TT-497 -- Metropolis Buys Kansai Scene Magazine, 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 07, 2008 Issue No. 497

+++ INDEX

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

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+++ WHAT'S NEW

After buying the Metropolis magazine in 2007, a journalist
for the Foreign Correspondent's Club of Japan, Peter Fuchs,
interviewed this writer (Terrie) about the future of
print, particularly English-language print publications in
Japan. The response given was that print is not dead, but
rather fufills the role of forming the foundation for a
host of extension activities, such as online websites,
events, education, services, and other means of engaging
and monetizing one's audience.

Yes, it is true that the role of print is changing, and
where people used to pay for print, they are now more
reluctant to do so, especially since there are so many free
alternatives. Nonetheless, people still identify with
brands, and right now print is much "sexier" and vivid to
the human senses than the web, and thus it is the ideal
medium to start a brand engagement with a new audience.

There has been a lot of speculation recently about the
ongoing viability of English-language publications such as
the Japan Times and Daily Yomiuri newspapers, and of course
paid periodicals such as the Tokyo Journal, our own Japan
Inc., and others. The speculation is that the
English-reading audience in Japan is already small and is
now shrinking even further no thanks to the mass lay-offs
by foreign banks and their subsequent downline of partners
and suppliers (i.e., readers and advertisers).

Certainly we agree that things are getting tougher, and
indeed, our own Japan Inc. publication is preparing to
once again go quarterly so as to ride out the emerging
recession. But this is not to say that these publications
won't survive. So long as their publishers realize that
just as with an online SNS website, if you are able to
continue interacting with your audience in an intimate way,
then that audience will give you permission to market
products and services to it in trade for information. For
Japan Inc. the monetization is in market entry, business
seminars, and management consulting services, all of which
are doing very well and contributing to the overall profits
of the company. Less paper, more engagement.

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[...Article continues]

Even the Japanese print media, a bastion of print tradition
in the publishing world, is under pressure. The Nikkei
published an opinion piece back in late July of this year
which said that the 5 major print periodical publishers in
Japan are feeling the pressure of reduced print demand, and
that most of them had experienced noticeable falls in sales
and profit with their conventional periodicals. To make up
for the fall-off, the various companies have each turned to
different strategies.

Top of the heap, Recruit, is pushing its free papers and
online business hard, and as a consequence has gained
overall market share. Second-ranked Benesse has a lock on
the student market and is busy rolling out handhelds and
educational game software. Third-placed Kodansha is pushing
high-yield novels to make up lost ground, and Shogakukan
and Shueisha are focusing on the web, new mags, manga, and
whatever else they can scrounge up.

According to the Nikkei, ad and subscription sales by the
top five publishers totaled JPY2.8696trn in 2007, up 0.5%
from 2006. Our sense is that this is the peak of the
market and next year, the numbers will start coming down
significantly -- perhaps never to recover... well, for
print subscriptions, at least.

Thus, domestic publishers like their colleagues the world
over are realizing that they need to engage their audiences
on multiple levels and they are now learning how to serve
their content up on multi-media, per the visions of the
mid-1990's. However, probably the biggest disruptor that
they didn't count and one they still haven't come to terms
with yet is the advent and migration to free papers.
Recruit has had a gigantic hit with Hot Pepper and if the
other publishers weren't so wed to tradition, they'd be out
competing like hell with Recruit.

What Recruit has found is that people really do like the
paper medium, it suits more of the human senses than Web
(touch, smell, and to a certain extent, sight), but the
public is spending less time reading paper-based media
because it takes time and they suffer from information
overload. Instead it's easier to go to the web and just
search topics we're interested in. Recruit, however, has
rightly surmised that commuters do want something to do
while on trains, and if the paper is free, people are
willing to read it.

This trend of free papers and commuters is extremely well
advanced overseas, as evidenced by the Battle Royale going
on in London at present between London Lite and The London
Paper. Wherever you go on the tube, you will see a commuter
holding one or the other broadsheet. Here in Tokyo, it
looks like for the time being that Recruit has the playing
field to itself (apart from Metropolis, of course), and we
see no serious challengers at this point.

