Does Microsoft need Japan to succeed?

It's been generally known for a while that Microsoft has had trouble selling game systems in Japan, first with the Xbox and now with even slower sales of the Xbox 360. Analyst Robert Ehrenberg harps on this fact in a repetitive analysis claiming that the Xbox brand in a "bomb" that is dragging down the company.

We don't buy it. While it's true that Japan still holds the spiritual center of the industry for many gamers, we don't necessarily agree with Ehrenberg's conclusion that "success in the Japanese market is a key determinant of success in the worldwide market." The Japanese market for home systems has actually been sizably smaller than the European and American markets for at least the past two generations. And while the best-selling systems in Japan tend to also do well elsewhere, success in Japan does not necessarily lead to success in the rest of the world -- see the tepid worldwide reaction to the hot-in-Japan Saturn and Dreamcast as evidence.

But Ehrenberg's logic really fails when he claims that a weak Japanese start means that key developers will be unwilling to support the system. Healthy 360 support from the likes of Capcom, Namco, Sega and Sakaguchi's MistWalker studio shows that Japanese companies are considering the 360's global footprint in their worldwide distribution plans. Maybe Japanese game buyers aren't important as long as Japanese companies and the rest of the world are on board.

Ehrenberg also asserts that Microsoft should dump the Xbox because it has so far failed to make them money. This neglects the long term value of the branding and cachet that Microsoft is slowly but surely building as a major part of the gaming universe. That kind of branding is invaluable. Just look at Star Wars -- three crappy prequels weren't enough to truly dilute the value of the hot property.

This article was originally published on Joystiq.