Big In Japan: D3 Publisher Takes On The U.S.

Emerging U.S. game publishing firm D3 continues to make inroads into the Western market. The Los Angeles-based D3 Publisher of America is the U.S. offshoot of Japanese publisher D3. Though the companies share some of the same funding, their aims are quite different. In Japan, D3 is known primarily for its value titles, with over 80 games for the PlayStation 2 alone, under their “Simple 2000” mark.

But in the West, D3 has been working on bigger budget releases, using both licensed and original IP. Gamasutra has had a couple of chances to speak with D3 Publisher Of America's EVP and COO Yoji Takenaka and his colleagues in the past. But as the company comes up on the early 2008 release of its Digital Extremes-developed Dark Sector, Takenaka has offered us a candid look at D3 Publisher's business strategy for next generation development and other fascinating nuggets of information on this unknown but significant publishing force.

In the interview, Takenaka explains how Puzzle Quest put them on the map, Naruto sustains them, and Dark Sector should throw the company into a whole new light:

How important was Puzzle Quest, in terms of getting D3 Publisher established as a brand in the U.S.?

Yoji Takenaka: Well, I think Puzzle Quest is the first original game -- one of the first games we published as an original IP -- and the first game where we felt we succeeded, and we got great support from users. I was reading GameSpot.com to see what people are thinking and doing and how people like the game. So I was kind of excited myself, too.

I don't beat very many video games, and I played all the way up to level 50 and I beat the boss.

YT: Oh, thank you. Great.

I played through the whole thing, and a lot of my friends played it, too. It was a very good genre hybrid. Has this strengthened your belief on the U.S. side in original games?

YT: Coming into the U.S., we started original IP development such as Dead Head Fred, Dark Sector, and other games in the future. I had some confidence when we started those developments, because I liked the concept, and we really took the concept very well internally. Also we had an external group view the concept, to get an objective opinion about it.

From day one, I thought we had a good chance with Dead Head Fred and Puzzle Quest. Puzzle Quest is a title that we picked up from Australia, and we showed the game to a few people, and those people could not stop playing. Right away -- "Hey, this is something!" So that's why we did it. It's not really just Puzzle Quest, but those games we bring in... I was comfortable starting, with confidence about the game.

Were you at all surprised by its success? It seemed to get bigger than anybody imagined, considering.

YT: I was surprised.

It didn't have a lot of marketing dollars behind it or anything, but still it was number one on DS and PSP for a while.

YT: One year and two months ago, we had a meeting to kick off our fiscal year, and I presented how I thought that Puzzle Quest would be our sleeper hit. It was! That's how confident I was. But it was difficult, because before it came out, retailers were not really excited, but press people like you changed the whole dynamic around the game. When we had a street date for Puzzle Quest, people were talking about Puzzle Quest so much.

Yeah, it was very much word-of-mouth. People made webcomics and blogs about it.

YT: It was the power of the Internet!

It wasn't like, "Are you playing Puzzle Quest?" It was, "Which version of Puzzle Quest are you playing and can we link up?" Because everyone was playing Puzzle Quest. So now you're expanding Puzzle Quest beyond its original three SKUs of DS, PSP, and PC. D3 is still kind of a smaller publisher in the U.S. Do you feel like that's something you're able to do because you're smaller?

YT: One thing about us -- maybe me -- is... I'm looking for the English word, it's like I don't realize how small I am. In a positive way -- kind of brave, but kind of stupid in a way.

What's the Japanese word you were looking for?

YT: Mukoumizu. It means you don't look far ahead. [Ed. note: "mukoumizu" is translated as "recklessness" by this online dictionary.] That's my philosophy to start this company. We started from ground zero -- nothing. As I told you two years ago, we are not in a position to bring a lot of games from Japan, so we really have to develop by ourselves. In other words, I had nothing to lose, and everything to gain. I have a little bit of something to protect right now, but we're still small.

What will happen when you have more to protect? Are you going to get nervous?

