Teahouse Exclusive Interview with Shanghai Youhu and Japan’s HorizonLink: The Japanese Market—More Supply Than Demand

On March 28, Shanghai Youhu Information Technology Co., Ltd. and Japan’s HorizonLink Co., Ltd. held a signing ceremony at Shanghai Ruian Plaza to formalize the exclusive distribution agreement for *Witch War* in Japan.

↑ Poster for the Signing Ceremony

Following the signing ceremony, Mr. Huan Hao, CEO of Shanghai Youhu, granted an exclusive interview to our Game Teahouse. Below is the transcript of the interview conducted by a special correspondent from Game Teahouse.

Interviewee: Mr. Huan Hao, Executive President of Shanghai Youhu

Teahouse Reporter: As far as I understand, *Witch War* is your company’s first title. Could you tell us why you chose to develop a game of this genre at the time? It includes elements like card games and match-three puzzles.

Huanhao: Our company puts a lot of effort into original product development and strives to create things that no one else on the market has done before. After all, there are currently so many homogeneous products out there.We don’t want to create yet another run-of-the-mill product and then have to compete on factors outside the game itself—such as operations and the like. As for us, our strength lies in game development, so we aim to fully leverage our strengths. It is precisely based on this philosophy that we’ve created this rather unique game.

Teahouse Reporter: Your company’s product recently entered open beta on domestic platforms. With a Japanese company now serving as the exclusive distributor, things seem to be going very smoothly. As your company prepares to enter both the domestic and international markets, could you share your views on the mobile gaming markets in Japan and China?

Huanhao: Japan is a very traditional powerhouse in the gaming industry. It has produced a vast number of entertaining games. As for gamers in the Japanese market, we believe they place a strong emphasis on gameplay. We, too, approached the development of this game with gameplay as our starting point. Therefore, we are confident that it will perform well in the Japanese market.As for the Chinese market, there is currently a severe problem of homogenization. Everyone is imitating one another to create games that are quite similar. In this environment, companies are competing on factors beyond the games themselves—such as operational capabilities, marketing capabilities, and many other non-game-related aspects. However, for our company, we will first focus on creating something that stands out significantly, thereby establishing a new highlight in the market.

Teahouse Reporter: Well, I’m sure that with this joint effort by the Japanese companies, the game is bound to be a huge success.

 Teahouse Reporter: Finally, I’d just like to ask one more question about the product’s development plans and some of the promotional activities planned for the future.

Huanhao: Our entire company is focused on this one product, and we’re basing our operations and planning around it. First, we’ll work hard to collaborate with our Japanese partners to take our first steps successfully.Once we’ve established a firm foothold, we’ll expand into the domestic market and other markets, actively optimizing the user experience for mobile users and gradually refining our product. After all, product development is a process. When we first launch the product to users, it’s really just the beginning. We’ll continue to collect user feedback on an ongoing basis and use it to improve our product.

Teahouse Reporter: Thank you very much.

↑ Group photo from the signing ceremony for the exclusive Japanese distribution rights to *Witch War*

Mr. Tanaka, President of HorizonLink, also took time out of his busy schedule to grant an exclusive interview to Game Teahouse, sharing his unique insights into the Japanese market.

(The following is a transcript of an interview conducted by a special correspondent for the Teahouse)

Interviewee: Susumu Tanaka, President of HorizonLink Co., Ltd., Japan

Teahouse Reporter: Hello, President Tanaka. First of all, congratulations on this partnership. We know there are many Japanese games, and most involve bringing domestic titles to the Chinese market, but you’re planning to promote *Witch War* in Japan. I’d like to know what it was about this game that appealed to you and why you chose to distribute it.

Susumu Tanaka: There are some things that can’t be expressed through language or logic, but there are others that will always captivate you. It might just be an intuition—an intuition about games.

