Multimedia!

A visit to the business section of any large Japanese bookstore quickly reveals the extent to which Japan has been enchanted by multimedia. Stacks of books on this relatively new technology, both translated and home-grown, literally inundate the shelve s. It's as if a new vision of the future has suddenly sprung up, with children of the "information age" queuing up to follow the pied piper to the multimedia promised land.

The truth of the matter is that there is little new about the underlying technology. Most of what passes as multimedia technology today was understood 10 or 35 years ago. Realization that the concept has been around for all this time, however, makes Japan's and the world's -- sudden passion for multimedia even more puzzling. What has changed over the past few years to spawn the present focus on multimedia?

A driving factor behind the current multimedia craze in Japan is the affordability of the needed technologies. According to NEC, the computing power of its PC-9800 series, Japan's most popular PC, has shot up by a factor of nearly 200 during the past decade. Similarly -- as seasoned computer buyers well know -- the prices of data storage devices (such as hard disks) and data transmission equipment (such as modems) have dropped significantly in recent years. The enhanced feasibility and affordability of advanced applications and equipment, however, are not sufficient to explain the hype and expectations that media integration technology has conjured during the past year. Surely there must be more to the phenomenon than the promise of realistic blood and gore for role-playing games and the virtual eroticism of interactive adult graphics

One explanation for the current multimedia phenomenon might be that the continuing slump in Japan's economy is prompting the industry to come up with a bootstrap remedy to pull itself out of the recession. In a report entitled Toward the Creation of the Information Communication Industry, published in January 1994, the Yuseisho (Ministry of Posts and Telecommunications, aka MPT) predicts that by the year 2010, the multimedia industry will form a market of 123 trillion ($1.23 trillion) and create 2.4 million jobs. Many companies understandably see this as an opportunity to once again put their balance sheets in the black.

After listening to almost daily reports of new services and business ventures spawning in the US (both of which, it should be noted, can exploit existing infrastructures, such as the Internet and CATV networks), many Japanese executives have had premonitions that their western competition was getting a head start. Disturbing questions filled their dreams: What was Japan doing while American entrepreneurs wired households in anticipation of an interactive future? Would Japan be too late in realizing that it had been focusing on the wrong aspects of creating the next-generation television standard?

Underestimating the impact of the digitalization of media has obviously cost Japan an edge in a quickly expanding industry. It has been reported that, while on a field trip to California last year, Japanese business leaders were struck by a sense of panic. Following that trip, top Japanese companies quickly invested in or formed partnerships with American industry leaders such as Silicon Graphics and General Magic.

Forgotten in the past

Multimedia is not a new concept in Japan. Over a decade ago, Nippon Telegraph and Telephone (NTT, still government-owned at that time) unveiled the Information Network System (INS) plan -- part of which was the CAPTAIN information communication service. Telecommuting and home banking were just two among the many "dream applications" available to people signing up for the service. CAPTAIN was heavily subsidized by the government, and subscriptions were forced on many organizations, particularly municipal and prefectural government offices across Japan. Much to the early subscribers' discontent, and NTT's chagrin, the CAPTAIN videotex terminals never lived up to the glowing promises, and most were eventually thrown into the oshiire (closet).

In its most recent report, Japan's Electronic Communication Council grudgingly admits that "there have been more than a few examples of what is known as New Media that did not succeed." Bad interface design is acknowledged as one of the primary reasons the CAPTAIN system did not gain widespread acceptance. An even more fundamental problem, though, was that there was no application compelling enough to convince consumers to pay the subscription costs. In spite of its failure to live up to expectations , however, the service survives today in the form of CAPTAIN Services, an NTT group firm that offers access through PC-VAN and Nifty Serve (popular online networks). In July of this year, for example, CAPTAIN Services added a pay-per-minute hotel reservat ion system that will cover over 200 hotels in Japan by the end of 1995.

Changes in the air

The MPT claims that things are different this time. Unlike a decade ago, when even "personal computer" (not to mention "multimedia") was hardly a household word, the technologies that can allow the average household to realize a variety of advanced ser vices actually do exist today.