YT: Yeah, I'll get nervous, I think. I'm more of an offensive guy than a defensive guy.

So is D3P in Japan going to publish Puzzle Quest over there?

YT: I think they are going to publish the game in the fall.

It's probably a good idea. I think it'll do well over there too, especially on DS.

YT: Actually a lot of people are talking about Puzzle Quest in Japan, so hopefully we'll have good sales, especially on DS. DS is huge over there. [Ed. note: Puzzle Quest is being released in Japan as THE Puzzle Quest: Knight of Agaria in November.]

One thing I've been wondering is that in Japan, there hasn't been a lot of D3's budget line, the Simple series, released on the DS. But it seems like Simple series-type stuff could be brought over to the U.S. on the DS format -- much easier than on the PS2 or something like that.

YT: Yes.

Have you mentioned that to the Japanese side at all?

YT: I'm waiting for playables of those games they're making. They're making quite many games on the DS.

Are they now?

YT: Yeah. They are.

There have only been like five or ten released.

YT: I know, but it's the choice of format in Japan. You only have to make games on the Nintendo format today. Sony PlayStation 2 is pretty dead already, and PlayStation 3 has not really made any ground, and 360 is Microsoft, and people don't buy it in Japan. It's too bad, because it's a great system to me.

So we are shifting things to the Nintendo format, all those in the Simple series. We do have some more PlayStation 2 coming out, but I am curious to find what kind of games will be coming out from the Simple series, and if they are making a new sort of game -- a DS unique game -- that would be great.

Do you happen to know off-hand if they're using the same developers as they were before, like Sandlot, Vingt-et-un, Tomcat, and those types?

YT: As for DS, I don't know. I have no idea what they're using. I have nothing to do with Japanese development.

Yeah. There's not a lot of back-and-forth between you. You're mostly autonomous, right?

YT: I am in charge of worldwide business except Japan. In Japan, we have my counterpart over there. He has been working for the company forever -- since the start -- so we kind of respect each other. He'll show me when he's ready.

Some of D3 Publisher's money in Japan comes from pachinko and stuff, right?

YT: Mm-hmm.

Is that still funding D3P in the U.S., or are you self-sufficient?

YT: We still get investment from our grand parent company, and they support us very well, and we really appreciate it. They have a long term view for us. It's not like, "You have to turn around and make money next year, and give me the money back." Rather, they wait for our growth. I think they have a bigger picture, like I do, for Western operations.

How have they seen your performance so far as a company in the U.S.?

YT: We are hitting our goal, a couple of years in a row, and they're happy. I went back to Japan in June, and I met all those executives there. They're very happy, and they just cheer at our international operation. So I'm very happy with that too.

Good. I've heard a lot recently from Japanese companies of all levels that next-gen development is not only difficult, but too expensive. Japan has really fallen by the wayside in terms of technology for next-gen stuff, because there's no sharing of resources, and middleware is very slow to pick up.

YT: That's part of the culture they have.

Yeah. Which is a shame.

YT: Not to share your stuff with anybody else, right?

Yeah, and I think that's a big reason why you won't see many 360 and PS3 games from most Japanese companies.

YT: Mm-hmm. Mm-hmm.

Do you think that's why people are turning to Nintendo more, because it's like the old style?

YT: First of all, part of what you said was true, because it takes money -- 10 or 20 million dollars for the first title on the PlayStation 3. I think Japanese publishers are treating 360 like a second or third format, or not thinking about it, except for bigger publishers. That learning curve is hurting the industry, I think.

At the same time, Nintendo's business model is great. Selling hardware at a low price point... it's very affordable, whereas 360 is more expensive, and the PlayStation 3 is initially a big loss. That's why I think Nintendo's gaining more share. It's like 70 or 80 percent of the business is Nintendo, now, in Japan.

I think, going forward, though, Japanese developers and publishers will make 360 and PlayStation 3 games. I'm talking about probably big ones -- probably the best top five or top six companies -- because more technology is available, and also they had a hard time developing new technologies, but they kind of came over the curve, and I think people are shifting development to a PC base now, so they can get PlayStation 3, 360, and PC together for their worldwide business. I'm waiting to see a lot of great games coming out from well-known publishers in Japan for worldwide business.