To be honest, there are indeed some well-made games in Japan right now. They don’t become successful immediately after launch; instead, they go through a three-month to six-month adjustment period, gradually fine-tuning the game to its optimal state before launching a full-scale marketing campaign—that’s how others operate in the Japanese market.However, we believe that right after a product launches, we need to focus on ensuring its quality. The user base in Japan isn’t very large—the total population is just over 100 million, and there are only about 30 to 40 million gamers. If we spend a lot of money on marketing to attract them, only for them to play just once and then stop, I think that would be a real shame.

Although the number of mobile game players is not large, the mobile gaming market is enormous; in 2013, it was worth nearly 30 billion RMB.Given this reality, there’s only one thing we need to do: provide excellent service to every user and value every player. Therefore, until our game reaches a standard we’re satisfied with, we won’t launch any particularly large-scale promotional campaigns; instead, we’ll focus on delivering a great user experience. What is user experience? It’s when players find the game fun.What does “fun” mean? Well… it has to be at least satisfying, right? We can’t let players get stuck at a certain point and lose all desire to play. We strive to serve every player well. For example, server response times and user feedback after a tap—these are the kinds of details we take very seriously. We’ll prioritize these aspects before moving on to game promotion.

So why am I bullish on this product? Setting user experience aside, its game framework, design, gameplay—or, to put it simply, the range of activities it offers—is incredibly rich. Users can choose whatever they want to do within the game. If I like collecting (cards), I’ll collect;if I like PvP, I can engage in PvP; if I like match-3 puzzles, I can play those. This makes it a very easy concept to promote, because there are so many different things you can do within the game. As a result, it appeals to a broad user base. At the same time, with a large-scale marketing campaign, we can also target more specific player segments—which is why we chose it in the first place, because it’s relatively easy to promote.

Teahouse Reporter: From your perspective, what elements should a high-quality game have? Because I understand that in Japan, game rankings are established over a long period of time—unlike in China, where a few companies might rise to the top suddenly and then fall just as quickly. In other words, the game industry in Japan is a long-term process.So, what elements do you think a high-quality game should have to prevent the kind of phenomenon you mentioned earlier?

Susumu Tanaka: My understanding is that, since there are very few users in Japan and acquiring each user is quite expensive, we definitely need to design the game from the outset to have a very long lifespan—primarily around two years—rather than following the fast-paced development cycles of domestic products, such as a one-year timeline. In terms of this design, we’ll make further efforts to incorporate elements tailored to Japanese players, which is primarily related to the user experience.For example, players will hold their phones in portrait orientation and use just one hand to play, since they’ll need the other hand to hold onto the subway handrail or do something else—like eating noodles or having a meal—and in those situations, they’ll spend five or ten minutes playing.

Once those two conditions are met, there’s also the question of aesthetic taste. There’s one point here that’s often misunderstood—namely, the idea that your personal opinion is enough. What kind of art style do you think young men—I’m referring to those around twenty—prefer?

(Teahouse Reporter: Boys? You have to make a distinction, right? Take "otaku," for example. I think they’re more attracted to very cute lolis and very domineering older-sister types.)

Susumu Tanaka: Hmm. So, what kind of art style do people in their thirties and forties—those who are relatively well-off—tend to prefer?

Teahouse Reporter: That kind? I'm not sure. Personally, I think it should be the cozy type.

Susumu Tanaka: Of course, I have my own take on it.My understanding is that boys like cool things, so when I was a teenager or in my twenties, I was into really cool stuff like dragons and robots. And those huge swords—the Japanese term “chuunibyou” refers to that kind of highly imaginative longing typical of middle schoolers. On the other hand, more mature and steady men actually tend to like cute things.

(Teahouse Reporter: I see.)

Susumu Tanaka: That’s right. Think about it carefully: older people actually prefer cute young girls, not those who are around their own age. So this is something to keep in mind when targeting the market. If this product is aimed at an older audience, we need to go for a cute, “loli” style; if we’re targeting a younger audience, we have to make it look very cool and give it that exhilarating, exhilarating feel.

Teahouse Reporter: President Tanaka, your insights are truly unique.

