Big In Japan: Koei Tecmo's CEO On Synergy, Western Expansion

The merger of Japanese game companies Koei and Tecmo completed earlier this year -- giving the former, which is in the drivers' seat of the combined company, Koei Tecmo, something very desirable: IP that works in the Western market, and creators who know how to make it. The company, which employs 1200 to 1300 developers in Japan in Yokohama (originally Koei) and Tokyo (originally Tecmo) -- as well as more at studios in China, Lithuania, Singapore, and Canada -- will continue to operate its combined forces at full tilt. Planned consolidation is coming only in the marketing, sales, and distribution fronts. The company says that, despite claims made this year by third parties, the company has 24 to 25 percent of sales outside of Japan in the most recent fiscal year. Of course, it would also like to improve those stats. Here, its president and CEO, Kenji Matsubara, lays out the current state of the combined company, and discusses the state of its Canada studio, its new games -- including its IP collaborations with external companies -- and the possibility of expansion into the social networking space, particularly in Asia. It's been an interesting year for Koei; the merger with Tecmo is completed. Could you tell me your thoughts on how that's going? Kenji Matsubara: We started the new company from April, and now we're working on how to take advantage of the consolidation. Koei Tecmo has a long history, and we have different cultures, not only in development areas but in many other management areas. What we're now doing is setting up a single business unit team so that they can work in single operation. It's not easy. Still, we are on the way to take advantage of the consolidation. We'd like to take advantage of consolidation as soon as possible. We have to wait one year [until] we can have good results from consolidation. What functions are going to be consolidated, do you think? Is it going to start with marketing or publishing and then maybe move into other things? KM: First, we already do distribution. Tecmo does not have domestic [Japanese] distribution. Koei has a subsidiary company, Koei Net, and they take care of the entire distribution in Japan, so now Koei Net handles entire Tecmo titles in the domestic [market]. Also overseas, Tecmo has a sales company in Los Angeles, but nothing in Europe, so we changed Koei's European sales office to Tecmo-Koei European sales office -- we call it TK -- so that TK now handles [distributing] Ninja Gaiden Sigma, a Tecmo title, to the European market. And we are working to consolidate North American sales office, too. Have you made decisions about what offices are going to remain open in North America, or are they both going to remain open? KM: Not decided yet, but we're still discussing. Was Tecmo's deal to develop Metroid: Other M for Nintendo a pre-existing deal or something that came after the merger? KM: It was pre-existing, so I didn't know about that from before the merger. Obviously they were able to negotiate that as a separate entity, but that's a part of your company now. That was, I think, a big surprise for everyone at E3. KM: (laughs) Actually, it was very surprising for us too. Because of the contract with Nintendo, Tecmo could not disclose the exact title name before consolidation was fixed. So just before consolidation, I heard the name of the title, and whoa -- that's a big title! Yeah, that's a very good and big surprise. Now that you have Koei Canada developing more Western-targeted titles, are titles coming out of Japan going to be more targeted towards Japan? KM: Because the Western market is getting bigger and bigger compared to Japan's market, even in [our Japan] headquarters, we have to focus on Western market. We plan to keep developing titles, like Samurai Warriors, very specific to Japan or the wider Asian region. But at the same time, we'd like to focus on new titles for the Western market. Tecmo is very good at working for the Western market,[with] Dead or Alive and Ninja Gaiden; DOA has experienced a million [selling] hit in North America. Actually, compared with North America, DOA is not so much popular in Japan. Tecmo's franchises, Ninja and DOA, are targeting the Western market. That's why we'd like to take the marketing promotion and product marketing [strategy] from Tecmo to Koei, so that Koei titles can be popular in the Western market. That's our strategy. You can start to get some of the expertise from Tecmo in terms of tackling the Western market. KM: Yes, that's our challenge. (laughs) It's not easy, but I'm sure we can do that. Update: Koei Canada How are things going with Koei's Canada studio? KM: They are now working on a new title; we already [announced it]... Warriors: Legends of Troy. We plan to ship this title in the fourth quarter of this fiscal year. So now Koei Canada studio has two teams; one is working on porting titles so far, for PlayStation 3 to PSP, and one team is working on this new title for PlayStation 3 and also Xbox 360. We talked a bit previously about how they're sort of a young team that was learning; are you happy with the progression of the studio in terms of expertise, and also recruitment? KM: Yeah. In general, we are very happy with their progress. Of course, we have many, many issues, so we have to accelerate their catching up with new technology and also learning the development process. But in general, Canadian engineers are very good at learning such a development process. Also, Canada's studios also developed their own tools for new titles. The most experienced people in Canada already have more than six years of experience in Koei, so they are very good at developing their own tools with respect to this Troy title. Compared with headquarters' experience, they're still young, so we sent up to 10 experienced engineers from Japan to Canada. So basically, they are catching up, and they are working very quickly. For the Troy title, are they using the same engine technology and other technologies that are being used for the Dynasty Warriors titles that are being developed in Japan? KM: Not the same, but they are using a basic part of the Warriors engine. But they adjust. There are many, many opportunities for improvement, especially for the Western market. They still keep the core of the Warriors engine, but they adjust and modify some parts so that Troy can be popular in the Western market. Koei's Games, Including Dynasty Warriors Obviously the Dynasty Warriors series has been a mainstay of Koei for many years now, since the PlayStation 2 launched. How is the current performance of that series in the domestic Japanese market? KM: In Japan, still, Warriors is a big franchise and can be popular. Last year we launched Gundam Warriors for PlayStation 3, PlayStation 2, and also Xbox 360. The volume was more than 800,000, and this is a very big number in Japanese market. So, still, the Warriors franchise is very popular in Japan. We'd like to keep this franchise [popular]. Of course, we have to improve in the Warriors engine and also other game functions. At the same time we'd like to have new titles other than the Warriors series; that's why we're working to develop [other games], especially for it to be popular in the Western market. Gundam Warriors is published by Namco Bandai. Metroid is published by Nintendo. Do you think that's a good model to have a mixture of self-published and other games? KM: I think it's good for us to have a mixed model, providing Gundam Warriors at the same time as we provide our own IPs. We can do both, and gain partnerships with other publishers like Bandai Namco or other IP holders. It depends. If we have a game system like Warriors and it fits with some IPs we don't have, if we have a good relationship -- and Bandai Namco has had a good relationship [with us] for many years -- that's why we can develop Gundam Warriors. Also, we're providing a new Warriors title... so we have a good relation with IP holders. [Ed. note: Matsubara is here referring to Hokuto Musou, based on the Fist of the North Star IP.] A Social Future? Social gaming has really become important, especially on platforms like Facebook. Mixi is a more popular platform than Facebook in Japan, so there are some differences in the markets, Has Koei Tecmo taken a look at that space? KM: Yeah, we are very interested in such casual games and SNS games, and we have a plan to enter [this] business, but we can't disclose it yet. But soon we will present our strategy for this -- SNS games, or Flash games, or user-generated content games area. So we have a plan, and we are working on that. We think this market will expand not only in the Western market but also in Japan, and especially for the Asian market. What we see is mobile game companies -- not from the game industry -- join this area. Like Facebook, they provide platforms, and they buy or make partnerships with game vendors and provide the game to the user for free. This is the current business model, and we think that in this industry, or this service, we [can] expand; so we would like to make a business in this area. That's why we are now working on a new strategy.