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“WSJ(3/26) Microsoft Must Woo Japan Game Mfrs For Xbox Titles
By Robert A. Guth and Khanh T.L. Tran
Staff Reporters of The Wall Street Journal
TOKYO—Pat
Ohura built a career at Microsoft Corp. in classic
Microsoft fashion: by trouncing his opponents, first in Japanese word-processing programs, then in Web-browsing software.
So he had every reason to expect he’d cruise to victory in his current
mission, persuading Japan’s video-game-software companies to create
games for Microsoft’s Xbox
machine. Then he met companies such as Tecmo Ltd., the maker of “Dead or Alive,” a hand-to-hand fighting game renowned for its scantily clad female characters.
Tecmo’s president put Mr. Ohura through agonizing negotiations that were
less about money than about gaining reassurance that Microsoft was
serious about games. In the
end, landing “Dead or Alive” for the Xbox came down to an unusual demand: Mr. Ohura had to promise to “sacrifice his life” to make Tecmo’s game a big seller on the Xbox.
“Our Microsoft magic didn’t
work with the game developers,” Mr. Ohura
says now. “I’ve never worked so hard in my life.”
As Microsoft enters the global video-game wars, the software giant
famous for its pugnacious tactics is having to play a game of finesse in Japan.
In negotiations with PC makers, Microsoft often holds all the cards,
because it controls the Windows operating system that runs 95% of all PCs. In video games, the shoe is
on the other foot. Microsoft is a novice, taking on
the established Sony Corp. and Nintendo Co., which together control 98% of
the market for TV-game consoles.
For Microsoft, there’s more at stake here than video games. Today’s game
machines sport PC-like features including Web connections and the
ability to play DVD movies.
Microsoft’s fear is that the boundaries are blurring
between all the different machines out there, and game players could
supplant PCs with their promise of delivering music and movies through
the TV. So it views the Xbox as an important beachhead in this battle for
the living room.
To get in the game, Microsoft has put itself in the unfamiliar position
of being a hardware maker—and it has had its share of problems making
the machines. As in PCs,
game-software writers have the hardware guys over a barrel, because consumers will buy a player only if it has enticing
titles formatted for the machine.
Japanese game writers churn out many of the most innovative titles, so
they get to play kingmakers. At Capcom Co., Microsoft negotiated with a judo expert who wears a
purple suit, owns 450 pairs of sneakers and bears a
head scar from a beating with a steel pipe. Tecmo’s president speaks Burmese and describes himself as the guru of his corporate “cult.” The
last American game console -- 3DO Co.’s Real, released in 1993 -- failed to wow the Japanese game moguls. It died.
“The most creative game developers in the world are here in Japan, andyou have to win their hearts and minds, even for the U.S. or the European markets,” says Microsoft
Chairman Bill Gates. “You’ve got to get these guys behind you.”
Microsoft brings massive financial power to the game business. Its
annual sales of $25 billion eclipse the revenues of the entire video-game industry.
Two years ago, it bought Chicago-based Bungie Software Products Corp.for an undisclosed sum to get its hands on “Halo: Combat Evolved,” a science-fiction shooter game that has
become one of the best-selling titles on the Xbox. It also lent money to cash-strapped Interplay Entertainment
Corp., the Irvine, Calif., maker of forthcoming games based on the Keanu Reeves movie
“The Matrix.”
But in the Japanese game-writing industry, closer in style to Hollywood than Silicon Valley, gut feeling and ego often drive million-dollar decisions.
Most of the big
Japanese game companies, wary of the risks of investing in games for a new player and worried that mighty Microsoft may take too much control of their industry, have yet to commit their most popular
games to the Xbox. Many of them simply dislike Microsoft, which they see as a bully.
“They’re the newcomer and have to approach each software maker humbly,” says Kazumi Kitaue, who oversees development of console-game software for Konami Corp. Konami is known
for such recent hits as “Silent Hill 2,” whichsets players against a headless four-legged monster, and classics such as
“Frogger,” which pits a frog against oncoming traffic. “We’re the
elders,”
he says. “We know this business.”
Japan’s dominance in video games traces back to 1983, when Nintendo
launched the Famicom, a game machine that quickly sold millions of units and spawned a
generation of game-savvy kids. Some became top game writers out of high school, and they created a culture to match: boozing all night and dropping big money on fast cars.
In 1996, Square Co.
decided to put its “Final Fantasy” game on Sony’s
fledgling PlayStation, abandoning long-time partner Nintendo. The deal
helped vault Sony past Nintendo as the world’s leading game-console
maker.
It remains No. 1 with some 70% of the market for consoles hooked up to
TVs.
An energetic 41-year-old, Mr. Ohura joined Microsoft Japan in 1986 and
rose by jumping into new
businesses. When Microsoft set out to conquer
Japan’s PC-software market in the mid-1990s, Mr. Ohura quickly overcame a chief rival and spread Microsoft Word across Japan. When Microsoft announcedthe
Xbox project in early 2000, friends warned him the Xbox job was toorisky.
He acknowledges that he “didn’t know much about the game industry.”
