|"Inside the Space
© Discovery Channel
The boob tube is about
to get smarter. Cable and satellite broadcasting are undergoing a digital renaissance. Barry Brophy tunes in to find out more.
The age of digital cable and TV
services has finally descended upon Japanese soil. Beginning this month, cable companies
have finally got the go ahead to upgrade existing lines to fiber optic cables that not
only will boost the lagging penetration levels of Japan' multi-channel, specialty TV
services, but bring the country's Internet standards, literally, up to speed. A host of
new services are on the way: two-way TV, complete with programming systems that allow
viewers to use a remote or cordless keyboard to scroll TV listings; choose programming
from an interactive guide; shop; send emails; play along with game shows and choose the
camera angles for the programs they're watching. Just how and when viewers can expect this
miraculous transformation of cable and satellite services from a broadcasting industry
that has recently come out of the dark ages is another story.
Japan's terrestrial and cable broadcasting industries have certainly come a long way since
their respective inceptions in 1953 and 1955. By the end of last year, these highly
fragmented industries contained 129 terrestrial broadcasters and over 375 multi-channel
cable operators. On the surface, these numbers insinuate that subscribers have been on the
receiving end of a plethora of programming. The reality is that Japan's cable and
satellite services have been less than user-friendly: The household penetration levels
tell the real story. As of March 1999, the total number of subscribers to cable systems
was some 7.94 million, of which approximately 2.9 million were hooked up to multi-channel
cable operators, offering the likes of CNN, BBC WORLD, ESPN, J Sky Sports and various
movie channels, and the rest to local broadcasters, re-transmitting terrestrial programs
and local service broadcasts. In real terms, however, these are measly subscription
figures with a household penetration level of just over ten percent. And with respect to
Japan's 46.8 million TV-crazy households-99 percent of which, according to the Ministry
for Posts and Telecommunications (MPT), have color television sets-a glaring anomaly.
But why has the industry in Japan, where viewers spend more hours glued to the TV than any
other nation in the world, been so slow to develop? The reasons for this stunted evolution
are manifold, not least of which is the rash of government restrictions and regulations
placed on it and only lifted in 1993. These guards prevented companies from owning more
than one operator, limited them to operating channels only in their own local area and
placed restrictions on foreign ownership.
|Keanu Reeves in The Matrix
© 1999 WB and Village Roadshow Film Ltd./Photo by Jason Boland
But the situation hasn't
changed overnight since deregulation. Nor is it likely to. "Cable hasn't just
flourished since deregulation. Japan is an extremely difficult market to get into,"
according to a spokesperson for Jupiter Communications (J-com), Japan's largest
multi-channel cable operator.
As of the end of September this year, the company had nearly 740,000 subscribers to its
cable TV service, 59,000 for its telephony and just under 100,000 for its high-speed
Internet. It is currently generating as many as 45,000 new customer sales a month, still
small numbers given the market potential.
For one, an adequate infrastructure for cable transmission barely exists. "With such
a high density of multi-dwelling units, i.e. apartment blocks, an almost unilateral
decision by owners not to invest in wiring the buildings for cable when they were being
built has made it difficult to make real progress in the short-term," says J-com.
But the company is hoping that the high percentage of young people who traditionally live
in apartment complexes, and for whom cable's IT offering would be most attractive, will
help to accelerate the process of cabling and making the maximum number of homes and
Consumer demand does have a limit, of course. Ninety percent of Japanese homes have access
to six or more channels that are offered for free and new BS (broadcast satellite) digital
broadcasting services, beginning this month, may also be free to a certain extent.
Moreover, the relatively late relaxation of broadcasting controls has meant that cable
companies have been forced to jostle with a glut of program providers, not to mention
omnipresent video outlets, for customers. Local cable operators have also been limited by
technology; they can distribute anywhere from 20-50 channels, depending on their bandwidth
This stands in stark contrast to countries with high penetration levels like the US, where
cable services like HBO, CNN, and ESPN and MTV were afforded a much freer hand in trying
to attract customers in advance of the video explosion of the '80s.
