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brands Corporate Governance Galapagos effect M&A media social media TV

How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

Dentsu dominates Japan’s media sector and advertising

Dentsu switches from JGAAP to IFRS accounting standards with big impact on KPIs

Dentsu dominates Japan’s advertising and media industries, and attracts some of the most creative Japanese talent, although Dentsu is not the first advertising agency in Japan – that priority belongs to Hakuhodo.

From April 1, 2015, Dentsu decided to switch to IFRS accounting standards from Japan’s JGAAP standards. For FY2014, Dentsu reports financial results both using IFRS and JGAAP standards, giving us the fascinating opportunity to compare both accounting standards for a major corporation.

So how big is Dentsu? For FY 2014 (April 1, 2014 – March 31, 2015) Dentsu reports (we have rounded the figures):

  • Turnover (IFRS) = ¥ 4642 billion (=US$ 37 billion)
  • Net Sales (JGAAP) = ¥ 2419 billion (=US$ 19 billion)
  • Revenues (IFRS) = ¥ 729 billion (=US$ 6 billion)

For operating income, net income and other data IFRS and JGAAP measure quite different KPIs.

Disruption is on the way: CyberAgent based on blogs, Recruit based on classified advertising and HR, LINE based on sticker communications, and many more…

How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?
How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

Managing Japan/West cultural issues via the Dentsu-Aegis-Network

As for many Japanese corporations, Dentsu’s challenge is to leverage a dominating position in Japan into a global business footprint, while managing the well-known cultural issues. Dentsu’s approach was to acquire the French/UK agency Aegis, and then via Dentsu-Aegis acquire a string of agencies all over Europe:

Dentsu and Dentsu-Aegis

Dentsu dominates Japan’s advertising space, and is a very very strong force in Japan’s media industry sector, through control and management of major advertising channels with an overwhelming market share in Japan, and has been working hard to leverage its creative power and strength in Japan into a larger global footprint.

A big step forward towards a larger global footprint for Dentsu was the acquisition of the London based Aegis Group, announced on July 5, 2012.

Read our report on Japan’s Media Landscape

Dentsu HQ
Dentsu HQ

Copyright (c) 2009-2015 Eurotechnology Japan KK All Rights Reserved

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brands media social media TV

Japan brand management: Saatchi & Saatchi Japan CEO Philip Rubel talks about Lovemarks in Japan

Japan brand management: brands often work differently in Japan. Saatchi & Saatchi Japan CEO Philip Rubel explains Lovemarks in Japan

Japan brand management: Saatchi & Saatchi Japan CEO Philip Rubel talks about Lovemarks in Japan
Japan brand management: Saatchi & Saatchi Japan CEO Philip Rubel talks about Lovemarks in Japan

by Gerhard Fasol

Philip Rubel, CEO of Saatchi & Saatchi Fallon Tokyo KK gave a talk about “Lovemarks”, a concept in branding developed by Saatchi & Saatchi CEO Kevin Roberts.

To understand Japan’s media landscape read the “Japan’s media” report.

The argument is that traditional “brands” are losing relevance because in our advanced “post-industrial” societies, function and technology are given, and can usually be rapidly reproduced or overtaken by competitors. Therefore, advertising based on function or technology does not work anymore. Another factor is the shift from traditional one-way media such as TV and print, to social media and peer-to-peer interactions, where anyone can publish anything about “brands” and “brands” cannot do anything about it directly. Thus traditional brands are dead. So, how can we get people to attach irrationally, beyond reason? Lasting relationships are not based on rational thinking.

Japan brand management: Lovemarks create loyalty which goes beyond reason

“Lovemarks” counter these effects: the concept of Lovemarks is to “create loyalty which goes beyond reason”. To create love for the Lovemarks. To get there, Saatchi & Saatchi believes in the “unreasonable” power of creativity: creativity can create loyalty beyond reason.

Philip Rubel showed us several examples of campaigns, mainly in Japan, which were successful far beyond expectations. These campaigns are based on creativity, incorporate surprise, appeal to emotion, and aim to exploit viral sharing on social media such as facebook and YouTube. Creativity is used to replace expensive traditional top-down one-way media such as TV and print, by social media, internet, YouTube and viral sharing and engagement. Here are some examples:

BMW films by Fallon

The issue was to develop the BMW brand in USA with limited budgets. BMW Films was a series of films created by famous directors and famous actors, which was uploaded to the BMWfilms.com website for download. BMW Films became famous, actors volunteered to appear, and download figures were far beyond plan.