Capcom, for instance --

YT: That's a great company.

They're doing well with their next-gen development, but it seems like they're developing this stuff for the Western market.

YT: For America first.

Yeah, for America first. Like Lost Planet and Dead Rising -- those games.

YT: Especially Dead Rising. The first day I saw the game, I asked, "Who's the publisher?" and the producer said, "Capcom." "Who's the developer? It must be an American developer." The producer said, "No, this is Capcom internal, down in Osaka." I couldn't believe that! That day, I built a lot of respect for them, because that's something I'm pursuing too, from D3. We are providing games for a Western market.

So the way D3 has gone about it is to allow a U.S. branch to take over that. Your role is to find things like Dark Sector.

YT: Capcom has great development resources in Japan already. We don't. That's why we came here to open up an office, talk to developers, and sign up developers for projects, like Dark Sector.

I was talking to Ray Nakazato -- he's in charge of the FeelPlus studio.

YT: Yeah, he's working with [Hironobu] Sakaguchi-san, right?

Yes, that's right. On Lost Odyssey and on other things I think. Maybe Cry On.

YT: He came from EA to Microsoft...

He was at Capcom briefly.

YT: He was at Victor before, I think. I met him like three times.

He's a nice guy. We were talking about this issue of Japan falling behind a bit in terms of technology, and he was saying that he feels like in the future, large companies are going to be making one or two 360 games per year, and maybe 15 or 20 DS and Wii games, because that's where the money is in Japan. It seems like in a way the graphics are less important over there. It doesn't seem like as much of an issue. What do you think about that?

YT: Traditionally or currently, yes. People are not necessarily looking for the best graphics, so you can get away with PlayStation 2-quality on PlayStation 3, yes. But I really don't know what's going to happen. I'm very curious to see how Nintendo will keep on this success story. That probably brings the video game market to a whole different realm, I think, from gamer to family. Like the DS -- it sold very well to women in their 30s in Japan. That's not the market we are chasing here.

Not traditionally, anyway.

YT: Actually, sometimes I think Japan is probably more mature in terms of video games. If so, is that coming to America? I don't know yet. Right now I'm not really worried about it, because everything I see in America is core gamer-driven right now, especially after 360 came out. Again, it's a great format, to me. And hopefully PlayStation 3 will catch up. I'm sure they will. I think we're going to have a great market for a while.

One question I've been thinking about for a while is when someone in Nintendo's new market purchases a game and they get Wii Sports or Wii Fit -- like a housewife or someone older -- will they buy another game? Ever? I don't know. I know it's a model that will work for Nintendo, because they sell their consoles at a profit and their games at a profit, but how about everybody else? I wonder. Will the mom of the family ever buy anything else?

YT: I think we as a publisher have to come up with a game design, produce a game, hire a developer, and take their concepts or designs, but we really have to think about how to utilize the Wii very well to whatever kind of game we want to make, be it an action game, adventure game, or RPG maybe. It's a software-driven business. It's not hardware. It's a software-driven business. If we come up with a great game on the Wii that utilizes the Wii controller very well, I think gamers will come back to the Wii and buy the games. Everything's software-driven.

I think ultimately it can be software, but my feeling right now is that for the very immediate term, Nintendo's business is hardware-driven. Wiis sell out immediately, even still in America. I passed by a GameStop, and they said, "We have six Wiis coming in today!" And I went to lunch next door, and when I came out they were taking the sign down!

YT: I think Nintendo is making the Wii because they want to sell their software. Tons of software. Ten million, twenty million, thirty million. Which they do. That's their business.

It makes sense. It's just that I'm a little worried about these millions and millions of people having Wiis with one game. That's what I'm concerned about. But we'll see.

YT: I share your worry, because I'm here to sell Wii games. We have three games coming out this calendar year, so that's my concern too. I think eventually, somebody will figure it out.

