Japanese Pop Industry

9/May/2003

Stanford Japan Center

Ichiya Nakamura

 

 

Chapter 1: Prevalence of Pop

 

 

1) Japan as a “Pop Country”

 

<1> Lost 100 years

 

The 1990s was the age of the USA. After the cold war, this country practically held supremacy in terms of policy and military might. The economy in Asia, including Japan, which had been a growing sector in the world, stagnated. Europe was struggling with clearing up the aftermath of the cold war and with the unification of the east and the west. During this time, the US took over the world’s leadership with the power of its digital economy. Even within the IT industry, the main business of the 90s, the US gained unchallenged victories in platforms (computers), networks (the Internet), and contents (Hollywood).

Japan calls this decade “the lost decade.” After its bubble economy burst, the Japanese economy has been caught in the doldrums and hasn’t made a break-though yet. However, it could really be a hundred years that Japan has missed. At the turn of the Meiji era (1968), Japan was astonished by modern Western civilization and raised a slogan of “Enrich and Strengthen Japan” in order to gain a ranking among the other world powers. However, its attempt at strengthening the country was abandoned after its defeat in World War II. Next, the Japanese relied on its remaining aim, enriching the country, defining this in terms of economical development. But what happens when this economic growth itself stagnates? All their propositions have vanished and they lose the very ground under their feet.

For many older western people, Japan’s image is still about “hara-kiri” and “kamikaze.” The propaganda used by the military state at the time when strengthening Japan was the prime aim, is embedded in these people’s mind and is still vivid. For the after-the-war age group, Japan appears as the country of Toyota, Honda, and Sony. Now the “econo-military” enterprises that are globally competing for the nation’s enrichment have become the new face of Japan.

Building on the high growth of the Japanese economy during the 1960s, Japan survived the two oil crises of the 70s. In the 80s, the expertise of their manufacturing industry, typically cars, home electric appliances, and precision machines, was feared in the US. Also, the Japan money that prevailed in the US―buying up the Rockefeller Center and some movie companies―irritated the US. After losing its economy strength in the 90s, Japan strayed from its course both economically and politically causing its very identity as a country to waiver.

 

<2> Drastic changes of the 90s

 

However, the situation is changing. You can ask children in the US, Europe, and many other countries, “What is the image of Japan?” Their answer would be Pikachu, DragonBall Z, Sailor Moon, and the Super Mario Brothers. Pop culture such as manga (comics), animation, and video games has now become the face of Japan.

Not only in Asian countries, but also among the younger generations in the west, Japan is the new “trendy” country. As Douglas McGray argues, Japan is now recognized as a “cool” country[i]. This new view of Japan has been occurred during the 90s when video games became popular, and Japanese animations started gaining audience ratings on the world’s TVs. Although they were not aware of it, it seems that Japan went through some important changes in the missing decade, quietly but dramatically.

This new “pop” aspect of Japan is not limited to their entertainment business provided through the medium of virtual space, but also penetrates the lives of the Japanese people themselves. People are keeping robot pets in their homes, and their essential daily item, the mobile phone, now enables them to take videos and photos and to e-mail friends using only their thumbs. When they get bored they sing along with karaoke, when they get hungry they pick up sushi from a conveyer-belt in a fast-sushi bar. Vending machines sell everything from alcohol and pot-noodles to pornographic magazines. Don’t want to go home? Stay in a “love” hotel, specialized for passionate lovers, or a 24-hour café with a comic library housing thousands of comic books. The reality of Japanese people’s lifestyles and life-designs are being introduced to other country as a unique aspect of today’s Japan.

This uniqueness does not totally enclose them in their own world. They wear clothes with the “GAP” logo, listen to Hip-Hop, meet friends at a Starbucks, access the Internet via “Wintel” to check out the recently launched Hollywood movies, and go out to Disneyland for fun. Japanese pop culture creates its own status, naturally mixing with such imported cultures.

In a future history book, the 90s may be recorded as the decade when Japan made inroads into international culture, when Japan entered into an ascendancy, and when Japan built a new ground to stand on, rather than the decade when Japan’s economy stagnated.

 

<3> From Japan to the world

 

In 2002, Spirited Away (Sen to Chihiro no Kamikakushi), directed by Hayao Miyazaki, became the first animation film to receive the Golden Bear Award at the Berlin Film Festival. It also won the Oscar for Best Animated Feature Film at the 75th Annual Academy Awards in 2003. In the 50th Cannes Film Festival in 1997, Shohei Imamura’s Unagi (The Eel), won the Palm d’ Or, and Naomi Kawase’s Moe no Suzaku (The Phoenix), won the Camera d’ Or. Further, in 1998, Hana-bi (The Fireworks), directed by Takeshi Kitano, was awarded the Golden Lion at the 54th Venice International Film Festival. One common aspect to these films is that they depict modern domestic issues in Japan.

The spread of Japanese culture is not in the intellectual area only. In 2002, the most used keyword in the Internet search engines of the world was “DragonBall Z.” It is also true that Japanese animations with scenes of a little boy eating a rice ball or a teenage girl battling against evil in Tokyo city are becoming regular TV animations welcomed by children in Europe and the US. Such superficial characters propagate quickly.