In its latest Communication White Paper, the MPT describes its blueprint for the future. Applications realizable by the end of the decade, according to a survey conducted by the MPT, include video-on-demand and home shopping; applications taking adva ntage of "virtual reality" and telepresence will be available soon after the turn of the century (see "Japan's multimedia timeline"). The MPT's role in all of this is to provide a "vision" and to establish guidelines for installing the national infrastruc ture that will allow private businesses to develop applications. The MPT's budget-conscious stance is that the private sector should be financially responsible for laying the infrastructure.

What is multimedia?

Reduced to the essentials, multimedia is simply a concept that enables the use of computer, audio, and visual technologies to communicate better and more efficiently. In this article, the term multimedia is synonymous with multimedia technology, which refers to the whole group of technologies associated with the digitization and integration of different types of media, induding audio, video, still images, and fed. It encompasses such technologies as analog/digital conversion :tec~ology, display technol ogy, digital signal processing technology (including data compression), data storage technology, and data transmission (networking) technology.

The use of a single word to refer to all these different technologies foreshadows the inevitable convergence of hardware. A computer Was once a specialized machine designed for a specific purpose. Today's computers, however, have added the functional ity of a telephone, fax machine, television, and more.

What infrastructure?

Because multimedia is essentially a better way of using technology to communicate, it relies heavily on the communications infrastructure. Much of the frustration felt by the industries of Japan regarding multimedia stems from the lack of a comprehensi ve infrastructure such as that already present in countries like the US.

One barrier to developing next generation technology is Japan's hardware orientation, which saps away the ability to adapt that software gives. The hardware-driven mentality is obvious if you go to Akihabara (Tokyo's electrical discounter area) and t ry shopping for word processors. For the average consumer, upgrading a word processor does not mean getting new software; instead, it means purchasing a completely new piece of equipment.

This traditional hardware orientation may be changing, though, and successful companies such as Sega are handling the transition well. After selling the hardware platform cheaply, they charge (indirectly, through royalties) for every software title t hat is purchased. Companies that still try to convince the consumer to buy new equipment every time a new functionality is added are being forced to change their way of thinking. At this point, some examples of applications often in the news might provid e an insight into the state of multimedia technology in Japan.

Cable television (CATV)

Interactive TV in Japan is still years away, largely because households do not now have access to a high-bandwidth data stream. In the US, large scale interactive TV trials are made possible by the already-existing cable TV (CATV) networks, which now c onnect more than half of all households in the country. In Japan, however, cable TV is not yet a big business. While there are about 120 cable TV companies operating in Japan, last year only 20% of them turned a profit. Even in densely populated areas lik e Tokyo, just a small fraction of households have access to CATV. and within the limited areas that do have access, individual household hookups are the exception rather than the rule.

The lack of a base CATV infrastructure is indicative of Japan's general communications infrastructure deficit. There are a fair number of VHF broadcast TV stations (seven in Tokyo, for example), and most areas of the country can receive broadcasts cl early. Since 1991, part of the national budget has been set aside to subsidize the installation of repeaters to provide coverage to those areas that have poor or no TV reception. In 1993, 540 million ($5.4 million) was spent in 50 such sites. Most viewers profess satisfaction with normal broadcast TV services (perhaps because they have never been offered an alternative). And since TV service is free (with the notable exception of government-sponsored NHK, for which all households with an antennae are requ ired to pay a monthly subscription fee), most Japanese consumers do not feel inclined to pay for cable TV services.

Another barrier to building an extensive CATV infrastructure has been the restriction on cable TV companies that requires them to operate only in small geographical areas. This barrier reflects the original purpose of CATV in Japan: a remedy for area s with poor VHF reception. To avoid having big capital dominate the market, the regulation mandated local capitalization to protect local interests. For a capital-intensive industry like CATV, there is little financial incentive in serving only 15,000 to 20,000 families. External pressure forced this and other regulations to be eased at end of 1993. In addition to expanding the permitted service area, the new easing of regulations permits CATV companies to enter the telecommunications market and to accept foreign investments that were previously barred to broadcasters.

