rior to the Xbox Summit 2005, we got the opportunity to interview Yoshihiro Maruyama, the Executive Officer General Manager Xbox Division Japan about his history with Square, Japanese gamers’ perception of the Xbox, and how he’s planning on making the Xbox 360 a success in the territory where its predecessor has failed.

Game Informer:  This is an impressive list of games and developers that you are announcing today.

Maruyama:  That is not the complete list because we have more than what we are announcing today under development.  Basically we’re giving a list of 37 companies working on 45 titles today.  In reality, we have close to 50 publishers working on around 100 titles.  Gradually we’ll be announcing more and more titles closer to the launch of the 360. 

GI: How many of those titles are being worked on by Japanese developers?

Maruyama: Oh we have some EA, Ubisoft, Activision titles. But all the games listed are for the Japanese market. So we have a very strong commitment of course from the U.S. and European publishers as well as key Japanese publishers we are announcing today.

Yoshihiro Maruyama presents at the Xbox Summit 2005.

GI: You have a great history in the industry. How did you land at Microsoft?

Maruyama: I started working in the videogame business about ten years ago in '95 when I joined Squaresoft.  At that time, Square was one of the closest third party developers to Nintendo. And actually I was invited to join Squaresoft by the president. "Squaresoft is the closest ally of Nintendo. And Nintendo will be forever." That's what he said. But a week after I joined people started saying, "Maybe we should switch to Sony." Which really shocked me. (laughs)

When I joined Squaresoft, Nintendo was like Sony today. It was a very powerful console seller worldwide. And nobody thought that anyone else can ever take that kind of a position. But once Square switched Final Fantasy to be on PlayStation the situation totally changed, even in my eyes.  I've talked to Robbie, Brian, and other executives of Microsoft about how to launch the Xbox here.  It was a very significant challenge because the PlayStation 2 had already launched in Japan in the year 2000, and the installed base was close to 8 million.  So anyone challenging against that large of an installed base here in Japan is going to be in for a very difficult challenge, but they did it and it turned out to be very challenging work (laughs).

So when I was invited to join Microsoft I talked to Robbie and I asked, "Are you really going to try again?" That was the only question I needed to ask.  Microsoft's answer was very clear, "We are here to stay in the game business. And we are committed to the challenge against competition in Japan as well as globally."  So I knew what went wrong this generation and I had some idea of what needed to be fixed in order to make it a success. So we are basically implementing everything needed to make Xbox 360 a success in the Japanese market.  My approach has been very content centric.  Even though the Xbox has a lot of non-gaming features on it, that doesn’t compromise the game experience. It's a very difficult challenge to sell consoles in the Japanese market. So that's why we have been working very hard with the Japanese third-party publishers as well as independent game developers like Sakaguchi, Okamoto, and Mizuguchi.  Our strategy for Japan is very straightforward. We offer a compelling gaming experience for Japanese consumers which excites the minds of the consumers here in Japan.

So until we launch the console sometime at the end of this year, we never know whether it's going to be a success or not in terms of numbers. But as long as I'm feeling some kind of sentiment, it's going to be different this time. (laughs)
 
GI: Why do you think the Xbox didn't do too well in Japan? I mean, I've been coming to Japan for five to six years now and every time I go to Akihabara, go to the game stores and you look at the Dreamcast section or anything else and the Xbox section is tiny, if there is one.

Maruyama:  Dreamcast is one example to start with. Dreamcast was launched in November 1998 – a year and five months before the launch of PlayStation 2 here in Japan.  They had close to 1.4 million sold by the time the PlayStation 2 eventually launched.  The first weekend PlayStation 2 sold close to a million units and three million the first two months. So the accumulated Dreamcast installed base of 1.4 million was surpassed in the first two weeks.  Launching earlier doesn't guarantee a success here in the Japanese market. It may be different in North America because if you are successful in the two first holiday seasons with hardware defining titles available, and it's very easy for someone to catch up eventually. Because here in Japan, simply coming early doesn't guarantee a success. But coming later than competition makes it more difficult.

So we didn't want it to come any later than Sony's launch in the Japanese market.  We have been operating with the strategy that Sony might be launching at the end of this year, which is not going to be the case.  We have three objectives: we would like to be on the market at the same time or earlier than Sony - that's one key milestone we are hitting. The other key component of the strategy is simply coming early doesn't guarantee success like we have seen with the Dreamcast. So we have to have a competent gaming experience for the Japanese consumers, and that’s why we are having this event today to preview all the games available on 360.  We have had some events in May to unveil some first party titles.  To succeed in Japan I don’t think we can just rely on third party titles, but we also need to have very strong hardware defining first party titles, plus strong support from the third party publishers, which we believe we are now achieving.  We believe this time around that we have very strong game titles to offer to the Japanese consumer. And thirdly, the design of the console, we have to be more attentive to the tastes of the Japanese consumer. The current Xbox console we heard was a little too aggressive for the Japanese consumers’ tastes.

