Japan: Media Mould Breakers

It only takes a ride on a Tokyo subway to see how media habits are changing in Japan. Not so long ago, those passengers who were not sleeping or strap hanging would have their heads buried in a paperback, newspaper, or manga. In the evening, some might also be trying to watch baseball on the flickering LCD screen of an early pocket TV. Today they are more likely to clicking their thumbs across the keypad of a mobile phone, checking news headlines, sending SMS messages, playing games, or surfing sites specially formatted for the mobile Internet (About 76% of mobile users in Japan surf the Web through their wireless handset, according the NPD Group). Soon, they may also be watching baseball on their phones when they are not plugged into their ipod or other MP3 player. And what are those pixellated squares of black and white dots on the transit ads that people use their phones to photograph.

Welcome to the tip of Japan's new media iceberg that is rattling nerves in the old media Titanics. No-one expects any of the old media to slip beneath the waves, but changing consumer media habits are forcing a budgetary re-allocation that is shifting funds from the media establishment.

Growth is also bringing headaches for the new breed of high growth Internet companies. To drive people to their portals or shopping sites, the desperately need to add compelling content. The rapid growth of broadband makes it feasible to stream audiovisual content not only to PCs but also mobile phones. Virtually the only sources for compelling Japanese content are the terrestrial TV broadcasters.“Historically, Japanese mass media, including TV stations have been among the largest content holders. They have superb production capabilities. Often they are compared with Internet-related media in the context of “old” versus “new,” but it is very clear that the companies that hold good content will be the ones that flourish in the years to come,” says a Dentsu spokesman.

Last year, two Internet upstarts each waged hostile takeover bids for major TV networks and jolted Japan, Inc.

Rakuten, Japan's largest on-line retailer, second largest portal, and a leading provider of Internet-based services, with a 2005, turnover of JPY 129.78 billion launched a grab for Tokyo Broadcasting System (TBS), Japan's third largest broadcaster. The bid failed. However at the end of November, the two signed a peace pact in which Rakuten promised not to exercise voting rights on its TBS stock in return for negotiations about business tie-ups. The agreement outlines three areas of co-operation: e-commerce, attracting customers to the web portal and on-line distribution of televisions programs.

Led by its flamboyant chief executive, Takafumi Horie, Livedoor, an Internet and technology services provider embracing more than 50 companies, including Japan's most popular portal, tried to gain control of Fuji TV, the largest broadcaster. Eventually, the bid was blocked and the two agreed to create a joint committee to consider ways to integrate their businesses. However negotiations failed to produce concrete proposals. Horie maintained his aggressive stance which included scathing comments on TV about the older generation that manages Japan Inc. All that came to a sudden end in January when Horie and his key lieutenants were taken into custody and later charged with violations of Japan's securities laws. Livedoor, once valued at over JPY 930 Billion has since lost more than 90% of its stock market value and seems likely to be de-listed and broken up. Proof, if ever any was needed, of the Japanese adage: “The nail that stands up gets hammered down.”

These events mirrored those in 1996, when Masayoshi Son of Softbank and Yahoo fame failed in a joint hostile takeover bid with Rupert Murdoch to acquire TV Asahi, a move widely abhorred as utterly repugnant by the establishment. Eventually, Son was persuaded to step back from the bid and has since prospered in partnership with Japan Inc.

The lesson is clear, change may be inevitable, but it will only take place at a pace that the establishment finds comfortable.

The battle for content may be the most visible sign of change, but it is not the only change. Digital is also driving the convergence between Internet, OOH, transit, TV, and print. ‘Digital paper’ is expected to become dominant in OOH, transit and POP, overtaking TV within a couple of years. QR codes, square of black and white pixels, that can be decoded via scanners built into mobile phones are becoming ubiquitous in print media and outdoor in Japan. The codes direct the phone's Web browser to coupons, games, or further details on a product.

There is also increasing convergence between ‘advertising’, ‘direct response’ and ‘sales promotion’. Usen’s Gyao, a free Web TV service supported by advertising, offers VOD and will soon target commercials to segments by age and gender (it has over 5 million broadband users and expects 10 million by August). Dentsu is also working with TV broadcasters to develop advertising funded Internet TV channels

However changes in delivery technology and the battles for power are not the most significant changes under way. “The twentieth century was an era of interruptions. There were limited channels and you interrupted the consumer with your messages. The passive consumer was obliged to consume them. Technology has now turned all that on its head. Today we have technologically empowered consumers who can avoid any message we wish to send at them. With an interrupt mind set you simply are not going to succeed any more. The key now is to find ways to engage consumers, to produce content, produce messages that they want to see, that entertain, or inform them in ways that attract their interest. Looking at Japan as a communications market place, it is now the most advanced in the world technologically. We see it as an enormous opportunity to learn, to experiment, to discover how we can engage and motivate consumers through this amazing array of technologies as media opportunities,” explains Jonny Shaw, head of planning at BBH Japan.

Traditional media may remain the stalwarts of media schedules, if nothing else the retail trade will require them to support distribution. But the media that build relationships will increasingly come from the convergent digital world.

by David Kilburn

Published in the Camoaign, March 24th 2006