This situation, in which daily views of Japanese life are accepted by the world as they are, seems to be different from the conventional western attitude that simply favors exoticism or oriental tastes, such as kabuki, sumo, or geisha. It also seems to be that the power of conveyance, penetration, and influence displayed by today’s Japanese pop culture is greater than the excitement of ukiyo-e painting, which gave birth to Impressionism in the past. Considering the spread of IT and globalization, the export of Japanese pop culture will become more meaningful in the near future.

The demand for the Japanese pop culture is led by the public, particularly by a group of people known as “otaku” (pop culture lovers). On the other hand, suppliers are usually small venture businesses led by the creators themselves, rather than established large enterprises. This structure of supply and demand, each of which has the particular taste of media contents, forms a very unusual entrepreneurship.

It is said that one reason for the lingering economic recession in Japan is the lack of sufficient chances for venture businesses to grow. However, the pop culture industry is a business that is led by venture companies established by the creators themselves. Could this be the beginning of a Japanese digital economy? Although pop culture itself falls into the field of culture and social issues, in this article I would like to discuss pop culture from the viewpoint of business and entrepreneurship, centered on comics, animations, and games, which have all achieved international business status.

 

 

2) Impact of the Pop Culture

 

<1> Economic impact from comics, animations, and games

 

Comics, animations, and games share 10% of Japanese media entertainment market, or 30% if character products are included, as the pop culture industry that traverses a wide range of media, including paper-based publications, film, TV, video, and Internet contents[ii].

It also shows its international competences as a Japanese brand industry. One third of the world’s media entertainment market is held by comics, animations, and games[iii].

These three forms of media are bound together like a family. The Japanese comic industry underwent a powerful development during the 60s and established its own current form of business model during the 70s. Animations are based on comic-style expressions and grew with the development of television and video. During the last 20 years, Japanese animations have made their way into the world. Through such animations’ efforts, Japanese comics have also evolved into a media that holds the world’s attention.

The home video games that appeared in the 80s, showed rapid growth during the 90s with the help of computer advancements and comic/animation-style expression. Influencing each other, both hardware and software evolved into a global-scale industry, driven for the most part by Japanese enterprises.

 

<2> Importance of pop culture in digital contents

 

After 1980, the network infrastructure (including CATV, satellite broadcasting, and the Internet) and various platforms (computer and AV devices) developed and spread rapidly along with the stream of digitalization. In particular, the computer not only managed to get inside everyone’s houses but was also getting out everywhere through the rise of ubiquitous computing technologies and broadband networks.

The best opportunity in this digital age is in the contents that are broadcast through these networks, and the contents industry is expected to grow as the “industry of intelligence.” This does not bode well for the conventional entertainment media industries―but in any case, the markets for the Japanese music and publication industries have been shrinking over the last few years. There is no guarantee that these conventional entertainment industries will show long-term growth higher than GDP.

The anticipated growth industries are the online non-entertainment industries, such as e-commerce, e-government, remote medical services, and distance-learning programs. Whether it is a business or a governmental activity, transactions in the real world will shift rapidly to an online mode. Such transactions will not be independent from their contents, and therefore the growth of such transactions means the growth of contents in an even wider variety of services.

The contribution of pop culture to such services will be in its established techniques of user interfacing. Expression and communication methods in digital interaction that are based on animation and game techniques, an integral part of the pop culture domain, will offer much to the coming services.

Pop culture also exerts an influence on the planning and design of products that have physical form, such as cars and robots. No matter whether the nature of products is virtual or real, the modern thesis of functionality over style is fading away from the limelight. Instead, values such as cute, funny, pretty, and cool, are coming back according to the demands of the people. Thus this pop-orientation has a significant influence on a wide area of the real economy.

 

<3> National brand and security treaties

 

After the war, Japan fell in love with its former enemy, the USA. It was not only the US’s unbeatable military force or economic power that caused the Japanese to throw themselves under the USA. Rather, the power of modern American culture, such as a yearning for extravagant western lifestyles, introduced through Hollywood movies and TV dramas, the stylishness of jazz and rockabilly music, and the powerful shock of the taste of chocolates and Coca Cola, must have played a vastly important role.

As Joseph S. Nye has pointed out, the importance of soft power, such as cultural attractiveness and political correctness, is taking over that of hard power, such as military force and economy. After the cold war ended, the possibility of military conflict between the great powers has decreased. Instead, the image of a country that consists of a national culture and global brands is influencing the world’s public opinion.

The afore-mentioned article by Douglas McGray, “Japan’s Gross National Cool,” opens its argument as follows:

Japan is reinventing superpower―again. Instead of collapsing beneath its widely reported political and economic misfortunes, Japan’s global cultural influence has quietly grown. From pop music to consumer electronics, architecture to fashion, and animation to cuisine, Japan looks more like a cultural superpower today than it did in the 1980s, when it was an economic one.