I know that Puzzle Quest is coming to Wii as well, right?

YT: Yeah.

But Dragon Blade is more of a hardcore gamer-type, right?

YT: Yeah.

D3 Publisher's Dragon Blade: Wrath of Fire

But that's for the Western market, right? So that makes sense. Would that kind of thing make sense in Japan?

YT: The game itself?

Yeah.

YT: I think we are keeping some elements that are liked by Japanese people. I don't know if we are going to do anything to localize it heavily for the Japanese market. We haven't decided yet. But I was thinking about the Western market, to just capture the Wii momentum about a year and a half ago. So we'll see the performance. In Japan, I'm talking to D3 Japan, and we are discussing what to do with localization. [Ed. note: Following the September release of Dragon Blade in the U.S., the game is on schedule for a late November release in Japan.]

It's your job to take care of the West, though, not to worry about Japan.

YT: Well, the Japanese market is important too.

It is, but it's not your problem necessarily.

YT: The games we produce here, we put our heart in it, so we want to sell the game in Japan.

Back to the point about games being expensive... I spoke to a producer at D3 Japan when I was at TGS -- I never actually printed this anywhere -- and he told me they cut out the girl from Earth Defense Force and also didn't include online multiplayer, because these features were just too expensive.

YT: I don't think so. When we started Earth Defense Force for 360, it was way too late for the time frame, because we had business plans to launch the title in November last year. I think we launched a month late. [The developer] Sandlot couldn't do so much.

They're only like 60 people, right?

YT: No, less! 30 or something. I went there once.

That's right. Another developer D3 uses, Tamsoft, is 60. I was confused.

YT: Yeah, Tam is bigger, but Sandlot is very small, but it's really good quality.

Of course. They're very good.

YT: That game opened up my eyes a lot, because it was so fun.

Did the U.S. version perform to your expectations?

YT: Actually, yes. When EDF came out on PlayStation 2 in Japan, the first game was about 60,000 or 70,000 in sales, I think. The second game increased to 200,000. I'm expecting a similar sort of event. Right now, all I have to do is promote EDF as much as possible. To me, every single person who bought EDF will buy the next one, because there's something in the game. Those people will talk to their friends. The first game is a seed to me, and the second game we bring in, I want to sell a lot of units for the low price point, I hope.

Yeah, that was another thing I spoke to him about -- if he thought the Simple series could continue on next-gen consoles like 360 and PS3. He said, "No, because it's too expensive." Do you think so?

YT: In Japan, probably as you said, technology is kind of behind, so they have to buy very expensive middleware. That's becoming very popular in Japan. Buying an engine. That's going to add up and it's going to be more expensive than they can probably afford right now. But I've been thinking about that point too. To sort of think about the Simple series in the Western terms.

I've been thinking about that as well, because you finally managed to release D3 Japan's Simple series game, The Adventures of Darwin. I don't know how well that did.

YT: It was my pick! I played the game, and I actually spent a couple of days playing -- about four or five hours a day. I got to the point where I thought I finished it, and I said, "Boy, this game's big and fun!" so I decided to pick it up. Later, I found there was another world somewhere. "Okay, I missed it!" (laughs) It is my game. It's a fun game.

I wonder if we will be able to see more like that coming, especially on the PlayStation 2, now that it's ramping down on its hardware cycle.

YT: It's not a planned thing, but every time we see a good game in the Simple series library, why not?

I've heard of several cases where D3 has tried to push a Simple series game through Sony, and it has not been accepted.

YT: From other third-parties before. We are very careful. So far, though, I think we have never been rejected by Sony, I think.

I thought I heard differently. I thought several games had been pitched on the budget line that had not been accepted.

YT: No, not from D3 Publisher of America. Maybe one game on PSP. In the beginning I thought about a pick-up, but it wasn't enough for Sony.

It seems like EDF 2 and Oneechanbara could be more possible on PS2 at this stage.