Susumu Tanaka: Yes, yes—because we’ve developed about ten products now. Whether it’s browser games or mobile games, at first I also assumed that certain types of people might like this, while others might prefer that, but it turned out that wasn’t the case at all. That’s the insight we’ve gained through our experience.

Teahouse Reporter: All right, so compared to mobile games in Japan, what are some of the differences between mobile games in China? In other words, what aspects of them appeal to you? Or are there any shortcomings?

Susumu Tanaka: Now we’d like to introduce some Japanese mobile games. They’re definitely portrait-oriented games—that’s something that can’t be changed. The games that sell well are all portrait-oriented. That’s because you can play them with just one hand, and you can spend five or ten minutes playing them while commuting or doing other things.

This is because Japanese people never check their phones while eating, during meetings, or when they’re with others—it’s a matter of etiquette for them. Even in the evening, when you’re out drinking or singing karaoke with colleagues or friends, you wouldn’t touch your phone.They view this as a sign of respect for their friends. So the only real “spare moments” are when they’re using the restroom or taking a bath (Note: Most Japanese people take baths rather than showers, so they can use their phones during this time)—which really amounts to only five or ten minutes. Games that can be played during these brief intervals are the ones that dominate the Japanese gaming market.

Next, the Japanese gaming industry has been around for quite some time. After all, it’s been more than twenty years. As a result, the market is very, very segmented: home consoles and PCs are primarily used at home, and game genres include SLGs, RPGs, FPSs, and more, in addition to online games. Now let’s take a look at what we have on hand.Handheld consoles include the 3DS and the PS Vita, among others. Then there are our smartphones, which can be divided into two types: traditional cell phones and smartphones. I won’t go into traditional cell phones—we don’t deal with those.In the smartphone sector, there are Android and iOS, and each phone has its own model. For iOS, there’s the iPhone Touch, as well as models with large and small screens—each targeting different user groups.The same goes for Android—there are large and small models, and different performance levels. Some are designed for one type of user, others for another; some prioritize better graphics, while others prioritize smoother performance. Overall, the market is truly very, very segmented.

This situation directly leads to a rather peculiar phenomenon: compared to China, Japan has fewer users but an exceptionally wide range of choices. The high cost of marketing in Japan stems precisely from this—the sheer abundance of options available to users. So if you want to poach users from other platforms and bring them over to your own, you’ll have to spend twice as much to win them over.But in China, this might not be the case. First of all, in China, gaming consoles—such as the PS3 or Xbox—are not officially available; there are only computers and smartphones, and the concept of handheld consoles doesn’t exist. Of course, this ban may be lifted in the next couple of years (Note: This likely refers to the lifting of the ban on gaming consoles in the Shanghai Free Trade Zone.)In this environment, the choices available to users are: first, those who play games, and second, those who don’t like to play games. It’s very black and white. Suppose there’s a game out there. I don’t usually play games, but I see an ad for it. I don’t know what it’s like, so I download it and give it a try—and it turns out to be pretty fun.Then I’d tell the people around me about it. For example, I’m a woman, and even though I don’t usually play games, I might think a game is really cute and say, “You should give this a try.” As a coworker, you’d think, “Well, I might as well give it a shot—it wouldn’t be right not to.” This ended up drawing in a whole group of people who didn’t normally play games.

What’s more, many people feel that rather than spending two or three thousand yuan on a gaming console, it’s better to spend just over a thousand yuan on a smartphone—which, incidentally, can also be used for gaming. As a result, the graphics in Chinese games are becoming increasingly beautiful and refined. This has become a key competitive advantage.The graphics are exceptionally beautiful, and the games are extremely demanding. This is because smartphones have taken over many roles that were originally meant for handheld consoles and home consoles. Since China lacks dedicated gaming hardware, smartphones have stepped in to fill this gap. As a result, Chinese mobile games tend to be side-scrolling, highly demanding, and feature exceptionally beautiful graphics.