The total sales of Pokémon (Pocket Monster) in the world market is estimated at 3 trillion yen. Although there is no method of quantifying children’s desire to learn about Japan when they get Japanese-made Pokémon game cards, it would not be far-fetched to believe that such items bring a brand value greater than its market scale into various countries. It is a fact that the younger generations in many Asian countries, where some people retain complex anti-Japan feelings, invoke a positive effect on long-term exports and security concerns.

 

 

Chapter 2: The Japanese Pop Culture Industry

 

 

1) Business Volume and International Competence

 

<1> Comics, animations, and game industry volume

 

The volume of world’s media contents market, including movies, videos, TVs, music, Internet, publications, newspapers, radio, billboard advertising, amusement parks, and games, is estimated at around 100 trillion yen as of 2000. Within this market, the market for comics and their character-based spin-off sales, animations, and games, share a third of the entire market, which is about 34 trillion yen. This figure is close to the world’s advertising industry share of 39 trillion yen.

- Comic (incl. spin-offs)　　　　 Approx. 10 trillion yen

- Animations　　　　　　　　　　　　 Approx. 10 trillion yen

- Games　　　　　　　　　　　　　　　 Approx. 14 trillion yen [iv]

The market value of media contents in Japan was worth approximately 13 trillion yen in 2001. The share of comics, animations, and the game industry in this figure is only 10 percent. However, this figure reaches 3–5 trillion yen when related businesses, such as music, spin-off goods, and amusement parks that utilize these comic, animation, and game contents. This is roughly the same share (30%) as for the entire media contents market.

- Comic (books and magazine)　　　　　　　　　　　　　　　　　　　 Approx. 530 billion yen

- Animation (TV, movie, graphic package)　　　　　　 Approx. 250 billion yen

- Game (software)　　　　　　　　　　　　　　　　　　　　　　　　　　　 Approx. 410 billion yen [v]

There is no great difference between the percentages of the game markets in the GDPs of Japan and the US; however, the comic and animation market in Japan is more highly developed. The Japanese animation market has almost the same scale of figures as the movie industry, and the number of newly-introduced animations on TV now reaches 75 programs per week (2001).

In particular, the Japanese comic market shows an unprecedented development. Comic magazines share 31% of the entire magazine market (3.286 billion issues), and comic books share 69% of the publication market (748.7 million publications). The number of comic magazines currently published is 277, and two of the largest sellers among these magazines, Shonen Magazine and Shonen Jump both publish 3.5 million copies every week. [vi]

 

<2> International competence

 

300 billion yen’s worth of Japanese media contents export exceeds the import figure of 200 billion yen. In the export of media contents, only comics, animations, and games pay their way, with games as the main contributor to the entire export volume.

60% of TV animation programs broadcast on the world’s televisions is made in Japan, and this figure reaches 80% if it is limited to European television. In 2001, Japan shipped 184.8 million titles of game software. Of this total, 39% was for Japan’s own market, 37% for North America, and 20% for Europe. The total export value was 253.2 billion yen and the import value was 3 billion yen. Although the figure for the comic (and spin-offs) market is not known, Japanese-made products seem to share more than half of the market.

In contrast, exports of other media contents such as TV programs, movies, music, and literature, are as low as to be at the level of cultural introductions and is far less than the import figures in the same field. Exports of movies are worth 1.1 billion yen while imports are at 91 billion yen, and 55% of sales in the entire Japanese movie market is achieved by imported movies. In the field of music, exports stand at 300 million yen, while imports are at 25.1 billion yen, and 50% of sales in the Japanese music market is achieved by imported music. Exports of publications are at 17.6 billion yen, while imports are worth 55.6 billion yen. [vii]

Japanese TV animations spread in Asia and Europe during the 80s, but the situation was different in the US. In the US, the particular types of animations first built a niche market among animation freaks during the 90s; then, following the hit of Pocket Monster (Pokémon), they established a wider audience for Japanese TV animations. For the Japanese game industry, the international market has been in their sights from the time of arcade games in the late 70s. They had already developed game machines with this focus, and established a dominant position in the world market when Japanese manufacturers took over the share of Atari, which went bankrupt in 1985.

Their successful advance into the world market is grounded in their skills acquired through the hard competition fought inside the Japanese market and the insatiable demands by diverse consumers. In order to capture a wide range of game users, from children to adults, it is important to provide a variety of choices, although the production number of each model may not be large, in order to back up the limited number of big hit products. Because the Japanese market naturally has such a particular demand (i.e. small but many choices), the market functioned as the test field for the game manufacturers to examine their business tactics before putting it to the world market.

 

 

2) Diversity and Fusion

 

<1> Diversity and detailed subdivision of genres

 

One of the most peculiar characteristics of the Japanese market in general is its requirements for diversity and detailed subdivision of genres. In the late 1940s, Japanese comic spread like an epidemic as children’s pop culture, mainly through the arrival of popular magazines and the appearance of Osamu Tezuka (author of Astro Boy). Tezuka’s comical and simple cartoon style first captured the children’s attention and later led to the development of the opposite style of comics, which are static, serious, artistic, and philosophical, designed for an adult audience in the late 60s. Well-known authors for this style of comics include Sanpei Shirato, Yoshiharu Tsuge, and Seiichi Hayashi, and subsequent works in this style established its own genre.

