Virtual and augmented reality to Japan

Trends and opportunities

The market

Japan’s virtual and augmented reality (VR/AR) market is forecast to grow from JPY14.1 billion in 2017 to JPY211.1 billion by 2020.1 This growth will be driven by Japan’s adoption of 5th generation (5G) wireless technology, increasingly diverse applications for VR/AR technologies, and strong government support.

Japan is introducing limited 5G commercial services to market in 2019, with a full launch anticipated for 2020. Major Japanese telecommunication companies such as NTT Docomo, KDDI and Softbank plan to set up VR/AR viewing platforms utilising 5G at sports games and other live events to offer new experiences to audiences.2 The mobile apps industry is also predicted to expand from 2020.

VR/AR technologies are expected to be used for experiential/training purposes (mainly VR) and navigation (mainly AR) by a range of industries such as healthcare, tourism, retail, education, real estate, defence and manufacturing.

There is strong demand for technologies that:3

  • enable error correction and reliable outdoor use e.g. automated error correction that accounts for interference from natural built-up environments
  • offer highly immersive content and technologies
  • support extended/long-time use e.g. miniaturisation of HDM/Smart Glass and reduction of motion sickness.

The Japanese Government is a strong advocate of new technologies. Japan’s Ministry of Economy, Trade and Industry (METI) provides grants for content creators that leverage advanced content creation technologies, including VR/AR, to promote products, services or tourism in Japanese regional areas.4

Market opportunities

Japan is a world leader in technology and gaming in particular, with a long history of pioneering and developing video game hardware and software.

Online gaming

Online games have become mainstream in Japan. Japan’s online games market reached JPY1,127.3 billion in 2017, accounting for about 70% of the entire domestic game market.5 The growth of online game platforms is augmented by Japan’s mature gaming market – most consumers already have access to mobile gaming infrastructure, with a 60.9% diffusion of smartphones in Japan.6

Mobile gaming

Japan’s mobile game application market was worth JPY969.0 billion in 2016 (4.4% growth on previous year).7 The Chinese and Korean markets are collectively worth JPY1.7 trillion, with Asia clearly driving the world’s mobile gaming industry when compared to other major markets such as North America (JPY950 billion) and Europe (JPY410 billion).8

There were approximately 67.6 million gamers in Japan in 2018.9 Among them, the number of users who play only mobile games increased by 1.9 million on the previous year. Mobile gamers account for close to a third of Japan’s gamers (20.2 million).10 According to EEDAR’s Insights Reports, the Average Revenue Per Paid User (ARPPU) per month on mobile games is US$24.06 for Japan, US$12.83 for South Korea, US$6.61 for North America, and US$2.88 for China.11

Consoles and new technologies

The console gaming market in Japan began growing again in 2017 – the first time in five years – with the successful sales performance of the Nintendo Switch.12

While the console gaming market had stalled prior to the Switch’s launch, the appetite for mobile technology and new technologies such as VR kept growing. Sony Interactive Entertainment’s PlaystationVR is the world’s best-selling VR terminal with a total of over 3 million units sold in two years.13

However, Sony Interactive Entertainment believes there are issues that may slow the take-up of VR/AR at home, including14:

  • A very high price point: A lot of devices, including competitive products, have a price tag of JPY30,000 to JPY80,000, which is considered expensive by Japanese consumers
  • Heavy headsets: The average weight of a VR headset is 400–600g, which is not suitable for long-time use or when walking
  • Discomfort: Users can get motion sickness when using headsets
  • Unfriendly to makeup: A lot of Japanese women are unwilling to wear a VR headset as it could easily ruin their makeup and hair style.

However, challenges associated with price point, weight and motion-sickness are not specific to the Japanese market, and VR technologies which address or overcome these challenges are likely to be in high demand in Japan.

Market entry

Given present challenges associated with entering the home use market, a good entry strategy for Australian firms is to target partnership and licensing agreements with corporates. Examples include VR arcades for gaming and companies in other VR-related sectors such as tourism, real estate and medical.

In addition, Japanese developers are likely to appreciate Australia’s conducive business environment, and favour its features such as:15

  • multiculturalism and understanding of different cultures
  • stable economic growth rate among developed countries
  • advanced game development ability/capability (cultivated through console game development)
  • negligible time difference with Japan.

The above advantages would lead Japanese developers to consider engagement with the Australian game industry for16:

  • test marketing when expanding mobile/smartphone content overseas
  • licensing of indie game content
  • establishing studios to secure superior talent and to develop games when expanding their business overseas
  • game development collaboration with Australian studios.

Key events

TOKYO GAME SHOW

CEATEC

DIGITAL CONTENT EXPO

3D & Virtual Reality Expo

  • Date: February 2020 (TBA)
  • Place: TBA (it was held in Tokyo Big Site in February 2019)
  • Organiser: Reed Exhibitions Japan Ltd.
  • More information is available here.

Accelerator programs

TECH BUSINESS CAMP TOKYO

  • Date: May–November 2019 (TBA)
  • Organiser: Tokyo Metropolitan Government

A three-month program for foreign startups with cutting-edge technologies and business models to come to Tokyo and deepen their knowledge of Japan’s unique market and the various needs of companies in Japan. The program also provides Japanese companies with the opportunity to familiarise themselves with foreign startup technologies. Started in 2017, the Tech Business Camp Tokyo receives applications from about 50 companies across 15 countries every year.

Appendix

vr-inside

(Source: VR Inside, 2017)

 


 

2 Ministry of Internal Affairs and Communications, 第5世代移動通信システムに関する公開ヒアリング, October 2018

5 Famitsu, ファミ通ゲーム白書2018, June 2018

6 Ministry of Internal Affairs and Communications, 平成30年版情報通信白書, 2018

7 Famitsu, ファミ通ゲーム白書2017, June 2017

8 Famitsu, ファミ通ゲーム白書2017, June 2017

9 Famitsu, ファミ通ゲーム白書2017, June 2017

10 Famitsu, ファミ通ゲーム白書2017, June 2017

12 Famitsu, ファミ通ゲーム白書2018, June 2018

15 Digital Content Association of Japan, デジタルコンテンツ白書2017, September 2017

16 Digital Content Association of Japan, デジタルコンテンツ白書2017, September 2017

 

Austrade Contact in Tokyo:
Maiko Suzuki, Business Development Manager, Austrade Tokyo
Tel: +81 3 5232 3981 Email: Maiko.Suzuki@austrade.gov.au

 

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