Japanese TV broadcasters, both public and commercial, have for half a century enjoyed virtually uninterrupted growth, much to the envy of other local industries. Now, however, they face one new issue after another, technological and otherwise. Some are opportunities for further financial success, while others are a threat to their survival.

The rapid development of the IT industry over the last decade or two has given the traditional TV industry a technological

advantage and convenience that is centered on digital equipment and transmission. But it also created an army of competitors in the form of cable, satellite and web, and most recently, iPod and cellphone platforms. Will the traditional TV media swallow these "new kids on the block"? Or will it be the other way round? The answer depends largely on how creative both parties can become in their efforts to sustain consumer interest in the long run.

Some of the new media seem still to be on shaky ground. Take the recent fall of Livedoor, previously one of Japan’s fastest-growing IT ventures. In 2005, it attempted â€" and almost succeeded â€" in a hostile takeover of Fuji TV, the country’s leading commercial terrestrial network, via an acquisition blitz of the stock of Fuji‘s parent company, Nippon Broadcasting Co., a radio network of the Fuji-Sankei Group. Prior to that, Livedoor had purchased a mail order business, a security company, an ad agency, and even a used car dealer to boost its market value to over US$7.6 billion. In January 2004, Livedoor’s market

value was higher than that of Fuji TV. Now, it has now tumbled down to less than a ninth.

In February 2005, ,after two months of squabbling and public criticism, Livedoor agreed to sell back to Fuji TV all the Nippon Broadcasting stock that it purchased for US$1.25billion. Less than a year later, Livedoor president Takafumi Horie and the company's senior executives were indicted on charges having engaged in irregular stock dealings and window dressing. Police raided the Livedoor office and Horie was arrested.

From his prison cell, Horie watched as his company was delisted from the Tokyo Stock Exchange on April 14, after having been a public-listed company for nearly six years.

Other IT whiz kids are still going strong, or so it seems. President Hiroshi Mikitani of Rakuten, the leading portal shopping site operator-turned-media conglomelate, is still pursuing his plans to “converge” with TBS (Tokyo Broadcasting System), the third largest network in Japan, by keeping more than 15% of TBS shares. Mikitani has been careful never to use the word “takeover”, even after news of Rakuten becoming the leading shareholder of TBS came to the fore last October. He is now calling a truce in his negotiations with TBS until June. Nevertheless, few today believe that he has really given up his TBS

conversion-acquisition idea. Mikitani has, so far, the track record of purchasing a security company, an ad agency, an internet research venture and other businesses over the years.

Masayoshi Son, the legendary IT industry leader of Softbank group, has recently become aggressive in the telco industry, winning a cellphone operator's license last year. Softbank has also lately acquired the Japanese operation of Britain’s Vodafone that had purchased Japan’s third biggest teleco, Nippon Telecom. Softbank spent an estimated record sum of US$15 billion in a leveraged buy-out in the deal, with the object of yielding a controlling influence in the cellphone business, so far divided between NTT and KDDI groups. The next step for Softbank is to start content transmission to cellphones sometime in early 2007. Its target is set to win 6.7 million subscribers by the end of 2011 and 10 million subs shortly afterward.

Thus, Softbank now competes squarely with two traditional giant telcos, the NTT group with its cellphone wing NTT DoCoMo, and KDDI with the au and Tuka cellphone unit brands.

Yasuhide Uno, the president of Usen, (a former cable radio operator in Osaka that has grown into a multimedia company) is yet another potential new media tycoon. He entered the scene as a "white knight" coming to the rescue of the dying Livedoor. His confidence is backed by a series of past acquisitions â€" that of a record label, cellphone software developer and a cellphone content distributor and, more recently, the success of a new broadband content distribution business called Gyao. Gyao offers free commercialsupported content to viewers and has accumulated over 8.5 million subscribers within a year of its launch in April 2005.

The growth was phenomenal and totally unheard of in Japan, where cable and satellite operators are regarded as being very lucky indeed if they clear or even come anywhere close to their first five million subs in the first five years. The company name usen is, the acronym of “united sensational entertainment network”. In Japanese usen means “cable” or “wired,” a name that is inherited from those cable radio days when Uno’s father founded the company.

The young IT leaders, undaunted by the failure of Livedoor, have come into the broadcasting arena at every possible opportunity, locking horns with the media establishment when the occasion calls for it, but in general they are cautious

about not looking too greedy, as in the case of Horie. Their financial records continue to remain strong. Rakuten, for instance, raked a whopping 251% sales increase to US$413 million during the last quarter of 2005 and an operating profit increase of 140% to almost US$1 million dollars during the same period.

