It’s no secret that Japan no longer dominates the global video-game market, but according to luminaries like Hideo Kojima and Keiji Inafune, the Japanese development community is mostly oblivious of western tastes and doomed to fail in its current state.

Inafune has it all wrong.
 

Most of the critics mean well, but they paint a picture of a sinking ship, with only a handful of people smart enough to get on the last few lifeboats. It’s a grim outlook for a nation that I typically associate with optimistic, ragtag groups saving the world and colorful curiosities that emphasize harmony over violence.

But is the situation really that dire? It’s a question my friends and I have been asking ourselves for a couple weeks after Game Developers Conference 2012, and I think we’ve realized that maybe it isn’t a problem that needs fixing. Maybe we’re looking at the new status quo.

Last year, you would be forgiven for forgetting some of the modest industry successes in the midst of blockbusters like Modern Warfare 3 and Skyrim. Although the payoff can be huge, development costs and advertising budgets for these games are staggering -- to the point where many talented individuals are leaving the triple-A world for indie pet projects and iOS tidbits.

But there is some territory in between, and the folks at Atlus and From Software seem to appreciate that. With Catherine and Dark Souls, respectively, they took two seemingly niche concepts and turned them into hits. Neither game is compromising: Catherine is a bizarre psycho-sexual, thriller puzzle game, while Dark Souls has made its fortunes by making players cry in frustration. And yet somehow, with reasonable expectations and budgets, these developers were able to find western audiences.

Compare that to Final Fantasy 13, the poster child for a Japanese game industry gone awry. With over 5.5 million copies sold, the lessons learned from this game’s development remain unclear. But whether or not you’re like me and managed to eke some fun out of the game, I don’t think it can be disputed that the title hurt the franchise’s reputation.

Developer Square Enix’s top talents spent over five years creating the engine, scenarios and 50-plus-hour quest. In that time, Atlus and Xseed (among others) successfully published numerous smaller projects that made money back and gave fans both new and old experiences. It’s great that Final Fantasy 13 was a grand experiment, but it was also a tremendous gamble that now has many writing Square Enix off after a single maligned entry in a beloved series.

But maybe Atlus-size business isn’t big enough. I can understand that; Europe and North America combined have over ten times the potential audience of Japan, and by catering to only Japanophiles, you end up leaving a lot of money on the table.

Well, if you’re so insistent on making inroads in the west, for the love of gamers everywhere, be careful with whom you work. Pick your projects carefully. Right now, I’m looking at scathing reviews for the latest Resident Evil spinoff, Operation Raccoon City, and wondering how Capcom let that one out the door. Ditto for Dark Void and Bionic Commando, the latter of which should have given the company pause the moment it was revealed that Rad’s wife was programmed into his arm. Our store shelves are just as crowded here in the States as they are in Japan, and we’re just as good at sniffing out half-assed dreck. (OK, so maybe that’s a stretch.)

Sometimes, though, it’s not even a matter of quality. I have some qualms with Vanquish‘s storytelling, but it’s every bit as competent as the latest Gears of War. Critics genuinely seemed to like Binary Domain, too. The problem is that on the surface, these games look and sound just as generic as countless other shooters, and neither Vanquish nor Binary Domain was ever going to get the same kind of advertising budget that helps Battlefield or Call of Duty stand out. I’m not saying that Japanese developers have nothing to add to the genre, but on this side of the Pacific, it’s an extremely brutal marketplace without much room for imports.

In making these "western friendly" games, Japanese developers also run the risk of losing their cultural identity. I think globalization is wonderful in a number of respects, but in this particular case, it is the enemy of artistic expression. When I look back on the most memorable Japanese games of the past few generations, I think of games like Okami, Katamari Damacy, Valkyria Chronicles and Shadow of the Colussus. Granted, not all of these games were huge sellers, but they all pushed video games forward while also remaining true to their country of origin. In chasing the dollar and farming out development elsewhere, you run the risk of losing the joy and flourish that make Japanese games so special.

There is one other alternative even though everyone dismisses it as an anomaly: Nintendo.* Miyamoto and crew have had their ups and downs over the past three decades, but they've remained on top through consistent quality and a willingness to move in new directions.

You can bag on the Super Mario Bros. or Legend of Zelda series for falling back on tried-and-true mechanics, but there's a reason both series have remained relevant, and it's not the iconic characters or the marketing. Those help; but at the end of the day, when you buy a Nintendo game, you know that you are picking up something that has been play-tested and carefully crafted. Years of research and development go into each one.

Companies like Capcom that damage their brands with shoddy products would be foolish to ignore Nintendo's track record. (Plus, Nintendo isn't against publishing cultural oddbals like my beloved Chibi-Robo and Animal Crossing.)

Of course, "Be Nintendo" isn’t much of answer to a problem that is taking a heavy toll on Japanese developers (and the global video-game industry to some extent). But while there are many quick options, such as social network apps, iOS quickies, and western collaborations, none of them are going to patch things up if you lose sight of what makes you special.

Japan, in this era of gory shooters and jingoistic military sims, you’re still giving us experiences like the synesthesia wonderland of Child of Eden and the biblical hodgepodge El Shaddai. Your games are capable of giving us unbridled joy and somber and contemplative journeys, and no matter what, it’s important not to lose sight of that.

* Renegade Kid’s Jools Watsham recently touched upon this defeatism in a great blog entry about the 3DS eShop and effectively making and selling games.