steel Battalion (remember that controller?) and, uh, Blinx The Time Sweeper. But as time passed and the Xbox brand grew more successful in the West, Microsoft’s focus on Japan started to waver. The support for Japanese development and publishers was still there in the early days of the Xbox 360 (see: Blue Dragon and Mistwalker’s games, Ace Combat 6, Ridge Racer 6, Ninety-Nine Nights, the Final Fantasy XIII trilogy, myriad 2D shooters, etc.), but the era of the second Xbox console marked a seachange where traditionally PC-focused developers like Bethesda, Irrational Games and BioWare finally embraced the Xbox hardware in earnest, and the brand grew alongside Western games like Mass Effect and Oblivion. The days of the big Xbox-exclusive Japanese game was now all but a distant memory.

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The Xbox’s lackluster presence in the east continued through the  Xbox One era, Microsoft launched the Xbox One in North America in November 2013, but didn’t launch it in Japan until September 2014, nearly 10 months later, all but burning every last bit of goodwill it had with the loyal Japanese Xbox 360 fanbase. Famitsu Xbox 360 Editor-In-Chief, Matsui Munetatsu, remembers it well.

“I think it had a terrible negative effect”, he says. “In Japan, the PlayStation 4 was released six months prior… [M]any of the one million-plus Japanese Xbox 360 users purchased the PS4 because they couldn’t wait to play on a next-generation console. I also think that the 10,000 yen (about $100 USD) price difference [between the Xbox One and the PS4], due to the inclusion of the Kinect, was a deterring factor.”

Further exacerbating matters was the fact that many of the Xbox 360’s small but loyal Japanese fanbase had already imported an Xbox One from the USA, and had already imported most of the games available at the Japanese launch, as well. “Most of the games were already released on other platforms,” Munetatsu explains, “And even the Xbox One-exclusive titles were already titles released overseas. [There was] nothing new. It was disappointing to see that there weren’t any new titles specific to the Japanese launch.”

Perhaps the final straw that broke the Xbox One’s back with fans in Japan was the minimal effort made on the localization of games into Japanese and, even worse, a general indication on whether games supported Japanese language at all.

“There are still many titles where both the in-game text and [Xbox Live] store info text remain in English, “ Munetatsu describes. “Although this may be better than having only a few titles available, there are many cases where the game information is in Japanese but the game itself is not localized, and the player can’t know this until after they purchase and play the game. The store information does not include information on whether the game is localized in Japanese or not.”

Throughout the Xbox One’s lifespan, Microsoft’s best efforts in Japan seemed resigned to highlighting that certain multiplatform games were enhanced for Xbox One X. This passive approach to engaging in the console “war” in Japan was matched by equally apathetic sales numbers rarely seen for a video game console. According to Japanese sales data analysis company Media Create at the time, merely a month after the launch of Xbox One weekly sales had already dwindled into the hundreds, comparable to sales of Sony’s failed Vita TV.

But even the PlayStation’s Vita TV shifted 185 thousand units in its brief lifetime, compared to the Xbox One’s total installed base in Japan, which at this point has barely passed the 100,000 milestone. Reports regularly surface out of Japan about how little the Xbox One sells, often as little as 40 or 30 per week, depending on the SKU. To compare these figures with other consoles, even at the beginning of 2020, before the COVID pandemic struck, Nintendo’s older 2DSLL sold 692 one week, while the Nintendo Switch sold over 62,000 in the same span, according to hardware sales posted in Weekly Famitsu.

Don’t Call It A Comeback, It’s Been Here For Years

With these numbers in mind, it wouldn’t be surprising if Japan weren’t at front of mind for Microsoft heading into the next generation of consoles.

But with the Xbox Series X (the most powerful console in Xbox history) and Series S (the more compact, affordable, digital-only ‘lite’ version of the X) on the horizon, Microsoft finds itself in a position to start afresh in Japan. It has learned from the Xbox One, and assures us , that Japan is every bit as important to it now as it ever has been, both as a market in which to succeed, a space in which to develop t relationships that are critical to their success there. While the trio of execs we spoke with—Jeremy Hinton, Sarah Bond, and Helen Chiang—kept any big reveals or secrets close to the vest, they did open a window into their strategies for Japan.

