Cracks in the walled garden: The view from Japan

ulken-headshotkopieThis is my first post for De Nieuwe Reporter. I am an American journalist and the former editor for interactive technology at the Los Angeles Times. I’ve been spending this year traveling and studying trends and practices in online journalism around the world. I will be writing here occasionally, and I also blog (infrequently) on my own site.

If the future of online news is paid (and that’s an admittedly big if), what might that future look like?

On a trip to Japan a few weeks ago I sought some answers from the gurus at InfoCom Research, a think tank run by NTT DoCoMo, the country’s largest mobile provider. I was looking for lessons on mobile content distribution from a country with a track record for innovation and early adoption in the wireless sphere, where customers often are more willing to pay for content.

We talked a lot about i-mode, DoCoMo’s proprietary mobile content platform, and how it successfully supports the creation of high-quality content through usage fees. I-mode is such an important revenue stream for content providers that they produce a great deal of i-mode-specific content, often to the detriment of their own free mobile web offerings.

Real money
Let’s look at the economics. According to InfoCom, just 9% of the subscription fees paid by i-mode’s 50 million Japanese subscribers flow back to content providers, but that still amounted to 20 billion yen ($208 million / 148 million euros) in 2008. Split among i-mode’s 2,800 content providers, that’s an average of 7.1 million yen ($75,000 / 53,000 euros). To look at it another way, if each of those content providers were a single reporter or photographer or blogger, i-mode commissions could pay living wages to 2,800 information gatherers. Of course, a handful of providers probably account for the lion’s share of the revenues, but however you slice it, we’re talking about real money.

One of i-mode’s successes is in providing a simple way for users to pay for content. At a time when news organizations are talking about launching micropayment and subscription walls, it’s worth noting i-mode’s simplicity: Users don’t have to think about providing payment information to multiple publishers. All they need to do is click and browse. If paid content is going to succeed on a large scale, it needs to be that easy. (Related thought: The problem of paying for content is clearly bigger than the newspaper industry, so why aren’t newspaper publishers collaborating with broadcasters and other content providers on a common payment system?)

Now it would seem that i-mode’s star is dimming. Foreign carriers have mostly phased out their versions of i-mode — launched with great fanfare under license from DoCoMo a few years ago — and even in Japan the platform faces growing competition from devices such as the iPhone and tiny netbooks with built-in mobile broadband, which can bypass the walled garden entirely.

To call i-mode a failure would be inaccurate. For one thing, it is still hugely popular in Japan: 48 million of DoCoMo’s 54 million mobile subscribers pay in the neighborhood of 4,500 yen ($47 / 34 euros) a year for information services ranging from sports results and news to e-mail and games. I-mode was also the first high-speed mobile data service in widespread use, and in the 10 years it’s been around it has helped define Japanese mobile culture. For example, i-mode’s feature-rich e-mail system, rather than SMS, has become the dominant means of exchanging information among phones, resulting in a raft of mobile-specific content pushed over e-mail.

Unfortunately for content providers, the apparent undermining of i-mode by the open mobile web suggests that walled gardens will succeed when technology is nascent and access is limited (think of AOL, Prodigy and their ilk) but ultimately will lose out to the broader ecosystem of the Internet.

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Where print still reigns: I was also curious about how to reconcile Japan’s high mobile content usage with the fact that newspaper circulation there remains relatively strong. (Total circulation there fell just 2.7% between 2003 and 2007, according to the World Association of Newspapers, compared with a 5.91% drop in the EU and an 8.05% slump in the US.)

I never found a satisfactory answer. Maybe it has to do with the large number of people commuting by train (though I didn’t see all that many newspaper readers in my train travels there). Whatever the reason for print’s current strength, the circulation slide we’ve seen in Europe and the U.S. is certain to happen in Japan eventually. But will Japanese users, with their i-mode experience and newspaper loyalty, be more willing to pay for news on the web than are those in the West? We’ll see.

Eric Ulken

Eric Ulken is oud internetredacteur van de Los Angeles Times. Hij nam ontslag bij de krant om in 2009 de wereld over te reizen, op zoek naar trends en ontwikkelingen in de journalistiek. Hij bericht over zijn bevindingen in een maandelijkse column voor De Nieuwe Reporter.

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  • qlynt

    I think what it comes down to is that Japan is still very much a paper based society. If you go into almost any office in Japan, you’ll notice files, file-cabinets, and papers everywhere. Even if they have a database with the same information, they generally also have physical copies of the data.

    Given that fact, many people also don’t really use PCs like people in the West, especially the older generation. Many still view using the PC as a task rather then as a convenience. Most people that I’ve talked to associate PCs with work and being in the office.

    They might read news when convenient on their phone, but ultimately, their trust again lies in the genuine article. It also doesn’t help that it’s probably a pain to read and browse news with i-mode.

    Overall, given the choice, I guarantee most Japanese people would rather read the newspaper then get news from a digital source.

  • Jan Bierhoff

    Nice impression Eric. The strong position of print has also a lot to do with cultural factors, and the level of social control on having a subscription in Japan. Keep on observing, also beneath the media practices.

  • I was also curious about how to reconcile Japan’s high mobile content usage with the fact that newspaper circulation there remains relatively strong.