Yet another reason behind the slow dissemination and acceptance of CATV, and one that will continue to hinder CATV growth in the future, is broadcast satellite services (transmitted from satellite BS-3). Subscription based services such as the WOWOW movie channel are capturing consumers who might have otherwise signed up for a CATV service.

Given all of these factors, whether the money-losing cable companies will ever start making a profit is problematic. Even if coaxial cable is just an interim technology, eventually to be replaced by fiber-optic cables in the next decade, current succ ess is important for presenting content providers with an opportunity to test new ideas. Future services may also prove that coaxial cable can provide enough bandwidth to satisfy the communications needs of most of Japan's households.

Internet

The Internet -- the inter-network of computer networks that is the darling of the press these days -- is another infrastructure in which Japan has only recently started to invest. Until the fall of 199.1, only a few lucky corporation employees, univers ity students, and research institute scientists could connect to the Internet from Japan. High prices were, and still are, a major hurdle in becoming a member of the global community. In the US, the Internet population is rumored to be over 30 million; as such, it is an excellent test bed for new network services. Compared to the US, the number of Internet users in Japan is minuscule.

Recently, the price of getting onto the Internet from Japan has started coming down, though it is still outrageous by US standards. (But then US users aren't paying for a cable across the Pacific.) While not yet offering the range of services available in the US or Europe, Japan's new VANs (value added networks) can offer connectability at an affordable price. Both Internet Initiative Japan (IIJ) and Fujitsu's InfoWeb, for example, offer dial-up Internet Protocol (analog or ISDN) service for a base reg istration fee of 30,000 ($300) and a 30 ($0.30) per minute rate. Electronic mail services are available through a relatively large number of providers, although many of them are still (or, at least, perceived as) sometimes unreliable. (For more informatio n on the Internet in Japan, see "Building On Ramps to the Information Superhighway" in the June issue of Computing Japan, or read the relevant articles in next month's networking issue.)

High-definition television (HDTV)

One field in which Japan thought it had taken the lead was the (now infamous) Hi-Vision, Japan's answer to the High-Definition Television (HDTV) standards war. Hoping to reclaim some of its lost production base in what seems destined to become a key in formation technology of the future, however, US industry spurned the Japanese analog-transmission standard. The US has gone as far as claiming that HDTV is an acronym for High-resolution Digital Television, and that the most important feature of the new s tandard is that it is digital. (If we accept this argument, improvement of the picture quality is merely a byproduct and not the purpose of the new standard.)

There is one byproduct of HDTV development that seems to have established itself beyond the original positioning as a niche product: wideaspect-ratio TV. Starting with Japan Victor's introduction in September 1991, 10 companies have launched a wide-a spect-ratio TV into the existing NTSC market (the broadcast format used in Japan and the US). Wideaspect-ratio TVs benefited from the initial investment in equipment needed to manufacture the 16-to-9 aspect ratio cathode ray tubes that were to be used for Hi-Vision TV sets. Had the Hi-Vision initiative not been announced, the market for what has been dubbed "wide TVs" would probably not have emerged, because development of the process for manufacturing large, defect-free glass (necessary for the wide CRTs ) was costly.

It is conceivable that the whole drive towards the wide TV standard was intended to help manufacturers recoup their investment in wide-aspect-ratio CRT manufacturing plants. Wide TVs now account for more than 15% of the total number of TV sets sold b y these manufacturers in Japan (and for 30% of the gross sales of TVs). Victor estimates that the demand for wide TVs will grow to 3.5 million sets in 1997, surpassing demand for normal 4-to-3 aspect ratio TV.

While it would make for an interesting account, this is not the place for a discussion of the politics behind the development, promotion, and the present decline of the HDTV standard. Japan's biggest mistake, however, and the one which ultimately led to the HiVision tragedy, was a failure to make the transition from the hardware based past to the software-oriented future. Japan hoped to gain a big share of the world's HDTV equipment market by setting the world-wide standard. In response, American bus inesses and politicians, afraid that Japan's advanced HDTV technology would destroy American competition, launched a counterattack using the technology they knew best.