Jeremy Hinton, Director of Xbox Asia, is particularly forthcoming. Microsoft’s leadership team in 2020 and those involved with the Xbox Series launch are different from when the Xbox One launched in Japan in 2014; and they want their presence known at this year’s Tokyo Game Show. “Part of our presence in being at Tokyo Game Show, and just more broadly how we’re thinking about potential success for our gaming business at Xbox in Japan, is that a lot has changed through the last generation,” says Hinton.

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“Microsoft is a different place, a different environment," he says. "We’ve had leadership changes...and certainly one of the key things that we talk about a lot internally is we’ve gone from a 'Know it All' culture to a 'Learn it All' culture. I think you really do see some of that in how we’re trying to approach [things]—not just in Japan, although you know this is certainly very relevant in Japan.

“We really are learning and listening and trying to make our content and services and platforms accessible to everyone and anyone. Fundamentally, our vision for gaming has changed as well, since the last time we launched a console. We now have a vision of playing the games you want, with the people you want, on the devices you want.”

Xbox Series X/S: Third Time's the Charm

So far, Microsoft is ticking the right boxes building up to the Series X launch in Japan. The Xbox Series X and S will launch in Japan near-simultaneously as the rest of the world; while it likely won’t arrive on the same November 10th launch date as North America, due to differing retail practices in Japan, it will still launch in the same month. The Xbox Series X will sell for 49,980 yen ($470 USD), and the Xbox Series S will launch at 29,980 yen ($284 USD), down from the originally announced 32,980 yen ($311 USD), priced slightly higher for Japan than the rest of the world. Though the reason the S was more expensive is unclear, Hinton says the adjustment was a result of Microsoft listening to Japanese consumers. “This is us really trying to listen to the heartbeat of the market, and we heard it loud and clear. People felt great about the Series X price but they said, “You know, Series S is good, but it would be perfect if it was just a little bit lower,” so we were able to listen and adjust really quickly before pre-orders [went] on sale on Friday.”

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While launching the console in Japan at the same time as the rest of the world (more or less) is all well and good, there’s more Microsoft needs to do than simply get the box on shelves. Understanding the local tastes, community and the ways people play is integral to succeeding in any culture. Sarah Bond, Corporate Vice-President of Microsoft’s Gaming Ecosystem—essentially, an arm dedicated to reaching gamers across every Microsoft device and service—acknowledges how important it is to understand the cultural differences. While this may seem like a no-brainer, it’s nice to hear someone on record admit as much. “One of the first things I did when I got this role was spend some time in Japan,” she says. “There was so much learning to be done in that market, and the developers in [Japan] have some of the most storied histories in gaming, the most iconic characters and creativity.”

Jeremy Hinton agrees that the Xbox One launch was a lesson in ignoring said cultural differences. “If I can self-reflect on how Xbox One launched, we showed up with a Western TV gaming box full of Madden and Call of Duty at the time, and Western TV shows, we showed up 10 months late in Japan, we showed up without much third-party support, and we showed up without much localization in our first-party games, and we showed up with a large box that was the most expensive box on the market. It wasn’t exactly a recipe for success.

“I think the thing that we heard loud and clear was that fans were consistent in their feedback. “We want more of this, we’d like to see more of this, can you help us here, et cetera,” and I think to the benefit of the culture that we do have now at Microsoft—which we probably didn’t at that point in time—[we understand that] we were walking in and saying “Here’s the thing we built, you’ll all love it,” and we were forcing our perspective rather than listening to a community.”

Building Blocks

But is anything going to change regarding Xbox’s traditionally Western-focused stable of exclusives? Microsoft has certainly been busy acquiring studios, in part as an effort to rival Sony's admirable game catalogue. In 2019, it acquired studios such as Double Fine, Obsidian, inXile, and Ninja Theory, and, as of only a few days ago, announced the industry-rattling news that it had acquired Bethesda Softworks’ parent company, ZeniMax, for $7.5 billion USD. The publisher responsible for hit franchises like The Elder Scrolls, Fallout, Dishonored, Wolfenstein, and Doom, Bethesda is also the home of Tokyo-based studio  Tango Gameworks, headed by the godfather of survival horror, Shinji Mikami, which develops the horror series The Evil Within and the upcoming GhostWire: Tokyo. Buying Bethesda sends a clear message that Microsoft isn’t conceding anything, and there’s no indication it’s going to stop any time soon. Buying up a major publisher in Japan would alter the gaming landscape.