We spent some time doing lots of focus groups to understand the tastes of the Japanese consumers.  I don't think we need to make a console that is attractive to everybody. But at least we have to make something which many consumers don’t dislike. So as long as it is neutral, I think that's fine. The first two elements are more important than the last. 

Those are our three parts of the strategy for Japan: coming out the same time or earlier than Sony, and offering a compelling game experience for the Japanese consumer, and make the design, not just the hardware but also the interface more suitable to the Japanese consumer.

Yoshihiro Maruyama And Game Informer Online's Billy Berghammer

GI: What's the most successful Xbox game here?

Maruyama:  It's Dead or Alive.  So I have been really appreciative of what they have done for us. Because they have done well in North America and among the Japanese game publishers - I have to admit that Tecmo is not the top ranking in Japan, but their business outside of Japan has done well. Square Enix, Capcom, Konami, and Tecmo are some of the top game publishers in America.  I think focusing on the Xbox has really helped their business particularly in North America.

GI: How many subscribers do you have to Xbox Live in Japan?

Maruyama:  We don't give any particular numbers but the subscription rate is close to 9% worldwide. Our installed base is similar to that percentage.

GI: How many Xboxes have been sold here currently?

Maruyama: No, we don't disclose that number, but it's in the range of hundreds of thousands, not tens of millions.  The number the industry's been reporting is like 450,000. That's what I've been hearing from Famitsu and Media Create.

GI:  Speaking of Famitsu, there was a survey done which asked people in the next generation, which console are you most interested in, and Xbox 360 came in last. Do you think it's because it's a console from North America?

Maruyama: No, I don’t think so because most of the people never expected their favorite games would be on the Xbox 360. That's all. So the reason why we're having this event is to change the mindset of the Japanese consumer. Now most of their favorite games are also available on 360. So if you ask a generic question "Which of the main consoles do you want to buy for the next generation?" Of course they are going to say PlayStation 3 because they are assured that most of the games available only PlayStation 2 to be available on PlayStation 3. The reason we are having this event is to tell the people you mentioned that most of the popular games that used to be only available on PlayStation 2 are now available on 360.

GI: So is that one of your goals is to get most of that software that's on PS3 on 360 as well?

Maruyama: Yes.

GI:  And then are you aggressively going after exclusive content?

Maruyama: We have more exclusive content announcements that are coming from our first party developers. But some of the games which we are announcing today will be kind of exclusive in terms of next-gen quality. Like, I'll say Resident Evil. They didn’t announce any particular date.  Most likely when Resident Evil 5 is published in Japan the 360 version will be hi-def quality with next-gen graphics. But PlayStation 2 will be just ordinary graphics. So until PlayStation 3 comes we have an exclusive window to the hi-def gaming experience for the consumer. 

GI: Resident Evil 5 is coming to the PS3 and...

Maruyama: PS3? Maybe the PS3 version will come, I hope, later than ours.

GI: At least Sony showed it a couple days ago.

Maruyama:  Last Wednesday Capcom announced it.  In regards to the hardware defining gaming experience we are relying on the first party lineup. Because many Japanese game publishers want to be sure they are publishing on not just one console but across different platforms. so they'll  be much more like a year.

GI: You guys announce the exclusives that you have here with Japanese developers. Were you planning on announcing more developers that are going to be releasing exclusive content for Xbox 360?

Maruyama: Yes, eventually. But, not in the near future. We have some publishing developments going on exclusively on the Xbox 360. Which all depends on how soon they are going to be available, because we do not want to start on something which is coming 2 to 3 years from now.   We’ll announce the games that are coming to the console in the near future, not distant future, but near future.  Yes, we do have more titles in the works that we’ll eventually announce.  

GI: Do you think the titles from Q! Entertainment, Mizuguchi-san, Mistwalker, and the others announced…do you think that's going to make a significant mark in changing the Japanese mindset?

Maruyama: That's more my mission because we have to communicate that to the Japanese population. That’s more of a marketing mission for us.  If you ask me a question "Can you?" I have to answer, “Well, I have to!”  I believe we can do that because the hype around the new franchises we announced last May has been very significant in the market. Of course, although the established franchises are important consumers also want to have new franchises to play. And if they are great, then people will keep playing it, but if not then they won’t.

GI: What are your thoughts about the challenge from Sony with PlayStation 3 and Nintendo with Revolution?

