Japan's game industry in 2011 was characterized by the growth of social network games for mobile phones and smartphones from companies such as Gree Inc. and DeNA Co. But console games are likely to stage a comeback with Nintendo Co.'s 3DS portable device selling strongly in recent weeks and Sony Corp. launching its PlayStation Vita handheld console in December.
"We would like to see the Nintendo 3DS spread explosively and quell reports that game-dedicated devices are coming to an end," said Nintendo President Satoru Iwata at a news conference in late October.
As he predicted, the 3DS console has been drawing brisk demand recently aided by the launch of new titles from popular games series such as "Mario Kart" and "Monster Hunter," with sales topping the 3 million mark in December in Japan, according to data compiled by game magazine publisher Enterbrain Inc.
"Achieving its targeted global sales of 16 million by the end of March is coming into sight," said Etsuko Tamura, an analyst at Mizuho Investors Securities Co., citing upcoming major software titles and strong overseas sales.
Intensifying the competition was the Dec. 17 launch by Nintendo's rival Sony Computer Entertainment Inc. of the successor to the PlayStation Portable (PSP) handheld game console, the PlayStation Vita, which sold some 321,400 units in its first two days on the market, according to Enterbrain data.
On the day the Vita was launched, more than 100 game fans lined up at a Tsutaya movie and music rental shop in Shibuya Ward to buy the new gadget. Twenty-six-year-old company employee Daichi Teranishi, who used to play games on the Nintendo Entertainment System, called Famicom in Japan, and the PlayStation, said he understands the popularity of social network games, which are often offered free of charge with further features available for purchase.
But he is also eager to play console games like the Vita as it employs advanced technology including high-definition images and enhanced network functions. "By buying console games, I would like to see the game industry revitalized," he said.
Andrew House, president of Sony Computer Entertainment, told reporters that Sony's game unit wants to see sales of the new console "far" outstrip those of the PSP, which topped 73.10 million units at the end of September.
"There will be a sufficient market for game-dedicated consoles if we continue to offer cutting-edge game experiences," House said. According to Enterbrain, the domestic game market -- combining both hardware and software sales -- shrank to about 494 billion yen in 2010 after hitting its peak of some 688 billion yen in 2007.
In contrast, the social network game market has been growing sharply, reaching 112 billion yen in 2010, a 4.4-fold jump from the previous year. "A generational change took place" in 2011 as social network platforms such as Gree and Mobage became widely recognized with more people starting to play games on smartphones, said Enterbrain President Hirokazu Hamamura.
But Hamamura predicted that console developers will come into the limelight as they try to play the leading role in the game industry. In addition to the 3DS and the Vita, Wii U, the successor to Nintendo's video game console Wii, may become the leading player in the next-generation console market following its scheduled launch in 2012.
A fierce race is expected among game makers to grab players' time, said Hamamura, adding there will be no big losers in the game industry because the customers for console games and for social network games are different.
"A battle to take the spotlight will begin," he said, adding the expected trend is likely to spur the entire game market in 2012. In a bid to outperform rivals, traditional game console makers are trying to diversify their earnings sources by enhancing network functions as well as selling software content.
One model of Sony's Vita, for example, features 3G mobile data connectivity as part of their efforts to enhance the Internet connection. Players will be able to use social network media such as Twitter by downloading dedicated applications via the Internet.
But Mizuho Investors' Tamura said what the Vita console really needs is to expand its corresponding game titles. "For the Vita to be successful, there needs to be a variety of new software," she said.
Nintendo, meanwhile, has introduced in its online shopping content for the 3DS a mechanism which enables users to purchase additional content such as new stages for a game they have bought, though such content is not yet available.
"As software development costs rise due to advanced hardware technology, game console makers need to secure more profits rather than just selling packaged software," Tamura said. "Business models are likely to change for console makers in 2012," Tamura said, citing the spread of download content.