Subject of Paper

Introducing Gallinfo Media's video podcast productions to the Japanese Market

Introduction - Gallinfo Media's Business Model

Gallinfo Media has decided to introduce their unique media product, which represents an entirely new genre, into the nascent video podcast market in Japan.

Executive Summary
In terms of market size, wealth, potential viewers (consumers) when measured against costs and risks, the Japanese market is attractive. Gallinfo Media’s (GM’s) greatest advantage may be the established cultural tastes for this type of genre. Further market research must be done to determine the potential for advertising revenue generation, before the Gallinfo Media market entry. As with any foreign company doing business in Japan, it will be critical to establish trusting relationships with advertising agencies and their clients.

Introduction

Subject of Paper: Introducing Gallinfo Media's (GM) video podcast productions to the Japanese Market.

Perspective

• The strategic planner addressing the CEO and BOD
• Discussing critical issues for establishing a new business venue, affecting policy drivers
• Addressing theories and concepts in course materials

Gallinfo Media's Business Model

Gallinfo Media (GM) has decided to introduce their unique media product, which represents an entirely new genre, into the nascent video podcast market in Japan.
Gallinfo Media’s podcasts use unique situational content to make a compelling viewer experience, while strategically placing products within the story-line, thus creating an alternative to the traditional advertising model. This combination of video podcasts, short-duration themes, and customized product placement -- represent new genera in entertainment.
These professionally produced video podcasts, lasting from 5 to 15 minutes in length, can be streamed or downloaded to any viewing device, and are:

• standardized on unique themes -- Themes can be targeted to fit the cultural tastes of a small audience, or to satisfy a broader appeal
• targeted to short attention-span viewing -- perfect for watching while taking a quick work-break
• written and produced to integrate product messages -- so as not to be viewed as a traditional (TV-type) advertisement

There are three components to the GM business model:

1. Production services, which includes the production of the content of the actual video podcasts
2. Web services, which includes the management of the web site, and the hosting and streaming of podcasts
3. Marketing services, which includes the establishment and management of the brand, and relationships with potential partners and advertisers

Critical Success Factors

Addressing Product and Brand Characteristics: Although GM eschews direct sexual content or nudity, some of GM’s content does rely on the use of partial nudity, displaying men’s and women’s bodies in semi-erotic themes. Would these messages be culturally acceptable? Would advertisers be opposed to associating their products with the erotic themes we use? How should our character profiles be changed to target Japanese cultural norms; are the characterizations acceptably compelling to a Japanese audience?
Before approaching the market or determining a course of action, we recommend hiring a firm which specializes in Japanese-American relationship-building, to research and address these issues.

Responding to Cultural Differences

Social structure and religion

Issue: Does the Japanese social structure and religious preferences create cultural difference which affects product decisions?
Relationship to business model: Relative to the GM business model, the Japanese share many social and cultural values and traits with their U.S. counterparts. Although social class remains a distinct reality in modern Japan (Brinton, 2005), the podcasts do not address class issues, and therefore should have wide appeal among both men and women regardless of class. Religion and other potentially restrictive social philosophies, which would affect the how Japanese viewers receive our themes, does not play a major role in decisions about the ethics of sex (Japan guide, 2006) or, consequently, its use as an advertising mechanism.
Strategy: Social and cultural differences should not create blocking issues for using the same formula for developing character models and plot lines that are employed in the U.S. In Japan, GM will not face broad cultural issues with class, religion, and economic differences that may impact acceptance of its genre.