But he learned quickly from people he poached from Sony, Square,
Nintendo and other top game makers,
building a team of 180 in 18 months. Then he set out to meet experts such as Yoshiki Okamoto, chief operating officer of Capcom, maker of “Onimusha,” in which players control a samurai who battles
ninja and gains strength by capturing undead souls in a glove.
Mr. Okamoto, the sneaker collector and black-belt in judo, has seen his
own adventures. A long scar runs down his forehead where he was hit with a
steel pipe in a
fight as a kid. Mr. Ohura schmoozed him and other executives
in drinking sessions after work and rounds of golf on the weekends. At a
game-industry conference in Los Angeles, Mr. Ohura rented out
a
Japanese-style bar, where the drinks are served by women who flirt with
the men. He plied top Japanese game makers with so much wine that he says he had to escort them back to their hotels in
a stretch limousine.
He soon realized the Japanese were skeptical of Microsoft’s plans.
Several star creators were cool to the Xbox. Some thought the machine—which includes a hard drive and runs
on an Intel Corp. processor—was too
much like a PC and thus not much fun. One game maker told Mr. Ohura that even if Microsoft offered financial terms as attractive as Sony’s, he would
refuse
to create an Xbox game, because Microsoft isn’t Japanese.
To show Microsoft’s commitment, Mr. Ohura introduced executives from
Japan’s leading game makers to Mr. Gates in May 2000 at a Tokyo hotel. Mr. Gates answered questions
about the Xbox technology, but the game moguls felt he didn’t seem to have a feel for games. “We saw him as a layman when it comes to the game business,” remembers Capcom’s Mr. Okamoto, who was at the
meeting.
Gradually, Microsoft started cracking the fortress. A key was Seamus
Blackley, one of the chief architects of the Xbox. A fan of classic
Japanese video games, Mr.
Blackley started travelling to Tokyo every month,
meeting designers and throwing himself into the culture, often bonding with
creators deep into the night at strip clubs with names like “Trap”
and “Coco
Bongo.”
Early on, he scored points with Tomonobu Itagaki, the pony-tailed
producer of Tecmo’s “Dead or Alive,” by beating him at his own game. “From then on I could trust him,” Mr.
Itagaki says.
In late 2000, Capcom’s Mr. Okamoto and several colleagues dropped by
Microsoft’s headquarters in Redmond, Wash., for a day of meetings and a
night on the town with
Xbox managers. After hours of swilling a
concoction of vodka and lemon juice, the group tied napkins on their heads
bandana-style, and passed pieces of chocolate cake around the table --
from mouth to mouth. The rollicking party helped cement Microsoft’s ties with Capcom. “Seattle was a good time,” chuckles Capcom’s Mr. Okamoto. In
time, he agreed to put “Onimusha” on the Xbox.
Back in Tokyo, Mr. Ohura was having a tough time with Sega Corp., the
No. 3 console maker and creator of classic game characters such as Sonic the
Hedgehog. He reasoned
that if a major player such as Sega backed the
Xbox, other Japanese might follow.
But by late 1999, Sega was deep in the red and struggling for survival.
Its largest shareholder, septuagenarian Isao Okawa, a billionaire
computer-industry pioneer,
discussed an alliance with Mr. Gates in which
Sega would manufacture the Xbox and create new games for it, but the
talks broke down.
A year later, Mr. Okawa was battling cancer and
handed the reins at Sega
to a protege, Tetsu Kayama. In late January 2001, Microsoft executives
visited Sega headquarters in Tokyo, where Robbie Bach, the head of Microsoft’s Xbox unit,
sketched out a proposal on a white board: Microsoft would invest in ailing Sega, in exchange for Sega’s creating exclusive Xbox games.
Mr. Kayama says he was secretly planning to get Sega out of the
game-player business, but wanted to remain free to write games for Sony and Nintendo.
He flatly rejected the Microsoft pitch, baffling the Microsoft team.
But Mr. Ohura sensed Sega still might bite. In February, he asked Mr.
Kayama to dinner, and they
started meeting regularly. Mr. Okawa, by now
bedridden and unable to speak, advised Mr. Kayama by scribbling notes on paper.
Mr. Ohura was getting desperate. Mr. Gates was set to deliver a keynote
speech at the March Tokyo Game Show. Microsoft wanted some big news to show the progress of the Xbox,
but it had none. “We needed something for Bill to present,” Mr. Ohura says.
Two weeks before the show, Mr. Okawa died, throwing Sega’s future deeper
into question. But a day before the game show, Mr. Kayama met Mr. Gates
at a Tokyo hotel. He
agreed to bring Sega games to the Xbox. And he had a
final demand: Mr. Gates must rework his show speech to include comments
eulogizing Mr. Okawa as an industry giant. Mr. Gates made the changes.
