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Global Japan
DEC 24, 2019

The New Digital Reality: Managing Change in Japan’s TV Industry

By John Flanagan
iStock photo/selimaksan

There is a global war brewing that is just beginning to touch Japan’s shores. Traditional media companies, miffed that “upstarts” have been able to build massive valuations on the back of their content—and wanting to cash in on the consumer information bonanza generated from targeted advertising—are launching their own subscription video on demand (SVOD) services.

Disney launched Disney+ on November 12, 2019, WarnerMedia Entertainment announced the planned launch of HBO Max for May 2020, and NBCUniversal Media will launch its Peacock service in April 2020. All of these will compete head-to-head with existing platforms operated by tech giants. To enhance their chance of success against these entrenched SVOD players, media companies have begun pulling all their movies and TV programs from rival platforms.

In a counter move, the existing platforms have begun creating original content. Netflix took the lead on this back in 2013 with the release of its first original series, House of Cards. More recently, on November 1, 2019, Apple announced its own exclusive content plan with Apple TV+, a relaunch of its iTunes movie and TV service.

Other strategies in this mad grab for a piece of the media frontier include competitive pricing and partnerships. The latter is a tribute to Amazon, which offers its video service free to all Prime members as a customer loyalty tool. Others have seen the value in this model and are following suit with telecommunications service bundles—WarnerMedia and AT&T, NBCUniversal and Comcast, Disney and Verizon, to name a few. In fact, AT&T acquired WarnerMedia while Comcast was buying up NBCUniversal to enhance customer retention, packaging their telecom services with content. Such acquisitions and bundles are changing the landscape of available media.

Japan is no exception.

Netflix, Apple, Amazon, and Disney are already in Japan offering SVOD services, and they are growing rapidly. Though Netflix struggled a bit after its launch in 2015, the company recently announced it reached 3 million subscribers.  Amazon has more than 10 million users. Local Amazon rival Rakuten is also entering the fray, and Japan’s U-Next SVOD service is aggressively expanding with major investments in content.

Japanese media giants are also following US bundling strategies—Netflix with KDDI, Disney and Amazon with NTT Docomo.

This is the new digital reality. No one can halt the younger generations’ shift away from TV. In fact, online video services across demographics will only gain popularity as the cost to consumers lowers through bundles and content improves with exclusive high-budget productions.

Faced with this, there are two strategies traditional TV networks can employ: they can jump into the war with their own SVOD services, or they can become an “arms dealer,” selling their content to the highest existing SVOD bidder.

Though a few networks have made some attempt at the first option, only Nippon TV has made a serious go with its Hulu-branded service, now at 2 million subscribers. However, the most successful digital service out of Japanese networks today is not an SVOD offering, but an advertisement-driven video-on-demand (VOD) service called TVer. TVer allows users free streaming of programs they may have missed for up to a week after broadcast. Designed mainly to prevent piracy, it was launched in 2015 as a joint service by all 5 major Japanese networks. As of October 23, 2019, the service had more than 9 million monthly active users, making it the second largest VOD service in Japan after Amazon.

While the success of TVer is no small achievement, competition with major SVOD players will require a significant content boost. Variety reported in October 2019 that an “explosion” of money was being invested in content as media giants gear up for the SVOD wars. The magazine wrote that Disney+ was spending $15 million an episode on its Star Wars series The Mandalorian, and even more for its planned Marvel TV series, all exclusive to the streaming service. Apple is reportedly equaling that per-episode investment for its drama The Morning Show and spending $17 million per episode for its sci-fi series See.

Granted, these programs will be monetized globally to justify the cost, but Japan’s networks will need to ready vast sums to stay relevant and attract users if they choose to launch their own platforms.

Then there’s the second option: the arms dealer approach. Paramount is offering its movies to all the SVOD services. A+E Networks, in addition to offering its content to multiple streaming services, is going one step further, producing series for others that will never be seen on its own channels.

The time has come for Japan’s TV networks to make a decision on which strategy they will employ and boldly act to stay relevant in the age of digital entertainment.