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Japan's digital content struggles: the country of the future remains stuck in the past

Japan's digital content struggles: the country of the future remains stuck in the past

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ecosystems japan lead
ecosystems japan lead

As anyone who’s spent much time in Japan can tell you, rumors of a technological paradise have been greatly exaggerated. While the country may be a world leader in things like high-speed rail and mobile payments, a lack of public Wi-Fi and an over-reliance on fax machines persist. So it is with the transition to digital content, where — despite the country’s huge appetite for consumer electronics — Japan continues to lag much of the world in offering services for the living room and beyond.

In fact, while we’ve been covering the fight for the living room all week, the lack of a traditional “living room” in Japanese homes may be partly to blame. With typically cramped living quarters, it’s not particularly common for families to have regular access to a large screen for movies and so on — witness the Wii U, heavily pushed as a “second screen” so that you don’t dominate the TV — and Japanese people have in the past been happy to get as much done as possible on their phones, being as they are the most personal of devices.


Another issue is a rampant culture of recording that’s been in place ever since the introduction of VHS and Betamax — both Japanese inventions, of course. Cable TV isn’t the standard fixture in Japan that it is elsewhere, and while many Americans of late like to talk about cutting the cord, the reality is that most Japanese viewers detached themselves from live broadcasts long ago. The vast majority of homes have a DVR, DVD recorder, or TV with similar functionality built in, and the fairly wide-ranging nature of free-to-air channels means it’s easy to use programming guides to get more than enough content to watch at next to no cost. I myself use Torne, a well-designed PlayStation 3 DVR accessory that Sony has managed to sell over a million units of. With all this in mind, the concept of actually paying for TV shows is a hard sell to many Japanese consumers.

Netflix and Amazon Instant Video remain unavailable in Japan

Perhaps this explains why services like Netflix and Amazon Instant Video remain unavailable in Japan, with little in the way of native competition. Hardware, too, is thin on the ground — the likes of Roku and Boxee Box are yet to make an appearance in the country. The Apple TV and Sony’s PlayStation 3 offer a reasonable selection of local and international movies for rental or purchase, but neither has a subscription plan and there are no TV shows on iTunes in Japan. While a few Japanese-only subscription services do exist, such as Actvila and Tsutaya TV, they’re mostly limited to smart TV platforms and neither offers unlimited viewing for a low, flat fee. Tsutaya TV limits you to 20 videos a month for ¥980 ($12.33), after which you’ll have to pay more for each rental, and Actvila offers individual theme “packs” for anywhere between ¥945 ($11.89) and ¥10,500 ($132.08) a month. Second-placed carrier AU will launch an Android-powered smart TV box later this year with contract bolt-ons that grant access to music and videos, but the impact is likely to be limited — it’ll be offered through cable TV providers.


The unlikely game-changer in all of this is Hulu

The unlikely game-changer in all of this is Hulu, which surprisingly chose Japan as its second market last year. The Japanese version of Hulu Plus is a fairly robust service that actually beats its American incarnation in a few areas, most notably with its complete lack of advertising. There’s no free Hulu site in Japan — following an early price drop, the service exists solely as a premium, ¥980 ($12.33)-a-month subscription package that works across the web and various devices, making it a unique offering in Japan. The library is growing too, and although the site launched with exclusively foreign content, it’s now doing a better job of licensing Japanese movies and dramas. I’m a subscriber, and I’ve been pretty happy with the service.

Hulu’s local managing director Buddy Marini told me that the company decided to launch in Japan for three main reasons: the well-developed infrastructure and penetration of connected devices, the country’s status as the second-largest market for entertainment in the world, and the thriving creative industry that produces a great deal of native content. While Hulu won’t disclose numbers, Marini says the company is “very happy” with business so far, and believes that it’s “growing steadily.” That price drop, meanwhile, was based on user feedback and a desire to open the service to “as many Japanese consumers as possible,” suggesting that the initial takeup may have been disappointing — even though Hulu Plus certainly offers the best value for money in Japan at present.