Maruyama: Most of the Japanese consumers still believe that the PlayStation 3 will be their first choice based on the assumption that most of the games they used to play will be available on the PlayStation 3.  My challenge is to change the mindset of the Japanese consumers and let them know that there's lots of new gaming experiences available on 360 on top of what they've been playing on PlayStation 2. That's the kind of message you have to communicate. So it's more of a communication message. GameCube…Nintendo is a very different animal because they can supplement their console with their own first party titles. So they can launch whatever console they want (laughs). They can keep featuring their own titles on their console.  I would rather say Nintendo is launching their new console based on the assumption that they can keep supporting it with their own titles, relying not much on the third party.

GI: Plus they have cash.

Maruyama: They have cash and they have a strong first party development.

GI: And Pokemon.

Maruyama: Pokemon (laughs). They can support their own console assuming that a certain captive audience will always buy their console. But we cannot base our assumption on that. 

GI: What kind of marketing plan are you doing for 360 here?

Maruyama: So as I mentioned to you that my communication challenge is to change the mindset of the Japanese consumer from the mind that they always believe that the games they want to play are all over on PlayStation 2 and future PlayStations. We have to change the mindset. So that's the biggest challenge and whether we are a U.S. based company or Japanese company it doesn't matter that much. Consumers here don't care much about a product’s country of origin. 

Most of the Japanese consumer electronic devices are not made in Japan but made in China or somewhere in East Asia even though it is branded in Japanese names. Japanese consumers are not so xenophobic in terms of buying devices. They are much more clever now. So in terms of our origin as an American company, it doesn't handicap us. We have a great gaming experience as long as we can offer those unique gaming experiences, but we have to communicate properly to because our competition has a much bigger mindshare.

GI: So is there going to be another Famitsu Xbox 360?

Maruyama: Oh, of course because we have always been promoting Famitsu Xbox. I don't know how it's going to be named, but (laughs). 

GI: Do you think most of the Japanese titles made for this market are going to be making it over to North America? Like the Mistwalker titles...

Maruyama: They'll all go to the U.S. market and the European market because there are certain audiences in north America and Europe who want to play role playing games. Kingdom Hearts sold close to 2.5 million alone.  Which basically means that people are willing to buy new RPGs in North America.

GI: What do you think of some of the Mech games or even the titles from D3 or From Software?

Maruyama: I have to say not all of the games will go to North America. Some selective high quality games because when I joined Squaresoft ten years ago most of the business was from the Japanese market. At the time 95% of the revenue came from the Japanese market. But Final Fantasy VII totally changed that landscape. In the design of Final Fantasy VII we modified character design and everything to suit the North American market, which really opened the door for Square Enix. So I would say more and more Japanese publishers now believe that there is business in North America and Europe.  It's much more important than it used to be. Or you look at Tecmo. Tecmo's business is..

GI: Well Tecmo's business is mainly American, and European.

Maruyama: Some companies have really carved into the US market, but some haven't. You look at Square Enix, most of the games appealing to the North American market are originally from the Square side of the business. Enix still has a challenge, none of their video games have really made a big push into North America. Dragon Quest hasn’t yet.  So none of the Japanese gaming companies have been taking the North American market for granted. They have to still design the game to appeal to both markets.

GI: So were you a big factor in getting Square Enix on board for Xbox 360?
 
Maruyama: Hmm, I think I know most of the people quite well so it helped. (laughs)  I know most of the major directors quite well. So officially and unofficially I talk to them from time to time.

GI: That was obviously one of the big announcements back at E3 with Final Fantasy XI. Can we expect to see more Square Enix products?
 
Maruyama: We are hoping yes. We are hoping they do more of their titles, but Final Fantasy XI has been an established MMORPG franchise for three years now. But I appreciate them customizing their games for the Xbox 360 in terms of graphics. So graphic quality of the games you are playing on 360 will be very different from the graphic quality you are playing on other platforms, which I hope appeals to a certain audience. But, of course I am hoping there will be more games to come.

GI: Are there going to be any differences with the Xbox 360 hardware-wise or Xbox Live here in Japan than what we'll see over in North America?

Maruyama: I think it'll be the same. We have a global product. The Live experience will be the same where ever you go.  One thing I'd like to achieve is not just introducing the new console to the Japanese consumers, but the new way of enjoying the gaming experience. Most of the people have never even touched an online game, worldwide we have 10% on Live, which basically means if ten people buy Xbox only one person goes online, which we'd like to increase to 20% to 30% to 40%. For the next generation we have a silver membership, which you don't need to pay any money to play. So we are hoping that the online subscribers explore the 360. And if you go online you can have a different kind of gaming experience. You can talk to somebody with whom you want to play a game with. Or you can play with several different people together. Not many Japanese customers have ever experienced this.