SONY Bravia balls in San Francisco

Making of SONY Bravia balls

SONY Bravia paint

Godiva Love & Hug project for Valentine’s day 2013

For Valentine’s day 2013, Saatchi & Saatchi built a hugging robot, which people could hug, and the hugs were measured, rated, and photographed, and the results could be displayed on social network sites etc. The campaign is explained here on Saatchi & Saatchi’s website.

https://www.facebook.com/GodivaLoveandHug

De’Longhi coffee campaign: Michelangelo’s David

De’Longhi had the issue of competing with much more powerful Nestle’s campaign centered on George Clooney. De’Longhi decided to use Michelangelo’s David, who is immensely popular in Japan – and who does not require actor’s fees…

Reebok Rajio Taiso

Radio Taiso is a morning gymnastics series, which Japan’s national radio and TV system NHK started back in 1928. Saatchi & Saatchi created an imitation of Radio Taiso using professional acrobats, and relied on viral marketing. The advertised brand name appears only very briefly at the end of the video clip – enough to create response far beyond expectations:

T-Mobile “Life’s for sharing” campaign

T-Mobile “Life’s for sharing” Royal Wedding episode currently has 27,539,402 views on YouTube:

Understand Japan’s media and advertising industries

Report on Japan’s Media (approx. 200 pages, pdf file)

Copyright 2014-2019 Eurotechnology Japan KK All Rights Reserved

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Internet media Mobile TV

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Two keynotes on “Evolution of TV” and “Social TV” and chaired session at BCWW2009 Global Media Forum, Seoul, Korea, September 10, 2009

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)
Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)
Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)
Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)
Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)
Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

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electronics component makers Japan's electronics industry Japan's electronics multinationals media Mobile TV

Wild differences in operating margins for mobile, TV media groups and electricals

We analyze the effect of the crisis on operating margins in three different sectors in Japan:

(1) electronics,
(2) mobile communications
(3) TV media groups.

In sector (1), Nintendo‘s margins are above 30% and increasing despite the crisis, while traditional electronics companies’ margins are evaporating.

(2) for mobile operators DoCoMo, KDDI and SoftBank margins are 10%-20% and increasing despite the crisis! Could mobile phone usage be crisis resistant?

(3) TV media groups had healthy margins in the 10%-20% range back around 2001- however these margins have been slowly melting away, and TV group margins are heading to cross the zero line into the red zone by 2010-2011. Watch out for a TV media crisis. Read more below.

Consumer electronics sector operating margins:

Nintendo bucks the trend: while Japan’s electronics firms’ margins are dropping into the red, and have never been much higher than 5% during the last 10 years, Nintendo‘s operating margins are above 30% and rising despite the crisis.

Margins of top Japan's electronics multinationals and Nintendo
Margins of top Japan’s electronics multinationals and Nintendo

(Find full data, fully labeled graphics and analysis in our report on Japan’s electrical companies)

Mobile phone sector margins are 10% – 20% and rising despite the crisis.

Mobile phones seem to be resistant to the current crisis. DoCoMo‘s, KDDI‘s and Softbank‘s margins are healthy and improving despite the crisis.

Operating margins of Japan's top 3 mobile operators
Operating margins of Japan’s top 3 mobile operators

(Find full data, fully labeled graphics and analysis in our JCOMM Report)

Margins of TV media groups have been melting away since their peak in 2001.

Back in 2001 Japan’s TV media groups used to enjoy healthy margins of up to 20%. Over the last 8 years these healthy margins have molten away, and Japan’s large TV media groups are likely to all simultaneously go into the red from 2010 onwards, unless dramatic action is taken. Media groups will need to grow profitable new business, e.g. mobile-TV, and other cross-media growth areas.

Could it be that recent anti-takeover measures have made the large TV media groups complacent?

