Chuo University Speech(Nov 25th, 2011)
"The Structural Transformation of the Game Industry"

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Interestingly enough, the computer games started at game arcades, and evolved into home video games and web based games. This is because the games are extremely complicated application software that require a certain level of processing capability with the hardware. At the beginning, playing the Space Invaders game required dedicated hardware with specific circuit board and input device, which meant a few hundred thousands of yen as a price. Individuals would not pay such a huge amount simply to play the Space Invaders, so the game arcade operators bought the machines, and let people play with one hundred yen to recoup the investment. Hence, that became the business model for the game arcade operators, as the machines were too expensive even though they were only 8 bits. Later, Nintendo came up with the Family Computer, and although a price tag of 10,000 or 20,000 was still high, it became affordable for the individuals. Game consoles just intended for playing games had to be developed because even the games back then required extensive processing power on the devices, which was not available with the computers at the time.

Ever since then, as the console platforms enhanced their power, the other devices also made progress. The capability for PC was enhanced, and games became available on other types of hardware. The decisive year was year 2000, which was when PS2 was introduced. PS2 was a game console as well as a DVD player. From 2000 to 2002 was when we saw the dissemination of i-mode with the cell phones. Many applications became available on the cell phone. So unlike the time when Nintendo introduced the Family Computer as a dedicated device to play games, game consoles were now devices that were used for other purposes in addition to playing games. Additional functionalities were equipped on the game devices. At the same time, devices that initially were not acquired to play games (PC, cell phone, etc) became readily available as devices to play games. Hence, money spent just for the sole purpose of operating the game applications declined in a relative sense. Historically speaking as less money were spent by the consumers on devices or environment to play games, the market became bigger. As the market expanded, the business model evolved to trigger industrial transformation. That had been the case for the last three or four decades. But let me make one point clear. The emergence of the web-based games will trigger a full-scale industrial transformation. However, this is just a matter of who is going to be the main player, meaning that each of the markets will continue to exist like geological layers on the ground. Mass media tends to jump to say that the amusement business is dead, or the home video games will become extinct, being taken over by the culmination of the web games. These are not the hard facts. The past is not necessarily always great, but these layers will stay, whilst the companies that drive up the overall market will be replaced.

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