It’s much the same situation with music, where international players such as Spotify, Rdio, and Pandora are yet to make their presence known. Windows 8, too, came to the country last month without any deals in place for Xbox Music. Sony launched its all-you-can-listen Music Unlimited service in Japan earlier this year, and while the service isn’t without its flaws it probably represents the best and most versatile service currently available in Japan, even at its relatively high subscription fee of ¥1,480 yen ($18.62) a month and paucity of Japanese content. The main culprit is the unwillingness of publishers to license their content in a similar way to what has become standard abroad — Sony Japan only allowed its songs to be sold on iTunes this past week — but the country’s business environment is also to blame.

Spotify and its contemporaries grew out of a startup culture that simply doesn’t exist in Japan to any significant degree. Those companies now have bargaining power with record labels after amassing tens of millions of loyal customers and establishing themselves as forces to be reckoned with, but it would be unusual for such a service to spring out of nowhere in Japan. Arguably the only domestic companies with similar clout are the mobile carriers, but while NTT Docomo and AU both launched their own smartphone music services this year, these are inherently limited by the potential audiences and devices they’ll run on. Docomo actually once offered a Napster-branded subscription service, but it shuttered a couple of years ago due to high fees and low take-up. Rekochoku and Chaku-uta, meanwhile, are popular mobile music download services that offer a wide library of Japanese artists, but without a subscription package or DRM-free way to move songs around they amount to little more than iTunes on your phone. The latter, in fact, evolved out of a ringtone download service. These actually worked pretty well in the past, given the pivotal role that phones have played in Japanese people’s lives for many years — compatibility with a wider range of devices wasn’t the concern it is today.

Almost all music services have DRM in Japan

Almost all music services, incidentally, still have DRM in Japan, though iTunes belatedly removed it this year and labels have pledged to strip it completely by the end of 2012. While harsh new anti-piracy laws have come into effect, they don’t cover the widespread, legal practice of renting and copying CDs from stores like the ubiquitous Tsutaya. It doesn’t help that the traditional Japanese music industry is in disarray, forced to disproportionately cater to obsessive otaku fans of idol groups such as AKB48 who are willing to buy multiple copies of $20 singles to get extra votes for their favorite member in popularity contests. With both physical and digital music sales down across the board amongst other demographics, the reluctance of labels to licence their content and pursue other business models is nothing short of mystifying.

If there’s one hope for a service that can finally compete with what’s on offer elsewhere, it’s coming courtesy of — perhaps unsurprisingly — the infamous Masayoshi Son and his SoftBank corporation. Son recently announced plans for Uula, an ambitious music and video offering that will launch next month. Uula is a joint venture between SoftBank and famed J-pop mogul Max Matsuura’s Avex Entertainment group — the title was taken from the last part of Matsuura’s name in Japanese — and will offer unlimited viewing to customers for ¥480 ($6.04) a month across smartphones, iOS devices, and TV via an HDMI dongle.

The real question, however, is whether or not Japanese consumers even want these services that we from the West can no longer imagine life without. Hulu and Sony are making good starts, but they certainly have their work cut out for them in Japan. As far as I can tell, most people are pretty happy as long as they live within bicycle distance of a Tsutaya — that’s basically everyone in Tokyo, by the way — and its convenient, cheap access to rented media. Which, of course, can be copied and kept forever; a practice that Tsutaya has gone out of its way to encourage by actually selling burnable discs and drives alongside its J-pop CDs. And for casual consumers, maybe it is a better solution. No DRM, no extortionate prices, and a sense of ownership. That’s the thing about Japan — for better or worse, you can always count on the place to march to the beat of a different drummer.

Explore the ecosystems

This week we're taking a close look at the future of TV and the living room — the great unclaimed space of the technology world. Check back each day for a close look at all the major players, along with a full range of interviews with industry players and reports on everything from the state of remote controls to the future of gaming. Tune in all week for the rest. Here’s a sampling:

Google, Microsoft, Aereo, Boxee CEO Avner Ronen
Wednesday: Amazon, Sony, live sports, TV apps, Condé Nast’s Dawn Ostroff, NBC's Vivian Schiller
Thursday: Apple, the state of remotes, Vizio CTO Matt McRae
Friday: Independents, New Yorker's Emily Nussbaum, Valve