Operating margins of Japan's TV media groups
Operating margins of Japan’s TV media groups

(Find full data, fully labeled graphics and analysis in our J-MEDIA Report)

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Categories
media Mobile TV

75% of mobile phones in Japan ship with digital mobile TV

Digital mobile TV started in Japan in 2005 – about 3 years ago: KDDI/AU sold the first phones with digital mobile TV starting in October 2005, at the same time mobile TV was available for public testing. The official commercial service of mobile TV started on April 1, 2006.

Today more than 75% ship with 1-seg mobile digital TV tuner and software, and the percentage is rapidly increasing as the figure below shows. Quite soon, almost all mobile phones in Japan will ship with digital mobile TV.

Percentage of Japanese mobile phones shipped with 1seg mobile TV built in
Percentage of Japanese mobile phones shipped with 1seg mobile TV built in

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

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Mobile TV

eMobile – mobile disruption in Japan

On March 31, 2007 eMobile will start high-speed (3.6 Mbps, HSDPA) mobile data services in Tokyo, Osaka and Nagoya, bringing disruption into the mobile data market in Japan.

While Willcom offers a flat data rate of YEN 9000 (US$ 77) per month for unlimited data transmission at 128kbps, eMobile will offer 30 times higher speed at about 1/2 the price:

3.6Mbps for PDAs, laptops and PCs for YEN 4980 (US$ 43, EURO 32) per month flat rate without any data limit (and n.b. no “fair use limit” as many European operators impose in the fine-print). …. and yes- you can probably also do wireless VOIP or Skype if you set this up yourself.

The established mobile operators (DoCoMo, KDDI/AU and SoftBank) do not offer any flat data rate to connecting PCs and laptops at this time.

eMobile offers the EM-ONE terminal:

  • data download at 3.6 Mbps (wCDMA-HSDPA)
  • wLAN (IEEE 802.11b/g)
  • Windows mobile 5.0
  • digital mobile TV = 1seg
  • 4.1inch VGA (800 x 480) LCD display by SHARP
  • camera (with QR-Code reader etc)

(By the way- did you ever wonder why new entrants love flat rates? it’s because telecom billing systems are so expensive and complex. Flat rates are one of many competitive weapons new entrants have over incumbents…)

eMobile went to market with a splash in Japan - the first terminal was an HSDPA / wLAN and mobileTV equipped pre-smartphone smartphone
eMobile went to market with a splash in Japan – the first terminal was an HSDPA / wLAN and mobileTV equipped pre-smartphone smartphone

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
Mobile TV

1-SEG

1-SEG? One-Seg? wansegu?

In Japan the nickname for digital mobile TV is written in Katakana: ワンセグ (pronounced wansegu). Japanese people love to abbreviate – oneseg is short for One Segment. Why?

The reason is technical: digital TV is broadcast in certain radio frequency channels. Each TV station (e.g. NHK, Fuji-TV, TBS etc) uses one particular 6 MHz wide frequency channel for digital TV broadcasts. Each channel is divided into 14 segments, and one segment is used for digital TV to mobile phones, while the other remaining 12 segments are used for high-definition digital TV, while the 14th segment is used as a buffer between adjacent channels to avoid interference.

Read our report on mobile TV in Japan.

Copyright·©1997-2013 ·Eurotechnology Japan KK·All Rights Reserved·

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Mobile TV

Mobile TV

Digital mobile TV started officially in Japan on April 1, 2006 after several months of testing. Japan’s media industry is large – Japan’s broadcasting industry alone is about US$ 40 billion sales/year, so mobile-TV will probably develop into a multibillion-$ industry over the next few years. At the moment there is a chicken-and-egg situation: content providers need a market with lots of subscribers, but subscribers will only buy handsets if there is enough good content. So investment and a longterm view is necessary to jumpstart this new market.

Apparently about 500,000 mobile phones with digital TV have been sold already – KDDI started selling mobile phones for digital terrestrial TV (1-SEG) from autumn 2005, while DoCoMo introduced the first digital TV handset only a few weeks ago.

According to major phone retailers, buyers are mainly men in the 25-35 age group. So there are some more steps to do until mobile TV goes mainstream, for example, making mobile-TV enabled phones smaller and more attractive for female customers.

Viewers can watch TV and they can purchase & download the music, join fan clubs and much more

First simple estimations by our team based on analysis of Japan’s TV industry and on the development of i-mode in Japan show that the mobile TV industry segment in Japan may well reach a volume of US$ 4 billion or more within a few years for m-commerce, advertising and other business combined.