Language, education, and folkways

Issue: Are there language, education or folkway differences that block the acceptance of our product?
Relationship to business model: In many ways, everyday life in Japan is even more structured around urban lifestyles and its integration with technology and media when compared with the U.S. or other countries. Also, the Japanese view themselves as fashion trendsetters. [Japan-zone, 2006] Popular culture is highly evolved and represents many opportunities. [Miyao, 2005]
Education levels are comparable or higher than in the U.S. The English language is considered a second-language and is also often used as the language of business. Business relationships in English are common.
Strategy: These cultural similarities can all be leveraged to create the modern, hip, fashionable, and trend-setting themes that are already part of the GM strategy. But when it comes to language, all our business will be done in spoken Japanese, using interpreters with extensive business experience in cross-cultural relationships. There are just too many code words in the Japanese for foreign executives to master or even understand. [DeMente, 2002]

Popular culture and workplace culture

Relationship to business model: The Japanese entertainment industry is highly evolved and in many ways on-par with the U.S.
Strategy: Although GM does not use a traditional workplace model using employees, preferring instead to outsource all production and other functions, all three components of the GM business model will need to respond to cultural differences and tastes in regards to working relationships:

• Producing content that is appropriate for a Japanese audience, such as using characterization, action, themes, and correctly interpreting the leading fashion and social trends
• Communicating with both advertising agencies and their clients, and with Japanese videographers and screenwriters to create trusting relationships and actionable work agreements

Labor, staffing quality, and availability

Relationship to business model: The video production industry and advertising/media markets are well established in Japan. Our research has shown that there are many leading-edge videographers and screenwriters that are eager to establish a working relationship with GM.
Strategy: The recommended strategy is to rely-on and use (established) Japanese writers, producers, and videographers to produce content for the Japanese audience. Always strive to ensure that cultural issues are seamlessly integrated into any product message.

Political, economic and legal issues

Political and economic philosophy

Relationship to business model: Japan’s political structure is very stable and Japan’s economic policies support the second strongest global economy. Business relationships between Japan and the U.S. have never been stronger. Japan is an exceptional country in which to do business.
Strategy: Japan was chosen as a launch country on the basis of its economic and political stability.

Legal and intellectual property issues

Relationship to business model: Japan has an excellent legal system that supports intellectual property law. Contract law is well established and parallels U.S. law. Even though law pertaining to racism, immigration, and human rights issues is still not as well managed as in the U.S. court system, [Maciamo, 2004] Japan has made great strides in patent and intellectual property law. [Takenaka, 1999]
Strategy: The GM strategic position on intellectual property is to avoid any reliance on IP rights usage, and instead promote the copying and wide distribution of GM videos without restriction. Contract law is an important component that ensures our somewhat complex service agreements will be respected.

Infrastructure and competitive factors

Infrastructure

Relationship to business model: Japan’s internet infrastructure ranks among the world’s best. At a time when the U.S. is falling behind the rest of the world in number of homes with broadband internet access, [Bleha, 2005] Japan is building an internet infrastructure that will strongly support video podcasting. [Ito, 2005]
Strategy: Coupled with increasing demand, we can expect that the infrastructure is well established to support cutting-edge video podcast concepts.

Competition, demand and market/brand positioning

Relationship to business model: The viewer appeal of podcasting in Japan has already captured the interest of marketing and advertising companies. [E-Commerce Times, 2005] Coupled with the well established interest of Japanese viewers in unusual podcasts the brand positioning and demand should be well received if it is localized correctly, because Japanese brand localization can be extremely important.
Strategy: Some of the technology decisions by podcast aggregators (a business model of competitors) are not as strategically placed for advertising success (as the GM strategy), and leaves a wide opening that allows the GM technology and advertising strategy to quickly and effectively be adopted.

Foreign exchange, finance and accounting

Relationship to business model: GM has the flexibility to structure the Japanese investment to take full advantage of leveraging the finance, tax, and exchange situations.
Strategy: The Japanese tax system is as complex as that found in the U.S. To be a tax-efficient company, GM must invest in a good Japanese accounting firm, and plan to re-invest profits in Japan. Strategies to move cash off-shore must be carefully planned.

