The Japanese video game industry, which gave birth to “Mario and Pokemon,” is in decline.

The game industry has grown globally due to the “nest egg demand” of the COVID-19 crisis. Recently, the rise of Chinese game makers has been remarkable. U.S. research firm Sensor Tower announced the top 100 global mobile game publishers in terms of sales this October.

The top three were Tencent, NetEase, and miHoYo, all Chinese companies. Although there is little public information on Shanghai-based miHoYo, a privately held company, there are estimates that its hit title “Original God” earned $3.7 billion (approximately 560 billion yen) in the first two years after its release.

The popularity of characters from China’s “Genshin” and “Collapse: Star Rail” and South Korea’s “NIKKE” were also popular in cosplay at recent Halloween and game shows, and the number of people dressing up as Japanese game characters was a hot topic on social networking sites. Is it now a thing of the past that Japanese games swept the world?

Differences in national support systems.”

Koichi Hosoi, 65, a professor at Ritsumeikan University’s College of Imaging Arts and Sciences, puts it simply.

In South Korea, there is a government-affiliated organization called the Korea Creative Content Agency (KCCA), which provides human resource development, overseas expansion, and financial support for the entertainment industry, including games, music, fashion, and animation, as well as public-private partnerships. In 1999, a government-affiliated organization called the Game Industry Support Center was established, and its first director, Kim Dong-hyun, directly appealed to President Kim Dae-jung to invest in the game industry to ensure Korea’s survival in the international community, and the center received its budget.

In 2001, I went to Seoul to see how the government was helping small and medium-sized game publishers to gather together in a building in Seoul, and to send their games out to the world under a unified logo and brand name. With state-of-the-art equipment throughout the studio, each company worked hard to create games that would be played by users around the world, and I was astonished to see how the government was pushing to strengthen the international competitiveness of the game industry.

China, as a country, is practically a public-private partnership, and the government is willing to provide support if it judges that foreign currency can be earned. For example, if a cartoon becomes a hit in China, it can immediately be made into a movie or a video game. I am amazed at the speed at which a manga that is not cheaply produced, but that has a clear understanding of its worldview, can be created in a short period of time, and then rapidly circulated to other media.

In contrast to this situation, in Japan, it is left to the private sector. Although they have the know-how to develop hit productions for other media, each company does so on its own, and their skills are not first leaked to the outside world. Venture companies are trying to take on cross-cutting initiatives, but the major companies are unwilling to follow the trend. As in South Korea, there is little movement toward overseas expansion through public-private partnerships spearheaded by government-affiliated organizations.

Professor Hosoi points out that Japan is at a crossroads, and says, “Japan still has some excellent works left over from the past.

Japan still has a lot of excellent works from the past, and structural reform should be carried out while it still has this advantage. Pokemon and Super Mario are hits around the world. However, when Chinese and Korean content rises to prominence and the generation changes, content originating in Japan may no longer rank in the rankings.

It is the right time to do something about it now. Japan has a decent domestic market, and if one smartphone game hits the market, it will be profitable for several years because of the charging system called “gacha”. However, the domestic market is shrinking rapidly due to the birthrate declining faster than expected.

If not only the games that win, but also the high-quality content that is lying dormant as assets from the past can be smartly circulated into movies, dramas, novels, and manga, as is done overseas, it would generate significant revenue and, above all, foster new human resources in many fields…”

Japan’s share of the global video game market is declining year by year. According to Professor Hosoi, “Although it is difficult to make a simple estimate,” the share was 35% in ’01, but it decreased to 19,3% in ’14 and 13.4% in ’22.

Japanese animation, which has taken the world by storm, also has a high degree of freedom of expression, such as Netflix, and excellent domestic human resources are flowing to U.S. companies with abundant funds. As domestic talented personnel move to foreign firms, foreign manufacturers will prosper even more. On the other hand, domestic human resources will be depleted, and the negative spiral will continue.

It is essential to improve and promote the preservation environment for game archives. For example, there are approximately 1,200 types of NES software. Research institutes in the U.S., Europe, and South Korea have collected and stored a large amount of game materials, including NES games, and there are some holding libraries with substantial collections. In Japan, the National Diet Library, some universities, and private institutions are collecting and storing video game materials, but they are all small and face operational challenges. As for the NES, it just made the whole of Japan go crazy, and there are 1,200 types of ideas for fun and play that are comprehensive.

There are many buried assets in Japanese content. There are many small seeds lodged in works that have been buried without seeing the light of day. We should develop a strategy, learn from the archives, and begin to make them a place for developing internationally viable content and human resources” (Prof. Hosoi).

With the domestic market shrinking, the video game industry is trying to survive by expanding overseas. Incidentally, “Pokemon GO” was developed by Niantic, an American venture company headed by John Hanke, and did not originate in Japan. In ‛15, CEO John Hanke gave a lecture at a conference hosted by Ritsumeikan University, where Professor Hosoi belongs.

He came to Kyoto wearing a stubble beard and a rough T-shirt. CEO John Hanke seemed very happy to see Professor Masayuki Uemura (deceased), the creator of the NES and who was teaching at Ritsumeikan University at the time, as innovators (revolutionaries) sometimes seem to understand each other.

miHoYo’s “Original God” is strongly influenced by Japanese games. Since ’00, home video games have been banned in China for 13 years because of their “negative influence on youth. Even so, people in China have been playing on NES-compatible consoles called “Hongpai-chi,” which have passed through the strict regulations.

The seeds of games sown by Japan have had a deep and long-lasting impact on creators and consumers around the world. However, in Japan, where they originated, they are still regarded as ‘children’s toys,'” said Professor Hosoi.

Professor Hosoi points out that the word “culture” also means “cultivation. With the advantage that has been passed down from generation to generation, now may be the last chance to discover and nurture the next generation of talent.