TOKYO With the world’s second-largest economy and some of its biggest electronics companies, Japan would seem poised to lead the planet into the digital entertainment future.
But the ride so far has been bumpy.
While the country is in the fast lane in terms of using mobile phones for entertainment — 100.5 million Japanese out of a population of 126 million have such phones, and the vast majority enjoy real-time broadcasts of TV shows — it is having problems in other areas.
The TV industry, for example, is bleeding red ink as execs try to adapt old business models to a changing world, and grapple with analog-era copyright regs that are proving inadequate in the digital age.
Particularly hard-hit are terrestrial broadcasters.
The National Assn. of Commercial Broadcasters in Japan (NAB) estimates that Japan’s five major networks and pubcaster NHK spend $833 million over the next three fiscal years as the country phases out analog broadcasts.
Digital TV is planned to be the only delivery system by July 2011, with lofty hopes of creating links between the Web and the home set. On July 24, Japan’s communications ministry outlined a plan for smoothing this transition, backed by a budget of $2.03 billion.
But NAB estimates that one-third of all local broadcasters will go into the red paying for the needed plant and equipment.
Meanwhile, those stations are losing viewers and revenues. NTV’s sales from spot ads plunged 9% to $238 million in the quarter ending June 30, while other networks have reported similar drops. Execs at NTV, TBS, TV Asahi and TV Tokyo have recently taken pay cuts to show contrition for falling sales and profits.
It’s not clear how much of this drop is due to ad sales migrating to the Internet or to Japan’s faltering economy. But according to Dentsu, Japan’s biggest ad agency, ad placement costs for satellite, cable, teletext and Internet media rose 26.5% in 2007 to $4.17 billion. By comparison, TV ad spending slipped 0.9% in the same period, to $18.16 billion.