By utilizing digital transmission, a household TV need not be a dedicated piece of hardware; instead, it can be a high-performance computer display, one capable of providing the user with high-definition television in addition to the graphics that us ers expect from a computer today. And while Japan may manufacture better LCDs (liquid crystal displays), among other computer parts, it is widely acknowledged that the US is years ahead of Japan in most core computer technologies, such as microprocessor d esign and operating systems.

Japanese alternatives

Several press releases have recently proclaimed that digital infrastructure is on its way. However, a major hurdle to developing a firm base in Japan is the government's insistence that Japanese industry develop multimedia communication pathways by its elf. To make good on the promise, while spending a minimum of capital, Japan has to quickly upgrade its existing infrastructure. Promising applications include digital FM broadcasts, communication satellite transmissions, and "fiber to the home."

Digital FM

FM radio stations have announced that they will start sending digital data along with their stereo broadcasts. FM Tokyo's concept is to transmit data to radios so that listeners can not only listen to music, but read up-to-date news and weather reports . Taking a different approach, a consortium consisting of J-Wave and other FM stations is targeting PDA (personal digital assistant) users as its main audience. The consortium is busy visiting PDA manufacturers, such as Apple Japan, in an attempt to find innovative and marketable applications that go beyond broadcasts of traffic reports, weather, and news.

One promising variation is electronic messaging. FM Osaka will start a text-based pager service next spring. Customers will be able to compose their messages on the pager, which then transmits the message over the telephone line to the FM Osaka studio. The station will transmit the message text on its FM frequency.

Communication satellites

Japan Satellite Systems (JSAT), a venture owned by C. Itoh, Mitsui Bussan, Sumitomo Shouji, and Nisshou Iwai, announced in June that it will start a SO-channel digital TV service using communication satellite #3 (CS-3), which will be launched in August 1995. Using l-to-S digital compression, CS-3 will be loaded with only 8 transponders to support the 50 channels; the digital TV service will start in 1996. The business model calls for the subscribers to purchase a 50,000 to 70,000 ($SOO to $700) receive r and to pay a monthly subscription fee of 3,000 ($30). JSAT's goal is 2 million subscribers within five years.

One small snag in the JSAT plan is that current Japanese regulations prohibit international TV broadcasting: both the reception of foreign broadcasts in Japan as well as broadcasting of TV programs to other countries. CS-3, however, will cover not only Japan, but much of Asia as well. With Japan finally entering the information export market, it is expected that the MPT will soon ease the regulations. Such measures will be crucial in driving the prices down to attract customers and expand the subscribe r candidate base.

With the slumping CS radio market, the industry has learned its lesson the hard way. This past year marked the first time in broadcasting history that a licensed broadcasting station has closed down. In fact, two stations ceased operations after fail ing by a factor of ten to meet their break-even point of 100,000 subscribers. One of the problems in attracting subscribers has been the entry cost: in addition to a monthly fee of from 600 to 800 ($6 to $8) per channel per month, subscribers have to purc hase a 40,000 ($400) antenna and 180,000 ($1,800) tuner. With salary bonuses down during the current economic slump, the average household now finds it difficult to justify the cost.

Fiber to the home (FTTH)

NTT has proposed an ambitious "Fiber To The Home" project, and it plans to complete the necessary infrastructure by the year 2015. In the MPT report, however, 2010 is cited as the deadline for laying a nationwide fiber-optic network. Whatever the compl etion date may be, the main issues are money and who will exercise control over the high-bandwidth, next-generation infrastructure. The general consensus is that private companies should pay for the infrastructure, which places the MPT in a dilemma. On on e hand, the MPT wants to retain control over the fiber-optic infrastructure by having NTT lay the cables (and, by the way, prevent rival government ministries gaining any jurisdiction). On the other hand, one of MPT's missions is to make sure that there i s "healthy competition" in the burgeoning market.

