TT-545 -- Will The Wall Street Journal's new Japan site be successful? Ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, December 06, 2009 Issue No. 545

+++ INDEX

- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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+++ WHAT'S NEW

On December 15th news will be made in Japan. That's when
The Wall Street Journal's new Japanese online edition launches
here in Tokyo. This is the first launch of a major foreign
public news (versus financial news services) brand in
Japanese since the Japan version of Newsweek was started
way back in 1986. At that time no one thought a foreign
firm could breach the Japanese weekly news magazine market,
but thanks to a concerted effort by the local licensee,
Newsweek Japan is apparently doing reasonably well here
-- certainly it has a strong readership base.

Because of our experience with Metropolis, we know that
producing a weekly is tough but it's not impossible, and
it is doable on a small budget. The key is to have a
strong direct sales force to produce a pipeline of revenue,
and to maintain quality and thus reader loyalty. We of
course don't know what Newsweek costs to produce, but our
guess is that it would be around JPY1.5bn a year, meaning
that sales would have to exceed that amount by at least
15 percent-20 percent. So this is not a bad business.

However, the WSJ's challenge is in our opinion an order of
magnitude greater. Not only are they going to produce the
publication themselves (rather than license it out), but they
are also producing a daily containing highly technical and
complex financial subjects. In addition, the effort is
completely online -- until now, web news has largely a free
service in Japan.

All these things contribute to a much more difficult
business model, so you'd think that the capital investment
to get the WSJ started is high. However, in a May press
release from Softbank Investment, the owners are only
putting in 400 million yen (Softbank Investment 40 percent, WSJ 60 percent) --
which seems very modest to us.

So is the WSJ business plan likely to be based on high
hopes or unrealistically low costs -- at least vis-a-vis
the paid-in capital?

[Continued below...]

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[...Article continues]

The challenge for the WSJ to go profitable in Japan lies in
its business model. As anyone who has been reading a
newspaper recently would know, Rupert Murdoch, the owner of
the WSJ through his News Corp conglomerate, has declared
war on free news on the Internet. He is saying that he
intends to make sure that readers of his news output are
paying for the privilege. Certainly of all the news sources
publicly available online, only the Wall Street Journal
seems to have cracked the subscription conundrum -- it has
almost 1m subscribers in the USA.

But will subscription news online work here in Japan?

Several years ago, we asked that question to a number of
players in the market, and the universal answer was that
they didn't think it would. Their argument was that those
who wanted free news could get as much as they want online
and from numerous sources, starting with Yahoo Japan. Then
those who wanted news they could rely on, would get the
Nikkei in paper version or go use the various websites that
the Nikkei operates. But to go completely online and to a
full subscription model was probably a good way to go out
of business quickly. So the consensus back then was very
negative towards subscription-based news.

However, when you look at it, the economics of operating a
news website are not as daunting as one might imagine.
Take, say 15 journalists and translators, 5 senior managers
and support staff, throw in the office and some other
costs, and you have a budget requirement of around 250 million yen
a year (not including the cost of the original news feed
itself). Divided into a subscription fee of, say, JPY1,000/month,
you are looking at just 20,800 subscribers to break even.

So where to find those 20,800 subscribers? Well in the
WSJ's case, two years ago we would have said it would be
difficult. Back then, all eyes were focused on BRIC
countries, China in particular, and the interest level in
the USA was at an all-time low. Talk of the coming
decoupling of the Asian and American economies was running
rife. This situation has of course drastically changed with
the implosion of Lehman Brothers in 2008, and now the
reality has been driven home that America and what goes on
there really does affect Japan in a big way. You just need
to see the close correlation between U.S. news events and
the Japanese stock market to realize this.

Thus, in the last 12 months all eyes in the financial world
now watch events in the USA with much greater attention.
This is a happy coincidence for the WSJ's new Japanese
venture, since the company is well recognized for its
in-depth analysis of U.S. events and news. Our take is that
getting a WSJ subscription in Japanese will be a compulsory
business activity for anyone involved in the financial
markets in Japan, just as it is in the USA. There are about
300,000 financial professionals here. Then there are those
involved in global trade at a senior management level --
yielding possibly another 500,000 potential customers. Thus
we believe that the WSJ has a huge market to go after and
will never have a better chance to grab them and their
cash.

We believe the key for the WSJ Japanese version to be
successful will rely on two things:
1. The WSJ needs to lure only-for-free subscribers out of
the woodwork and get them addicted to quality news, by
using graded and upgradable packages.
2. The company needs to maintain its high-quality analysis,
so as to differentiate itself from the Nikkei and other
sources. Just like the Japanese edition of Newsweek, they
have to carve out their own niche and become respected and
quoted for their quality insight. This will breed the brand
loyalty and word-of-mouth marketing that have worked so
well for the firm back home.

