This month, Microsoft, Nintendo North America and Sony Interactive Entertainment Co., Ltd. jointly submitted a joint statement to the Office of the United States Trade Representative. The game industry in the United States has brought serious negative effects. This rare combination reflects a common attitude in the North American game industry.
Tactile translated the full text of the joint statement and attached relevant background knowledge in the form of annotations.
Microsoft, Nintendo North America and Sony Interactive Entertainment Co., Ltd. respectfully submitted this joint written statement as a response to the "Section 301" soliciting public comments. Editor's note: The original sentence of this sentence is more complicated, so it is slightly simplified and explained in the notes. "Section 301" refers to the Section 301 of the Trade Act of 1974. Based on this clause, US President Trump initiated a policy against China in 2017, in terms of technology transfer, intellectual property and Investigation on innovation and other aspects. The Office of the United States Trade Representative needs to review and analyze public opinions in this investigation,
irst of all, we would like to point out that we support the application submitted by the Entertainment Software Association (ESA) to remove a series of electronic game-related products from the list of goods subject to tariffs. As a leading game console manufacturer, our purpose of submitting this independent statement is to emphasize the fact that if tariffs are imposed on game consoles, it will have a huge impact and economic damage to the entire video game ecosystem.
More specifically, imposing tariffs on game consoles will:
Harm consumers, video game developers, retailers and console manufacturers;
Putting thousands of American citizens' high-value-added, high-income jobs at risk;
Suppress innovation inside and outside the gaming industry.
Although we appreciate the government’s efforts to protect US intellectual property rights and maintain the US’s leading position in the high-tech field, increasing tariffs will cause great harm to US consumers and companies, instead of achieving their original goals. Therefore, we respectfully request the government to remove the sub-item 9504.50.00, which includes game consoles in the "US Tariff Coordination Table," from the final list of additional tariffed goods, so as to avoid imposing tariffs on these products.
1. Our three companies and the video game industry are driving U.S. economic growth and technological innovation The video game industry produces groundbreaking, high-tech game consoles that can attract consumers of all ages and support companies of all sizes across the United States. As manufacturers of almost all game consoles in the U.S. market, Microsoft, Nintendo and Sony are leading the continued growth of a vibrant and highly innovative game market.
From an economic point of view, the video game industry has made a significant contribution to the US economy, and the annual growth rate cannot be ignored. In 2017 and 2018, the total revenue of the U.S. gaming industry was 36 billion and 43.4 billion U.S. dollars, respectively, a year-on-year increase of more than 20%. The gaming industry directly or indirectly employs more than 220,000 employees. In the United States, 99.7% of video game companies can be classified as small businesses, spread across all 50 states; many developers make software for various platforms, including PCs, mobile devices, and game consoles we produce. They are booming An indispensable part of the growing software development market.
In 2018, our three companies sold more than 15 million game consoles in the United States. Currently, there are nearly 8,000 employees in the United States, including senior technical R&D personnel, as well as creative designers and developers in game studios.
Founded in 1975, Microsoft is one of the leaders in the technology industry. Microsoft has developed a wide range of services, software and hardware products, including Office office software, Windows operating system, search engine Bing, Surface tablet, Azure cloud services, and Xbox game products and services. Microsoft manufactures and develops Xbox game consoles, accessories, software and development tools, allowing software developers to develop games and applications on Xbox or the cloud. At the same time, Microsoft also owns game digital store Xbox Live, game live broadcast service "Mixer" and 15 independent studios, some of which are located in Washington, California and Louisiana. In the United States, Microsoft cooperates with more than 1,000 game developers to provide games and content for the Microsoft platform.
Nintendo North America is headquartered in Redmond, Washington, where a high-tech R&D team from Nintendo is also there, focusing on developing technologies for the company’s future game consoles, systems, and services. In addition, Nintendo has game development studios in Redmond, USA and Austin, Texas. For the past 30 years, Nintendo has been providing unique and original entertainment products to players all over the world, including but not limited to NES game consoles, Game Boy series handhelds, Wii and the latest generation of console Switch
. Sony Interactive Entertainment is a leading innovative company in the field of interactive digital entertainment. It owns the PlayStation brand and its products and services, including PlayStation series consoles, PlayStation Network (the number of global active users is close to 100 million), and sells various forms of digital PlayStation Store for entertainment products.