During the 70s and 80s, the genre was further subdivided into SF, sports, gag, nonsense, love stories, school-based stories, gourmet/cooking, history, “business” comic, and others. At the same time, the variety of magazines has increased, targeting particular audience groups, categorized by their gender, age (from pre-school to middle-aged), and social status. Porn comics are seen as one such type and a variety of these can be found among the ordinary magazines in shops and convenience stores. In Japan, even governmental public relation documents, legal handbooks, and users’ guides for domestic appliances are presented in comic format. Expression in a comic-style format is widely accepted and is a part of the ordinary method of conveying information in this country.

The course of development of animation in Japan is quite different from that in US. The main stream of American animations are made in Hollywood and are designed to be shown in cinemas, while Japanese animations are made mainly for TV programs. Compared with TV animations, US animations are often a series of one-off episodes, while the Japanese animations are made as a long sequential story. Further, Japan has an established animation genre for adults.

Animations targeted at adults started being offered during the 70s. Then in the 80s, audiences started focusing on the creators and directors of animation films, not only on the works themselves. Creators like Hayao Miyazaki, Katsuhiro Otomo, Mamoru Oshii, and Hideaki Anno who were brought into the spotlight at that time are now regarded as established artists. It was the same period when video animations in special genres, such as SF or “pretty girls,” targeted on “core” animation fans built up their own markets.

Because the development of video games started in Japan and the US almost simultaneously, both countries first made similar types of games, such as shooting, action, and sports, during the 80s. However, in the 90s, Japanese games quickly subdivided into a variety of genres through the influence of comic and animations. These included role-playing games, fighting, music rhythm games, love affairs, historic stories, raising an imaginary creature, and interactive games. Japanese games established a peculiar style of expression and market. The game software market reached its peak in 1995, and market volume has been decreasing since then. However, the number of newly launched game titles becomes twice as many within the last 10 years.

Thus, the market for comics, animations, and games in Japan has developed to fulfill the wide range of demands by diverse consumers. The existence of a vast number of creators for different fields and tastes has enabled the provision of a wide diversity of genres of media contents.

 

<2> Fusion of businesses

 

Although the internal organization is subdivided into diverse genres, the markets for comic, animation, and game form a united market. The fundamental ground of this market is the comic, which had already established itself as a style of visual pop expression before animations and games. Japanese TV animations really started with Astro Boy by Osamu Tezuka in 1963, which was based on his paper comic. Animating a paper comic is still used as the main production method in the animation industry and 60% of animations are based on paper comics.

In the early days of game software, stories and characters were created for a game. However, the style of adopting established comic characters for children became popular in the 90s. In reverse, animations based on popular Japanese game characters have also been made. Some examples of this are the American animations Super Mario Brothers and Sonic the Hedgehog.

A typical sample of media mix, which is the method of using character-based content in multiple ways, is Pokémon. Pokémon first appeared as a game software. It was then adapted into a comic, then animated for a TV program. This TV animation made a huge success world wide, and this further led to the production of animated movies, card games, models, and various toys. After the successful case of Pokémon, media industries, especially publications, started setting forth business plans to roll out products under this media mix strategy from the beginning and aiming them at the international market.

This expansion of multiple usage of a character has been accelerated by digital technology. The video game was born from the computer technology of the 60s. During the 70s, business-oriented computers came into wide use, and this spread into home use in the 80s. The 90s was the period when the processing ability of computers dramatically increased and this contributed to improvements in textual quality and the speed of computer graphics. Animation production used to be a prime example of manual work with minimum pay; however, the advances in computer graphics with 2D and 3D technologies after 1995 changed this manual labor into a high-tech industry. Much of the hardware and software used in this field is standardized and this allows the movement of staff and job sharing.

 

 

3) The Venture Aspect and the Centralization in Tokyo

 

<1> Venture aspect of the pop culture industry

 

The venture aspect is one of the features of the pop culture industry. For both the game and animation industries, their software markets were mainly pioneered by newly-risen small companies. The video game industry was Japan’s representative industry led by high-tech venture companies.

The game industry currently contains 146 companies and 46% of these companies have less than 10 million yen in capital. The population of the industry is said to be about 18,500, which means the average number of employers per company is approximately 100 people. (However, some point out that the venture-oriented period of the game industry is coming to its end because the game development process is becoming larger, as seen by the news of the merger of ENIX and SQUARE in November 2002.) The animation industry is said to contain 437 production companies and 5,000 animators, and the comic industry employs 4,000 cartoonists and 28,000 assistants. [viii]

The important factor behind this rise of miscellaneous venture companies in the pop culture industry is again seen in the advance of digital technology in the 90s. The conventional expression industry, no matter whether it is movies, TV, music, or publications, was supported by machinery. The division between the professionals and amateurs was whether they had access to contents production equipment, such as cameras, editors, and printers.