As it turns out, the only competition right now is from other government ministries and the projects they are backing. The regional electric companies, under Tsusho Sangyosho (the Ministry of International Trade and Industry, aka MITI) jurisdiction, are the focus of one project. In addition, Kensetsusho (the Ministry of Construction) recently proposed that a fiber network to be funded by the national government. Given the recent unstable political climate in Japan, the struggle among the ministries w ill likely continue or even intensify. The result might well be that the intended nationwide infrastructure base becomes a conglomeration of bits and pieces rather than the result of a coherent plan. And how the existing private portions of cable, such as those already laid along railroad tracks, sewage lines, and highways, will be integrated into an overall nationwide system is anybody's guess.

Coming applications

As has been happening in the US, deregulation of the CATV industry last December now allows Japan's CATV operators to become common carriers, thus permitting them to supply telephony service over cable. Such service, commonly known as video dial tone ( VDT), has been a huge success in other countries, such as the UK, where 10,000 new subscribers are said to be signing up for the service every month, bypassing British Telecom's monopoly. The first company in Japan to apply, Kinki Cable Network (KCN), fil ed an application for a carrier license at the end of June. KCN plans to introduce leased line services over their cable network at a discount of 10% to 20% off the cost of NTT's dial-up service. KCN's first client is Sogo Keibi Hosho (a securities compan y), which reportedly will pay 1,000 ($10) per month for each connection, compared with the 1,200 ($12) per month that it is presently paying to NTT.

Another coming application is the video game software transmission service that will be provided by Sega Digital Communications. (Sega and its parent firm CSK hold a majority of SDC stock; other shareholders are Kandenko, C. Itoh, Sumitomo Shouji, Ni sshou Iwai, and Mitsubishi Shouji.) For a monthly fee of 3,000 ($30), a subscriber will have constant access over the cable lines to 30 games. Subscribers will need an attachment to connect their MegaDrives (known as Genesis in US) to the cable line.

After a September start, the first year will be spent garnering subscribers from the current audience of the top 20 CATV providers - in return for providing SDC with access to a ready subscriber base, the CATV providers will get a 1,000 ($10) cut eve ry month. While 20,000 subscribers is the goal for the first year, SDC predicts that the service will capture an audience of 100,000 within three years. If this first phase is successful, Sega is expected to advance to the next stage: interactive game pla ying among people on the network.

Footing the bill

In the industry's search for new multimedia applications, a common concern always seems to resurface namely, how the new infrastructures in Japan will be paid for. JSAT spouts hype with the best of the evangelists, but there is no assurance that the di gital TV venture will live up to the lofty expectations. And with new common carriers bypassing NTT's monopoly through CATV, and the recent decision to bar NTT itself from providing personal handyphone system (pi-IS) service, it is doubtful that NTT will be able to foot the 45-trillion ($450-million) bill required to wire all the households in the next 15 years.

Despite what some seem to believe, the construction of a multimedia information society will not appear overnight. Like the evolution of the Internet, it will take time and much effort. The key lies in the hands of the content providers -- useful app lications that work on the current infrastructure must be provided first, in order to create the demand that will justify, from a business point of view, the funding of incremental improvements.

Evolve or perish

As noted earlier, the MPT predicts that the domestic market for multimedia 15 years from now will be 123 trillion. This figure may or may not be unrealistically optimistic. What is clear, however, is that this market is not a totally new bonanza. In fa ct, Nikkei Shimbun points out that the MPT figure is equivalent to 3 million ($30,000) per household per year. Since, even with inflation and pay raises, it is obvious that the average household cannot afford to spend an additional 3 million yen a year fo r multimedia equipment and services, a major portion of the predicted multimedia revenue must simply be a redirection of spending in traditional industries, such as publication, broadcasting, and communications.

The various effects of this expansion will undoubtedly have a negative impact on other industries. Consider, for example, the reduction in paper consumption and magazine and newspaper sales as more and more information is published online; the effect o n department stores and other traditional retailers as home shopping and other new sales channels bypass them; and the overall reduction in sales of specialized hardware, such as word processors, game machines, video players, radios, and even TVs.