Asked whether Microsoft would pursue Xbox-exclusive content developed in Japan, like it once did with the original Xbox and 360, Bond prefers to focus on relationship-building. “Building those relationships, getting to spend time with Square Enix, Capcom, Koei Tecmo, is a big part of what my role is,” she explains, “before this pandemic basically locked me in my basement for six months—I’d go twice a year and spend some real time with those folks. Seeing their games, playing games, seeing the stuff they’re working on, walking through the studios, but also to talk frankly about [Microsoft’s initiatives] for this next launch period. It was very clear to us out of the gate... that the Xbox One launch had layer after layer of missteps and, in particular, related to Japan, that we were not going to repeat.

So Phil [Spencer] and I would [go to Japan] multiple times actually, as we were developing our overall strategy for what we as Xbox do in gaming, and also as we were talking about Scarlet—or Xbox Series X and S as we can now call it—we were very transparent with them about it being a global, simultaneous launch, [we talked about] our commitment to the content and the developers, and ultimately our vision to put the player at the center of everything we do.”

Hinton infers that rather than drop heaps of money on individual projects in order to gain momentary or permanent exclusivity, Microsoft’s strategy is broader than that. “We don’t love deals that take what would have been multiplatform games away from players. Generally, we will have times where we work with developers through our global publishing arm who will create content for us exclusively from scratch, So we commission the content, we work with them on what the game will be, et cetera, and we are effectively funding the development.”

Those continue to be in the works, says Hinton, and Microsoft has a broad range of developers that it  works with in the global publishing arm. “Microsoft Flight Simulator is a global publishing title for us developed by an external studio, so we will continue to work on that basis with external developers.”

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However, instead of focusing on and doubling down on things that might appeal specifically to Japan -  chocobos, moogles, and blue slimes, for example—Hinton sees a more universal approach is the path to success. “The thing that has changed through the initial era and the Xbox 360 era to now is gaming as a category is significantly more global than it probably was at that point in time,” he says.

“More and more we want to serve a global audience and that means working with our first-party studios, yes, to create games that we think will appeal on a global scale,” he continues, “but it also means that we are going to have partnerships with publishing and developing partners that we will be able to bring not only those games to those local markets, but ultimately these publishers are working with us to bring their games to a global audience.”

In recent years, Microsoft has also been giving love to Japanese games and gamers in ways that we might take for granted. Recall the stunning 4K upgrades to catalogue titles like the original Xbox’s Panzer Dragoon Orta. That game looks like it was developed for Xbox One when played on a One X in 4K. The substantial work Microsoft put into the visual overhaul of Final Fantasy XIII is equally beautiful, ifless of a jump than Panzer Dragoon Orta, but only because that game already looked pretty on Xbox 360. The final consideration is the effort Microsoft made in helping to bring Sega’s Phantasy Star Online 2 to Xbox One and Windows. For a time it seemed like that game would never reach Western shores, but it’s finally here, with the New Genesis expansion set to arrive on Xbox and Windows in 2021.

Base-Building

Xbox’s newer strategy of focusing on an ecosystem, rather than a singular device, plays into the fact that most people in Japan spend the majority of their time on smartphones. This is where the typical Japanese gamer consumes games, videos, and interacts with social media, and while the same can be said for the west, it’s more of an acute social shift in Japan, siphoning time away from dedicated game consoles, TV time and other forms of entertainment. Cloud gaming is the key to Microsoft’s plan to address this shift. xCloud (Microsoft’s Azure-powered cloud gaming service), which launched for Game Pass Ultimate subscribers on September 15, 2020, is a multi-platform cloud gaming platform—similar in function to Google’s Stadia—that benefits from the Xbox family’s huge library of games.

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“Mobile is dominant [in Japan], absolutely, especially with younger consumers,” says Hinton. “It’s also interesting to note, if we look at platforms that people play exclusively on, only ten percent of gamers in Japan play exclusively on a console. Japan [represents] the most multi-device kind of gamer that we see globally.