However, digital technology reduced equipment costs dramatically enabling the downsizing of contents production in the order of desktop publishing, desktop music composition, and desktop video editing. This divided contents production and contents distribution (including delivery and promotion) enabling the multiple usage of one source. Further, the introduction of the Internet and then the mobile Internet (Japan’s equivalent to WAP access) has provided new media where people can easily join the contents business.

In 60s and 70s, those who aimed at becoming cartoonists were recognized as peculiar skilled people, and comic editors and animation producers were not treated as main streamers. However, in 80s, the real talents came to gather in the field. Pop creators with computer literacy came to take routes of the video game industry. Creators got a position of “the stars”.

 

<2> Business centralization in Tokyo

 

The pop culture industry is specifically centralized in Tokyo. 67% of game companies and 82% of animation companies are located in Tokyo. Notably, animation production companies are lined up along the Chuo railway line that runs from east to west across Tokyo. [ix]

The reason of the animation industry growing up in Tokyo seems mainly due to the fact that most of their clients such as TV stations and related media companies such as comic publishers were located in Tokyo. Japanese media industry has been Tokyo oriented. All major newspapers and publishers are located in Tokyo, and TV programs are delivered from six Tokyo key stations to nation wide. Nintendo(Kyoto) and Hudson(Hokkaido) in the game industry are the exceptions.

As comics and animations focused on the domestic market in the beginning, it seemed needed for creators to locate in Tokyo where the business was generated. (In this point, the game companies locating outside of Tokyo could survive because the industry had been playing in the world wide market from its beginning.)

On the other hand, it was preferred to locate in the suburbs of Tokyo rather than at the center of Tokyo because atelier style environment was favored for animation production. Further, making an animation requires close communication between contractors and their subcontractors in order to make the finished quality of pictures consistent. These factors naturally integrated the animation industry in the specific part of Tokyo.

Not only the video game but also the comic and animation now require facilities for digital production and broadband network, and it seems reasonable to integrate in the place with those access. However, digital network also enables them to disperse production. Especially, international specialization in the animation industry is getting common, and the world wide strategy of production locating is becoming important.

 

 

4) Cultural Background

 

<1> Introduction of western technology and traditional pop culture

 

The Japanese style of comics, animations, and games are all a result of an amalgamation of modern technology imported from the west and Japanese domestic culture. Cartoons were imported from Europe after the Meiji era. Animations came from the US, and Disney’s techniques were adopted into Japanese animations. The first Japanese animation film for the theater was born in the 20s and TV animations flourished during the 60s. Hollywood is still the center of American media contents production, including TV programs, while the Japanese movie industry has declined after the rise of television. The lenient broadcasting restrictions also encouraged this. The way for animations to survive was by moving to TV.

Since the start of games with MIT’s Space War! in 1962, the US was the center of the game industry throughout the 70s. However, the launch of the “Family Computer” by Nintendo in 1983, both the hardware and software markets have been led by Japanese game manufacturers. Improvements in imported technology, which was in the background of this success, can be understood as a typical strategy of Japanese manufacturers, which had led them to success after the war.

However, their technique of story making and ways of expression are deeply rooted in their cultural background that has been followed down the years since the days of the 12th century picture scrolls through ukiyo-e in the Edo era (1600–1868). Further, these were not the arts of upper class society, such as the aristocracy and educated samurai, nor of religious groupings, but belonged to the common people. This fact marks a distinct contrast with the status of arts in the west. Everybody draws some pictures and tells stories, and this custom has been cultivated through Japan’s long history.

The development of such pop culture fully depends on the number of the audience, probably more than the social mechanism of rearing excellent creators. The power of creation is founded on aesthetics. People are allowed to be immersed in pop culture in trains, schools, offices, or wherever they are, and this environment is the cradle of the pop culture industry.

 

<2> Adults and otaku

 

Another distinction in the Japanese pop culture scene is that comics, animations, and games are not only for children. The category of an adult audience for animations and games is firmly established in Japan. The reason behind this may be because entertainment for children and adults is not separated in Japan, and adults are not in a directive position for children in the field of entertainment.

On the other hand, western adults are more in control of children’s entertainment. It is also rare in the west that children travel so widely by themselves. Further, Japanese children have more disposable income, thus they are capable of purchasing what they want. The demands of children are directly reflected in product supplies.

The obsessive fans of comics, animations, and games are called “otaku” in Japan. These people form a significantly powerful consumer grouping. A Comic Market, also referred to as “Comike,” is an annual festival held by these otaku, where they buy and sell their hand-made comics, magazines, and related products. The Comike of August 2002 marked 370,000 visitors in 2 days and sales reached 9.8 billion yen. This figure is greater than the entire sales of soccer tickets in Japan for the last World Cup!

The Comike has produced certain types of stylistic devices implemented by this group of people, such as creating an original story using existing popular comic characters, or even dressing up like a comic character, which is referred as “Costume Play” or “cosu-pre” in Japan. Also, the core trend of modern Japanese comics, such as SF or “pretty girl” series, is created from this market. Within this market, the creators are simultaneously consumers. Comic book publishers are always on the lookout for new talents in this market. The otaku group functions as a driving force of market trends and as the birth place of new creators.