In the past five years, the virtual reality headset PlayStation VR is one of the most visionary products developed by Sony Interactive Entertainment. In addition, Sony also owns PlayStation Vue, a live broadcast service for TV programs. In 2016, Sony Corporation moved the global headquarters of Sony Interactive Entertainment from Tokyo to San Mateo, California, demonstrating its willingness to invest in the United States for a long time. Sony Interactive Entertainment has 6 studios in Washington, Oregon and California, focusing on developing world-class games for the PlayStation console, employing many designers, artists, developers, producers and related support personnel.
2. Video game consoles are highly specialized products with a complex supply chain Unlike PCs, the hosts of our three companies have customized hardware configurations and design solutions to provide consumers with differentiated and unique functions. Games and services designed for a certain host must be redesigned-through a labor-intensive process called "porting"-before they can run on another host or PC. For game publishers, this is a huge cost.
In 2018, more than 96% of all game consoles imported into the United States were made in China. Through many years of investment, we and our partners have developed a game console supply chain in China. If the government imposes tariffs on game consoles, this supply chain may be severely impacted, and we have to switch to purchasing parts from the United States or a third country, which will lead to further increases in production costs.
ach game console is composed of dozens of complex components purchased from several countries. Even if we want to change a supplier, we must also be very cautious to avoid product quality being affected or problems in consumer safety. The imposition of tariffs will greatly disrupt our company's business, cause a significant increase in costs, and hinder the sales of game consoles, games and services.
3. In addition to game console manufacturers, American consumers, and American retailers, the proposed tariffs on consoles will hurt small and medium-sized software developers in the United States.
By promoting the growth of consumer demand for games and services, game consoles provide an important foundation for the business of several of our companies. But the profit margin of consoles is very low. We usually price consoles at or slightly higher than the production cost to make them as economical as possible,When consumers buy a host, they are very price sensitive. In 2018, approximately 110 million U.S. console players spent $15 billion on gaming software and services, which means that the per capita annual spending on games for U.S. console players exceeded $130.
Video games are one of the core parts of the structure of American entertainment culture. Two-thirds of American households have at least one gamer, and 60% of American citizens play video games every day. Many American families plan to buy a new game console during the Christmas holidays this year, but if the price of the console increases by 25%, many of them may not buy it.
According to a research report recently done by the independent economic team "Trade Partnership" for the Consumer Technology Association (Consumer Technology Association), the government's imposing tariffs on host computers will cause consumers to spend an additional US$840 million. The report also pointed out, "Even if the new tariff revenue is taken into account, the US economy will still have a net loss of US$350 million per year during the tariff period because the burden is borne by American consumers." and then we can make profits by selling video games and services. In addition to affecting game console manufacturers and consumers, the imposition of tariffs will harm thousands of game and accessory developers in the United States, causing serious chain reactions. Our console has built a huge ecosystem for small and medium-sized game developers; on the consoles of Microsoft, Nintendo and Sony Interactive Entertainment, many games are not developed by ourselves, but created by independent developers. By promoting a rich variety of game products, we provide consumers with more choices. The United States is a global leader in the creation of video games. As of 2018, the United States has more than 2,700 game software developers and publishers, employing more than 65,000 employees. These employees have high skills and enjoy high salaries. If the sales of game consoles or software decline, they cannot be unaffected. Competition in the console game market is already fierce, and a game's low sales or cancellation may lead to large-scale layoffs. In addition, since console manufacturers are also the publishers of many independent games, they assist small development teams in game production, promotion, and distribution. If the console manufacturers' revenues decline, the support provided to them will inevitably decrease. For game practitioners, the decline in pay may prompt them to work in other states or other countries with higher incomes