And also not just getting the entire game in one DVD, but maybe keep adding new levels, new features, and new characters through the marketplace. The second hand market is becoming a big issue here in Japan.  So if you sell one or two stages to the customer in the package, then if they enjoy it people can download the third, fourth, and fifth level. So we’d like to try many new things out, not just with the gaming experience, but with a new business model. Because if you just keep publishing a game which people can finish playing in certain amount of time and then that's it.  They then want to get some of their money back. (laughs)  Assuming the game is great, people will keep buying the levels. We can basically eliminate the secondhand model.

GI: So what's the penetration for people at home that have internet?

Maruyama: I think internet penetration in terms of ADSL is about 60%.  We have 30 million subscribing to ADSL, and The Japanese population is about 48 million.

GI: What about HDTV?
 
Maruyama: To be honest I don’t know that number. But HDTV penetration should be higher because what I've been hearing is starting early next year all the major production facilities are primarily focusing on Plasma and LCD Displays, which should be seen more in stores next year. So we are expecting the size of ownership of the High Definition TV to significantly grow starting next year so it's a very good time for us to launch a high-def based game console.
 
GI: Will there be any connection between cell phones in Japan and the Xbox 360?

Maruyama: We are not announcing anything in particular today, but we are contemplating a link somehow.  Not the same game experience but some information or Xbox Live invitations or that sort of thing.  Basically what you will experience on the smaller screen will be totally different that what you'd experience on a big plasma screen. But you might also get subtle information like an invitation to Xbox Live.  Those kinds of possibilities we’ll be exploring.

GI: I've heard from some developers that Xbox 360 will not make it in Japan this year. Is there any truth to that?

Maruyama: No, there is no truth to that. We are launching in Japan this year.

GI: The same day and date as in North America and Europe?

Maruyama: I don't say it's going to be the same day and date but by the end of the year we launch in Japan.

GI: When Sega announced Dreamcast, everybody here and in North America was excited about Dreamcast. And then Sony came out and said, "Here's PlayStation 2." And people think it was the downfall of Sega's Dreamcast. So Microsoft announced 360. And then Sony came out at E3...
 
Maruyama: Sony actually announced the PlayStation 3 at E3 and they also announced more features about PlayStation 3 last Thursday in Tokyo. So I still remember what kind of media frenzy happened after PlayStation 2 was announced in Japan in 1999. So this event last Thursday was under the same intention as the Sony event in 1999.

GI: So you think they're trying to re-Dreamcast?

Maruyama: Oh, of course. Yeah, if I were in Sony's position I would try to do the same thing.
 
GI: Do you think it's having the same effect?

Maruyama: I don't think so. That's why I asked you earlier if you went to the Sony event.

GI: Well I saw the trailers and I saw the press releases and everything else, and the PSP announcements, and PlayStation 3 announcements. But I haven't played a PlayStation 3 game yet and I've played Xbox 360 games.

Maruyama: So actually when PlayStation 2 was announced in 1999, of course there was  no gaming experience available. Simply people thought that this was the next true generation and Dreamcast kept increasing their installed base but all of the sudden Sony announced PlayStation 2 and everybody moved to the PlayStation 2.

GI: Do you think that'll happen again?

Maruyama: Oh, I don't think so. I should say, I shouldn’t make it happen (laughs).  There was a question about the high definition gaming versus the high definition films available on DVD .  Because in Japan many people want to be able to store high definition broadcasts onto DVD.  The demand for HD DVD is huge, so they can store it.  In North America people don’t care about storing it, they watch it, and then buy the eight disc set six months later, and people buy it and it’s cheaper. 

GI: So would you like to see a HD DVD-R drive in the 360?

Maruyama: Blu-Ray was originally started as a DVD-R type product and the HD-DVD became more like a playback device.  They both started from very different concepts.  The recording products are very expensive in Japan, unlike in the United States.

GI:  Do you think Blu-Ray is that big of a deal?

Maruyama:  I don’t know.  You should go to Watch Camera and see what Blu-Ray looks like.  It’s $3000.  Do you know how expensive the disc is?  50GB disc costs you about $60.  One disc, not a stack of discs.  I went to buy one myself, and no discs are on display, you have to bring the empty case to the counter, and the clerk can get it out of their storage.  I counted the time, and it took five minutes to get the product.  That shows you there isn’t that many people buying the product. (laughs)  No movies are available yet.  Just recorders.  You can record High-Def broadcasting to your hard drive and then make a High-Def copy to your Blu-Ray.  That’s the only application you have.

GI:  That’s a lot for $60.  Do you think Sony having Blu-Ray will make an impact?

Maruyama:  That’s what Ken Kutaragi said they were doing last week.  I have to assume they’ll have it.    I’m very much a gamer, I’m a game guy, so I’m really not interested in their hardware features of the other company’s hardware.