Yukoh KawamuraChairman & CEONikkei Business Publications, Inc.
Cross Border Publishing in Asia…A Japanese PerspectiveFIPP World Magazine Congress
May 23, 2005
Good morning, ladies and gentlemen. As introduced, my name is Yukoh Kawamura, Chairman & CEO of Nikkei Business Publications in Japan. It is a great honor to be given an opportunity to speak today in front of such a big audience.
The theme I was given for the presentation today was “Cross Border Publishing in Asia...A Japanese Perspective.” However, in view of what I will discuss today, I would like to make a slight change in the subtitle to read “…A Japanese Gloom.”
What then is our gloom? Firstly, there is the issue of the Internet. In the past, the Japanese magazine publishing industry has been somewhat “protected” from foreign entry because of the language barrier and also because of Japan’s unique distribution system for magazines and books. But the Internet of course has no borders and the Japanese market is being urged to open up to non-Japanese publishers. Moreover, traditional print magazine publishers now face a situation where both the print culture and the conventional magazine business model are facing threats.
Secondly, there is the issue of China. Particularly on the global advertising scene, Japan is viewed less and less as an individual market that needs to be worked on, but rather one of the markets in Asia where China is the big attraction. Also, from the publishing perspective, Japanese publishers are facing the challenge of tackling the Chinese market that appears to have a huge potential but still with restrictions and risks.
Now, as a starter for my presentation, I would like to provide some background information on Japan’s publishing industry as it presently stands. Unfortunately, the Japanese publishing industry continues to face sluggishness. According to a research conducted by The Research Institute for Publications, total circulation sales revenue generated in 2004 in Japan was 2 trillion and 242.8 billion yen. Circulation sales revenue from books was 940 billion yen and that from magazines was 1 trillion and 290 billion yen. This was the first time in the past eight years that a growth was seen from the previous year. But still, the situation continues to be very tough particularly for magazines and we cannot say that the prolonged publishing recession has hit the bottom.
The number of suspended magazines in 2004 was 172, which was the worst in history. On the other hand, there were 216 new magazines launched, especially in the women’s fashion sector. Partwork publishing is a growing sector in Japan as far as circulation volume is concerned.
The magazine advertising market has been shrinking, down 1.6% from the previous year in 2004. According to a study conducted by Dentsu, total ad spending in 2004 was 5 trillion and 857.1 billion yen. Spending in newspapers and TVs fared well. And for the first time, spending in the Internet surpassed that in radio, catching up rapidly with spending in magazines.
Under the circumstances where not only magazines but also newspapers are lowering their circulations, there are several thinkable reasons for the publishing recession in Japan, of which the most important probably has to do with the younger generation showing less and less interest in printed media amidst the spreading use of the Internet and mobile phones. There is a good example that I can offer in this aspect.
Last year, there were two bestseller books that drew considerable attention in Japan. One was named “Deep Love” and the other “Densha Otoko” meaning a man on a train. Honestly speaking, neither had much content to it. “Deep Love” was about a female high school student who, after repeated prostitution, becomes infected with AIDS and dies. “Densha Otoko” was about a shy fanboy who showed his courage to stop an act of public peace disturbance on a train and wins respect of many women who came to know of the fact.
What was special about these two books was that they were not printed books from the very start. “Deep Love” was originally a serial novel offered as mobile phone content. “Densha Otoko” was originally a conversation that developed on an online bulletin board. For these reasons, these stories unfold in forms such as email exchanges, online chats and blogs, which led to the strong support of the younger generation. I would say these are symbolic examples of how the online world is eating into the print world.
Back to the issue of the prolonged publishing recession in Japan, movements are starting to take place where new business models are sought beyond print publishing. One example is the Kadokawa Group, a publisher with long history, which through acquisitions and partnerships is diversifying its businesses to place film production and related content business at the core.
“More than a magazine” is the concept of National Geographic Society with whom Nikkei Business Publications forms a joint venture in Japan. Japanese publishers too are endeavoring to build new business models that go beyond print to cope with the rising pressure from the Internet. The strategies to this end will differ publisher by publisher and cannot be explained so easily. Neither do I know so well about what each is doing, so I would like to frankly discuss today what Nikkei Business Publications is doing to cope with the emerging power of the Internet. And to begin, I would like to provide a brief outline of Nikkei Business Publications.
