Sierra Visits Japan! Compares U.S. and Japanese Software Markets

//For over three years, Sierra On-Line has been working to develop business relationships with the software industry in Japan. Thexder, which was released in September of 1987, was Sierra's first import from Japan, and has already sold more than 100,000 units in this country.

Recently, Sierra President Ken Williams and some of his top staff took yet another journey across the Pacific on a fact-finding mission. Here is Ken's story…//

The trip to Japan from the West Coast takes about 10 hours by jet. It's a grueling, exhausting journey, made even more unbearable because the seats in jets traveling to the Orient are made to seat the somewhat smaller bodies of the Japanese people.

Four Sierra employees made the trek. Their destination - Tokyo. The short term goal was to gain a better understanding of the Japanese computer hardware and software market, with the long term goal being to open a branch office of Sierra in this faraway land.

From this and previous trips to Japan, I have acquired a good working knowledge of the Japanese hardware market. It is basically broken into three major segments, with only one major computer supporting each segment.

American hardware companies that we are familiar with, including Apple, IBM, Commodore and Atari, are almost unknown in the Japanese computer market. Commodore and Atari have no presence at all, and the Apple II is virtually unknown outside the "international schools" that educate the American and European students whose parents do business in Japan. Even computer giant IBM has less than a 1% share of the Japanese computer market. Apple's Macintosh, with its ability to display the native Kanji alphabet onscreen, has seen some success in the country, but it's "inferior" graphics resolution and high price limit its potential in the marketplace.

In Japan, the #1 market presence belongs to Nintendo, which has sold literally millions of its Family Computer. The Japanese version of the Nintendo machine, offers an optional disk drive in addition to the cartridge slot.

The "Famicom" (Nintendo's nickname), is a national obsession. Sierra's crew witnessed the extent of Japan's love affair with games when Dragon Quest III for Nintendo was released. The night before it went on sale, lines formed around the block at stores where the game would be on sale in the morning. Inside of five days (the length of Sierra's trip to the country), Dragon Quest III sold over 1.5 million units. Towards the end of the week, with the game in short supply, the normally sedate Japanese were pushing and shoving to get the treasured game before supplies were exhausted.

Nintendo currently owns a "dominant" share of Japan's home computer market, but a battle for this market seems to be forthcoming. While Nintendo prepares a 16-bit version of their machine, other hardware makers are looking to make their own presence known there. Sega has already offered a new game machine to rival Nintendo, though it has placed a distant second (much like the Nintendo/Sega competition here in the U.S.). A larger challenge for Nintendo lies ahead from NEC (the largest business computer maker in Japan) which has teamed with HudsonSoft (the largest software maker), to market a new machine called the PC Engine. The folks from Sierra had a chance to look at this new machine, and the graphics capabilities, along with its more computerlike capabilities, make it an exciting entry into the Japanese computer market. In the short time since it was introduced in Japan, it has sold an amazing 600,000 units. If this machine is released in the U.S., it will likely be a knockout in the video game arena.

Occupying the market position analogous to that of the Commodore 64 in the U.S. is the MSX computer. An unusual thing about this computer is that it is made by more than one computer company. Several Japanese computer manufacturers, including Sony and Fujitsu, agreed on a standard for manufacturing a home computer. The resulting machine costs approximately $300 (including disk drive) and has graphics and music capabilities far superior to that of the Commodore 64. Some of you may remember that the Japanese tried to introduce the MSX standard to the U.S. in 1984, but were repelled by the success of the Atarii 800, Commodore Vic 20, and Texas Instruments TI/99. While those machines have faded to near obscurity, the MSX standard is still alive and well in Japan.

The high end of the market is dominated by NEC. NEC makes two popular computers, the NEC 8801 and the 9801. The 8801 costs around $1,500 for a color based system. It has great graphics and sound, and is the most popular of the powerful personal computers. The NEC 8801 market is much like the Apple IIe market here in the U.S. There is a plentiful supply of quality software available and a large installed base of computers, so publishers pay great attention to it.

Like the Apple IIe, the NEC 8801 is limited by its 8-bit processor, and is nearing the end of its life cycle as users upgrade to its more powerful 16-bit replacement. Although the NEC 9801 is MS-DOS based, it has capabilities much like the Apple IIGS, with superior graphics and sound, a better CPU, and more memory. However, like the Apple IIGS, the NEC 9801 costs around $3,000 for a fully configured system.