YT: At this stage, but since we have EDF going already, I don't know how we would go back to PS2 EDF.

You could just change the name.

YT: It could be a good idea to do EDF 2, because it's such a huge game. But I'd rather keep the 360 going.

Sure. Do you think that the next 360 version will have some of those options that were not available in the first?

YT: I don't know. Actually, I cannot comment. And also I don't know! People don't tell me in Japan. I'm sure they're going to make a full-blown version next year. That's all I can say. That's all I expected.

I really hope they bring back the girl, because I like flying around.

YT: And I heard [that] from many people, and I read some write-ups too.

Part of what I like about EDF -- and don't take this the wrong way -- is that it does feel low-budget. It feels like a B-movie version of games, but not in a bad way.

YT: Exactly.

In a good way.

YT: Exactly!

It's got silly dialogue, and sometimes your character gets caught in the buildings, but that's part of the fun, for me, anyway. I don't know if everybody feels that way.

YT: That's exactly what we felt like when we decided to pick it up.

It's just fun. You don't feel like you have to have this amazing investment in the character or anything. It's just fun to do. You want to keep playing.

YT: I'd like to provide gamers a break from serious gameplay. Everything's getting so serious and so intense. I just want to cut that flow, and give a game that is nothing but fun. You blow things up, and you can laugh at it.

Yeah, you blow up all the buildings in that game, and it's great. That's what I do all the time! I can't help it!

YT: That's my intention!

It's great. My friend and I played that game. We have a 360 in the office, and generally we never play anything. But Earth Defense Force... we were like, "Okay, after work today, we're going to play EDF on the 360."

YT: I like to satisfy people!

You're working on the serious side as well, though. Dark Sector is pretty serious stuff. Do you feel like you can balance well the difference between the fun, light, pick-up-and-play games and also the more immersive type, like Dark Sector?

YT: Yeah. We have kids' games too, and some casual games too. We are dealing with many kinds of game. I'm not just talking about genre, but kinds of games. More like a different species. For the original IP area, my image is that we make high-end games, really competitive games, and fun games, going forward. So I'd like to provide different kinds of experiences to the gamers, and then we have kids' games.

Are you at all concerned about brand image at all for that, or is that not a concern?

YT: As long as people love our stuff. EDF, as you said, graphically, probably less. A lot less. But we are providing a key element, which is fun, that the other huge, 20 million dollar titles don't have. So I'm proud of that. I'd like to be known as a fun game company. Games, going back 20 years ago, were fun. Nothing but fun, with simple graphics. EDF made me realize that.

Yeah, because old games like on the NES were like, "Kick the guys!" You just go through and kick all the guys in the level, and that's what you do. And EDF is like, "Okay, blow up a bunch of stuff!" And that's it.

YT: It's like a simple game mechanic can work. It doesn't become repetitive, but a lot of serious games get into that, and people get tired of it. I'm having fun providing those games.

I think it's funny that some people don't realize that. Games can be art, and they can be very deep and important. But at the same time, games can be so simple and fun. The main mechanic in EDF is that you shoot things and you blow them up, and the reason why it's fun is because you're doing that, but the reason you keep playing is because you get more weapons so that you can blow stuff up in different ways.

YT: So many weapons! (laughs)

It's so simple. That's two things you do -- blow stuff up, and get more weapons to blow stuff up more. It's so simple, and I don't know how people could miss that. It seems like an obvious, easy emotional response, just to do this one fun thing.

YT: I'm sure the franchise will do well. But our job is also selling Dark Sector and also other IP coming out in the future.

I think Dark Sector was a good choice, because obviously developer Digital Extremes was a company that split off from Epic, which is a good sign. They have a lot vested in this.

YT: And also they have technologies and creativity. It's such a great company.

At the same time, they've undergone so many changes within that one game. Does that concern you at all?

