By Dr. Serkan Toto – On Japan's Game Industry

Esports In Japan: Small Market, A Lot Of Challenges And No Nintendo

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A lot has been written about esports in Japan in recent months, mostly on why competitive gaming isn’t taking off over here, the third biggest market for games in the world.

It makes sense, as esports seems to be everywhere nowadays, enjoying coverage by mass media, attention by large brands and even recognition by the highest circles of politics.

Small Market Size For Esports In Japan

I personally always wondered why the phenomenon doesn’t translate into a much bigger business: data provider Newzoo, for example, estimates the global esports market to reach US$1.4 billion in 2020.

What sounds like a handsome sum isn’t so handsome, considering that it doesn’t even amount to 1% of the entire gaming industry.

In Japan, it’s even worse.

According to PWC’s “Global entertainment & media outlook 2017-2021”, Japan’s share in the global esports industry will stand at an almost negligible 3% in 2021.

(PWC’s top three for that year are the US with 34%, South Korea with 22% and China with 21%.)

In December 2018, Japanese data provider Gzbrain released a report on the state of esports in Japan.

Here are Gzbrain’s numbers for Japan’s esports market*:
– 2017: US$3.4 million (you read that right)
– 2018: US$44.2 million
– 2019: US$54.6 million
– 2020: US$66.4 million
– 2021: US$78.4 million
– 2022: US$90.8 million

These sums cover six revenue sources: prizes, ticket sales, merchandising, licensing, media rights and (at 75.9% of the total) sponsorships.

For context: in its latest White Book on the industry, Gzbrain said Japan’s gaming market overall in 2017 was sized at US$14.4 billion (console, mobile, PC).

The point I am trying to make is: from a commercial perspective, the market for esports in Japan is projected to remain tiny until at least 2022.

(Again, the same point could be made for esports in general, but that would be a separate discussion.)

Reasons Why Esports In Japan Is Still A Niche

As mentioned above, media coverage on eSports in Japan has been mostly negative so far.

This is unfortunate, as a lot of effort has been put into making esports big in Japan, most notably the formation of the JeSU (Japan eSports Union).

JeSU is trying hard on popularizing esports in Japan on multiple fronts, for example by quickly adding high-profile member companies, issuing pro player licenses, doing aggressive PR, and political lobbying.

Some things are working: PUBG has become big in Japan, CyberAgent (4751) subsidiary CyberZ manages to organize well-received tournaments regularly, more Japanese know about the term “esports” than ever, etc.

Still, esports in Japan is facing a tough future.

I am not saying it has no future at all, but there are several hurdles to overcome:

  • single-player, story-driven RPGs are traditionally Japan’s top genre and not suitable for eSports
  • mobile is by far Japan’s biggest market segment in gaming right now, with nobody having cracked competitive gaming on smartphones at scale anywhere so far
  • in Japan, the PC as the hotbed of esports is the least popular of gaming’s three big platforms
  • globally, Japan has produced relatively few star esports players so far (constituting a chicken-and-egg problem)
  • legal hurdles were setting limits to the amount of prize money that could be awarded to players locally for a long time
  • almost all of the world’s biggest “traditional” and iconic esports titles are not nearly as popular locally
  • etc.

Nintendo’s Reluctance Is A Big Impediment For Esports In Japan

While most of the arguments above have been circulating in the analysis of esports in Japan domestically and internationally, I haven’t really come across another factor that I believe is absolutely critical.

It’s the reluctance of Nintendo (7974) to get into esports.

I believe as the country’s biggest and most iconic game maker, esports can never really become mainstream if the mass market developer Nintendo isn’t on board.

Since the launch of the Switch in March 2017, Nintendo is absolutely dominating the console space in Japan with a 70%+ market share.

Nintendo would be the “lever” that esports in this country needs to at least get a shot at scaling to a mass market.

(On mobile, the two big powerhouses Mixi (2121) and GungHo (3765), are JeSU members since day 1 but are struggling to scale esports for Monster Strike and Puzzle & Dragons.)

Nintendo cannot be called completely inactive with regards to esports in a broader sense, as they:

  • offer “tournaments” inside their games (i.e. in Splatoon 2)
  • host competitive gaming events offline (i.e. just recently at the so-called Tokaigi 2019 event near Tokyo)
  • produce games that are outright competitive by nature (Smash Bros, ARMS)
  • do work with esports companies from time to time
  • etc.

However, it’s clear (at least to me) that Nintendo hasn’t fully embraced esports as a concept so far: there are no official Nintendo game leagues, no circuits, no Nintendo-licensed pro players, no real sponsoring efforts, no merchandising etc.

In Japan, it goes so far that company representatives like president Shuntaro Furukawa (intentionally or unintentionally) don’t even use the term when they are asked about esports during interviews or investor briefings.

And, of course, Nintendo isn’t a JeSU member – even though the creme of the crop of Japan’s gaming industry is, from Sony (6758) to Bandai Namco (7832).

At best, Nintendo seems to have adopted a wait-and-see approach when it comes to esports: until that changes, expect a continued uphill battle for making esports go mainstream in Japan.

*Currency conversion for all sums mentioned above: 100 yen = US$0.91 at time of writing.

About the author

Dr. Serkan Toto

I am the CEO & Founder of Tokyo-based Kantan Games Inc., an independent consultancy focused on Japan’s game industry.

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By Dr. Serkan Toto – On Japan's Game Industry
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