One of the hottest mobile gambling games in the world currently, Genshin Impact, has taken over the mainstream gaming culture in Japan. Millions of daily active users consume the creative and visually captivating game that offers plenty familiar cultural references; from anime styled characters, bright rainbow color-schemes and an overwhelming central theme of women clad in maid clothing. Built by Chinese engineers it represents a concentration of the enterprise level development in China-based video game production.
The new mobile game taking the Japanese video game market by storm, Genshin Impact, was released in late 2020, and for a while went relatively unnoticed, only being played in niche gaming communities and seldom talked about in the mainstream. But it didn’t take long for this situation to change, and before the end of the year the game was already generating up to $2 billion in annual revenues. Most of this income is believed to have come from international markets.
The game’s success is hardly surprising in the broader context of the global video games market. The exploding industry has seen windfall after windfall of cash and fundraising over the last decade, with financial investment firms now valuing the industry globally at some $200 billion, a staggering figure that paints a picture for how connect young gamers are around the world with design studios leading the creativity and development within the space. The industry has long been dominated by studios based out of the United States and Japan, but in recent years there has been a marked shift in power, with
Chinese developers with huge budgets have been targeting Japan for years already and aim to design video games that feel similar to Japanese online casinos and the customer experience therein. The strategy so far has been to target local influencers, appropriating cultural references that make the connection clear and obvious, and applying lessons that have been learnt over the past few years.
Can Japanese Gacha Games be Considered Gambling?
There are many methods that game developers deploy in order to maximize the revenue impact of their creations. One such method that has become frequently popular is in-game purchases. These types of transactions are seamlessly integrated into the game and offer a player the chance to significantly improve the performance or physical appearance of their character. The concept has a new name called gacha and is a word that defines the love of Japanese consumers for mystery box style reward mechanics across the spectrum of video game options for a consumer.
Players have to pay a fixed fee to the in-game bank, essentially, and then via a lottery system they are given a reward. The odds of getting the highest valued items in the game, which may only become available in the pack inventory at very short-notice, are extremely small. The classic algorithm for game developers and gambling studios is incredibly prominent in gacha-style games, and the question of can gacha games be considered gambling is certainly in interesting case-study in the direction of modern game development. As it currently stands, Genshin Impact is possible to play in its entirety without spending a penny. Even so, the masses of users on the product cannot resist the many psychological cues and encouragement to spend real cash to advance their status in the game; an issue that is increasingly frustrating segments of its userbase and Japanese gambling regulators.
Art studios in Japan have benefited heavily from the influx of support from the teams at Japan’s anime studios. It feels like China is the only country on the global stage that is willing to offer a fair valuation for the intellectual property attached to these cultural pieces. With this IP they’re able to transform a version of artwork into a game that millions of users will potentially be impacted by, which remains of course a compelling proposition for artists in the space seeking to make a stronger platform for themselves.
Whilst some people say that this kind of foreign outsourcing of game development is killing Japan’s video game development sector, many argue that changing cultural norms in Japan are actually to blame. The population is getting older, the market is getting a lot smaller and companies with big conservative biases are less inclined to take a risk on big new ideas. The culmination of all these things is playing directly into the hands, and pockets of Chinese game developers.
Chinese Developers Building Gacha Games for Japanese Consumers
Investment in the Chinese video game development ecosystem has been booming in recent years. Investment has been flooding in from all angles, and quite literally it is now the epicenter of global video game production – particularly for mobile devices. Companies like Tencent Holdings can be attributed with a lot of the success. Their success building TikTok created a wave of innovation within China, and for the last several years, teams in the country’s hottest tech-startups have seemed to crack the formula for building viral appeal video games.
Japanese gacha games are quite a new phenomenon in terms of roadmap pivot, and the opportunity in Japan was not immediately realized. A lot of early developments from Chinese gaming studios was to build products that were heavily optimized for the western markets, the United States and western Europe in particular. But over the years it has become increasingly more apparent that the value of this market is best tapped into directly via consumers in Japan. Per capita, the Japanese mobile user demographic is far more in-tune with the ecosystem, and is more willing to take a risk on new video games that come from unknown developers. Compare that with consumers residing in the United States and Europe, and it’s obvious that the trust-factor is lacking considerably in this part of the world.
In many cases China is far better equipped to tackle the demand in Japan for high-quality gacha gaming products than engineering teams based in Japan. Chinese developers are known to be some of the best in the world for a multitude of disciplines covering VFX, computer vision, and general AI. The expertise in China has been built over many years of accepting to do outsourced work, refining their practices, and integrating technology at the bleeding edge of what is entirely possible.
A Curious Phenomena on Display with Genshin Impact
With Genshin Impact, a very subtle but strikingly familiar phenomena is on display. It is related to the creative shortcomings that have affected all facets of China’s cultural and entertainment industry. The developers of Genshin Impact proudly describe themselves as purists, and completely passionate for Japanese fantasy role-playing games. They have essentially embodied the key visual elements of Japan’s pop-culture, manga-verse, and anime.
The massive focus and reliance on motifs associated with traditional Japanese cultural symbols is a reminder that Japan as a country has tremendous soft power. The lack of development of China into its own unique cultural symbols is a likely result of years of totalitarianism, and the lack of freedom of thought so often perpetuated by its dominant and authoritarian government. The video game sector, much like many other entertainment sectors across Japan have often struggled to produce original creative directions for its biggest cultural tales and folklore. Even with the booming economy domestically, China still struggles to find a creative identity and image that resonates with audiences on a global scale. It has proven far more interested in imitating the work and style of other countries.
Whether or not Genshin Impact remains a divine celebration of Japanese culture, or simply a rip-off of its most iconic imagery remains largely irrelevant in the broader business context. This is especially pertinent for venture capital looking to deploy funding around Asia specifically within the mobile video games market. Japan appears to be defunct of high-pedigree game development, unlike the huge eras over the past few decades which saw the development of incredible games under well-respected brands like SEGA and Nintendo.
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