"Japanese cable companies just don't have the luxury of that window of time, a la
cable in the US before video took off," according to J-com. "In the States, they
were able to get it going before any other alternatives were available. In Japan it's the
opposite. It's a whole different dynamic."
Bet on Internet
But the market is changing rapidly. And ironically it's not TV programming that the
operators are pinning their hopes on to lead a cable charge.
"Cable TV per se may not drive penetration up, but it's our hope that computer
convergence and interactivity could bump it up to 40 or 50 percent," says J-com.
"Cable offers the opportunity for other products-like telephony and high speed
Internet-that alternative mediums like satellite just can't. What the cable companies are
looking to do is to accelerate the convergence of what you can do on the Internet and what
you can do with your TV, but in a TV-centric way, which a lot of customers would be more
Tokyo-based cable company Mediati are just one group, alongside more established names
like J-com and Tokyu Cable, that are aiming to hitch onto the impending marriage of home
entertainment and information technology to exploit an insatiable public appetite for
audio, video, games and interactive content. Operating since May, they currently provide
general programming including ESPN, BBC WORLD, CNN, J Sky Sports 1, 2, and 3, as well as a
variety of movie channels. This is coupled with high-speed Internet access and, from next
year, interactive features. Along with many companies, they are now in the process of
upgrading to fiber optic lines and are currently establishing a digital, interactive TV
"Up until now, while cable's been important for individual communities, it's not been
a very progressive medium. It's generally been pretty underdeveloped," according to
John Flanagan, Mediaiti's vice president of products and marketing. "At present, the
big companies are bringing existing, smaller cable companies together to form a more
homogenous group. This consolidation, and the efficiency that it brings with it, will
allow us to launch much more interesting services through the medium that individual
operators don't have the means or the resources to."
why has the industry in Japan, where viewers spend more hours glued to the TV than any
other nation in the world, been so slow to develop?"
In September this year J-com became even bigger, merging with Japan's second largest cable
operator, Titus Communications. J-com, which distributes Shop Channel, Discovery Japan,
LaLa and Nikkei CNBC amongst others to Japanese homes, have already begun to replace
existing cables with fiber optic ones. Fiber optic lines can carry information some 450
times faster than conventional telephone lines, and once installed they will allow users
to download digital video and audio material into the home with minimal reduction in
"The cable operators are starting to offer bundled services, with Internet access and
telephony, along with standard distribution and multi-channel services," says Steve
Hofmann, vice president of finance for Jupiter Programming Co. (JPC). "They are
effectively becoming all-in-one communications companies."
The advances will enable broadcasters to offer value-added services such as electronic
program guides and interactive services, including home shopping, gaming, and
pay-per-view. The MPT reckons that digital broadcasting implementation nationwide will be
completed by the end of 2006. The next generation of TV will also be able to support web
browsing, email and video-on-demand.
Interactive TV, the jewel in the cable broadcasters' crown is already being widely touted
as the next generation of the Internet. Microsoft has already announced that the next
consumer version of its Windows program, due in 2001, will not only let viewers watch TV
on their PCs, but join in as well. "A new breed of PC appliances is emerging aimed at
home entertainment rather than workplace productivity," said John DeVan, senior vice
president of Microsoft's TV division.
|Plenty of sports action is aired
Microsoft's Enhanced TV is
designed to allow such things as interactivity with content, playing along with game
shows, email, chat features and personalization, including customized electronic program
guides. Viewers will be able to easily transmit data from their TVs to personal computers
and other Internet-compatible devices.
In the not-too-distant future your boob tube will be a lot smarter. "For example, if
you're watching a show, and you like the dress on one of the actresses-you can find out
who made it, how much it costs, and buy it there and then," says Flanagan.
