Xbox, despite occasional efforts by Microsoft, has been a complete virtual bomb in Japan. With installed base that’s been close to nil, some have even wondered whether the third-generation Xbox would even be released in Japan at all.
Edge, a UK based magazine, has written a piece demonstrating that, despite being small in number Japanese Xbox fans are a seriously dedicated lot, celebrating the mere fact that Microsoft bothered to post news about the unveiling of the next-gen console in Japanese on the Dashboard.
But what most people don’t recognize is that the possible key to penetration in Japan has absolutely nothing to do with gaming.
Despite most people’s perceptions of Japan, it’s a country that is pretty backwards when it comes to internet-based services. CableTV is hardly commonplace, most people experience the net on their phones, and you can’t sell a Blu-ray player in Japan that isn’t a recorder with a built-in DVR. The Verge did some great coverage last year on exactly what a unique market Japan is when it comes to what US and European customers have taken for granted.
Apple, and to a much lesser degree Amazon, are about the only brands with a toe in the pool that are equipped to possibly finally penetrate Japan’s unusualy home video market, and Microsoft has essentially zero effective capability to bargain with content holders there like they do here. The true key to success in Japan’s video market can be summed up in one word: Tsutaya.
Think of it as the Japanese equivalent Blockbuster, if Blockbuster never lost its power, and literally had locations every six blocks or so. Tsutaya has an eight-story store on the corner of the busiest street crossing in the world. Everyone in Japan rents everything from Tsutaya. And while Tsutaya currently does offer online rentals with package plans, there is nothing comparable to a Netflix in Japan, offering cheap, unlimited streaming.
At this point, it’s safe to assume that the new Xbox contains the rumored HDMI input like Google TV, and that it’s being positioned as a complete media hub. Penetrating Japan in any way, shape, or form is going to require a partner company to vouch to the Japanese consumer. Apple sure isn’t going to do it, Amazon isn’t going to help its nearest rival in streaming sales market (not to mention the fact that Amazon currently has no subscription streaming foothold in Japan, which wouldn’t make it much of a help anyway), and so the only player left is Tsutaya.
Creating a RedBox Instant-style relationship with Tsutaya , where people get physical rentals and streaming in one package, is likely the exact sort of thing that Microsoft needs to do to become a real media player in Japan. If the company offered a Japan-exclusive Xbox with a Blu-ray writer and a larger hard drive, combined with the new Kinect, which is designed for smaller rooms and voice control, and back that with a push from the 800-pound gorilla that is Tsutaya, and Microsoft might — just might — be able to make its next-generation console viable in that market. Otherwise, if I were Microsoft, I’d simply pack my bags and focus on more welcoming territories, because that’s the only way the company is going to be able to get the consoles into homes in a country where the majority of adults do not play games outside of an arcade, and consumers tend to stick with the home team, all other things being equal.