Lead-market characteristics of the Japanese video game industry. Mirko Ernkvist.
University of Gothenburg, Sweden. ABSTRACT. OBJECTIVES:.
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