 

 

Chapter 3: The Model of Japanese Entrepreneurship

 

 

1) Combination of Freelancers and Enterprises

 

The production style of the Japanese pop culture industry is not mass production on a line but a single work created by an individual’s imagination. A great number of creators are jostling in a niche field to send out their work, that is, pop culture products.

While the distributors of such products are conventional mass media enterprises such as businesses related to movie, broadcasting, publication, or communication, its market structure is oligopolistic or pseudo-oligopolistic. Although the market is occupied by a limited number of large enterprises, note that their scale of business is far smaller compared with that of major Hollywood enterprises, such as Disney or AOL Time Warner, each of whose annual sales is larger than the total revenue of Japanese broadcasting industry.

A producer who belongs to the mass media industry, takes care of creator management, obtaining sponsors, distribution, collection, and fund assignment. Additionally, an organization called a “project,” which consists of a small number of media producers and a large number of creators, is a fundamental unit within the infrastructure of the Japanese pop culture business.

For example, a comic may be produced by a 2-person-unit, one the creator (i.e. a cartoonist) and one the producer (i.e. a publisher’s editor). Among all the 4,000 cartoonists in Japan, there are some cases of forming an independent production studio with many staff. However, they remain in general a home manufacturing group centered on one creator.

A business unit for animation productions consists of a production studio and a distributor. The production studio is a group of animators managed by the creator―the animation film director. Usually, the distribution company provides a manager for the creator and a producer for the animation TV program or film. Among the 437 animation companies, only 50 companies are direct contractors for a distributor. The remainder are subcontracted by such direct contractors.

The business model in the game industry is a little more complicated. Creators in this field refer to three groups of people: game designers, graphic artists, and programmers. A games manufacturer runs a project centered on the leaders of each group and invites freelancers to join the project. The same game designer and the promotion staff from the game manufacturer also play the producer’s role, again with the help of freelancers.

The members of an animation project or a game project could vary for each production, and the number of project members could exceed 100 according to the size of the product. However, the top creator and the top producer are always the project chiefs. The same creator/producer pair may work together for different projects over a long term, but it is also true that some creators change their partner distributors for each project.

The business of a creator and a production studio is highly risky and competitive. Particularly, animations and games are now facing an international marketplace. The one who takes the major risk is the media distributor who produces the products, perhaps comprising an investor and a business incubator. The business unit formed by a creator and a producer is a feature of the Japanese pop culture business.

 

 

2) Two Types of Entrepreneurship

 

A person who aims at becoming a professional creator is usually a great lover of the media and starts their career as a highly motivated amateur. The income of a successful creator is high, therefore becoming a professional creator is very competitive. These highly motivated amateurs and the entrepreneurship of the creators provides power for the international business of comics, animations, and games.

Comic production does not necessarily require production facilities and can even be produced alone. Many of the new talents made their debuts though being scouted, and the reputation of their work then increases their name value. The number of popular cartoonists who earn more than one hundred million yen a year has reached nearly one hundred.

For those who aim at becoming animation or game creators, such as an animation director or game designer, the common route is first joining an animation studio or a game manufacturer. However, the recent spread of digital technologies enables some unknown creators to send out their work through an amateur community or a small independent company, which could lead them to overnight success.

In contrast, the conventional contents industry, such as a movie maker, does not promise the successful creator a high income, although they are also an industry utilizing graphics. In the movie industry, production and distribution are undividable in the traditional business structure, and their market is more or less limited to inside Japan. Even in the case that the creators are independent of a film company, they have to depend on the production and distribution system of the film industry, which keeps them in high risk and low return status.

Looking at this situation in a wider context, it could be said that the business fields that are independent from the distribution system but carry out their own operations in a high-risk and high-return style, are now achieving success in both the national and international markets. The same pattern can be observed in the PC and mobile Internet contents business.

Those who aim at becoming producers usually build their career in media enterprises that distribute products and manage funding. In the case of a comic, this would be an editor of the publisher, it would be a TV producer or a movie producer if it is animation, and it would be a game designer in the case of a game. However, there are only about ten major publishers, six key TV stations, and only three Japanese movie companies. The gate to such business is narrow. Also, these publishers, TV stations, and movie companies have only tended to develop their business as a domestic media distributor in the enclosed Japanese market. This has caused a shortage of producers who are internationally capable, which is now seen as one of the challenges facing this industry.

The contents business is now required to be rolled out over different media, such as publications, TVs, movies, games, online supplies, character spin-off items, and amusement venues. A producer who can control all these various media is now awaited. However, it has been pointed out as a problem in the Japanese pop culture industry that Japanese media enterprises are not good at cultivating such talents. Although a number of creators are striving to break into the international scene, the lack of producers who can successfully introduce them to the world market is one problem that Japan is currently experiencing.

There is some good news, however. Some pop culture projects have started international cooperation, such as employing a Japanese creator, Korean and Chinese assistant creators, and Western producers and sponsors. This international team can utilize the strengths of each country and form a horizontal relationship that benefits everyone. The number of such multicultural projects is expected to increase in the future.

