Connected TV has much potential in Japan but its future remains undefined, as media owner efforts to develop a CTV marketplace to meet advertiser demands, are still in the early stages.
Japan is a place of contradiction. It’s hard to reconcile the Japanese proverb derukuihautareru, meaning "the stake that sticks out gets hammered down" - often seen in business - with our idiosyncratic culture.
Famously the birthplace of the Walkman and a nation that’s been using contactless payments for 20 years, the Japanese are trendsetters and innovators rather than early adopters. Japan paved the way for modern-day advertising, now exemplified by the global reach and power of holding company Dentsu Inc.
Japan has been less quick off the mark though when it comes to the adoption of digital advertising and programmatic with strong demand for traditional media. However, in recent years we have been catching up with the West.
Ubiquitous super-fast internet (5G is already available) and a culture predisposed to embracing new technology means that Japan has an on-demand and hyper-connected society. So how have Japanese embraced OTT (over the top)/CTV(connected TV)?
A mobile-first landscape
Free-To-Air TV broadcasters like TBS and Fuji TV dominate TV viewing in Japan with cable TV having limited penetration amongst Japan’s 125m population. The OTT market is relatively well serviced in Japan and a sizable opportunity.
Each broadcaster offers their own SVOD (subscription video on demand) service for premium content like Paravi (TBS) and FOD (Fuji TV) with remaining catchup content distributed via AVOD (advertising-based video on demand) OTT service Tver.
International SVOD platforms like Netflix, HBO, Disney+, Amazon Prime are all available and domestic AVOD players AbemaTV are popular and offer scale. New AVOD offerings such as sports-focused DAZN and Rakuten TV with their NBA rights are available or soon to launch. According to an Omdia report, OTT subscriptions are estimated to grow 10.6% over 2018–23, with OTT video revenue growing 12.4%, over the period to reach US$4.83bn in 2023.
Similarly to other Asian countries, Japan is a mobile-first market. According to We Are Social, 83% of 16 to 64-year-olds own a smartphone but only 7.6% own a device for streaming TV content over the internet. Meanwhile, 28% watch TV content via a subscription streaming service each month and 53% use entertainment or video apps each month all suggesting mobile (not CTV) dominates OTT consumption.
Low incomes and intergenerational households
Japan’s unique socioeconomic characteristics are likely to play a significant role in the adoption of CTV. The economic stagnation during the “Lost Decade’ in the ’90s is still seen today. Low-income households have grown at the expense of middle-income groups. Traditional lifetime employment is being replaced by lower-wage part-time contracts as companies feel the pressure of global competition. This is in stark contrast to the emerging Southeast Asian markets like Indonesia and the Philippines who are experiencing a surging middle class.
Coupled with the high cost of living, property prices, ageing populations and declining birth rate, intergenerational adult households are the norm in Japan. Three million 35 to 44-year-old adults still live with their parents. Adults cohabiting in a small home with a lack of privacy let alone factoring differences in taste and preferences is likely to be restricting big screen TV co-viewing in the living room.
Content available via mobile and tablet will appeal to the younger demographic who seek the flexibility to watch on the go - rather than big-screen viewing in the living room - and appeal to their desires for more independence and household separation. As seen in other APAC markets and hastened by the recessionary impact of COVID-19, AVOD services rather than SVOD will see the highest growth rates as consumers look to limit discretionary spending.
Future of CTV in Japan
CTV will become more popular however it will not eclipse mobile-based OTT consumption in Japan for the foreseeable future. The now-postponed Olympics offered an opportunity to increase the adoption of smart TVs, particularly as Panasonic is a global sponsor. The importance of live streaming plus catch-up services would have been much greater for these games and a welcome boost to OTT viewing. Additionally, as seen in other markets, telco brands play a key role in OTT adoption with their attractive pricing and packaging. Proposed plans by the major Japanese mobile operators to launch OTT offerings will certainly drive consumption once launched.
From an advertising perspective, the US and EMEA broadcasters/OTT providers have created a strong CTV advertising ecosystem with premium content available via apps on smart TVs with sufficient audience scale to attract brands. Current efforts are focused on convincing the agencies and brands of the unique benefits of placing ads within long-form high-quality content on the big screen as a credible alternative to social video environments like YouTube and Facebook. Japan finds itself in the opposite position where the demand for CTV from leading agencies is there, however, the broadcasters and platforms are still in the very early stages of developing a CTV marketplace.
Socioeconomic factors will determine the future of CTV in Japan. As COVID-19 eases, the office-based intense work culture is likely to return and with a negative growth outlook for the next 12 to 18 months dampening consumer confidence and spend, demand for smart TV’s will feel the impact.
That being said, the pandemic has also created a surge in OTT viewing and broadcasters/content owners will have an opportunity to capitalise on this change in behaviour but whether it looks to grow overall OTT services or focuses on creating a new CTV ecosystem, remains to be seen.