Meanwhile, Mr. Ohura had stepped up his attempts to get Tecmo to release
an Xbox version of “Dead or Alive,” the racy fighting game. The title is
Tecmo’s best-selling
PlayStation 2 title, so committing to an unproven
player was a financial risk. Tecmo’s voluble president, Arihiro
Nakamura, says he needed to “feel” that Microsoft “loves” the game. So he
subjected Mr. Ohura to repeated lectures on the game business. In one climactic meeting, he shouted at Mr. Ohura: “Are you willing to sacrifice your
life for our game?” Mr. Ohura nodded.
Mr. Ohura says he understands the tough tactics. “It was a big risk, and
they needed to make sure that it was the right gamble.” In March 2001,
Tecmo agreed to make a
version of “Dead or Alive” exclusively for the Xbox.
Other challenges mounted. Konami had said it would release an Xbox
version of “Metal Gear Solid,” a blockbuster title in which gamers guide a
spy
named Snake on antiterrorist missions. But in May 2001, at a game-industry
conference in Los Angeles, Microsoft’s Mr. Bach and Mr. Ohura were
surprised to see Konami’s Mr. Kitaue arrive
at their booth.
The chain-smoking executive began bombarding the Microsoft men with
complaints, some specific—such as Microsoft game-writing software
tools that didn’t work—and all
stemming from what he saw as Microsoft
pushing risk on Konami. “Konami is spending its own money” on developing Xbox games, Mr. Kitaue says. “We’re taking risks. Microsoft isn’t taking risks.”
Tempers flared, but Mr. Bach ended the meeting by promising, “We’ll make
sure we accommodate you,” according to people there. That night, Mr.
Ohura caught up with Mr. Kitaue at a party to try to
patch things up, but
hopes dimmed for getting “Metal Gear Solid” on the Xbox. “There was a
disconnect,”
Mr. Ohura says. Mr. Bach says Microsoft continues to work on building
its relationship with Konami and other Japanese game makers.
It was the start of a rough summer.
Mr. Ohura sacrificed weekends with
his daughters to play more golf with game executives. The long hours caused
him to gain 15 pounds. To inspire his troops, he had a friend make 200 rings
imprinted with the Xbox logo. He started wearing his every day. For
extra confidence during crucial meetings, he also wore a pair of yellow boxer
shorts one of his daughters gave him for Father’s
Day.
Back in the U.S., Microsoft was having trouble ramping up production of
the Xbox because of problems making a key chip. For that and other reasons,
Microsoft decided to push back the
Japan launch by three months to
February 2002, meaning game creators would miss the crucial year-end shopping season.
In August, Mr. Ohura, wearing his lucky yellow boxers, broke the news of
the delay to a room of hundreds of game developers. When he called Konami,Mr. Kitaue was livid.
“You stupid idiot!” Mr. Kitaue recalls yelling into
the phone.
Mr. Ohura says he was shaken but didn’t have time to dwell on it.
Another prospect was slipping away. Microsoft had spent countless hours wooing Square Co., maker of “Final
Fantasy,” a hit game that plunges players
into a futuristic world that can take 40 hours or more to explore. Square had
spent $130 million to make a movie version of “Final Fantasy.” After the
film
flopped last summer, Square needed cash and seemed open to an alliance.
But Microsoft was caught off guard when Sony announced in October that it
would invest $124 million to become
Square’s second-largest shareholder. Mr. Ohura says he felt the door to Square “narrow.” Indeed, Square hasn’t
committed any games to the Xbox.
Gradually, Mr. Ohura lined up a respectable list of titles. Konami
shipped “Air Force Delta,” a fighter-plane title, and Capcom shipped “Onimusha,” the samurai game. Mr.
Ohura remains confident of landing bestsellers such as “Metal Gear Solid” and Square’s “Final Fantasy.”
Microsoft has already faced some glitches in Japan. Earlier this month,
it said it would repair or replace defective versions of the Xbox following
complaints that the
machine can damage game disks.
Many game makers say Mr. Ohura has at last won their trust, but they’re
still keeping him on his toes. He recently stopped by Tecmo to report
that the Xbox was
flying off U.S. store shelves. Mr. Nakamura, the Tecmo
head, says he snapped back: “Your ship just set sail. There’s still a vast
ocean ahead.”
(END) Dow Jones Newswires”
--Note on europe sales: Dissapointing sales for Europe
http://www.theregister.co.uk/content/54/24592.html
“Xbox may not be playing too well in Europe, according to a report at
Heise News. Quoting figures from Markt für Computer- und Videospiele,
the
report suggests that only small quantities of the machines were actually sold
in the immediate post-launch period in FRance and Germany.
In the first three days in Germany MCV says
only 10,000 Xboxes got into
the hands of consumers, and this position was mirrored in France. In the UK
it chalked up a healthier 48,000 in the first three days. MCV speculates
however that
large quantities of machines will have been bought by
dealers; so although they might show up in any sales claims Microsoft makes (it
hasn’t, yet), they’re only real say when (or if) they go out
of the shop
door.
MCV compares the Xbox European rollout to the Playstation 2 launch. In
November 2000, around 140,000 units were sold in Germany and the UK.
Meanwhile, recent
Japanese sales figures have shown Xbox sales
flattening fairly swiftly after a post-launch spike."
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