 

 

3) Two Types of Projects

 

When observing business patterns in the Japanese pop culture industry, there seems to be two ways of rolling out a business plan. One is to use the value inherent in a particular creator, and the other is to use the value embedded in a particular character in the contents.

The first method employs reputable creators who constantly present high quality original work and aims at further success using the creators’ value-added names. The other takes popular characters, such as Pokémon and Dora-emon, and utilizes these images in a series of films or other multimedia products, thereby collecting the returns from previous investments in a new project.

These two models have contrasting aspects. First, the key players in each type of project are different. In the creator-oriented project, creation itself is the business seed and the producer plays the role of manager for the creator. In the character-oriented project, the producer is the main promoter of the character, while the creator only provides a prototype of the character.

Their business models are different, too. The creator-oriented project is a long-term cultivation. The character-oriented project is a high-risk and high-return project over a short time span.

The time required between scouting a new talent, and that talent becoming famous, is long; however, once the creator establishes his or her own following, collecting the returns on the investment so far is relatively easy. Until recently, the criteria for the creator’s value was how well-known is the creator in Japan. Now this is changing to how internationally well-known is the creator.

The character-oriented project is of a short-span but the return is large if the project is successful, because once the character has become popular, a profit can be expected from the copyrights to the character. The case of Pokémon is typical of this type of project. Different media enterprises invested in these Pokémon characters, utilizing them in different channels such as publications, TVs, videos, movies, games, toys, and other goods. This parallel-multiple channel business model is now becoming a specialty of Japanese enterprises.

 

 

 

Chapter 4: Digitalization and Pop Culture

 

 

1) Contents and Infrastructure

 

<1> Positive and negative effects

 

Some influential factors for the future structure and entrepreneurship in the pop culture industry will be: market trends; ratio of production, distribution, and consumption in the market; intensity of international competence, personnel arrangements and liquidity; consumption trends; and general financial conditions.

Other than these, the most influential factor for the pop culture industry will surely be the advance of digital technology. The growth of animation and game industries and the rise of IT venture businesses in the 90s were all driven by the rapid advance of computer downsizing and networking. This technological innovation and extension is still ongoing and is constantly progressing.

This means that the pop culture industry also keeps changing. The diversification of media such as digital broadcasting, broadband, and mobile Internet, continually extends the methods of contents presentation and distribution. Production divisions will be further freed from the distribution system and the structure of investment collection will also change. Internationalization of business through the Internet will encourage the further opening up of investment and distribution for businesses. And, needless to say, new technology will create new forms of expression for comics and games.

However, technology may also bring with it some negative impacts. Although the pop culture industry has grown quickly, its market has actually been decreasing since the time of the burgeoning advance of IT. The value of the comic market was 568 billion yen in 1998, but this has decreased to 523 billion yen in 2000. The music market also decreased from 608 billion yen to 540 billion yen within the same period.[x]

Some argue that rampant illegal copying has caused the market decline, but that is not sufficient to explain the slow down in the entire pop culture industry. Others argue that the diversification of consumers blurs the target customer on which the entertainment business can focus, and the resulting passive business attitude makes it difficult for them to create a mega-hit. This situation could also be understood as a maturation of the pop culture industry, as the novelty value of the business fades away.

Within the game industry, the rise in development costs and the deterioration in profitability, along with the shrinking market and intensification of competition are considered as industrial crises. An overgrowth in size and budget of conventional pop culture contents discourages venture companies from joining and competing in the field. For this reason, those who are seeking new business opportunities focus on the “light” contents business, such as Web sites, accessible from PCs and mobile phones.

 

<2> Prevalence of the mobile Internet

 

The telecommunication infrastructure industry, including the Internet and the mobile Internet, is steadily growing. The percentage of Japanese households equipped with the Internet reached 44% in 2002, and the penetration rate of Broadband has exceeded the US figure. The sales of the mobile communication market have grown from 6 trillion yen in 1998 to 9.2 trillion yen in 2001. In 1999, telecommunication expenditure per household increased by 13,000 yen and the percentage of information-related expenditure out of the entire household expense went above 6%. A breakdown of this expenditure showed that 80% of the increase was used for telephone and PC telecommunications. An analysis of teenagers’ expenditure indicated that mobile telephone charges occupy the largest percentage (males: 29%; females: 34%), and this figure is higher than other entertainment expenses such as for CDs or games (males: 15% for CDs and 10% for games; females: 10% for CD and 9% for karaoke).[xi]

The expected financial flow in the IT industry was that a decrease in hardware expenses increases software (contents as the result of intellectual activity) expenses. In contrast, however, more money flowed into hardware (infrastructure) rather than into the contents business. If the profits from infrastructure business are invested in contents production as a result of vertical integration, it would be more hopeful, however, digitalization has so far promoted a seemingly endless modularization of business and horizontal specialization.

