At a fascinating Gamasutra-attended keynote speech
kicking off the Tokyo Game Show Forum on Wednesday, Square Enix's
president and Japanese game trade association CESA's head Yoichi Wada,
speaking on 'The Undercurrent Of Revolution In The Games Industry', gave
a notable speech about the state of the market and why the revolution
is to be embraced, not feared.

Interestingly, the forward-thinking executive chose to show his slides
entirely in English, despite the vast majority of the audience being
Japanese and his speech conducted in Japanese - showing the importance
of international markets to the Japanese industry.

Wada started with a graph showing estimated worldwide market size over
the past few decades, showcasing how console game hardware and software
have had mobile, online games, browser games and cloud games layered on
top of them to add a mass of extra new game users.

As he commented, "every time the game industry grows, there is some
kind of deviation" in terms of the industry coping - and we're currently
going through one of these.

Starting way back, Wada gave the example of Space Invaders in the arcade, noting that regular people couldn't afford to buy arcade machines, and they were dedicated.

But over time, with the introduction of Nintendo's Famicom in Japan, and
the 'golden age' of console gaming in the '90s, a dedicated game
console was the way most people played games.

But it's the rise of 'hybrid' devices, which aren't just dedicated to
games, that means "the entry barrier to customers is reduced". For
example, many people have devices like smartphones which also play
games. Even consoles such as the Xbox 360 do many other things such as
stream movies and music. Thus, the market has been exponentially
expanded, but significantly changed along the way.

Wada pinpointed 2007 as a pivotal year "where all games were connected
to networks", and networks themselves actually serve as platforms. In
addition, Apple's iPhone, a key revolutionary element, was launched in
that year. He also traced the vital rise of the browser game and gaming
where the processing is done across the cloud.

Overall, the CESA head pointed out that enthusiasts "are happy to pay
thousands of yen", but with more general purpose machines that also play
games, regular users are often "not willing to pay for the game" - at
least not upfront.

And with this massive change, many of the 'rules' we once knew - maybe
about magic powers in Square Enix's RPGs, he joked - are changing. The
new community of gamers don't know the old rules. So he urged the
Japanese industry to change their businesses where necessary to match
these new users.

Next, Wada looked carefully on how "the emphasis has shifted from
processing power" around dedicated gaming machines to other factors,
especially after the year 2000 or so. And this has played to the current
rise of the 'general purpose' machines that also play games, versus
machines dedicated to games. Nowadays, people don't see a big enough
difference between dedicated gaming machines and their smartphones in
terms of visual look and feel.

So processing power is not the sole driver of dedicated game consoles'
popularity. It's also been input innovations that have changed things up
in terms of gameplay experience. Starting out with the DS and Wii and
moving through Move and Kinect, gaming machines have majorly changed
their controls.

But touch pads on smartphones can be just as good to the average
'expanded market' game player. Those more casual gamers can't really see
the difference between their smartphone gaming experience and that on a
dedicated console - another shift.

After 2007, Wada noted that "surge of changes" in the game industry was
"really perplexing for us". But he thinks that Japanese companies are
in good adaptive shape, and referenced the Tokyo Game Show show floor as
an example of that, both for Square Enix and other companies. Yet he
warned that "we've just experienced the first tide", and there will be
more tides of change - a "second and third" and more - over the next few
years.

The Square Enix president's message to the Japanese press and industry
was that It's no longer just about a console contest - Nintendo vs.
Sony, say. It's more about thinking about gaming abstractly and what
your gameplay experience will be.

And a big part of that is around business models. Things have moved from
the seller controlling the price of retail games through stores, with
the price decision now "shifted to the users". In the new model, a lot
of monetization is based around micropayments, where "the consumer
controls pricing power and pays to his satisfaction".

Concluding, Wada referenced 'freemium' and free to play in a big way,
suggesting that "it's not really price destruction" as such. But it
changes how you make games, in order to make games that people will want
to play over and over again.

The entire concept of value has changed in the new game business. Wada
strongly believes that "cloud is the real revolution", not just for
games. He himself has two PCs and smartphones, but it doesn't mean that
he uses those processors all the time. So the "huge paradigm shift" to
demand-based cloud computing is vital to the future of many media
industries.

Wada's speech, while not in itself novel, continues to show why he
continues to stand out as relatively forward-thinking - among a
retail-centric Japanese industry disrupted by the rise of mobile social
network gaming powerhouses such as Gree and DeNa.

Companies such as these, platform-holders in their own right who have
some of the bigger booths at this year's Tokyo Game Show, are a big new
part of the ecosystem, in the same way that Apple or Facebook has become
in the West. Overall, Wada's concentration on the rise of the
general-purpose game playing machine is striking and important for the
Japanese video game industry.