Smarthphone Gaming Market in Japan. Kansendossier

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1 Smarthphone Gaming Market in Japan Kansendossier

2 Colofon Naam marktscan Smarthphone Gaming Market in Japan Datum Agentschap NL is een agentschap van het Ministerie van Economische Zaken. Agentschap NL voert beleid uit voor diverse ministeries als het gaat om duurzaamheid, innovatie en internationaal. Agentschap NL is hèt aanspreekpunt voor bedrijven, kennisinstellingen en overheden. Voor informatie en advies, financiering, netwerken en wet- en regelgeving. De divisie NL EVD Internationaal stimuleert internationaal ondernemen en samenwerken en een positieve beeldvorming van Nederland in het buitenland Agentschap NL Hoewel deze publicatie met de grootst mogelijke zorg is samengesteld kan Agentschap NL geen enkele aansprakelijkheid aanvaarden voor eventuele fouten. Niets uit deze uitgave mag worden verveelvoudigd en/of openbaar gemaakt door middel van druk, fotokopie, microfilm of op welke andere wijze ook zonder voorafgaande schriftelijke toestemming van de uitgever. Foto s:[ ]. Pagina 2 van 15

3 Inhoud Colofon 2 Smartphone Gaming Market in Japan 4 Content 4 1 Japan s Smartphone Gaming Market 5 Overview of the Current market and the Future Outlook 5 Drivers and inhibitors of smartphone gaming market 6 2 Business Models of Smart Phone Gaming Market 8 3 Smartphone User Trend 10 4 Major Players in the Japanese Market 12 Colofon 14 Pagina 3 van 15

4 Smartphone Gaming Market in Japan Due to the rapid expansion of smartphone handset market and the development of communication infrastructure as well as payment systems, the domestic market of smartphone applications is expected to grow dramatically in coming 2-3 years. It is rather easier for small and medium sized companies in Japan to enter this market since the entry barrier is quite low; therefore application wide-ranging developers from one man companies to large companies are active in the market. However, the average price per application is very low for B to C market. Unless the company has a mega hit application, they cannot expect high volume of sales. This may make it difficult for small companies with little cash flow to survive for a long term. In order to reduce the cost and time for game development, some of the Japanese small or medium size contents providers or developers are looking for overseas game titles for localization. Dutch serious gaming has been promoted in Japan for the last 5 years. As a result, many Japanese companies began to show their interests in Dutch serious gaming or educational game titles. This report is designed to give an overview and a future outlook of the Japanese smartphone gaming market and the prevalent business models. Smartphone game users trend can also be found in the report. Content 1. Japan s Smartphone Gaming Market 2. Business Models of Smart Phone Gaming Market 3. Smartphone Game Users Trend 4. Major Players Pagina 4 van 15

5 1 Japan s Smartphone Gaming Market Overview of the Current market and the Future Outlook The value of the smartphone gaming market (billing amount plus ads) in Japan reached 8.5 billion Yen in The users of smartphone games are expected to increase due to the rapid growth of smartphone users over the coming years. Smart phone gaming suppliers have developed their monetizing solutions and payment systems so that businesses from peripheral markets are expected to make new entries to the market. Therefore, the market is expected to grow 30-fold to 255 billion Yen by Rapid penetration of smartphones is one of the key drivers of this market. The number of smartphone subscriptions is expected to reach more than 50million units by the end of A sharp rise in companies, including game developers, entering the smartphone gaming market will be one of the factors impacting the future growth of smartphone users. Improved platforms will contribute to the growth of leading games. In particular, the advances of social networking services (SNS) and carrier-based smartphone platforms have created an advantageous environment (Forecast) for such (Forecast) game titles. (Forecast) In addition, the increase of outstanding smartphone game titles developed by leading game developers will further boost the market. Changes in market values (estimate) Yen) Paid games (bil. Yen) Ads (bil. Yen) Total (bil. Annual growth rate Pagina 5 van 15

