It seems that Japanese game companies are pinning their hopes on the Switch 2 to turnaround the industry, and help save companies like them.
As reported by Automaton Media, the famous outsourcing video game company TOSE, very clearly stated in their latest financial report that they hope that Nintendo’s next console will bring “a particularly favorable wind” with it, that will revive their business.
TOSE may have an infamous reputation among retro gamers, for being front and center as the developers of some of the worst games released on the NES. But that paints a misleading picture, as TOSE is discreetly one of the most successful video game companies in the world of all time.
While most gamers know Capcom, Konami, and Square Enix, there are even more smaller video game companies that work in Japan. And these smaller game companies specialize in doing outsourcing work for the bigger game companies.
While we believe that game developers deserve to be credited for their work, some gamers don’t quite understand the business companies like TOSE have. Their floor pitch to bigger companies like Capcom is that they will make the video games for them, without taking credit.
In the modern era, this practice has changed to some degree. Because of laws and easier access to information, it’s widely known when game companies do outsourcing, and developers do get their outsourcing work in the game credits.
TOSE reported a net loss of 260 million yen (about – $ 1.7 million) as of August 2024. They closed their Philippines subsidiary and a development center. As we read rumors of Japanese game companies cancelling video game projects, that led to a real loss of work for companies like TOSE. That is the cause of their current losses.
And this is how Japanese video game development is different than it is in the West. Japanese game companies did not acquire big studios with hundreds of employees, but they still employ hundreds in outsourcing game companies. The struggles of Japanese game developers is less visible, but no less real.
So it’s a really big deal when TOSE says they expect to become profitable again by August 2025. And they are mainly relying on the Switch 2 to produce that turnaround. The Switch 2’s launch is expected to lead to new video games being greenlit, and that’s when TOSE will get more business again.
TOSE believes that demand for PlayStation 5 and PC games will remain strong, but they’re clear about Nintendo creating those headwinds for them. And there’s a reason for that too.
While PlayStation has tried to make these moves less visible as well, gamers and observers did realize they had largely abandoned their business in Japan as of 2021. To sum things up, they slowly reduced and closed Japan studio. And they also reduced investment in their smaller Japanese IP and third parties.
Most Western gamers only saw Japan Studio being closed, with some members being spun off to Team Asobi. They also see that Polyphony Digital remains largely the same.
These were the exceptions that proved the rule, as we no longer see games like Gravity Rush and Tokyo Jungle. Games like Freedom Wars and companies like Vanillaware reemerging to be multiplatform are also subtle hints that they no longer rely on Sony for their business.
All this does mean that the game industry in Japan is suffering until the Switch 2 launches. We may take it for granted that gamers are just being impatient, but this all looks different to the people making games themselves.
Nintendo’s decision to still not announce the Switch 2 and its release date may seem insensitive to these smaller developers in this context. But another way of seeing it is that Nintendo wants to make sure that the Switch 2 will succeed at launch.
And there’s definitely room for debate if Nintendo did make the right choice, since the Switch 2 still hasn’t been announced or released yet. Game developers in companies like TOSE hope Nintendo did make the right choice, because their business needs that boost that the PlayStation 5 Pro and the increase in Japanese Steam users demonstrably is not providing them.
If you care about the people who make the games as much as the games themselves, you should definitely be rooting for the Switch 2 and TOSE to succeed. But success and failure are not guaranteed, and we will all just have to wait and see if Nintendo gets it exactly right.