*******************

OK, now for something a bit different. You have all seen
the ads we've been running here in Terrie's Take for
readers to donate to JHELP.com, the organization that helps
foreigners in trouble in Japan, and Japanese in trouble
abroad. Well, out sister company Metropolis has teamed up
with several sponsors to create a Christmas donation
program that helps both us and JHELP, and that costs you
nothing in cash -- and just 5 minutes of your time online.

The program has 4 simple steps:

1. Sign up to the new Metropolis Members Club, at
www.metropolis.co.jp/members. It's free and you get
registered to win free stuff every week. Check out the
website for more details.

2. Sign up to PayPal, at www.paypal.jp (not the dot.com
site). It costs nothing, and you can ignore the credit card
link request.

3. Let Metropolis know that you signed up for PayPal, at
jhelp2009@metropolis.co.jp, and they will send you a small
starter donation to activate your PayPal account. You can
keep the donation, or send on to JHELP.

4. Metropolis emails you that the starter donation was
sent, and you go back into your new PayPal account to
accept the donation.

And that's it! What happens next is that Metropolis then
adds you to the donor's list, and in January 2010 will
donate JPY200 per donor to JHELP. It may not sound like a
lot, but the target is to sign up 5,000 registrations by
December 25th, so collectively your 5 minutes of effort
will go a long way to helping JHELP cover the operations
costs it has helping those of us in need.

For more about JHELP, check out their website at
www.jhelp.com.

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+++ NEWS

- ACCJ position picked up by Nikkei
- Immigration official arrested for bribery
- 24 trillion ye stimulus package on the way
- Housing starts may hit 50-year low
- Stuck in Narita's Transit area for 8 months

-> ACCJ position picked up by Nikkei

We don't know what the bigger news is, American Chamber of
Commerce in Japan (ACCJ) coverage in the Nikkei about the
government's backtracking on the privatization of Japan
Post or the actual content of the statement itself.
According the Nikkei's "well placed sources" the ACCJ will
urge the government to ensure that the Japanese domestic
parcel transportation industry stays open and fair. ***Ed:
It's interesting to see how the ACCJ is now becoming an
important lever for change within Japanese domestic
politics. Our take is that the ACCJ statement was in the
Nikkei because it also serves the interests of some very
large but nonetheless vulnerable domestic firms in the same
industry -- all the more reason why the Japanese give the
ACCJ so much time and respect.** (Source: TT commentary
from nikkei.co.jp, Dec 4, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20091204DA4JZ044.htm

-> Immigration official arrested for bribery

You don't hear much about bribery of officials these days
-- Japan has pretty much cleaned up its act in that
department. So it was with some surprise that we read how
a senior immigration officer who served at the Yokohama
District Immigration office was arrested for taking bribes
from a people trafficker. Apparently the bribes were for
issuing certificates of eligibility to borderline cases.
(Source: TT commentary from nikkei.co.jp, Dec 4, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20091204D04JF285.htm

-> 24 trillion yen stimulus package on the way

Both the Nikkei and Kyodo say that the government is
planning a huge new stimulus package that will be worth
7.1 trillion yen ($80.5 billion dollars) in real spending and another
16.9 trillion yen in loans and guarantees -- most of which will
become real spending in 3-5 years time. Most of the money
will be going into loan guarantees for small to
medium-sized companies, who have been hit hard by the
downturn. The package will come on the heels of efforts by
the Bank of Japan this last week to inject JPY10trn into
the markets as cheap loans to larger firms. (Source: TT
commentary from google.com, Dec 5, 2009)

http://tinyurl.com/yg7zxtr

-> Housing starts may hit 50-year low

According to the boss of Japan's largest home builder,
Daiwa, housing starts may fall by 20 percent through to March
2010, to just 800,000 units. He also reckoned that in
following 1-2 years, the number of starts may drop as
low as 600,000 units, which would be the lowest point
for building starts since 1961 -- around 50 years by
the time it happens. Sales this fiscal year, through
to March 2010, are expected to fall 7.2% against last
year, to JPY1.57trn. (Source: TT commentary from
bloomberg.com, Dec 3, 2009)

http://www.bloomberg.com/apps/news?pid=20601080&sid=azPk8jg75.Fc

-> Stuck in Narita's Transit area for 8 months

Just like a scene straight out of the 2004 Tom Hanks movie
The Terminal, the Japan Times reports that Chinese activist
Feng Zhenghu is banned by his native China from returning
home and is therefore stuck in limbo at the Narita Airport
(presumably in the transit lounge, since he wouldn't be
able to get past Immigration). Feng has been there since
April, and survives on food delivered by passengers coming
in from Hong Kong, Taipei, Beijing, and the USA. Actually,
Feng has asked people to stop bringing food, because he now
has more than he can stash under his small airport bench!
Apparently Feng has traveled back to China several times,
but is being refused entry at the airport each time and
subsequently has had to return to Narita. ***Ed: This is
all very weird -- but precisely the sort of thing that
happens in totalitarian states like China.** (Source: TT
commentary from japantimes.co.jp, Dec 4, 2009)

http://search.japantimes.co.jp/cgi-bin/nn20091204f1.html

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

*** No comments or feedback this week.

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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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