Meanwhile, Japan’s traditional broadcasters are not just sitting back and watching these "young Turks" slice up the new media pie.

of their content to PCs, albeit belatedly in 2005, but in efforts that were far less in scope and variety than that of their American counterparts. They were, in fact, limited by the peculiarity of the Japanese rights-protection environment and regulations. Under current regulat ions and voluntary “understandings” in the trade, secondary uses of content after its initial airing on television by networks are next to impossible, except for a limited number of video were releases. This applies to all genres, whether it be sports, movies, drama serials, variety shows or documentaries.

The reason? Rigid refusals by a range of rights-protection organizations for drama or music content to actors to sell their rights. In most other countries, the payment of rights fees might resolve this issue, but not in Japan, where rights holders somehow believe that their rights would be forfeit if their products are used outside the regular realm of television â€" which would mean anything from the Internet, to cellphone distribution to oversea sales of the content. Besides the “potential” monetary loss, rights holders also assume that over exposure to different media would damage the “rarity" â€" or inaccessibility of their products.

So, for the initial stage of Internet and cellphone distribution at least, Japanese terrestrial broadcasters who had their hands tied had to resort to using just news programs filmed inside their studios by their own staff. They avoided outdoor shots that may give rights-junkies any opportunity to sue them for the “violation of privacy.” Or they would produce dramas and short movies specifically for Internet or cellphone distribution.

Nippon TV, for instance, began its Internet VOD distribution of old new and short movies to PCs in October, 2005 and to cellphones a month later. The program was revamped in April this year to include NTV’s satellite news, called Nittele News 24, which is carried by Sky Perfect TV. In February this year, NTV launched a 30-minute distribution of evening news compiled from the terrestrial News Plus One that runs Monday through Saturday, again on a VOD basis. The second largest commercial terrestrial network also started on April 12 podcasting news (edited from Nittele News 24) via the Internet to replace

streaming.

By then, every other commercial network was on the bandwagon, with different degrees of intensity. They sent their signals, though limited in genre and scope, to PCs and cell phones. TBS, for example, invested nearly US$90 million last summer in eMobile, a mobile broadband service company, while Fuji TV accepted a 3% acquisition of its shares by NTT DoCoMo, the cellphone wing of NTT, late last year.

Then, on April 1, this year. The whole spectrum of program distribution to cellphones changed dramatically, when the distribution of digital terrestrial (called chideji in Japanese) content to cellphones and other mobile terminals became official. Called the “One Seg” service (meaning one segment), it derives its name from the technology to utilize one of the 13 frequency band segments allocated for transmission of chideji signals to cellphones â€" a system that is unique to Japan.

During the One Seg test period between January and March this year, appliance manufacturers were cautious in the way they introduced One Seg compatible cellphone models to the market because they were uncertain as to how the public would react to the new system and device. These new devices were retailed at slightly higher prices of about 10 to 20% more than regular cellphones during the early part of the test period.

Public enthusiasm to One Seg cellphone viewing, however, far exceeded initial expectation, and the production of One Seg compatible cellphones were soon lagging behind market demand, according to industry sources.

As a young white-collar worker browsing at a Tokyo discount appliance store put it, “Why not? The price of a chideji cellphone has already come down to being about equal to, or even less than, the price of an old, regular cellphone, And the image on the cell phone screen is even better than what you get on regular, analogue television!”

In fact, towards the end of the January-March test period, thousands of white collar workers were already secretly watching the World Baseball Classic games on One Seg cellphones under their desks or behind their desk top shelves during office hours, so that they wouldn’t miss the Japanese team winning the tournament.

The secret of this success is that TV signals transmitted to cellphones in One Seg are all from regular chideji programs which are largely simultaneous with terrestrial programs. In other words, viewers can watch virtually most of the regular terrestrial television programs via One Seg service on cellphone screens wherever they are, the only difference being the screen size. Since the rights issues are already resolved when the programs are transmitted to digital terrestrial feeds, and the same commercials are also being transmitted to cellphones, there are no hurdle to clear as far as the One Seg service goes.

According to one estimate, sales of One Seg-compatible cellphones have already exceeded 5 million and is likely to reach 20 million, (Japan consumes 90 million cellphones a year). If that really happens, the speed of its subscriber growth growth is more than twice that of the existing chideji digital terrestrial system, and three times faster than that of the five-year-old digital BS (broadcasting satellite). It certainly is a tremendous booster to digital terrestrial broadcasting in Japan, which is set to totally replace existing analogue terrestrial broadcasting by 2011 under a mandatory Government policy.

On April 18, NTV began a new experiment: It showed its franchise Yomiuri Giants pro baseball games "live" on board Japan Railway’s Yamanote loop line trains in Tokyo simultaneously as the game was being shown on NTV’s digital terrestrial channel. Depending on the outcome of this test, which ran till April 30, similar distribution to public transportation systems will be considered later, says Yoshihiro Iwasa of NTV international strategy planning.

Therefore, Japan’s traditional broadcasters and new media companies are pretty much on an even keel right now â€" although anything can happen within the next few years, especially by the time the mandatory analogue-digital switchover becomes a reality in 2011.

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