Auds hitch up to broadband wagon

Softbank's ADSL pay TV system booming in Japan

TOKYO — Suddenly, the future of television in Japan looks very different from just a year ago.

Satellite and cable TV has a new and potentially troublesome contender: broadband television via the Internet, with video-on-demand and Internet phone services thrown in as a bonus.

“In a few years the whole broadcasting structure in Japan might change radically,” opines an executive of a cable programming company. “Satellites and all might become things of the past.”

Taking the explosive growth of broadband connections in Japan into account, this prophecy is not farfetched.

There are close to 20 million broadband users and that figure will triple by 2007 according to government projections. Right now, Japan ranks third in broadband subscribers after the U.S. and South Korea.

The boom began when Softbank Corp. (owning 4% of Yahoo and 41.94% of Yahoo Japan) offered cut-rate asymmetric digital subscriber lines (ADSL) via Yahoo broadband in late 2001, forcing former telecom monopoly NTT to push down prices for its Flets ADSL services.

Softbank had bigger things in mind. In spring this year it started to offer Broadband Cable TV to its ADSL subscribers.

It is Japan’s first and, for now, only commercial ADSL pay TV system allowing VOD. Internet phone service is being marketed together with BB Cable TV as a package for any new Yahoo BB broadband subscriber.

The price is temptingly low. A monthly fee of only 2,500 yen ($21) includes 17 channels (among them Fox, CNBC, National Geographic and MTV) and the set-top box rental. The aggressively pursued target: close to 900,000 BB Cable TV subscribers, or 10% of Yahoo BB ADSL subscribers within the coming two years or so.

This marketing success involving sales teams at shopping malls and street corners and relentless discounting has come at a steep cost.

Softbank lost $846 million in the financial year ended March 31, and a $289 million during the April-June quarter. During July the company spent $67 million on marketing and promotion alone, according to its president Masayoshi Son.

Stakes as high as that have not stopped others from jumping on the broadband-wagon.

All major communications and broadcasting firms want to be part of it when the market reaches critical mass.

The announcement two weeks ago by Japan’s largest cable television provider, Jupiter Programming, that it has pacted with Tohokushinsha Film Corp., Secom, Nifty Corp., Plala Networks and electronic giant NEC Corp. to establish a content distribution company is just the latest in a flurry of new broadband ventures. And all of them center on what’s still lacking: content.

In mid-July, Disney announced its Disney BB service which will air on NTT’s ADSL platform, featuring games, music and educational videos. Softbank countered with the announcement of a game portal for its subscribers.

Meanwhile, dominant satcaster Sky Perfect Communications is still struggling to break even in this sector. It established OptiCast Corp. in June to deliver television via the newest technology, fiber-to-the-home, diverting some of its satellite-based content to the new platform.

Not to be outdone, telecom group KDDI Corp. plans to spend $1 billion over the next five years to build up its own broadband-based television, telephony and Internet access service with a target of three million subscribers using dedicated lines.

Add to this all major television networks, film distributors, animation studios and Internet portal operators with the collective intention to milk the broadband television and VOD bonanza with alliances and newly formed ventures, and the new trend looks like a media bubble in the making.

“What’s going to happen to the billions invested in satellite and digital broadcasting?” muses a broadcasting analyst in Tokyo. “A lot will never be returned.”

And Japan’s consumers hold their breath — and purse strings — as they ponder which way to go: television via traditional delivery forms or via broadband Internet.