…more about mobile-TV: download our mobile-TV report

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Categories
M&A media Mobile TV

Japan media landscape restructuring

Japan’s broadcasting is a US$ 40 billion/year industry

There have been many attempts over the years for Japan media landscape restructuring

by Gerhard Fasol

Japan’s broadcasting markets (commercial TV + NHK + CATV + satellite + AM & FM radio) have annual combined revenues on the order of US$ 40 billion. The main players in this market are five large commercial TV groups and the semi-public NHK.

Media Group TBS attracts uninvited merger proposals

One of these five TV and media groups – TBS – has received an uninvited merger proposal by it’s largest shareholder – the internet portal Rakuten – and in parallel also attracted the Murakami-Fund as an investor.

TBS media group under pressure? and why?

Earlier this year Japan’s Murakami Fund acquired about 7% of the TBS Media Group, and declared that TBS was undervalued and should sell non-core assets, such as real estate and other non-TV / non-media related properties.

Recently, Rakuten acquired about over 20% of TBS shares, making Rakuten the largest shareholder of TBS. Rakuten announced a business plan for a merged Rakuten-TBS Group integrating Rakuten’s internet businesses with TBS’ TV and media operations. Since Rakuten’s stock market valuation is about 35% higher than TBS’ valuation (as of October 24, 2005), Rakuten’s management is expected to dominate a potentially merged group.

TBS’ management is not delighted with the prospect of losing control in this way. In response, three things happened:

  1. TBS management announced cooperations with “stable shareholders” Dentsu, Mitsui Bussan, and Bic-Camera, and non-shareholder Amazon.co.jp, and other Japanese corporations.
  2. The Murakami Fund proposed a management buy-out, which would lead to a delisting of TBS by the Tokyo Stock Exchange, taking TBS private. This possibility was voted down by TBS management.
  3. Livedoor offered support as a (very unlikely) white knight. Given Livedoor’s record of a failed hostile take-over attempt of the Fuji-Sankei media group earlier this year (for details see our report on Japan’s Media industry), it seems to be more than unlikely for TBS to go for Livedoor as a white knight – however no one knows for sure.

At this time the acquisition battle for the TBS Group is in full swing and the final outcome is difficult to estimate. In parallel to the take-over battle, a public discusson by Japan’s industry leaders is examining the desirability of hostile take-overs in Japan.

Japan media analysis report:

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M&A media TV

Livedoor and Fuji TV take over battle via Japan Radio

New economy player Livedoor attempts takeover of “old economy” media conglomerate Fuji Television Group

Livedoor and Fuji TV: Takafumi Horie “Horiemon” attempts to exploit an overlooked loophole in Fuji Televisions shareholder structure to gain control of the very much larger Fuji media group

Livedoor and Fuji TV: New economy (Livedoor) is knocking at the door of old economy (Fuji-TV) (for details see our “Japan’s Media” report):

Fuji Television headquarters building in Odaiba
Fuji Television headquarters building in Odaiba

Below is an outline of the take-over battle raging right now. The complex cross-shareholding is puzzling, and the reason for it is surprising to the uninitiated: a long time ago there was no radio and no TV, only newspapers. Radio in Japan was born as babies of newspaper companies, and TV stations were born as babies of the Radio stations. So at the beginning Fuji-TV was a tiny in-company venture subsidiary of Japan-Radio (Nihon Hosou). The cross-share holding structure dates from these pioneering days of TV in Japan and has not been touched since – until Livedoor’s Takafumi Horie came along.

Schematics of Livedoor's attempt to take control of Fuji Television Media Group via the radio station Nihon Hosou
Schematics of Livedoor’s attempt to take control of Fuji Television Media Group via the radio station Nihon Hosou

Takafumi Horie’s nickname in Japan is Horiemon. Why? Because many people think that Takafumi Horie looks similar to Japan’s cartoon character Doraemon.

By the way: some media falsely report that Horie is the founder of Livedoor. This is not the case. Horie-san founded a website design company called “Livin’ On the EDGE Inc” in 1996, later renamed EDGE, and many other companies. In 2002 he acquired the free email/ISP company Livedoor.

This battle stimulated us to release our “Japan Media” report.

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