Nintendo re-ignites Japanese Video Game Market

A few years ago, I wrote about Nintendo's efforts to save the ailing Japanese video game market , being pushed by a demographic crisis, hyper urbanization leading to shifting gaming habits, and the dominance of Mobile gaming.

In the past two years the Dedicated Video game market has seen a resurgence thanks to the Nintendo Switch.

Monopolizing the Japanese Market

This year marked the third best selling year for any hardware of all time.

Animal Crossing: New Horizon really catapulted demand for Nintendo's hardware, aided by Ring Fit Adventure, Konami's huge Japanese hit this holiday Momotaro and an ever growing library of evergreens that saw growth YoY.

In 2020, Nintendo accounted for 87% of all hardware sold in Japan, as the PS4/PS5 continued Sony's decline in the country. Looking at the state of software sales on the PS5 and the line-ups of the two companies in 2021, it's very likely that Nintendo will have over 90% of the hardware market in 2021.

Decline of PlayStation in Japan

For the first time since 1994, PlayStation has sold less than 1 million hardware in Japan. According to analysts from Bloomberg "Sony’s home territory of Japan has been sidelined in promotional planning for PlayStation 5 and seen its development teams slashed ". While Ace Research goes further and sees this as a "Decisive decline, Sony will come to regret"

The importance of Japan, is sometimes overlooked, even though the market is only behind China & the USA in terms of overall gaming revenue. One needs to look no further than a recent job posting by Square Enix. The Japanese Gaming Giant is one of the biggest supporters of PlayStation but according to a recent job listing although Japan represents only 15% of the Global gaming market Square achieves nearly 50% of it's game division sales in Japan.

As Sony relevance in Japan fades, one of it's major differentiation to Microsoft will also start to disappear as Japanese 3rd Parties have no choice but embrace Nintendo Switch, in order to ensure future profitability of their games. Currently the Top Selling PlayStation 5 game - has not been able to surpass 50,000 physical sales in Japan and each week Switch games make up 25-30 of the Top 30 games in the country.

Japanese Third Parties finding success

It has been a slow transition for third parties to the Nintendo Switch, many companies were very much expecting the platform to fail after the Wii U cratered in Japan. This made the Switch sell mostly on the back of Nintendo's 1st and 2nd party efforts in combination with Western indie games that were localized to Japanese.

The fall of 2020 marked a change for third parties as Konami, Koei Tecmo and Marvelous were able to launch hit games in time for the holidays. Konami's party game Momotaro Dentetsu?achieved 2 million sales in two months in Japan alone - and should become their best selling game of all time in Japan.

Koei Tecmo launched a Zelda-spin-off - Age of Calamity which has already become their best selling game World Wide with 3.5 million sales in it's first quarter.

While Marvelous had Sakuna of Rice and Ruin, developed by a small two man team which is on it's way to surpass 1 million sales World Wide.

In 2021 it's seems that a lot of other Japanese 3rd Parties have shifted focus from the PlayStation, to the Switch - starting with Nippon Ichi with Disgaea 6 next week; Marvelous has two games slated for H1 2021 - Story?of?Seasons?Pioneers of?Olive?Town & Rune Factory 5 hoping to take the franchises to new heights; while Square Enix & Atlus will launch Bravely Default 2 & Shin Megami Tensei V.

Capcom set to see explosive growth

Capcom managed over 20 million domestic sales on the 3DS thanks with the Monster Hunter franchise, 2021 is set to be their big entrance on the Switch since it took them a while to actually be ready with an exclusive Monster Hunter game for the device. In the past two years this transition has seen them experienced substantial decline in domestic sales

Monster Hunter Rise is about to change their fortune, the game is the first third party title to have the potential of selling 5 million in Japan alone, and is likely to become the fastest selling 3rd Party game World Wide on the Switch.

Growth will be aided by a spin-off title in the franchise - Monster Hunter Stories 2.

2021 is set to see exponential software growth

Due to the much stronger 3rd Party line-up in 2021 we can expect that this year will mark the Nintendo's Switch's peak in Japan and 3rd Party studios that have made the device central to their strategy will be set to see record growth.

Overall the situation will be confounded by the lack of competition by Sony in Japan.

2021 is set to be the third year in a row Japan Video Game market grows, something unexpected by most - as the demographic crisis and mobile gaming were trends people were expecting to lead to constant decline.

• Nintendo FY3/2021 Q1 Earnings
• А Supplementary Hybrid Console with Blue Ocean appeal
• Dominating the Japanese Market