Lead-market characteristics of the Japanese
video game industry
Mirko Ernkvist
University of Gothenburg, Sweden
ABSTRACT
OBJECTIVES:
Certain geographical markets might act as lead-markets for innovation, the geographical market
in which globally successful innovation first takes off (Beise, 2004). One factor contributing to a
country’s lead-market status is a high degree of leading edge users that is ahead of the majority
of users in market trends and act as important sources for new innovation (von Hippel, 1986;
Morrison, Roberts, & Midgley, 2004).
The role of lead users is often pronounced in creative industries in which producers often are
involved in a close iterative development process with user groups in the uncertain search for a
new hit product (Grabher, Ibert, & Flohr, 2008; Lester & Piore, 2004). Yet, the experiential
nature of creative product attributes are also a source for a highly heterogeneous user market
in which different communities of consumers have different interpretation of what is
considered “cool, beautiful or exciting” and market trends change rapidly (Lawrence and
Phillips, 2002). Few studies have tried to establish how lead-markets affects the growth of
creative industries over longer time periods. This raise the questions regarding how creative
industries adapt and respond to changes in the heterogeneous demand side over time, e.g. the
emergence of new user groups with different experiential preferences and/or the declining
lead-user characteristics of existing user groups.
The aim of this paper is to study the Japanese video game industry with a focus on how
changing lead-market characteristics of certain user groups have affected the long-term growth
of the Japanese game industry. The video game industry provides an interesting context for
such a study as it has become subject to an increasingly heterogeneous global demand market
during the last two decades, a result of growth of the industry to new demographic user groups
and an increasing cross-fertilization of games with other entertainment industries (anime,
manga, film, music, sports). As a leading global exporter of games, the Japanese game industry
has faced several of the challenges of the changing demand environment of games.
The following are the main research question of the paper:
Could existing lead-market users become misleading, i.e. a barrier to growth and a source of
inertia for game companies under some circumstances? If so, why?
How have Japanese game companies managed to handle potential trade-off in preferences of
heterogeneous user groups in the development of games?
Has Japan’s competitive status as a lead-market for games changed over time?
METHODOLOGY:
The theoretical part of the paper will introduce the lead-market concept and conceptualize the
role of users in the development process for games. Following this will be an empirical part that
describe the demand environment for videogames as well as the response of major Japanese
video game companies to these changes. The empirical part of the study will be based on
business history method with a range of qualitative as well as quantitative empirical sources
that focus on both the demand and supply side of video games.
In regards to the demand side, Japan has relatively good statistical and survey data that enables
a historical analysis of game users and their heterogeneous preferences. This include annual
reports from the game trade organization CESA, Tokyo Game Show Visitors User Survey,
reports from game industry analyst companies (MediaCreate, Enterbrain, ASCII Media Works ),
game company data and general governmental and university surveys covering entertainment
use in Japan (“White Paper on Leisure”, Survey on Time Use and Leisure Activities, JGSS).
To analyze the supply side and its response to demand side changes, the paper use a number of
company and industry sources, including interviews with industry representatives, company
material and trade press.
EXPECTED RESULTS:
The main expected result and contribution of the paper is:
-A better understanding of how changes in the demand environment affects the role of
different user groups as lead-users over time.
- A contribution to the understanding of the situational nature of lead-market user
groups in the game industry, i.e. under what circumstances are lead-users beneficial and
when could previous lead-users become misleading to reach new user groups?
-Company strategy and changes in lead users, i.e. an analysis of how Japanese game
companies have responded to the changes towards a more heterogeneous demand
environment of games and the specific strategic challenges this has created.
References
Beise, M. (2004). “Lead markets: country-specific drivers of the global diffusion of innovations”.
Research Policy, 33: 997-1018
Grabher, G., Ibert, O., and Flohr, S. (2008). “The Neglected King: The Customer in the New Knowledge
Ecology of Innovation.” Economic Geography, 84(3):253-280
Lawrence, T. B. and Phillips, N. (2002) “Understanding Cultural Industries”. Journal of Management
Inquiry, 11(4): 430-441
Lester, R., & Piore, M. (2004). Innovation : the missing dimension. Boston: Harvard University Press.
Morrison, P.D., Roberts, J.H., Midgley, D.F. (2004), "The nature of lead users and measurement of
leading edge status", Research Policy, 33: 351-62
von Hippel, E (1986) “Lead Users: A Source of Novel Product Concepts” Management Science, 32(7):
791-805