“So I think it’s more that our vision of gaming has caught up to the way Japanese consumers are enjoying their games today, [and this is] where we see a real opportunity into the future. Yes, we’re going to continue to sell a console and build the best possible console and be the first choice for consumers, but we know the reality is people want to play their favorite games everywhere, and that’s what we’re hoping to bring with xCloud gaming, as we roll that out in Japan in first half of next year, teams are working hard with local telcos and operators and data centers now, to ready the networks and make sure that’s all gonna work well when we do get to launch.”

Japanese developers are already excited by xCloud. “We would put [...] in the creators’ hands [their own games playable on xCloud] and they would be just stunned,” says Bond.” It was always the part of the meeting where we would lose half an hour [to them playing their game], like “How did you do this?” They’d turn to us and be like “Did you work [on making this run on xCloud]?” and we’d be like “No, it just works.” That really changed the conversation with Japanese creators, because they suddenly saw this huge opportunity to reach a market, and people across devices, that they hadn’t before. This isn’t really about one console versus another, this is a completely different paradigm.”

A Killer Combo

In speaking with Hinton and Bond, however, it’s clear that they view Game Pass as the real game-changer for Xbox Series X. It’s been a game-changer everywhere else, giving Microsoft a winning formula that Sony and Nintendo have yet to counter. In the context of Japan, this could have huge implications. While slow to adapt to new things, Japan consumers have recently embraced the Netflix subscription model, which is in itself a small miracle, considering how protective Japanese publishers are of their profit margins. Physical media is much more expensive than in the west. CDs (remember those?) often cost the equivalent of $30-40 USD in Japan for something that would cost $12 in the US. DVDs and blu-rays cost anywhere from $40-90 for a half-hour anime blu-ray when an entire season might cost the same North America. Similarly, video games can suffer from the same pricing strategies. While prices for games are more or less standardized in the west, in Japan a publisher like Koei Tecmo releases new entries in its Shin Sangokumusou series (Dynasty Warriors) at the cost equivalent of $90 USD or more. It’s  not the only publisher to adhere to these pricing structures, either. Square Enix, Capcom, Bandai Namco, and others are known to charge a premium for their top-tier franchises, like Final Fantasy, Dragon Quest, and Monster Hunter.

Microsoft’s Game Pass model changes all that. While there must be some serious behind-the-scenes discussions to make the Spotify-like program work in Japan, for the gamer hypothetically getting to play something like a new Dynasty Warriors game via Game Pass marks a serious value for consumers. Microsoft is clearly counting on this to distinguish the Xbox and Windows from its competitors. Bundling Game Pass (low cost subscription service) with xCloud (play anywhere), a simultaneous launch (no brainer), and, eventually, Xbox All-Access (“we don’t have plans to announce in the market yet, but we are working behind the scenes to bring it to Japan,” Hinton confirms), could be the way Microsoft infiltrates Japanese homes across the country.

Sarah Bond shares how much traction Game Pass is getting in Japan already, primarily on PC. “We actually think that what we’re doing in terms of our vision for gaming is really unique for what Japanese gamers and players are going to enjoy and are seeking. Our Game Pass on PC usage in Japan is like 4 times higher than our average worldwide.” According to the stats shared by Phil Spencer is his opening statement at Tokyo Game Show, 90% of gamers subscribing to Game Pass have tried new indie games that they would otherwise never have discovered.

Indies represent an area of great potential for Xbox. You never know when something is going to click in Japan, as Undertale’s success there has shown, but discovery is half the battle. Could the Xbox Series X benefit from a leftfield hit, like how Vivarium’s Seaman once uplifted Sega’s Dreamcast in Japan? Surely. While it remains to be seen whether something edgy and quirky enough to distinguish the Xbox from its competition will surface, Game Pass represents a great venue for indie developers to showcase their wares. If Microsoft can help bring more indie games to life (at a fraction of what it costs to buy Bethesda), that investment might pay off in spades.

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Backwards compatibility is another edge that the Series X will have going for it. While it might not do that much for new gamers who are less aware of Xbox’s legacy titles, it could bring back Japan’s once-faithful Xbox fans in droves. If their beleaguered, old Xbox libraries are suddenly more relevant than ever, this could restore a wealth of goodwill to the brand. “Yeah, we were just talking about that the other day,” Hinton agrees, “that all of a sudden we’re launching with something like 4,000 games, Day 1 on a console which is pretty incredible.”