There are other probable effects to consider as well. In the US, new mergers and new business initiatives are the methods being used to survive through the current multimedia shakeup. Blockbuster Entertainment, an American video rental empire, for exam ple, has announced such new business partnerships as a "music-on-demand" venture with IBM, to deliver music to customers over a data network (instead of physically transporting CDs and cassettes). This will likely mean the disappearance of CD rental store s in the not-too-distant future. Just as the proliferation of fax machines resulted in a sharp decline in the number of bike couriers, the emergence of a new infrastructure with the capability of transmitting video will displace many traditional businesse s. As media integration advances, industries reliant on analog media will either have to make the switch to digital or become extinct.

Multimedia in Japan seems headed to become a big industry, although much later than was originally predicted. A major difference between the previous ISN/New Media hype and the present situation is that this one is being led by the private sector, es pecially the entertainment industry. The infrastructure is expensive, however, and consumers will only pay for what they think is worth the price. The infrastructure providers must be careful in selecting the content providers and putting together their b usiness plan, bearing in mind that it is ultimately the consumers who will pay -- or not. And they must come up with the "killer applications" that will induce consumers buy.

It is impossible to attend a computer show or read a computer magazine in Japan without repeatedly hearing the phrase maruchimedeia jidai (the era of multimedia). But if multimedia in Japan is to prove the success that everyone predicts, the governme nt will need to continue to guide businesses by providing a long-term vision, and engendering a business climate that encourages more risk taking. The government should also be a leader in promoting education that prepares tomorrow's workforce for jobs in interdisciplinary fields.

ISDN Karaoke

One of the favorite pastimes of the Japanese, karaoke (singing along with professionally recorded background music) has evolved over the years, from an after-work exhibition for drunken sarariman (white-collar workers) to a popular night-out for famili es and students. Karaoke got its start in bars, where businessmen sang as stress-relief and used it as a vehicle for bonding with colleagues or business partners. Recent growth of the industry, however, has been not in bars, but in the so-called "karaoke boxes," a facility providing cozy rooms where customers need not worry about strangers listening to them (or, perhaps even more appealing, where customers no longer have to listen to strangers sing). There are over 10,000 karaoke box facilities throughout Japan, with an average size of about 12 rooms each.

The original barroom karaoke supplied singers with the lyrics in a booklet. This presentation was soon overtaken by laser disc-based systems, where lyrics appeared on a screen with images, and followed the music syllable by syllable.

The technology breakthrough that contributed to the present proliferation of individual karaoke rooms was centralization of the source. To avoid having 20 sets of laser disc players (each player containing possibly hundreds of laser discs) for a 20-r oom facility, companies such as Dai-ichi Koushou, a karaoke giant, developed a video server system in which video signal switchers are used in conjunction with automated laser disc-feeding robots to process the requests centrally. The facility proprietor then orders multiple copies of laser discs that contain the most popular songs, based on the actual request history. In short, this is a localized version of video-on-demand,

The medium on which the video images and music are stored has undergone an evolution as well. The original (imageless) karaoke was stored on audio tapes. These were superseded by laser discs, which were soon overtaken by 12-cm CDs (that took up less space). Some versions of CDs contain only the music and synchronized lyrics, played on a TV screen with random video clips. Advanced CD systems, however, have the video images stored on the CD itself using MPEG-1 compression.

The latest trend is to use ISDN. In addition to saving space at each site, this offers timeliness in terms of new releases and provides a large selection of songs to attract more customers. As a result, many karaoke boxes are making the switch in ord er to survive in the competitive market. One subsidiary of Brother Kougyou has sold over 20,000 ISDN karaoke systems. Competitors include Dai-ichi Koushou (teaming up with Yamaha) and Nikkoudou and others, selling a Pioneer system. Sega has also announced plans to market an ISDN karaoke system based on its new Saturn game platform, scheduled to ship this fall.

Most of these companies have already started testing the distribution of non-karaoke software over the network. Thus, the foundation for interactive TV trials may already be here, without help from the MPT or anyone else.