Xbox exec on Japan expansion: 'We face a challenge'

Microsoft wants to expand its Xbox gaming business to all global regions, but the company faces an uphill battle in countries like Japan.

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Microsoft aspires to reach games industry leadership by 2030, with an implied $32 billion of revenue generated from its widening ecosystem of products and services. To get there, Xbox needs to expand. The recent Activision Blizzard King acquisition will accelerate these plans with an enviable content war chest worth many billions of dollars, including Call of Duty, World of Warcraft and Candy Crush.

Xbox's strategy goes well beyond first-party content, and to achieve its goals, Microsoft needs to build its business in certain markets like Asia, including both Japan and China. Progress is well underway--Xbox has made deals with Square Enix to bring more games to the platform, starting with Final Fantasy XIV in 2024. To streamline this expansion process in Japan, Microsoft recently hired former PlayStation business director Mena Sato Kato to help spark partnerships and relationships between Xbox and Japanese publishers.

"We face a challenge and that means there are still a lot of things we can and should change," Kato told Bloomberg in a recent interview, speaking about Xbox's current trajectory in the Japanese market.

Despite the landscape, Kato is confident in Xbox's worldwide presence, saying that the platform is a critical pathway for expansion for third-party Japanese developers.

"Japanese publishers will definitely need us in expanding their business. It would be difficult to do that just with the PlayStation."

Microsoft has since been able to attract Japanese partners like Capcom, who is releasing the new IP Kunitsu-Gami: Path of the Goddess day one onto Game Pass. Other examples include Microsoft successfully courting SEGA to release newer Yakuza titles into Game Pass day one as well.

Unsurprisingly, domestic game-makers Nintendo and PlayStation dominate the Japanese market, however Microsoft could have a sizable advantage with its value-oriented Xbox Game Pass subscription. It remains to be seen how well Microsoft will be able to leverage its content and services to make a meaningful impact in the region.