“Going through the list, we have a lot of classic JRPGs that we launched exclusively through the 360 era that, if you’re a young gamer coming in now to consoles, chances are you didn’t play those games 15 years ago, so this is an opportunity for you to play what is still an amazing experience that you wouldn’t have otherwise.”

Share the Fun

One of the things that makes Microsoft unique in the competitive and crowded gaming landscape is their willingness to share some of their key investments across multiple platforms. Admit it. You were as surprised as anyone when Cuphead and Ori and The Blind Forest appeared on Nintendo Switch. Maybe you were less surprised when certain Xbox One franchises landed on Windows 10, but you were still pleased by the sudden appearance of Forza on your gaming PC. However, nothing touches the ubiquity of Microsoft’s most accessible franchise, Minecraft.

Minecraft is incredibly popular in Japan, a pleasant development considering how conservative the Japanese can be in embracing new franchises. According to Helen Chiang, Studio Head for Minecraft at Microsoft, Japan is the third largest market for Minecraft in the world, and the second-largest market in the world for the recently-released Minecraft Dungeons. While Minecraft is Microsoft-branded and not specifically Xbox-branded (really, it’s everything-branded), the franchise still provides another opportunity for Microsoft to point consumers back to the Xbox for more easily accessible, play anywhere games.

 “I think of this as a huge opportunity,” Chiang says, “and I think with Minecraft and some of the choices we made to focus on Japanese players, I hope that Japanese players take away the message of “We (Minecraft) and We (Xbox) care very much about them,” and hopefully this can be the start of turning what you talked about into a huge opportunity. There are so many benefits of the Xbox platform, and if we can do a small part in helping to bring our community over to Xbox and to really showcase some of the new things around Game Pass, around xCloud, that are really powerful parts of the platform. I don’t look at this as “What can Minecraft do for the Xbox?” I think it’s a very symbiotic relationship, there’s great benefits of being part of that platform, hopefully we can do our part as well to help advance that platform as well.”

X Marks The Spot

Every few generations seems to find every console maker tumble in the undertow of their own hubris, followed by a rebirth of innovation and, sometimes, success. Where Sony went from the wildly successful PlayStation 2 to the misfired PlayStation 3, then recovered with the PlayStation 4. Nintendo set the world on fire with the Wii, fell on its face with the Wii U, and got back up on its feet with the Switch.

The Xbox One sunk in Japan, so is it Microsoft’s turn to bounce back? It seems to have the right ingredients in place

“Isn’t that true of almost all business situations?” asks Bond. “You step back”, says Bond, and you learn from what you’ve done in the past, you turn over every rock, you really evaluate, you center down to where your customer is, right? It’s a really great forcing function.”

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In the end, only time will tell whether these strategies elevate the Xbox Series X enough to be called a success in Japan. It’s not impossible for Western tech companies to gain traction. Japanese consumers used to change their flip phones out every six months for fashion reasons. It seemed unlikely that they would stick with a single iPhone for years at a time, and yet that’s exactly what happened. Android moved into that space, too, changing the paradigm that was once thought immovable. So it’s not out of the question that Microsoft could suddenly find favor in Japan with their new Xboxes, whether for style, game, size, price, or service reasons. Clearly this is not an apples to apples comparison, and gamers identify with their favorite game consoles for very particular reasons, but at least this time around Microsoft is putting itself in a position to succeed where it has failed in the past.

As usual it is going to come down to software support.The Series X has a stronger launch line-up in general than the Xbox One had, and if you add in backwards compatibility and the ability to pull out older classics (to see how they fare in 4K) offers some intriguing twists to the latest entry in Microsoft’s attempts to succeed with Xbox Japan. Lastly, while the omnipresence of Minecraft may indeed be a unique, platform-agnostic ace in the hole for Microsoft, the thing gamers should be on high alert for is whether the software giant decides to open the checkbook for one (or more) of Japan’s biggest game publishers. Few titans in this industry have the ability to make such a bold move, but Microsoft is one of the few. [poilib element="accentDivider"] James Mielke (Milky) is profoundly lactose intolerant, and makes a habit of interviewing Japan's most notable game developers when possible. Follow him on Twitter.