However, if we look only at the mobile Internet market, the contents business has grown along with its infrastructure. The percentage of Internet usage on mobile phones is now about 80% in Japan. This figure is massively higher than the 8% in the US and the 7% in the UK and Germany together. A mobile phone is still a “telephone” in the west, but it has grown into a reading and writing machine in Japan.[xii]

On NTT DoCoMo’s i-mode network, 60,000 sites were built within 2 years of its launch, with the 3,000 official sites among this figure achieving sales of 100 billion yen. Although the scale of this mobile Internet contents market is small compared to the mobile infrastructure market, this business has created an entirely new market within a short time.

In terms of “pay-for-contents” services, entertainment services, such as a ring tone downloading and games, are more popular than practical services such as news, weather, and traffic information. This is because the main users of mobile Internet are teenagers and people in their twenties. Again, this market now forms part of the pop culture business.

Also, this is a kind of dot-com business, which is built around venture companies. Many students start businesses in this field, and also people are flowing into this field from the game, animation, and music industries. This is now one of the most active business fields in Japan.

 

 

2) P2P

 

The conventional contents business may not be actively growing, but the online transaction business including e-commerce will grow larger. The B2C market was worth 1.2 trillion yen in 2001 (of the total, 85% from e-commerce and 15% from contents business), and the Japanese government estimates that its value will increase to 8 trillion yen by 2005. The online education market has also grown by seven times in the last five years.[xiii]

The current volume of the media contents market is 13 trillion yen and various other contents business, such as e-commerce, remote medical services, remote education services, and e-government, will be added to this. The point we should consider in this situation is how we can plan out the usage of the 17-trillion-yen-scale telecommunication market as a foundation for the contents market.

In Japan, business trends are led by the younger generation. Elementary school children who are accustomed to exchanging Pokémon characters on their Game Boy machines will soon shift into mobile phone communications when they grow up into their teens. Then they will exchange their mobile e-mail addresses and mail each other, pressing buttons only with their thumbs, wherever they are and whatever they are doing. High school students are busy sending their photos and videos from their mobile phones to their boyfriends and girlfriends. They are almost like mobile TV stations.

This tendency in youngsters to spend more on communication than on passive entertainment may mean that they are attracted by close communication with their friends and family. In the other words, their behavior indicates that amateur contents may be more financially appealing than those made professionally. This could be seen as the beginning of actualization of the Pier-to-Pier (P2P) society in which everybody can produce and broadcast their own information, rather than urging the pop culture business to make better efforts.

The downsizing of the contents production system in the 90s brought about the age of venture businesses. The technology owned by music and graphic professionals became available to technically-minded amateurs. Such technology now flows out to non-technical people, enabling them to carry out “multi-media” communications as part of their daily routine. The younger generation is well advanced in the communications of the future.

In the same way, Comike is the place that allows thousands of non-professionals to horizontally trade their hand-made information, playing the multiple roles of creator, fan of other creators, seller, and consumer in this market. This community can be the source of a new wave of pop culture.

In addition to Comike, “2ch.net”, a large-scale bulletin board site, is typical of high-tech communication by ordinary people. This board is not controlled by any administrator. News, entertainment information, gossip, or abuse, anything can be written anonymously. This is the world’s biggest board that marks hundreds of thousands of posts every day. The site is gradually obtaining power as a medium through which people can exchange and share information under the various topics for free, differentiating itself from, or rather discriminating against conventional mass-communication avenues.

This new type of communication is a characteristic of Japan now. Utilizing this situation, shifting from a one-directional communication structure, in which the public consume contents produced by a limited number of professionals, to a by-directional P2P communication model that allows people produce contents cooperatively though participation, sharing and exchange could become a key business strategy for Japan.

 

 

3) Ubiquitous Computing

 

Another digital trend as powerful as P2P is ubiquitous computing. The further downsizing of computers represented by mobile computers, wearable computers, and embedded computers, and their penetration into society indicates the developing computerization and networking of every object, from house appliances to public facilities. Objects are starting to digitally interact with people and with other objects.

One important point here is the change in the man-machine relationship, not simply pursuing the previous modern aims of convenience or functionality. Honda’s Asimo, Sony’s Aibo, and Sega Toys’ Pooch (which is a little closer to a toy than the previous twos) are all robot pets equipped with highly advanced computers. The old square-faced computer is altering its position from that of a cold business machine to man’s friend, with which we can interact and live together. And their interfaces are the source of further contents business.

It is said that the Japanese like to personify objects. If it is true, it must be very Japanese that a “pop” character emerges in people’s daily life as a physical existence with high-tech functions. Another type of “robot,” the vending machine, has already been much more deeply embedded in everyday life in Japan than in any other country. What they sell is not just drinks or cigarettes. They sell toys, flowers, rice, raw eggs, and even living horn beetles (for pets). They talk to you or allow you to pay via a mobile phone. They are bizarrely high-tech. There is even one project that attempts to connect these machines over a network.

Animation and game characters are used on toys and daily goods. Passenger planes and even military aircraft use such characters as logos. Just as Louis Vuitton took on the designs of Takashi Murakami, a precedent has been set for merging Japanese-made pop art and high quality brands. The number of occasions where Japanese pop culture jumps out from the computer display and appears as a physical existence will certainly increase.

This may be Japan’s strongest card for opening up new business fields, utilizing its vast power of technology and pop culture.