Thirty-five years ago, Nikkei Business Publications was born as Nikkei-McGraw-Hill, a 50-50 joint venture between Nihon Keizai Shimbun and McGraw-Hill. The name of the joint venture was Nikkei-McGraw-Hill, which launched a magazine named Nikkei Business under editorial licensing arrangement with McGraw-Hill’s BusinessWeek. We introduced the annual subscription system in Japan where we would deliver copies of Nikkei Business directly to the subscribing business leaders. Nikkei Business is presently the largest business weekly in Japan both revenue-wise and circulation-wise.
We learned from McGraw-Hill’s methodologies, and introduced more B-to-B annual subscription titles in industries such as electronics, machinery, computer, medicine and construction to follow Nikkei Business. Over ten several years ago, the capital alliance between Nihon Keizai Shimbun and McGraw-Hill was dissolved and we became wholly-owned by Nihon Keizai Shimbun. Over the years, we have grown to become the foremost B-to-B publisher in Japan that offers essential information on technology, management and lifestyle. Our Japanese name is Nikkei BP, with “BP” meaning “business publications.” But personally, I like to think that “BP” also stands for “best provider” of quality content.
Presently, Nikkei Business Publications publishes over 40 magazines and newsletters, both through annual subscription and at bookstores. As other printed media, we publish books, mooks and partworks. In the area of online, we operate over 70 online properties. We also organize seminars and events, while offering research and consulting services. Among our events are WPC EXPO, Asia’s largest IT/digital showcase; Tokyo Game Show; BioJapan; and numerous highly-specialized seminars of themes such as RFID.
Nikkei Business Publications has editorial licensing arrangements with many powerful media of the world, including BusinessWeek. Also, as mentioned earlier, we have a joint venture with National Geographic Society to publish the Japanese edition of National Geographic Magazine. This fall, we will work with Time Inc. to launch Real Simple Japan and engage ourselves in a new frontier of offering lifestyle solutions.
As such, Nikkei Business Publications covers a broad range of industries and markets, but in each case, we make sure to identify who our targets are and offer them solutions through an organic mix of print, online, events, seminars, research and consulting. This is our basic concept of doing business and, in this sense, we too go beyond print to seek new business models.
A very unique fact about Nikkei Business Publications is that we adopt the staff writer system. Presently, we employ over 500 staff writers to disseminate B-to-B information of the highest quality. I believe this staff writer system enables us to boast the strongest position in Japan as B-to-B publisher, particularly in the high-tech arena.
Twenty years ago, I served as the editor-in-chief of Nikkei Business. At that time, Nikkei Business ran a series article dealing with the lifetime of a company. It was an analysis based on actual examples that the lifecycle of a company from incorporation to decline is 30 years – which is probably much shorter nowadays. This serial article was, so to say, the application of the Darwinian theory of evolution to companies. Our aim was to state that it is not the fit or the strong that survives, but that which can cope with changes and evolve, even in the case of companies. Nikkei Business Publications, which celebrated its 36th anniversary this year, is no doubt facing the same challenge of finding out how to cope with the changes in the business environment.
Over the past couple of months, the name Takafumi Horie appeared daily in Japan’s media. Mr. Horie is a young man who runs an IT venture business named Livedoor, and he has been growing his company’s market value very rapidly through stock splits and acquisitions. The reason why he made a hot topic in Japan’s media recently had to do with his overnight purchase of a radio station’s stocks to become its major stakeholder all of a sudden, with his real intention being to win influence over a TV broadcasting station in the same group. Although Mr. Horie’s proposition of “merging the Internet and traditional media” caused a great deal of controversy in Japan, all of this ado ended when Mr. Horie decided to sell his radio station stocks to the TV broadcasting station in return for a massive cash flow. Mr. Horie, during the days of the takeover battle, was known to comment on any new developments as “quite within a reasonable range of expectations.” Now that the fuss is over and Mr. Horie enjoyed generous cash from this heat, we as an outsider feel that this was a conclusion “quite within a reasonable range of expectations.”