YT: I don't see so many changes. I only saw one change take place before we came in. I'm sure you're talking about the sci-fi theme, and now we're talking about the near future. It's more down-to-earth. That's the game I invested in -- not [the older] one. When we signed the deal, that was the game. To me, it was always the same game, and I came to realize in the middle of the development that people expected sci-fi. Okay! Sorry. (laughs)

D3 Publisher and Digital Extremes' Dark Sector

Okay. I think it's going to be a much better game, the one that's coming out.

YT: I think this game will be loved by people, and we'll take any and all support we can possibly get. The game is coming out of January next year, and I think we picked the right timing for an original IP. A very serious original IP -- the first one from our company.

Dark Sector doesn't look like a game that someone just randomly made. It looks very deliberate and looks like a very big-budget, high-end game. I hope that it does what it wants to do. I think it will.

YT: One thing I can say is that we are in a unique position. We are well-funded, and we are still small as a publisher. I always say we are like a car publisher in third gear right now in North America, but how many third-gear publishers can fund a game like that? We are funding more games like that coming out in the following year and the year after that. I'm enjoying being in this position.

It seems like it's a good place to be in, because no one expects you to be able to fund something that's really big-budget and totally out there.

YT: And also we are here to establish new franchises on next-gen. We're not talking about franchises made on PlayStation 2 or PlayStation 1. That's what's unique about our company. We provide next-gen games. To me, the games that have come out on Xbox 360 so far are probably not next-gen enough, and I want to position Dark Sector to be one of the first truly next-gen games utilizing the technologies. They're doing very well.

For D3, instead of building up from a place where you start with a low-quality game and then you get to mid-tier and then higher levels, since you have this funding, you're able to go straight for the highest level when you can.

YT: Starting a publisher like this, though, you really have to look at the timing. Two and a half years ago, the 360 was on the horizon. You could barely see the top, and the PlayStation 3 is following, and you really have to catch the wave to get on next-gen. And that's what we did.

It's very hard to predict when you know these two systems are coming. Which one is going to be on the crest of that wave?

YT: This is like the movie business, entertainment business. It's risky. The thing is in what risk you take. We chose Dark Sector.

It's slightly different, because with the movie business, you have one format. You have film.

YT: I'm talking about hit and miss.

You're in a slightly more difficult position.

YT: It is.

You have to say, "Okay, is it going to be better for Wii, 360, or PS3? And which one of these is going to do best in two years when this game is out?"

YT: That's been a problem in the video game industry.

Forever!

YT: Yeah, forever. Because what you're doing is not developing, but you are constantly researching and developing. Researching and developing is a little bit different from developing, to me. It takes risk.

I don't know to what extent it's true, but it seems like a lot of it comes from just your personal feeling, like whoever is at the head of a company says, "You know, I feel like based on what I've seen, I feel like the 360 is going to sell well this year. So if we release this game on 360 this year, that's enough. That's good." It seems in some ways like the releasing of games on certain formats -- unless you're EA or Ubisoft and you release on all formats at once -- it's almost like an emotional response to, "This is how I feel. This is going to be the best."

YT: With next-gen, you're talking about 360, PS3, and high-end PCs. The three formats. We'll probably keep covering this area. Dark Sector is not on PC, though. It can be on PC, too. The kids' side, like Ben 10 or Naruto... Naruto is only on Nintendo formats for us. Kids' games can be on Wii and PlayStation 2, and could be PSP and DS, for different games. You can spread your risks, too. If PlayStation 3 started doing really, really well, we are covered, going forward, and I don't think two formats will go down together. Another two formats will compete together, and we're going to have a better scenario next year, I think.

I almost wonder if the two higher-end formats might not merge, but that's kind of a weird thing to think. Sony is behind, Microsoft is losing money. I know that Microsoft has a mandate to make money soon on their games business, but they won't. Not next year, and not the year after that. Sometimes I wonder if PlayStation 4, or whatever, and the next Xbox --

YT: Will run out of gas, or something?

No, if maybe they'll combine and be the same format.

YT: That would be interesting.

It's been a theory that's been going around with a few people, because they both have their own unique problems, and maybe if they combine, they've got one format, and they can solve their problems. You never know.