Microsoft's Xbox 360 facing hurdles in Japan

When Microsoft Corp. launched its Xbox 360 in Japan last year, it hoped things were going to get better for its games business in the country.

The market, home of Sony Computer Entertainment Inc.'s PlayStation console, proved to be a tough one for Microsoft, which saw its Xbox thoroughly outsold by the PlayStation 2. But it thought that the early start its Xbox 360 had over Sony's PlayStation 3 would give it the upper hand in the next round of the video game wars.

After all, the Xbox 360 was the first next-generation console to launch. It was the first to support high-definition games and it debuted when HDTV sales were booming. Microsoft had also brought in some big-name Japanese game developers to produce games with greater appeal to a local audience.

Almost eight months have passed since the console went on sale here, but Microsoft is still struggling to crack the Japanese market.

In the last week of June, Xbox 360 sales totalled 1,897 units versus the PlayStation 2's 23,133 units, according to market tracker Media Create Co. Ltd. That placed it in the number two position among consoles ahead of Nintendo Co. Ltd.'s GameCube, which sold 1,002 units in the same period.

"Globally we are doing very well but Japan has always been tough," said Darren Huston, president and chief executive officer of Microsoft's Japan unit, Microsoft Co. Ltd., at a company event on Thursday. "We launched early and with not enough Japan-specific content," he said.

Of the games promised by Microsoft for Japan, some still haven't arrived. One of the most eagerly awaited, the N3 Ninety Nine Nights role playing game by Tetsuya Mizuguchi of Q Entertainment Inc., was released in April along with another popular local title, Final Fantasy XI.

The result of those launches has been an uptick in sales in Japan, said Takashi Sensui, general manager of Microsoft's Xbox division in Japan. Sensui took up the post earlier this year.

"In the end of March and April through June we've had many good titles coming out," he said. "RPGs (role playing games) are one of the biggest game segments in the market [in Japan] but it's taking a lot of investment to make large-scale RPGs."

Looking ahead, things are likely to get more competitive for Microsoft in Japan. Sony is due to launch its PlayStation 3 console in Japan on Nov. 11, roughly 11 months after the Xbox 360 went on sale. Many gamers appear to be waiting for the Sony console.

A poll conducted in May by Cross Marketing Inc. among 366 self-identified gamers found 256 of them said they want a PlayStation 3. Of the respondents, who were allowed to select multiple next-generation consoles, 127 said they want Nintendo's upcoming Wii console, and 93 said they want an Xbox 360.

Huston said Microsoft would continue to push original content as its key weapon, but he acknowledged the tough battle ahead. "I can't say I'm beaming with confidence in Japan," he said.