It should be noted that although the NEC 9801 runs MS-DOS, it is not an IBM compatible machine. The graphics on it are completely different than any of the many PC graphics standards, and many of the operations are different. The machine cannot take advantage of the large library of MS-DOS based software available, and it isn't easy to adjust current MS-DOS software to work on the NEC 9801. Sierra's conversion of Thexder from the NEC 9801 to the IBM PC required a major rewrite, and this obstacle creates a barrier that has to date prevented the U.S. and Japanese software markets from sharing products. This may change soon though. A group of Japanese hardware manufacturers have recently launched an effort to develop a standard IBM-compatible machine which contains ROMS's with the Japanese character set. This new machine will be called the AX and will be sold by several different manufacturers. This should be an immediate success because of IBM's large existing software base along with the ability to use Japanese characters.

The biggest different between the U.S. and Japanese software markets become apparent immediately upon visiting a computer store in Japan. The first thing you notice is the high quality graphics in the software. The Japanese computers all feature a much higher graphic resolution than their American counterparts. This enhancement was originally made so that Japanese computers could display the intricate characters of the Kanji character set on screen, (representing a Kanji symbol usually requires a 40 dot by 40 dot matrix, whereas characters in the U.S. are expressed in a 6 by 8 dot matrix). Japanese game designers exploited this enhancement to do better quality game graphics than many American game designers ever imagined possible. Many Japanese games have colorful graphics that are almost staggering.

Another difference in markets is the general lack of health in the Japanese computer industry. Most Japanese publishers described their sales as flat or up only marginally this year, while their U.S. counterparts grew by 25 to 100% in the same period. I attribute this lack of growth to a lack of variety in the Japanese software market. Games, and a very few hardcore business and utility products, make up the entire market. Education and home productivity products are nonexistent. To our knowledge, only Broduerbund Japan (the Japanese subsidiary of our U.S. competitor) is addressing this market, having recently released a Japanese version of Print Shop. We wish them well, as it is obvious to us that without some productivity benefit from personal computer usage, the Japanese personal computer industry cannot realize its full potential.

The Japanese entertainment software market has matured a great deal since Sierra's first trip to Japan a few years ago. On oru first visit, the Japanese bestseller charts were monopolized by action games. On this visit, fantasy role-playing games such as Wizardry and Ultima seemed to be the hottest segment. Adventure games and sports games also fared well. Whereas simulation games seem to be very popular in the U.S. software market, they have not caught on well in Japan. Even Sublogic's Flight Simulator, which is the bestselling U.S. non-business product of all time, has been regarded as a failure in the Japanese market.

I spoke with several Japanese publishers about the comparative lack of educational software there. The closest I came to understanding this curiosity is one person's opinion that the Japanese educational system has not been as aggressive in their acquisition of personal computers as the U.S. Apparently, the Japanese government is uncertain as to which hardware company from which to purchase computers. If the government buys from NEC, then the other hardware companies will feel slighted. If the government buys from all the manufacturers, then no software standard will exist and no one computer will have a large enough installed base to develop all of the educational software necessary. Catch-22 anyone?

My most significant observation of Japanese software is its utmost quality. The attention to detail which exhibits itself in the quality of the music, animation and graphics, is highly enviable. The Japanese have made software into a performance art, and the Japanese software publishers have a pride in their products that all U.S. publishers could learn to display. For the time being, it seems that Sierra will be acting more as an importer of Japanese software to the U.S> than a player in the Japanese computer software market. As we have worked and talked with the Japanese, we are learning the attention to detail that is part of their culture.

At the conclusion of our trip to Japan, I purchased every top selling game I could get my hands on to demonstrate for the Sierra staff. My hope is to incite them to even higher levels of quality. This quality can be witnessed firsthand in the two products we have imported from Japan, Thexder and the upcoming Silpheed. Looking overseas, Sierra has found both a ready source of quality products to bring to the U.S., but also a good example to follow for our own product development at Sierra.

The trip to Japan is long, and traveling there is expensive (things cost 2 to 20 times as much as they do in the U.S.). However, the education offered is well worth the cost and trouble. The payoff will come from the rise in quality you will witness from our products - both the Japanese imports and the new Sierra products built with the attention to detail learned from our friends in Japan.


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