6 Changes in the smartphone gaming market in Japan Source: Seed Planning Smartphone Gaming Market Report (Japanese only) Drivers and inhibitors of smartphone gaming market Handset landscape Smartphone user trends Gaming service provider trends Drivers Wide adoption of smartphones Faster-than-expected penetration of smartphones Improved data transmission rates, migration from 3G to LTE (*1), contributing to wide adoption of smartphone. Usage rates of smartphone games will continue to grow. The game usage rate is higher for smartphone game users than feature phone (*2) users. An increasing number of game developers and platform providers will enter the market, offering a significant number of attractive game contents, thus leading to vitalized smartphone gaming market. Growth of smartphone-based ad businesses (ad network/reward ad business) will contribute to the growth of this market. Telecom operators have improved their billing infrastructure. Inhibitors Increase in market share of Android handsets Wide adoption of handsets with low-arpu OS Slowdown of ARPU Stagnant usage rates of paid games Increase of competitive non-game contents. (Competitions against digital books and other attractive contents will increase in terms of user acquisition.) Immature business model and low profitability (The number of lucrative game titles is limited.) Game developers will experience low profitability due to the increase of less expensive games mixed with free games and other games sold at different price levels, as well as an increase in discounted game titiles. This will lead to decline in game developer s motivation to invest. Pagina 6 van 15

7 (*1) 3G: 3G is a collection of third generation cellular data technologies. In order to be labeled "3G," a cellular data transfer standard must meet a set of specifications defined by the International Telecommunications Union, known as IMT Basically, a 3G technology based on CDMA is used in Japan (with an exception of an improved TDMA technology.) To meet the IMT-2000 standards, a system is required to provide peak data rates of at least 200 kbit/s (about 0.2 Mbit/s). However, many services advertised as 3G provide higher speed than the minimum technical requirements for a 3G service. Recent 3G releases, often denoted 3.5G and 3.75G, also provide mobile broadband access of several Mbit/s to smartphones and mobile modems in laptop computers. LTE (Long Term Evolution) is a wireless broadband technology designed to support roaming Internet access via cell phones and handheld devices. Because LTE offers significant improvements over older cellular communication standards, some refer to it as a 4G (fourth generation) technology along with WiMax. With its architecture based on Internet Protocol (IP) unlike many other cellular Internet protocols, Long Term Evolution supports browsing Web sites, VoIP and other IP-based services well. LTE can theoretically support downloads at 300 Megabits per second (Mbps) or more based on experimental trials. However, the actual network bandwidth available to an individual LTE subscriber sharing the service provider's network with other customers is significantly less. Long Term Evolution service is only available in limited geographic areas, but telecommunications providers have been actively expanding their LTE services. Source: Seed Planning Smartphone Gaming Market Report 2011 (*2) feature phone is a type of phone which offers more features than a standard phone, including One-Seg function which allowed to watch digital TV broadcasts and Osaifu (Wallet) Keitai for payment. Pagina 7 van 15

8 2 Business Models of Smart Phone Gaming Market The smartphone gaming business models are shown below, for individual business groups by billing model and ad model: IT Console Official Online SAP companies companies Contents game Providers companies Downloadbased billing Item-based billing Monthly billing Reward ad model Common ad model Note: and represents the level of competitiveness and the status of market entry. Highly competitive Less competitive <Business models> Breakdown Type of billing Downloadbased billing Item-based billing Outline Revenue is generated on a download basis, which was the main billing model for smartphone games until Game developers can easily earn money from this billing model, although it is difficult to maintain a fairly high revenue only with a single game. Users purchase their favorite items so that they can play the game in their favor. The majority of successful smartphone games is based on this billing model, which will continue to be used as the most effective way of billing. However, careful attention needs to be paid Advantages (A) and disadvantages (D) (A): Once a game wins a big market, they can gain significant revenue within a short period of time. (D): With limited profitability, it is difficult to maintain mid-to-longterm gaining. Likely to be affected by pricing competition. (A): Free games easily attract trial users. Paid games will be a stable source of main income on a mid-to-long-term basis, if they can attract many users. (D): This option requires the cost and time to wait for the users to start paying for the items; therefore, short term revenue is difficult to generate comparing Pagina 8 van 15