Mr. Horie, seemingly the young challenger against Japan’s conventional systems, used a very provocative phrase, “killing the media with the Internet.” Frankly, I do not think that the media will ever be “killed.” For instance, the anti-Japan demonstration in China, which drew the attention of the whole world, presented to us the fright and fragility of a sudden emerge of an Internet society in a country where there is still room for really independent media and journalism to grow. In today’s diversifying society, the importance of magazines as a media, offering all sorts of different values and unveiling all sorts of different problems, can only increase as we move further into an Internet society.
But if what Mr. Horie meant with his provocative phrase was to kill not the media itself but the business model of the media, it comes to us with a much more serious meaning.
I say so because the rapid expansion of the Internet is becoming a challenge to the strength that Nikkei Business Publications has boasted over the years in the field of B-to-B. At this moment, we still keep a very strong position in the B-to-B arena both in terms of circulation share and advertising share. The question we face today is; is it really enough to offer practical information once a month in the form of a magazine to respond to the reader’s needs? Is there really a future for a print B-to-B magazine as more and more of our readers go online, not only to domestic sites but also to all sorts of sites around the world, to seek the information they need? I can see that many of the leading B-to-B publishers in the U.S. are making drastic moves from print to online in view of the growing B-to-B websites. Yesterday, I had an opportunity to have lunch with Mr. Patrick McGovern, Founder and Chairman of IDG, here in New York. We discussed quite frankly about the business models for print and online media.
While I share the same worries and concerns as my counterpart B-to-B magazine publishers around the world, I have not yet decided to shift completely from print to online. The reason is because I do not have sufficient confidence at the moment to generate the same revenues from online as I do now from print media nor can I see a strong future outlook for online media. Also, there is the issue of the staff writers that Nikkei Business Publications employs. Given Japan’s employment practices, it is not easy to replace them from print to online.
What Nikkei Business Publications has been doing instead is the construction of a merged business model, which we refer to as the “Mag-Net.” Like a magnet attracts metal, the idea of our “Mag-Net” strategy is to draw our target readers to a new platform that combines magazines, newsletters, target websites and specialized seminars. Let me explain in more detail. We have a comprehensive portal website by the name of “nikkeibp.jp,” under which we have placed “IT Pro,” “Tech-ON!” and “MedWave” as specialized portals. What we are trying to do is to mix our B-to-B magazines as a form of information push with our targeted websites as a form of information pull, adding on to them targeted seminars for provision of synergy solutions. And with our websites hosting microsites sponsored by client companies, our goal is to create a business model with multiple revenue sources – magazine ads, online ads and seminar revenues.
In order to promote our “Mag-Net” strategy, we need to further improve our database infrastructure. We also need to work out the extent to which we will have the affiliate function in order to grow our online model. To this end, we are seeking collaboration with other companies, both domestic and abroad, rather than work independently.
Moving on to the next topic, I would like to discuss publishing in the Asian market. Today, this is almost the same as publishing in the Chinese market, at least in Japan. Although it is said that China is gradually opening its publishing industry to foreign entry, there are still some very rigid rules at the moment. Basically, publishing by a foreign capital is not allowed in China. China is often referred to as a nation ruled by personal connections or power of influence rather than by law, which allows for some so-called “gray areas” to exist. But since this is not legally accepted, there are some risks that need to be faced. In addition, it is very difficult for a foreign capital publisher to create on its own a business model that can bring profit.
Therefore, the basic style now for non-Chinese publishers wishing to enter the market is to go through licensing, with the only exception being IDG. IDG, which continued to its business in the country even after the Tian’Anmen Square incident, is said to have created strong pipes in China.
Among the Japanese publishers, Shufunotomo is building a pioneering success in China. The Chinese edition of its magazine, Ray, is said to have a circulation of 600,000, winning the hearts of Chinese readers who share the same Asian taste as Japanese readers. My assumption is that Shufunotomo generates quite an impressive amount of licensing revenue from China. The company, together with Mitsubishi Corporation, established a joint venture in Shanghai to handle content licensing, which is said to be doing very well too. Another Japanese publisher, Shogakukan, is publishing Chinese editions of Oggi and CanCam, both women’s fashion magazines, and the company too is planning to incorporate a licensing business company in Shanghai.
