With the bulk of Xbox hardware sales occurring in North America, the Xbox division in Japan has its work cut out for it. But it also has a few factors that run in its favor: A devoted following of current Xbox owners, high broadband penetration, and a culture of gaming that sees a number of grassroots channels that facilitate gamer-to-gamer communication.

　　As our talk continued with Japan's Xbox division general manager Yoshihiro Maruyama and director of marketing Mike Fischer (see Part 1 of our interview), the two men spoke in greater detail about Xbox's strengths in Japan and how they are approaching the market today.

　　Maruyama mentioned another key trend in addition to the increase in first-person games, which was that he saw a greater number of online games at this year's show. He noted that this trend favors the Xbox. "I think that the Xbox is the best online gaming environment for game developers as well as game users." Echoing figures previously promoted by Microsoft, he added, "We are hoping for a total installed base of 16 million worldwide at the end of June, and close to one million Live users."

　　One interesting fact is that those Live users will be disproportionately located in Japan; Japanese Xbox owners are more likely to subscribe to Xbox Live than users in the rest of the world. According to Fischer, there are two likely explanations. The first explanation is Japan's well-developed broadband infrastructure. DSL and cable services are commonplace, and they are typically faster and cheaper than in the US; almost one million homes have fiber-optic Internet connections offering industrial bandwidth. Second, Japanese Xbox owners tend to be fairly hardcore users who are more likely to take advantage of all the console's capabilities.

　　Though Fischer and Maruyama clearly appreciate the hardcore gamers the Xbox has attracted, broadening the console's appeal is a key step in increasing its installed base in Japan. Xbox Live Arcade and the video-chat function--new initiatives announced at E3--will both play a part in this.

　　Of course, offering more locally developed games would be another way to broaden the Japanese user base. With this in mind, we asked Maruyama and Fischer if there were any games under development in Japan besides the already announced True Fantasy Live Online and Phantom Dust. Fischer's response: "We can't talk about that right now, but we have more that you're going to hear about soon. We have a major investment for development in Japan and Asia, and we have a number of projects going on both at our headquarters and at independent developers."

　　Asked to comment on Japanese titles for the Xbox 2, Fischer smiled and said, "We want to keep the focus on Xbox right now." Maruyama added, "You know, in the current Xbox there are a lot of things that developers haven't tapped yet, and we're still providing new tools and libraries to help them make full use of the hardware."

　　With this remark, Maruyama moved into a discussion of the XNA development platform, making it clear that it's a key part of Microsoft's gaming strategy. He said that working with conventional development tools and learning to program for different platforms like consoles, PCs, and next-gen consoles is as though "you used to drive a car, but now you have to learn to drive a train. But as long as you use XNA, the transition to the next generation is very seamless and smooth. It's like you start driving a Corolla, and then move to a Camry...and eventually maybe you go to a Ferrari. In the past, hardware transitions caused a lot of trouble for developers, but now we've created a very continuous development environment." The technology has strong potential to reduce development costs, and Maruyama reports positive initial reactions from Japanese developers, for whom rising development budgets are a key concern.

　　Another way that Xbox courts developers is through the Live infrastructure. Following up on his earlier remarks about the Xbox's strength as an online game platform, Maruyama explained it like this: "The Internet is like a river, with the developer and the user on opposite banks. We've built a bridge the developer can use to reach that user--[which includes] the authentication, billing, and other systems. Other consoles haven't done this, so anyone that wants to reach the user on these consoles has to build their own bridge, which is very expensive. We want to let development companies focus on creating contents rather than building bridges."

　　The Xbox team knows just how it's going to use XNA and the Live infrastructure to attract developers to its platform. But that's just the first part of a two-part equation. The second part is marketing--getting the hardware and software into consumer's hands. Fischer explained some of Xbox Japan's strategies and techniques.

　　According to Fischer, a key factor shaping Japanese marketing efforts was "the recognition that a recommendation from a friend was one of the most important aspects of making a purchase decision. We realized we had some very loyal consumers, so we decided to take advantage of that opportunity. We do that in a number of different ways. We've had some very simple user-appreciation events, like the Xbox Live Party and 'DoA in Hawaii.' But it's important to look at how we did those--it's not just a matter of sending a prize to somebody--it's getting these people together."

　　Fischer explained that the unique strength of online play is creating community, and Xbox events capitalize on that fact. "Ultimately, the social aspect of gaming will be key to our industry's growth, just like the social factor on the Internet was one of the key drivers for its rapid growth. Our events tap into that by getting people together and letting them meet [other] people that they might have played with on Xbox Live."

　　One of the ongoing Japanese promotions is called "Xbox Totsugekitai." After some debate over the most appropriate way to render this expression in English, there was general agreement on "Xbox Evangelist." This is an interesting program in which the Xbox group runs gaming events both on college campuses and by request for smaller groups. (According to Fischer, the main focus now is on the campus events, and the latter part of the promotion is just now getting off the ground.) The promotion is designed to give people a chance to get together with some friends and try the consoles in a relaxed environment--maybe the best way to break down Japanese gamers' stereotypes about the Xbox.

　　One interesting wrinkle is Japan's "manga kissa." A Japanese cultural institution, these are coffee shops that also offer extensive collections of Japanese comic books. In the last few years they've expanded their offering to include Internet access, movies, and game consoles. Obviously, these establishments offer a relatively low-cost way to expose more Japanese gamers to the Xbox. Microsoft Japan has taken note. According to Fischer, the company has a number of programs to work with the manga kissa, and they're also "looking at ways to incorporate a lot more Live functionality in those facilities."

　　Toward the end of the interview, Fischer shared a compelling vision of gaming's mainstream future. He commented that current world leaders have been known to get together for a game of golf, and he wondered how that custom might change. "Maybe someday, the US president will log onto Xbox Live and when his friends' list comes up it will be the prime minister of Japan, the president of Taiwan, and the prime minister of Britain...."

　　That day is a long way away, but Maruyama and Fischer are working hard to bring it closer.