Pros and Cons of Investment Strategies

Strategy	Pros	Cons
Direct Export	This strategy is already used indirectly because viewers can access the content over the internet, and do. As part of the initial entry process, the first step will be to translate the language (to Japanese). The only cost will be translation. Ultimately, we also want to use a Japanese source to stream the video starting within Japan; currently it is streamed directly from U.S. servers. This is a good, low-cost approach to gauging general product acceptance. GM may choose to use U.S. resources in web development.	The downside to direct export of U.S. content is that it is not optimized for the Japanese advertiser, which is directly related to the business model. Although the viewer may be just as entertained regardless of content, the whole point is to provide an avenue for advertisers to get their message out.
Indirect or piggy-back export	At first this would seem like it doesn’t apply, but there is a way to piggy-back on Japanese anime video sites as an entry point to the market. This may be a good strategy, especially as the product is already using anime in the videos.	The downside is becoming closely associated with another website or genre, polluting our own brand image.
Franchise	None	We do not have any components of the business which can be franchised. We could lose control of our brand quality by allowing others to copy our techniques. The model of ‘more outlets’ or more ‘producers’ does not add value to the business model.
License agreement	This is the preferred method of doing business. We want to contract all the business functions to professional producers, including: ad agencies, videographers, writers, actors, web services and accounting. In this way, GM can maintain the absolute minimum staff on hand in Japan (perhaps less than 5 people to run the whole show, not including sales staff).	The downside of using all ‘outsourced’ services is that costs may be slightly higher then using employees. The management of contracts (legal fees, contracts consulting fees, extra accounting, etc.) will also add cost.
Foreign direct investment	GM does not need to invest in manufacturing, retail or other hard resources. GM will use profits to reduce costs. The first investment will be in the factoring of borrowed money. (Note: Today GM factors their receivables to manage cash flow issues). After we can factor our own capital needs, GM will turn to streaming infrastructure, and may build its own server farm and network ops center.	There is no downside to using FDI to reduce costs, as our accounting practice already assume that foreign exchange issues are to be avoided by keeping profits within the invested country.

Conclusions

In Japan, GM will not face broad cultural issues with class, religion, and economic differences that may impact acceptance of its genre. GM's trend-setting themes will play well to a Japanese audience. Strong localization of themes and use of Japanese sub-contractors will help ensure that advertisers find value in the genre.
Political, legal, infrastructure, finance, and intellectual property issues should not affect our market entry. License agreements should be the preferred method of establishing a profitable business model.

Bibliography
Brinton, Mary C. "Class Structure in Contemporary Japan (review)" The Journal of Japanese Studies - Volume 31, Number 1, Winter 2005, pp. 146-149. Located on the web at: http://muse.jhu.edu/cgi-bin/access.cgi?uri=/journals/journal_of_japanese_studies/v031/31.1brinton.html

Religion in Japan, Japan-guide.com, 2006, http://www.japan-guide.com/e/e629.html

Modern Japan, Japan-zone, 2006, http://www.japan-zone.com/modern/index.shtml

DeMente, Boye, "Interpret thinking, not just words," Japanese Etiquette & Ethics in Business, Sept. 2002, Available at the following website: Asian business Code words, http://www.apmforum.com/columns/boye55.htm

Miyao, Takahiro, Notes from the Stanford Seminar on Japanese Pop Culture, Activity report # 57, March 2005, http://www.glocom.org/special_topics/activity_rep/20050302_miyao_stanford/index.html

Maciamo, "Badly needed reforms for the Japanese legal system," Japan Reference, June 2004, http://www.jref.com/society/japanese_backward_legal_system.shtml

Takenaka, Toshiko, "Comparison of U.S. and Japanese court systems for patent litigation," University of Washington School of Law, autumn 1999, http://www.law.washington.edu/Casrip/Symposium/Number5/pub5atcl6.pdf

Bleha, Thomas, "Down to the Wire," Foreign Affairs, May 2005, http://www.foreignaffairs.org/20050501faessay84311/thomas-bleha/down-to-the-wire.html

Ito, Joi, "Japan internet stats," Impress 2005 Internet white paper, 2005, http://joi.ito.com/archives/2005/06/14/some_japan_internet_stats.html

"Podcasts opening new ad markets in Japan," E-Commerce Times, March 2005, archived at Podcasting News, http://www.podcastingnews.com/archives/2006/03/podcasts_openin.html


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