Analysis: PS3 Tops 5m in Japan. How Big Will the Base Get?

Japan's population has been relatively stable since the dawn of gaming in the 1970s-1980s. Because of this, it is relatively easy to compare the performance of products from different eras in the country without calculating whether "gaming" is growing demographically or whether there are simply more people in demographics traditionally strong for video games. Growth from 100 million people to 130 million people means that all things being equal there should be 30% more gamers than there were before. On the other hand, population stagnation at about 125 million people as we see in Japan with gaming growth means that old people and women and athletes, "other types of people", have joined the nerds, men, and children over the years.

With that in mind, I would offer that Japan has four success levels for its video game systems:

Niche Systems: 0-5m (GC, Dreamcast, Xbox, Wonderswan, X360, Genesis). These systems serve only audiences with very specific taste, and the experiences that define the systems are either more heavily social / unsocial than what the vast majority of people like.

Hardcore Gamer Systems: 5m-10m (PS3, N64, Saturn). These systems have a small smattering of popular games that alot of long-term gamers like to play alot, and thus can't ignore. Nonetheless, these systems have trouble catching on because light-usage gamers don't really want to invest in a system with a limited array of hit titles.

Light Gamer Systems: 10m-20m (PSP, Wii, NES, SNES, PS1)  These systems have tremendous "social games" that breakout such as Monster Hunter, Wii Sports, Mario Brothers, Mario Kart and DDR but there is a wide seperation in usage patterns. A small minority on these bases buys a tremendous number of games each year, but most others buy less than two games per year. NES, SNES, and PS1 all managed high attach rates as many "light gamers" used these systems as their primary systems for an exceptionally long time. NES, SNES, and PS1 peaked in 1986, 1992, and 1997 respectively - but they were supported for four-five years after those peaks in each case, which explains rather well why the attach rates topped 10 for each system. There is evidence to support long-term usage - Nintendo continued to field questions about fixing Famicoms until 2003. SNES was similar, and PS1 production / assistance from Sony didn't end until the mid 2000s. The issue facing both Wii and PSP is that while the small core buys alot of gamers, the light gamers in Japan on the systems do not appear to be supporting the systems for the NES/SNES/PS1 time-lengths: six to ten years.

High Usage Systems: 20m+ (GB, PS2, DS) When 'everyone' has a system, or is playing it, usage increases as people discover they like more types of games than they thought they would. The light users begin to buy more than two gamers per year, and start to attract in people who stopped or never played video games before by explaining why they are getting more involved with this particular form of entertainment. Attach rates are highly variable here. These systems are supported for an exceptionally long time, and thus many buy a system for only one or two games, but for the size of the base, most people are clearly satisfied with the software on the machine as the attach rates destroy the rates on rival machines.

Over the last year or so, the PS3 has successfully moved out of the 'niche' system graveyard in Japan as it began to get a steadier stream of big hits. You can see it in the numbers - the system is only now tracking above the N64 which had far worse third party support but was similarly out of line with the 'social' trends in gaming the Wii and PS1 tapped into during their runs. The open question is whether the PS3 will push through the hardcore demographic outlined above, and reach the lower bounds of the 'Light Gamer' realm, where millions of people owning a PS3 feel content to buy a key hit or two per year.

The systems above are those which have penetrated the 5m mark in Japan - with a list of how long it took to happen. We don't have NES weekly figures, but it does appear to have peaked in 1986. I've also estimated a bare minimum of what the systems to top 5m will sell if they are still selling. Where it stands now, with sales of ~30k per week, the PS3 should top both the N64 and Saturn rather easily. That much is obvious now. On the other hand, the PS3 is over a year off the PSP pace to 5m, and reached that level less than half as fast as both Wii and PS2. SNES reached 5m in about half the time.

Of the systems to top 5m, the peak years came near the launch year (which I consider X/X/Year to 12/31/Year) in full years one to three. PS1 peaked in 1997 which was full year three. PS2 peaked in 2002, which was full year two. PS3 had its full year three in 2009 - and easily had its best year to date. PSP and GB are a bit different because they are portables which were continually refreshed by hardware iterations and important new games to push that hardware. PSP peaked with Monster Hunter Portable in 2008 and a new PSP, full year four. Game Boy peaked with Pokemon. For consoles though, there has yet to be an exception to the rule that consoles peak by full year three in Japan.

All of this points to PS3 ending up somewhere between 8m and 12m in Japan. It certainly doesn't look like it is about to achieve a SNES / PSP / PS1 type pattern in Japan if you look at aligned launches.

Even if PS3 followed the PSP pattern into year four, increasing by 20% to about 2.1m the system would remain behind the PSP pace. My hunch is that PS3 will in fact break with the PSP pattern above in 2010 even though it will be well ahead of its 2009 pace until September, and then fall behind with fewer weeks over 100,000 late in the year. A total of ~1.5m looks likely. Furthermore, the economics of the system make it likely that Japanese support will tail off quicker than on PSP as the base is smaller in Japan with higher development costs. To reach 12m, Move probably needs to take off in Japan, and the PS3 needs to decline slowly. After PS2 peaked in 2002, it averaged a 32% decline over the next seven years. Using that as a guideline for PS3, the system would just barely reach 8m. As one final metric, the PS2 will end up at about 23.5m in Japan meaning that it reached its 'half way' point of 11.75m in February 2003, almost three years after it launched. With a similar pattern, PS3 reached this point sometime around November 2009, when the base give or take a month in either direction was at 3.7m-4.7m in Japan.

Sony will not come close to selling as many PS3s as PS2s in Japan, but given the struggles of the PS3 during much of 2006-2007, selling 8-12 million PS3s in Japan isn't a terrible outcome.

Contact Vgchartz at jmazel@vgchartz.com

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Further Reading

The Japan Preview: 9/5 Edition (Metroid Leads Quiet Week)

Video Game Releases in Japan from Sept. 4th to Sept. 11th

NSMB Wii Is 3rd Home Console Game To Top 4m In Japan...Ever

Weekly Analysis, 28 August 2010 - DS, X360 at the top - Wii Rises