Since launching in Japan in 2015, Netflix has focused on providing high-quality and original content from both international and local sources.
“That original content has been strong motivation for new members,” says Taito Okiura, the director of anime at the streaming service. “Our global content library is also the hook for new members to join Netflix. This year, Netflix will spend approximately $8 billion making that library even bigger.”
That sizable war chest is a warning to Japan’s film industry, whose studios and exhibitors alike are now tasked with dealing with streaming video services or risk being left behind.
Going forward, anime will be a key strategy for Netflix as it seeks to boost its fortunes. In January, the company announced an agreement with studios Production I.G. and Bones for the co-production of anime titles to be streamed in 190 different countries.
Rui Kuroki, the producer of Production I.G.’s sci-fi series “B: The Beginning,” says that it was easier to produce original IP under Netflix’s system than it would be otherwise. “We could simply focus on quality, with a final product that looked and sounded as the creative team had originally envisioned,” he says.
The platform is helping with creativity as well. Another Netflix project that went online this year is “Devilman Crybaby,” a series based on a manga by Go Nagai. It includes violence and sexual situations that, according to Okiura, are ideal for Netflix.
“Netflix has a highly flexible and creative environment that values creative freedom,” says Okiura. “With this, creators can employ their best means of expression for their stories, which will eventually lead to more appealing content for audiences.”
Meanwhile, Amazon, which began its Prime Video service in Japan in 2015, is also focusing on originals, using book and DVD sales, box-office revenue and other data to deliver content that it knows customers will enjoy, including the series “Kamen Rider Amazons” and “Crayon Shin-chan Gaiden.” It is also providing unexpected, new types of content to audiences, such as “The Bachelor Japan.”
In the beginning, Amazon targeted the development of original multi-season dramas. “But very few shows in Japan traditionally have gone for multiple seasons,” says James Farrell, head of content, Asia Pacific, Amazon. “Finding partners to create shows with us took some time, but we’ve been lucky since to have partnered with some of the best companies in the industry.”
According to marketing firm GEM Partners, Amazon and Netflix are chasing two local players for supremacy in the market: dTV, from telco giant NTT DoCoMo, and Hulu, whose Japan operation has been owned by broadcaster Nippon TV since 2014, rank first and second, respectively.
The stakes are high. According to the same marketing firm, sales in the streaming market in Japan were estimated at ¥183 billion ($1.6 billion) in 2017. That figure is expected to jump to $2.34 billion in 2022. For some perspective, Japan’s box office totaled $2 billion last year.
Sensing trouble, exhibitors are taking action, with some enhancing the cinema experience to lure audiences away from their home theaters.
In March, chain Toho Cinemas opened the Movie Palace, a theater that features large leather seats, wider screens (some as much as 20% bigger than normal) and a high-end speaker system.
“We have created this special and luxurious feel,” a Toho Cinemas representative told the Asahi Shimbun newspaper at the time it opened. “That allows customers to have a respite from their ordinary lives.”
In the Odaiba area of the capital, a United Cinemas theater projects a single film on three screens positioned side-by-side, which creates a unique effect for scenes that involve high-speed motion. For its part, Aeon Cinema includes 4DX technology, which features such effects as vibrating seats and wind to coincide with the action unfolding on the screen.
Because the home entertainment market is still relatively strong in Japan, exhibitor and studio Shochiku is considering a premium video-on-demand concept. Under the proposal, which is only in the planning stages, the home entertainment release will be moved up closer to the end of the theatrical run at a price nearly that of a theater ticket, which is around $16.
However, getting the timing right will be tricky, according to Kazunori Moriguchi, general manager, home entertainment and licensing division.
“If the audience knows a picture is coming onto the internet, they might not go to the theater,” he says.
The VOD system might work well for a film that got a limited theatrical release, he observes.
Looking ahead, Netflix sees specialization developing more in the market, which also includes the likes of anime streamer Crunchyroll, online shopping mall Rakuten and AbemaTV, an internet television station that provides a variety of programming, including news and sports.
“Consumers will have a range of entertainment options to choose from based on each occasion,” Okiura says. “For example, people will go to TV for news and sports, but for films and shows people may want to turn to Netflix, where it can offer variety of films options as its specialty.”