Japan's VOD Dilemma

With Nippon TV’s NTV2 online video service reportedly turning its first monthly profit after dropping subscription charges last October, other Japanese broadcasters players may also be wondering if free content is the way to go for video-on-demand (VOD).

In a market where terrestrial broadcasters typically offer VOD as a paid-for service, with no widely successful players, Tokyo Broadcasting System (another national broadcaster) is also experimenting with a free model, starting a trial this month.

As the Japanese media market continues to deteriorate, alternative revenue streams are becoming increasingly attractive to traditional broadcasters.

Elusive profits
Making money from VOD however, is far from easy. Even free online video portals like GyaO, which boasts over 20 million registered users and is among the most viewed websites in the country, haven’t been able to secure enough advertising money to offset content acquisition costs.

Terrestrial players can leverage their own content, as well as existing TV audiences to promote their new services. Nippon TV for example markets its offer via TVCs and variety shows on its digital TV channels. Advertising around online video tends to be bundled together with the terrestrial channel however, limiting the opportunity to bigger advertisers.

“There is an accessibility issue that keeps many out of the market, for the simple fact that the interactive content is being sold in a bundle with the terrestrial television spots,” says Takeshi Komuro, leader at media agency Mindshare in Japan.

Ad revenues from Nippon TV’s online video service come mainly from product placements in its variety drama and shows.

One way forward could be offering original content. “There is an opportunity towards content development and distribution on the part of advertisers that hasn’t been fully explored,” Komuro suggests. “Ideally, the online channel will evolve to support terrestrial content as well as sponsored or independently-developed content.”

Paid-for still in play
The jury is out on a successful business model for VOD. Other broadcasters still use a fee-based approach, for either part or all of their content. The strongest player in the market, state broadcaster NHK, doesn’t feature online advertising, charging a relatively modest JPY525 (US$5.65) for unlimited viewing for a week.

TBS hasn’t given up on a paid-for approach either. Its free trial offers a TV catch-up service, offering recently-aired programs for free, though its revamped fee-based TBS On-Demand service will be relaunched in April. This currently focuses on original programming, but will be expanded to include terrestrial shows by request.

Fuji TV meanwhile, another of Japan’s five major national broadcasters, is also strengthening its paid-for service, tying up with mobile operators KDDI and Okinawa Cellular. 

Online rises in declining ad market
Internet advertising in Japan rose 16.3% last year, compared to declines across the board for all other platforms, according to recent figures from Japanese advertising giant Dentsu. But this growth is largely from search-related and mobile ads – so online video plays a small role.

“Online video isn’t really very high on the radar yet,” Komuro adds. “As penetration numbers continue to climb, I expect it will quickly become more and more common for advertisers to want to be a part of the market.”