Nikkei Business Publications too is entering the Chinese market with various different approaches. There are several reasons why we target the Chinese market. Firstly, the move of production bases to China in recent years is creating the need for local technology information. Secondly, our readers are also moving to China as more and more Japanese companies shift their bases to China. Thirdly, there is an increasing need to have an established brand in China in order to cope with the needs of B-to-B advertisers in Japan. Nikkei Business Publications, as a company unfolding marketing efforts in Asia, Europe and the U.S., consider China as part of our global strategy rather than a single market from which we can anticipate big returns. Therefore, our strategy in China is “No Risk, Low Return”; we are building brands in China to make more money from other markets. We are hoping that slow and steady will probably win the race eventually.
Let me take a moment to outline the efforts we make in China. Firstly, we import and export information. Two years ago, we became the first among the world’s magazine publishers to be allowed to open an editorial bureau in Beijing. Presently, we have a correspondent stationed in our editorial bureau. On the other hand, we license editorial content from the Caijing magazine, a growing business magazine in China. In addition to Caijing, we have built amicable relationships with several Chinese publishers, as we feel that obtaining technology information from China will become increasingly important in the future.
We also host events and seminars in China. In Japan, we are the organizer of the Tokyo International Automotive Conference, for which we collaborate with Dow Jones and other parties to host at the same time as the Tokyo Motor Show. The past occasions have each been a huge success, inviting world’s automotive leaders including the Chairman of General Motors. Based on this experience, we organized last year the Beijing International Automotive Conference, together with China’s leading publishers and related entities, which was the one and only official seminar of the Beijing Motor Show. In addition, we have worked with Tsinghua University in Beijing and Fudan University in Shanghai to hold both high-tech and management seminars.
In the area of online, we have a Chinese-language website named “Tech-ON! China” via which we offer mainly technology information. This website collects approximately 4 million pageviews per month.
As a good example of how we work with Chinese publishers, I would like to introduce our partnership with IDG China. Prior to our partnership with IDG China, we were publishing Asian editions of a flagship magazine of ours named Nikkei Electronics via our subsidiary named Nikkei Business Publications Asia. The Asian editions were published in three languages; English, Complex Chinese for Taiwan, and Korean. Three years ago, we launched the Simplified Chinese edition for the mainland China readers as a controlled circulation magazine published in Hong Kong. Last year, however, we merged this Simplified Chinese edition with an IDG China title, and began licensing content from Nikkei Electronics. Our magazine now operates under the double brand of Electronic Design & Application World and Nikkei Electronics China.
The Nikkei BP Group represents global ad sales of this new double-brand magazine. By having the Japanese edition, English edition, Complex Chinese edition, Korean edition and Simplified Chinese edition, we believe that we have a stronger base to sell more advertising pages into Nikkei Electronics and its foreign language editions. Nikkei BP Asia is presently preparing to open an advertising company in Guanzhou, China for the purpose of gaining more intelligence in doing business in China.
Needless to say, having the right partner is essential to run a successful magazine publishing business in China. From a wealth of potential partners, we need to define those who are reliable enough, those with whom we can negotiate business in reasonable manners and those with whom quick decision makings are possible. Quite obviously, the quality of the content being offered is also very important. From our past experience of working with McGraw-Hill, we learned that the editorial effort of the local partner is the key to make it successful as a media.
In this respect, IDG China turned out to be a very good partner for us with whom we can pursue a win-win relationship. But as we all know, Nikkei Business Publications is not the only partner for IDG China; they have relationships with many media around the world, which in some cases are in a competitive relationship with ours. Therefore, we are working on a case by case basis with IDG China, and currently discussing the next project which will bring success to both parties.
So, here we are with our multiple approach China strategy under which we will soon be publishing the Chinese edition of Nikkei Biotechnology & Business together with a technology publisher in China. There are also plans under way to license Nikkei Microdevices content to a publication in Hong Kong to which PennWell also licenses its content. Our future plans include licensing of our editorial content also in fields such as medicine, construction and environment.
Whether it’s an online business or a Chinese business, doing it all on one’s own without the help of others is difficult. In today’s publishing business environment, the win-win strategy by building synergies both in and outside of Japan is becoming more important than ever. I would like to close this speech by asking all of you here today to consider allying with Nikkei Business Publications where there is mutual benefit.
Thank you.
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