Japan: A Slow Adopter,but potential world leader in digital signage

June 22, 2007

From aka.tv 22 Jun 2007

Given the country’s history of technological innovation, it’s perhaps surprising that Japan’s digital-signage market has been relatively slow to take off. But according to Chris Phelan, CEO of Japanese media-networks company Vanten, things are looking up: after a period of stagnation in the 1990s and early 2000s, Japan’s rising economy could lead to a less conservative approach to new advertising media – and a potential boom for digital signage and interactive displays.

“Spending on new ideas was slow for many years and many businesses were not willing to try new things,” says Phelan. Since 1991 there have been four separate recessions in Japan, effectively stretching the downturn to a decade-long slump during which younger employees (the so-called Lost Generation) were unable to find jobs.

And although the economy has been improving steadily since 2003, these long years of decline have resulted in a certain cautiousness. However, as Phelan says, “Japanese companies are doing a booming business with China these days and are feeling positive about the future for the first time in many years”.

According to Phelan, “Japan Inc. as a whole is a slow adopter of new business processes and business-enabling technologies. While consumers lead the charge in new gadgets and 3G mobile, business always lags in integrating new technology.”

Perversely, however, this reluctance to plunge into the latest trends might prove to be a major asset in developing a strong digital-signage sector.

“The planning stage is longer in Japan than in many countries – making sure a new model is well-thought-through and workable is very important to Japanese businesses. They would rather be a couple of years slower but get their first rollout of a technology right,” adds Phelan.

“I saw this many times in the Internet space. Japanese companies were quite slow to introduce email, Web and e-commerce into their business flow. When they did, they added them at an amazing pace, but it was a year or two later than their counterparts in North America and Europe,” he says.

This caution has been compounded by the failure of some early digital-signage rollouts in Japan. Many companies looked at these projects and concluded that digital signage wasn’t going to give them an adequate return on investment. “I have heard people mention these early flops as the reason their company has not yet launched digital signage. Companies are increasingly planning major rollouts but it could be a while before they start taking the plunge,” says Phelan.

Space pressures
Japan has a large population in a small land mass, so space is at a premium. Says Phelan: “The size of displays used in Japan tends to be smaller than in other countries. This creates opportunities that might not exist elsewhere. Outdoor LEDs are popular for this very reason – there is more room on the front of a store than inside of it.”

For example, Vanten’s installations for retailer Yodobashi Camera comprise three large outdoor LED screens on the exteriors of Yodobashi’s Tokyo, Yokohama and Osaka stores, run remotely from Vanten’s head office. Earlier systems had relied on video playback and required video production to create any new content – a costly process. Vanten’s introduction of a PC-based system with real-time rendering has reduced costs and improved quality, as well as allowing the addition of weather and news feeds.

These improvements have also led to an increase in advertising revenue from major clients such as Microsoft and Sony, while the publicity the signs attract has helped Yodobashi Camera’s profile.

But Japanese companies such as Yodobashi Camera have to compete in a highly ad-saturated market, with people seeing an enormous number of advertisements every day. “Advertisers and planners have a lot of great media options to pick from,” says Phelan. “TV is very strong in Japan and has higher advertising recall among viewers than [in] the U.S., for example. Mobile and Internet are both growing at a tremendous pace. It is an incredibly rich and complex media market and digital signage will need to earn its place in the planners’ media mix.”

One area that Phelan sees as having high potential is the commuter market. “Three million people pass through [Tokyo’s] Shinjuku Station every day. Being able to reach huge volumes of people with out-of-home media is very appealing to advertisers. Digital signage in commuter spaces has its own set of problems, though. Current deployments do not have sound and when TV content is repurposed for use on out-of-home screens it often does not make sense without sound.”

The future
Japan has an advantage in its strong home-grown technology base, including many of the world’s largest manufacturers of displays, such as Sony, Panasonic, Sharp, Pioneer, Hitachi and Mitsubishi. “These companies all tend to have some kind of digital-signage software and have very large sales organizations,” observes Phelan, although most of the large display manufacturers sell their software as part of a package deal with hardware, potentially limiting their impact on the non-hardware side of digital signage.

And there are also a number of companies offering small, in-shelf screens that play simple looped commercials from a memory stick – companies that have achieved strong penetration into Japan’s retail market, but will have to update their technology and diversify if more sophisticated digital signage takes off in Japan.

After recent successful deployments and with a strengthening national economy, there appears to be a growing number of companies considering the use of digital-signage networks. Many businesses are also waking up to the possibilities of tapping into a tech-savvy population.

“In the next five years I think Japan will become a leader in next-generation digital signage,” says Phelan. “When Japanese companies talk about digital signage, they always talk about integrating the technology with mobile applications, database-driven content and POP inventory. I think the key is getting the consumers to interact with the digital signage. With Japan’s dense population centres and high penetration of next-generation mobile phones, this is irresistible. It’s what the media owners and consumers both want.

“I am looking forward to the next few years when Japan adopts, localizes and makes digital signage its own. After that you can expect to see innovations flowing out of Japan to the rest of the world.”