9 Ad Model Monthly billing Reward ad model Common ad model for the industry trends, as there is an increasing problem in purchases of expensive items that might be imposed of regulatory actions. Users are required to make payment on a monthly basis. This billing model became available when Docomo Market and au one Market launched in This was the mainstream payment scheme via official contents designed for conventional future phones. Reward Ads packaged with user incentives and applied with installation based billing system. Users will download the target game application from the ads presented in the game. Then the user is able to earn credits that can be exchanged with a digital item within the game. Using a certain amount of space in the game as the frame available for ads, games are digitally distributed from the advertiser. There are two different approaches; (1) A game company itself is contracted with the advertiser/ad agency, and (2) Ad network sells and supplies bundled ad space with several game titles for advertisers Currently, the ad network distribution is more prevalent than the direct contract between a game company and an advertiser or an ad agency. to a down-load-based billing. (A): Steady income can be assured. With stable source of income, game developers can commit to future developments. (D): Average Revenue per User (ARPU) is limited. (A): Matches with item-based billing, and plays a complementary role for item based billing effectively. (D) Likely to cannibalize paid items, resulting in slow revenue generation. (A): Revenue can be generated without being paid by users. Companies can easily introduce free game offerings. (D): Likely to be affected by the economy. It is difficult to maintain services solely with ad business due to low price per ad. This may result in poor usability. Pagina 9 van 15

10 3 Smartphone User Trend The results of the survey that was conducted in August 2011 are shown below. 500 Smartphone game users were asked about the usage environment: <Summary of findings> % of the respondents stated that they use a gaming machine less often than they did before purchasing a smartphone, play games using a video game console, or do not use a video game console anymore % of all smartphone users surveyed play paid games. The longer experience with smartphone usage they have, the higher rate for using paid games can be seen. 42.2% of users of paid smartphone games pay more than 1,000 Yen a month on average. Questions were asked about current usage of smartphone games to a total of 500 respondents (250 males vs. 250 females) who have a smartphone and play games with it. It was found that the majority of respondents use a video game console less often than they did before purchasing a smartphone. Now that they have a smartphone, asked about how long they play games now using a video game console, 36.8% answered that there has been no change in the length of time in which they play games using a video game console. On the other hand, different comments were given including; the time for playing games using a video game console reduced (29.1%), do not play games using a video game console any more (14.5%). In other words, 43.6% of all respondents use a video game console less frequent than they did before purchasing a smartphone. Changes in the time during which they play games after purchasing a smartphone Looking at the respondent group comprising 18% of all smartphone gaming users surveyed, the longer experience in paid smartphone games they have, the Pagina 10 van 15

11 higher usage rate for paid games can be seen. One in eight users was found to play paid games. Many users enjoy playing free games at first, and then tend to use paid games more often as time passes. Source: Seed Planning Smartphone Gaming Market Report % of paid game users pay an average of more than 1,000 Yen a month for these smartphone games. Source: Seed Planning Smartphone Gaming Market Report 2011 Pagina 11 van 15