So we're saying that while paper media will be around for a
long time to come, it is clear to us that most papers will
become free, with the exception of very few titles. It will
be interesting to see who of the Yomiuri, Asahi, Mainichi,
and Nikkei go this route first. Or perhaps it will be an
interloper like Recruit, with a full line up of news.

This is not to say that there isn't a space for paid
content. If a paper can present information of such quality
and depth that people HAVE to buy it as a tool for their
job, then that publication will continue for as long as it
is relevant and useful. This where the Wall Street Journal
has done so well. It is significant that the WSJ has almost
one million paid subscribers in the USA and there is no
Nikkei equivalent. We wonder if this is because the Nikkei
doesn't have the confidence that it can get its readers to
pay for online information, a distinct possibility, or
whether they are just too lazy to change old habits.

Whatever the reason, we think this old fashioned view about
free papers will break down as soon as one of the big four
or an outside challenger gets the mix right. Make the news
free and distribute the paper daily in the evenings on the
subway and we predict it would be like a dam bursting for
the others.

Looking overseas again, we were interested to read that one
of Canada's most successful publishers (in terms of ROI) is
a gentleman called David Black (not related to jailed
publisher Conrad Black). Black owns 170 community free
papers across the Western states of Canada and makes money
on most of them. None are large, and in fact the average
print-run per title is a miniscule 4,818 copies...!

Black says that the secret to his success is keeping costs
low (Umm, OK), sharing back office costs, sharing printers,
offering high-tech functional websites to archive and
provide feedback, and ensuring that distribution occurs
where people gather. In fact these are all basic components
of our own business plan for Metropolis, and so we are
heartened that there are other paper publishers who are
finding that paper is not dead.

Like David Black's audience, Japan's foreign population
dwells in communities not much different in size to the
small towns and cities spread across British Columbia.
Therefore, Metropolis' senior management decided to take a
leaf out of his book and last week Crisscross KK, (CCKK)
announced that it would expand into the Kansai by buying
out the leading English-language free paper in that region,
the Kansai Scene. Kansai Scene is a 64-page monthly free
paper produced by Nihon Papers KK, and has a circulation of
25,000 copies per month, delivered to over 400 distribution
points. It recently celebrated its 100th issue and so it is
a proven keeper.

In buying Kansai Scene, CCKK management plan to maintain
the publication as it is for a while, but to eventually
bring it into the Metropolis fold and identity (without
dropping the Kansai Scene title -- which local readers are
endeared to). Just as Black has said, our thinking is that
both magazines will be cheaper to run thanks to shared back
office and printing resources, as well as cross-selling and
editorial sharing. The purchase now gives Metropolis
approximately 55,000 print copies hitting most
English-readering foreigners in Japan, and good number of
Japanese as well. There are no plans for Kyushu, Hokkaido,
or Okinawa at this point, but given the concentrations of
non-Japanese in those locations they will undoutably show
up on the radar screen at some point. With the acquisition,
CrissCross KK is now officially the largest English-
language periodicals publisher in Japan and also reaches
the largest audience of unique readers in print.

Also, as Recruit and Canada's Black have shown, it's the
extension activities that will define the future profits of
the publishing business. Metropolis is already running
monthly party events in conjunction with EigoTown --
attracting around 500 people a month. Further, its last
"mega event", the Halloween party, attracted 2,400 guests
-- about 400 more than the venue could hold (and Metropolis
apologizes for this -- plans for a much bigger venue next
year will fix the problem). Without stealing Metropolis'
thunder, in about 6 weeks time, the company will also have
a major website upgrade that will re-introduce the web
aspect of the business and make it a center of focus for
foreign lifestyle in Japan -- both on PCs, cell phones,
and mobile devices. More on this once the site is launched.

So we at Metropolis certainly don't think that paper is
dead. Instead the message is that it is evolving. So long
as content is delivered in whatever way people want to get
it, and so long as that content remains entertaining,
informational, and relevant, then it will remain in demand.
And with a loyal audience you get loyal advertisers.

