Power up: Will Chinese funding be the savior of the Japanese video game industry?

Power up: In September, a quarter of a million people traveled through Japan punishing late summer heat to the cavernous sprawl of the Makuhari Messe convention center in the industrial hinterland west of Tokyo. They came for the 27th Tokyo Game Show, which was back in full ostentatious form this year after a pandemic break and a timid return in 2022.

Most came hoping for the opportunity to play one of the hundreds of video games still unpublished. show in the show’s 11 hangars. Others were hoping to trade deals to get their video game published, or to publish someone else’s.

To walk through the front doors was to enter a scene of roaring overstimulation. A babble of tens of thousands of voices collide with a competing tympanum of a video game trailer. The line for some games were closed only 10 minutes after the opening of the show, after passing its maximum occupancy.

All around were competing visions of the future of video games: traditional troll-battling fantasies; competitive shooting games in which guns shoot streams of candy-colored bath bubbles; virtual reality racers play outside of high-tech helmets; artificial reality dioramas layered over the world as seen through the lens of a smartphone camera; games full of supporting characters whose dialogue was written and recorded by AI. (One booth offered a dozen books and manuals on ChatGPT and how it could revolutionize—or rather, cut costs for—the industry.)

Players will visit Tokyo Game Show 2023.
 Photography: CFOTO/Future Publishing/Getty Images

It was a curious moment in which to attend such a celebration of video games, and not only because Tokyo Game Show is one of the few remaining exhibitions where fans gather to play in person.

Last year was spectacular for game releases, but a disaster for the industry, which was besieged by layoffs and studio closures thanks to rising costs and the natural contraction in the post-boom market pandemic In September Epic Games, creators of Fortnite, dismissed 870 personnel; Electronic Arts, home of The Sims and (formerly) Fifa, done 6% of its workforce redundant; the Ascendant Studios based in California lost almost half of its workers, while Volition, creator of the Row of the Saint series, was closed, one of many victims as the Swedish investment company Embracer tried to download recently acquired assets.

Amidst all this, however, Chinese investors remain bullish, and the Japanese gaming industry is one of their ambitions. It seems like an unlikely pairing. China’s gaming industry – the largest in terms of size and revenue anywhere in the world – looks very different from that of Japan and the West, having developed from a distinct set of cultural and technological conditions.

The most popular Chinese games are competitive online titles that are usually played in internet cafes, or free mobile games in which players can spend money to speed up their progress or skew the matches in their favor.

There are also different rules and expectations around the role of gambling in society. Unlike Japan, where teenagers are free to play as long as their parents or guardians allow them, the Chinese state introduced curfews in 2019 to limit access to video games among those under 18: 90 minutes a day, or three hours in public, spring breakers.

In 2021, these restrictions have been tightened, limiting play to one hour on Fridays, weekends and public holidays. The goal of the policy was to curb “addiction to the game”, in the phrase of the administration, which in its most extreme cases led to the deaths of individuals who, through a combination of exhaustion and dehydration, developed fatal blood clots. (HAS recent study by researchers at the University of York found that the policy had little or no effect in reducing playing time).

Cosplayers at Tokyo Game Show 2023.
Photography: Costfoto/NurPhoto/Getty Images

These cultural differences have not stopped Chinese conglomerates such as Tencent and NetEase from establishing studios Japan and they are with some of the most famous Japanese directors.

Goichi Suda (creator of the No More Heroes series), Toshihiro Nagoshi (creator of the Yakuza series) and Ryutaro Ichimura (a veteran of the Dragon Quest games) all work for NetEase studios. The Chinese company recently established two Japanese-led studios to create Japanese-style console games to appeal to Western audiences.

For many, Japan remains the creative heart of the gaming industry, thanks not only to Nintendo and PlayStation but to a vast cast of creatives whose teams and studios have made many of the game’s defining moments.

50 years Today, many of these individuals, now in their 60s and 70s, represent the main figureheads in an industry otherwise made up of unrecognized battalions of internal or external workers: Shigeru Miyamoto of Super Mario, Hideo Kojima of Metal Gear, Yuji Naka of Sonic the Hedgehog.

The impression is somewhat deceiving; Japan remains a creative leader in industry, but money and power have mostly moved overseas. This year more than half of the approximately 700 exhibitors at the show were international companies.

In September a rather Embarrassing find of internal Microsoft emails (mistakenly released by the company’s lawyers as evidence in a high-profile US case brought by the Federal Trade Commission) included a message from Xbox CEO Phil Spencer in which he theorized whether be possible for Microsoft to acquire Nintendo (“a career moment”as he put it).

That might be the stuff of overcaffeinated executives’ dreams, but it’s undeniable that China’s video game superpowers, Tencent and NetEase, have been systematically acquiring Japanese studios and talent.

These moves are part of a direct strategy to expand the companies’ influence and power in the Western video game industry. Games made in China do not translate easily to Western audiences. In comparison, the entire console business was shaped and defined by Japanese developers; Since the early years of the industry, they have been a dominant creative and commercial force shaping players’ tastes and interests.

Pedestrians watch an advertisement for Final Fantasy XVI, one of Japan's biggest video games, in Shinjuku, Tokyo. (Photo by Richard A. Brooks / AFP) / To go with
Photograph: Richard A Brooks/AFP/Getty Images

For Japanese staff now working for Chinese backers, the benefits appear to be increased funding, creative freedom, and, perhaps, the chance to break away from the working practices of their home industry, which by many accounts combines punitively long hours with comparatively low pay.

As Goichi Suda recently put it, “Thanks to the support and backup we now have from NetEase, not only do we have a bigger studio and more people, but the environment itself has become much easier to work with.” Chinese investors provide a semblance of security, and their pitch, as evidenced by the huge Chinese and Chinese presence in Tokyo this year (almost 20% of the 406 exhibitors were Chinese) proved compelling.

The long-term risk of these hires and acquisitions is, as in any volatile creative industry, failure to invest in the next generation of artists and designers. Sony’s closure of Japan Studio in 2021, once a hotbed of boutique experimentation and talent growth, was a worrying development from an artistic perspective. And whether Chinese investment will continue in less favorable economic conditions is doubtful. NetEase might not be so accommodating if the games currently in development don’t sell.

If, at that point, they leave the talent like their Western counterparts did, where are the Japanese directors left to go?

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