12 (DeNA): Social Game Providers and Contents Providers ngmoco Koei Techmo:http://www.koeitecmo.co.jp/e/index.html Capcom:http://www.capcom.co.jp/ir/english/ Doricom:http://www.drecom.co.jp/ only) (Japanese Konami:http://www.konami.co.jp/en/index.html Sega Samy:http://www.segasammy.co.jp/english/ Bandai Namco:http://www.bandainamco.co.jp/en/index.html CROOZ:http://crooz.co.jp/en/ AXEL MARK:http://www.axelmark.co.jp/en/about/philosophy/ DeNA:http://dena.jp/intl/ mobcast: SQUARE ENIX: GungHo Online Entertainment: NEXON:http://company.nexon.co.jp/introduction/top.aspx only) (Japanese GREE:http://corp.gree.net/jp/en/ Dwango: Cybird: (Japanese Only) Xing Inc: NTT Solmare: NEC Biglobe: Worker Bee Inc.: (Japanese only) MIT K.K.: Voltage: Online Game companies who also sell gaming apps NHN Japan Gamania Digital Entertainment: only) (Japanese Game Pot: GameOn: only) (Japanese GCREST America: Coreedge Inc.: only) (Japanese CJ Internet Japan: only) (Japanese USERJOY JAPAN: (Japanese NC Japan: only) (Japanese Q ENTERTAINMENT: GAMEYAROU Inc: only) (Japanese Cave: Sammy NetWorks: NEXON : only) (Japanese Hanbit Ubiquitous Entertainment: only) (Japanese ITAC INC: only) (Japanese ADVER-GAMING:http://www.ad-gaming.co.jp/index.html only) (Japanese AhnLab, Inc.:http://global.ahnlab.com/en/site/main/main.do E-Guardian Inc:http://www.e-guardian.co.jp/eng/index.html Exphase inc:http://www.exphase.jp/en/top/index.html 4 Major Players in the Japanese Market Pagina 12 van 15

13 Interspace Co.,Ltd.:http://www.interspace.ne.jp/index.html only) (Japanese gameage R&I:http://www.gameage.jp/english/index.html THIRDNETWORKS:http://www.thirdnetworks.co.jp/company/company.html only) (Japanese Dice Creative:http://www.dice.co.jp/campany.html only) (Japanese DENTSU:http://www.dentsu.com/ 8&page=1&search01Btn.x=41&search01Btn.y=8 PROFIRE only) :http://www.profire.co.jp/company/(japanese Other Information Gaming Industry Associations in Japan Computer Entertainment Suppliers Association (CESA) Japan Online Game Association(JOGA) Exhibitions relating to gaming Tokyo Game Show Computer Entertainment Developers Conference (CEDEC) This information is compiled by the Embassy of the Kingdom of the Netherlands in Tokyo in collaboration with Seed Planning Inc. For more information or comments regarding this document please contact the Netherlands Embassy in Japan. Embassy of the Kingdom of the Netherlands Mrs. Sachiko Stone Shibakoen, Minato-ku Tokyo, Japan Tel: +81 (0) Pagina 13 van 15

14 Colofon Dit is een publicatie van: Agentschap NL / NL EVD Internationaal / Unit Informatie & Advies Prinses Beatrixlaan 2 / 2595 AL den Haag Postbus / 2509 AC Den Haag T +31 (0) E Agentschap NL Mei 2013 Agentschap NL is een agentschap van het ministerie van Buitenlandse Zaken. Agentschap NL voert beleid uit voor diverse ministeries als het gaat om duurzaamheid, innovatie en internationaal. Agentschap NL is hét aanspreekpunt voor bedrijven, kennisinstellingen en overheden. Voor informatie en advies, financiering, netwerken en wet- en regelgeving. Agentschap NL streeft naar correcte en actuele informatie in dit dossier, maar kan niet garanderen dat de informatie juist is op het moment waarop zij wordt ontvangen, of dat de informatie na verloop van tijd nog steeds juist is. Daarom kunt u aan de informatie op deze pagina's geen rechten ontlenen. Agentschap NL aanvaardt geen aansprakelijkheid voor schade als gevolg van onjuistheden en/of gedateerde informatie. Binnen onze website zijn ook zoveel mogelijk relevante externe links opgenomen. Agentschap NL is niet verantwoordelijk voor de inhoud van de sites waar naar wordt verwezen. Pagina 14 van 15

15 Dit is een publicatie van: Agentschap NL NL EVD Internationaal

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