**********

Terrie's Take is proud to be a supporter of The Japan
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+++ NEWS

- SME credit opens up to more companies
- Q3 solar cell shipments jump 44%
- Japanese aid to Vietnam stops
- Nomura to cut 1,000 employees in UK?
- Huge jobs retention package coming

-> SME credit opens up to more companies

Some weeks ago we predicted a flood of cash for small to
medium-sized companies, from the government, and that
flood is indeed happening. Just to make sure no potential
voters and their employees miss out, METI has said that the
number of industries that can apply for the special loans
with lowered credit checks and government credit guarantees
has been expanded to 698 different business categories --
pretty much every area of human endeavor. ***Ed: Any
foreign business owners in Japan who are not applying to
this program are missing out on a major opportunity to pull
in a low-interest loan. Apparently the program guarantees
loans up to JPY280m.** (Source: TT commentary from
nikkei.co.jp, Dec 6, 2008)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20081206D05JFA19.htm

-> Q3 solar cell shipments jump 44%

Although the torrid pace probably won't continue, those
companies involved in making photovoltaic cells in Japan
are seeing demand for their products soar, particularly
from Spain and Germany, where the governments of each
country offer consumers subsidies to go solar. The Japan
Photovoltaic Energy Association says that shipments were up
44%, to around 304.5MW. 60% of the shipments went to
Europe, up from 53% last year. Domestic shipments limped
along at 6%, partly because consumers are hoping the
government will make good on its promise to offer tax
rebates for those investing in solar installations for
their homes. (Source: TT commentary from nikkei.co.jp, Dec
5, 2008)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20081205D04JSN02.htm

-> Japanese aid to Vietnam stops

In a move that just has to have deeper reasons, Japan's
ambassador to Vietnam has said that Japan will cease
providing aid to Vietnam until the SE Asian nation cleans
up its corruption problems. Japan is a leading provider of
low-interest loans and ODA to Vietnam, pledging US$1.1bn
last year alone. The announcment comes after Asian
Development Bank and the World Bank both released reports
citing corruption as a problem. ***Ed: Given Japan's habit
of tying aid to company contracts in SE Asia, it is hard to
imagine that corruption is such a big concern, so we wonder
what is really going on behind the scenes? Are the
Vietnamese reneging on some other business deal perhaps?**
(Source: TT commentary from bloomberg.com, Dec 5, 2008)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTIhAZGLZ2Ko

-> Nomura to cut 1,000 employees in UK?

Robbing Peter to pay Paul, Nomura Holdings has said that it
will be firing up to 1,000 employees at its London office.
The move comes just weeks after the company's ill-advised
US$2bn bid for Lehman Brothers holdings in Europe and Asia.
Nomura doesn't say how many of the cuts are Lehman staff,
but most likely most are existing Nomura staff -- people
stuck on the wrong side of the CEO's ambitions. ***Ed:
Nomura has put figures about saying that it will have a
pre-tax profit of JPY500bn (US$5.4bn) in FY2010, ending
March 2011, thanks to profit contributions from the Lehman
acquisition. But to us, projecting out a profit by 2 1/2
years simply shows that in fact the acquisition is going to
hit the P&L big time before that -- indicating a major case
of indigestion for Nomura.** (Source: TT commentary from
reuters.com, Dec 4, 2008)

http://www.reuters.com/article/managementIssues/idUST15722320081204

-> Huge jobs retention package coming

According to the Nikkei, the ruling LDP party is planning
to create a massive jobs creation package to incentivize
corporations to employ more people. Apparently the package
will offer a variety of subsidies, including up to JPY1m
per person employed by companies that are in the red. Other
payments for profitable companies employing those who have
lost their jobs recently or who are working for temping
companies. There will also be funds for local governments
to create new projects requiring personnel. Overall, the
LDP says that the package is worth JPY2trn, and will create
new jobs for around 1.4m people. ***Ed: While we're sure
that some smaller companies might be motivated by a JPY1m
subsidy, mainstream employers know that the real cost of
bringing in an otherwise under-employable person costs a
lot more than this. Thus we don't see this measure
providing much effect.** (Source: TT commentary from
japantimes.co.jp, Dec 6, 2008)

http://search.japantimes.co.jp/cgi-bin/nb20081206a1.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 corrections this week.

***********************************************************
END

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+++ ABOUT US

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

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