So let’s take a look at what would happen if we brought a game like this to Japan. Japan doesn’t have it—there’s no such market there. Specifically, there’s no market for hardcore mobile games. So, essentially, you’d have to cultivate that market from scratch. And going from zero to one is an extremely painful process.I believe such a market will emerge in the future, but right now it’s extremely challenging. So when we bring products from the Chinese market to Japan, we absolutely cannot position them as hardcore games—we can’t give players that impression. Instead, they need to feel very casual, yet be a very, very deep “rabbit hole”—yes, we need to get them to “fall” into it.If we do that, we’ll succeed. But the entry point must be “light.” Conversely, when bringing Japanese games to China, you can’t make them “light”—they must remain very “hardcore.” Only by bringing Japan’s most “hardcore” games to China and promoting them using that model can they succeed here.Furthermore, the so-called online games and mobile games in Japan today are essentially single-player games; very few of them require a real-time internet connection.

Teahouse Reporter: I’d also like to ask—since I know your company is a leading online game operator in Japan, I’m sure you have many unique approaches to operations. Would you be willing to share some of them with us?

Susumu Tanaka: When we were developing browser games in the past, we found that Japan also had many platforms—similar to China’s 4399 and 51.com. Among them, the major players were HANGAME—an online gaming subsidiary of the HANG Group—as well as MIXI CITY and DeNA.After we finished localizing our games, we submitted them to these platforms. They would then review them, assessing which aspects were good and which weren’t; they’d tell us what needed to be changed and what didn’t; and once everything was finalized, they’d give us the go-ahead to launch. So we’d go live.Then we spend money on promotion to drive external users to their platforms, thereby increasing their user base. But then we started to wonder: isn’t this a bit silly? We’re spending money, providing the product, and even helping them with promotion—right?So why not just build our own platform? That’s how Arkgame, our own platform, came to be. We developed five or six browser games on this platform and integrated a third-party payment system—SBPayment, a payment system under SoftBank. It was on par with other platforms. We operated this for a while.But the market wasn’t focused on browser games—it was all about mobile. So we gradually shut down our browser game operations and pivoted to mobile games.

Okay, so when it comes to mobile, we’ve noticed the same thing: no matter how we promote or market our products, we’re essentially doing work and running ads for Google and Apple. That’s just the nature of their ecosystems.So what can we do? We have no choice but to convert users from both platforms into our own. Essentially, when we launch a product, we hope our Google users will come over to our iOS platform to play, or we’ll retain them on a single platform—since most people only have one phone, they’ll end up playing the game on Android.But if a game is available on Android but not on iOS, we’ll bring them all over to our platform. Then, through that platform, we’ll introduce our next new game to them.That’s exactly what we’re doing right now. However, you might think of existing platforms like GREE or DeNA. To be honest, they’re very strong in the traditional mobile space. But when it comes to smartphones, they’re no longer platforms—they’re just game publishers. That’s why many Japanese mobile game developers who used to collaborate closely with them have started publishing their own gamesThey publish their games themselves on Google and Apple platforms. That’s because Japan doesn’t have as many platforms as we do here in China—there’s only the App Store and Google Play. There’s nothing else, so compared to here, releasing a product is a relatively simple process. What we’re doing is bringing all the users together—essentially creating our own user platform.

Teahouse Reporter: This signing is truly a cause for celebration. Finally, I’d like to ask: what prompted this collaboration between the two parties?

Susumu Tanaka: That was also a matter of fate. Our company has a department called the New Business Development Division, which is responsible for developing and securing new business opportunities.Then, around that time, I got to know some colleagues from Mr. Huan’s team, and then—yes—I met Mr. Wang (Wang Yifeng, co-founder of Youhu): I paid them a visit in person, traveled all the way to Tokyo, and they really appreciated our game, so we hit it off right away. Before I knew it, I was here.

Teahouse Reporter: Okay. Thank you very much for attending this signing ceremony and agreeing to this interview.

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