May 15, 2006 In Japan, a Provider of Cable Ups the Ante By KEN BELSON NY Times
http://www.nytimes.com/2006/05/15/technology/15cable.html?pagewanted=print TOKYO The Japanese are among the most avid television watchers on earth, yet most are still pulling their favorite shows out of the air. Just one in five homes here subscribes to a cable or satellite service. Jupiter Telecommunications, the nation's biggest cable provider, is out to change that. Jupiter, which sells services under the brand name J:COM, has been aggressively signing up customers for its television, broadband lines and digital phones even going so far as to pitch its wares door to door. In March, J:COM also started selling mobile phone service, an offering that American cable companies like Comcast are only just developing. This "grand slam" bundle has made J:COM the company to beat in Japan and is typical of how the company's American owners led by the cable tycoon John C. Malone are experimenting with both the latest technology and age-old salesmanship. J:COM, which is partly owned by Sumitomo, looks like a local company from the outside. But behind its Japanese exterior, J:COM has a heavy American imprint, thanks to its majority owners at Liberty Global, which was formed last year when UnitedGlobalCom merged with the international holdings of Liberty Media International. Microsoft owns a small share in the company, too. J:COM brings in almost one-third of the sales at Liberty Global, whose overseas holdings stretch from Japan to Chile to the Netherlands, and its advanced services are providing a road map for cable companies in other corners of the globe. But to sell those services to a public used to getting their TV for free, J:COM must do some hand-holding. The company has 1,900 sales agents who go door to door, signing up new customers and providing technical support. That extra effort might appear excessive to Americans, who have been buying cable and satellite services for years. But J:COM reckons that the personalized attention is crucial, because about 40 percent of Japan's population is over 50 and reluctant to order new services on their own. "We have to explain to people why cable TV is important, and face-to-face interaction lets us do that," said Hiroyuki Nakatani, J:COM's manager in charge of sales and marketing. In addition to offering video-on-demand, digital video recorders and other products that are mainstays in American homes, J:COM is expanding by aggressively buying rivals. Last year it took over cable companies in Kobe and Tokyo to raise its market share above 30 percent. J:COM, which is nearly five times as large than the second-biggest competitor, plans to keep buying some of the hundreds of remaining Japanese cable providers. The acquisitions, combined with new products, have helped J:COM's sales grow by more than one-third in the last three years and an additional 20.4 percent in the first quarter this year, to 51.1 billion yen, or $464.1 million. Profits in the quarter surged 30.4 percent, to 4.37 billion yen. "With our new services, we want the entire home entertainment budget to come our way," said Tomoyuki Moriizumi, J:COM's chief executive. "We want to make a one-stop shop for consumers." J:COM hopes that its extra bulk and new services will help it fend off new kinds of competitors. Companies like Softbank are offering television over the Internet, and Japan's biggest phone companies are building vast fiber optic networks and teaming up with satellite providers like SkyPerfect to offer their own television services. SkyPerfect, which has more than four million subscribers for its satellite services, is working with NTT, the country's largest carrier, to bundle its television with NTT's phone and broadband services for as much as $18 a month less than J:COM charges. The arrangement is similar to the relationship that Verizon and other American carriers have with DirecTV and Dish. The fresh competition is a big reason investors remain skeptical about J:COM's prospects. The stock of the parent company of J:COM rose 21 percent in the three months after its debut in March last year, but it has lost all of that in the last few months. On Friday, it closed 5.5 percent below its initial offering price. Yoshiyuki Kinoshita, an analyst at Merrill Lynch here, said "excessive concerns regarding the company will disappear" once investors focus on the company's growing profits and expanding market share. All Japanese pay-television providers, though, still must grapple with the country's broadcasters, including the government-owned NHK. Like ABC, CBS and NBC decades ago, they dominate the television industry with big-budget dramas, game shows and sports. Growing numbers of shows are broadcast in high definition. These networks win most of the advertising dollars spent on television, forcing cable and satellite to rely more on monthly subscriptions than their American counterparts. Cable and satellite providers also face structural barriers. Many Japanese live in cramped apartments that lack the clear views of the sky needed to hang satellite dishes. The cable industry is dotted with dozens of tiny family-run or municipally owned companies. In big cities, trading companies, electronics makers and utilities and railroads often hold control. With so many competitors spread across the country, J:COM has a hard time getting large enough to win deeper discounts from set-top box makers and programmers. Still, J:COM has done a better job than most at selling new services to generate revenue. Almost 40 percent of its 1.8 million television subscribers have digital cable services that allow them to use digital video recorders, video on demand and other premium services. Nearly 23 percent of its customers order their television, broadband and phone service from J:COM. "Other companies like NTT are trying to offer a triple play with satellite companies," Mr. Moriizumi said. "What's the point? We have one company, and we can give volume discounts of about 1,500 yen to customers with all three products." Naoki Hiratsuka, a 58-year-old father of two, has had J:COM's triple play for four years. In addition to a basic television package, he gets a digital phone line and a broadband connection with a top speed of 30 megabits a second, about six times as fast as that offered by most American cable companies. He pays about $130 a month for the three services and some premium channels. "When I saw the price of the package, I had to switch to J:COM," said Mr. Hiratsuka, who used to buy his phone and Internet line from NTT. Mr. Hiratsuka is also considering whether to get a cellphone from J:COM once the company adds more models. J:COM does not operate its own cell network, but uses the one run by Willcom, a local carrier, an arrangement similar to what American cable companies are developing with Sprint. In its first two months, J:COM's wireless service attracted 7,000 customers, many of them older consumers and teenagers who prefer a basic, inexpensive service. The company, which hopes to sign up 50,000 subscribers by the end of the year, charges $25 a month for a fixed-rate calling plan that lets J:COM customers call each other free. Like American cable companies, J:COM wants to develop phones that work on the cellular network outdoors and wireless networks indoors and, ultimately, will let subscribers program their digital video recorders from their phones. J:COM tailors its offerings for its audience with interactive services like mah-jongg and karaoke for older customers and daily recipes and workout programs for housewives. In a country known for its personal touch, J:COM and its American owners appear to have gone local. "To the Japanese consumer, it's not only the cost, but also the convenience, so that if something breaks down, there will be a face to call," said Jane Buenaventura, a telecommunications analyst at Pyramid Research. "It's a market that is used to the retail approach, and J:COM knows that very well." ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list medianews@twiar.org To unsubscribe send an email to: [EMAIL PROTECTED]
