Video-game enthusiasts used to wait in line to fight villains at the three-story Moon's Tear arcade in Tokyo. Around noon on a recent Friday, its only customers were two suit-clad men and a college student.
"I don't want to blow my money here anymore," said 26-year-old Hitoshi Tanaka, the student. "I plan to buy myself a PlayStation 2 soon, and then I might visit here just once in a blue moon -- or maybe never."
Arcades, an entertainment staple in Japan, have fallen on hard times, along with companies that supply their coin-operated games. Home game systems now offer arcade-quality graphics and sound, and a weak economy has made consumers hesitant to shovel ?100 (US$0.80) into arcade games.
"A kid with coins jingling in his pocket finds it hard to justify" spending money at an arcade when he has a game system at home, said Jay Defibaugh, an analyst with Credit Suisse First Boston in Tokyo.
Japan, with less than half the population of the US, has 1 1/2 times as much revenue from arcades. Even as the country's economy was slumping, arcade revenue grew during much of the 1990s. That streak ended when revenue fell 2.3 percent in 1998. It dropped another 1.5 percent in 1999, the latest year for which statistics are available, to ?619.5 billion (US$4.98 billion).
The decline comes as Sony Corp and other makers of home game consoles continue to flood the market. Sony has shipped about 4.7 million PlayStation2 consoles since the game system's debut in March 2000. Nintendo Co introduced its handheld Game Boy Advance in March and will start selling a new home system, GameCube, later this year.
Osaka, Japan-based Capcom Co, Japan's fifth-largest maker of game software, got the message. It earlier this year decided to stop making titles for arcades and focus on games for PlayStation2, Game Boy Advance and other home systems.
"The home-use machines have high specifications, and it's the same for people now to play at home," said Shouhe Tatemi, a Capcom spokesman.
Capcom made the right decision, said John Millar, an investment manager at Martin Currie Investment Management Ltd, which holds Capcom bonds that can be converted to stock.
"For some time there has been a shift away from amusement arcades, and it is fair to assume that the launch of new consoles will put more pressure on arcades," Millar said.
SNK Corp, maker of Neo-Geo games and operator of such arcades as the Neo-Geo World Tokyo Bay Side, is one of the victims. It filed for bankruptcy protection from creditors in April.
"Arcade operators have seen a terrific decline in the past few years," said Defibaugh, the Credit Suisse analyst. "The returns from this business are quite weak relative to console games."
The same is true for some US game makers, even as the nation's overall arcade revenue continues to grow. Chicago-based Midway Games Inc last month said it will cut its workforce and stop making coin-operated games. The maker of Pac-Man and Spy Hunter, hot arcade titles in the 1980s, will focus on home games.
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