Some available set-top boxes include an 8.5GB hard drive that can record and replay a
broadcast before the end of the show. So if you miss the start of your favorite program
you can watch from the start while it's still recording. In the US at present, some
viewers can receive trailers that integrate with the electronic programming guide. So if
you click on a still frame from Ally McBeal, you'll get the broadcast trailer of that
episode, working up to a week in advance.
Eye in the sky
Variety has been the buzzword for satellite television, already in the digital age. But
with nationwide cable lines getting a technological facelift, broadcasters like SKY
PerfecTV! will have a fierce rival. "Cable is a very powerful competitor to
satellite, and will become even more so as it digitizes its infrastructure. It has the
one-stop shop advantage of being able to offer terrestrial BS and CS television services,
which the DTH operators can't match," says an industry source.
Satellite television is currently the most popular form of pay television service in
Japan. At present, however, only SKY PerfecTV!, founded in 1996, is offering
open-platform, i.e. pick-and-choose, satellite programming. SKY PerfecTV!'s main rival in
Japan, DirecTV Japan, announced in March that it was to terminate its Digital Broadcasting
services, having failed to compete sufficiently strongly in Japan's crowded marketplace.
Although the price of cable and satellite for comparable packages is roughly the same in
terms of subscription fees, SKY PerfecTV! is able to offer over 174 channels as compared
to local cable operators, who distribute anywhere from 20 to 50 channels, depending on
their bandwidth capabilities.
Currently, SKY PerfecTV! punters must install a set-top box and a satellite dish receiver.
That equipment usually retails for around JY16,000 - JY32,000 and is available from most
large electronics stores as well as large merchandisers like Ito Yokado. Alternatively,
customers can acquire the equipment through an installment purchase or lease, although the
three- to four-year financial commitment present in many cases can be a big turn-off for
customers. On top of the initial set-up cost, customers then pay a basic monthly fee
ranging from JY950 to JY7940. Set-up fees for cable, on the other hand, are presently
somewhere in the region of JY15,000-JY35,000 for installation, with a monthly fee paid
|"America's Most Wanted"
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As of August this year SKY
PerfecTV! had over 2,226,000 subscribers and recently was listed on the Tokyo Stock
Exchange, hoping to use the proceeds of the sale of shares to acquire the rights to Serie
A football and the 2002 World Cup amongst other things. The company has also expressed its
intention to provide interactive services using new set-top box technology, including the
use of built-in hard drives to record programming. However, the nature of SKY PerfecTV!'s
satellite broadcast at present means that the company can't offer the same types of
telephony, Internet and two-way interactive features that the cable companies can without
a degree of latency. In layman's terms, satellite TV, which still relies on existing phone
lines to transmit information as the viewer interacts, will always be slower than digital
The concept of two-way, or truly interactive TV is what the cable companies are hoping
will help them to overtake satellite as the medium of choice for the square-eyed. However,
despite their broad range of programming and data services, satellite and cable TV still
face stiff competition from those channels, existing and forthcoming, offered by NHK and
Wowow. In particular, NHK's BS channels had a subscriber base of over 10 million as of
March of this year, while Wowow, operated by Japan Satellite Broadcasting Inc., is
estimated to have had around 2.5 million subscribers. BS broadcasters currently offer four
television channels-two from NHK (BS1 & BS2), one by Wowow, and one used for pilot
broadcasts in the Hi-vision (High-definition) format.
Moreover, new broadcast satellite services using digital technology are also set to begin
in Japan this month. Six broadcasters, five of which are affiliated to the terrestrial
broadcasters, have obtained licenses to participate. They are expected to offer a total of
ten channels, five of which will be free. Some of the channels will also integrate data
broadcasting functions. In addition to television programming on the new channels, eight
broadcasters have announced plans to launch interactive services similar to those being
touted by the cable companies.
So what does the December launch mean for the industry and the consumer? "The whole
premise of BS digital is high-definition TV. And the types of programming available will
certainly be enhanced by the new format," according to J-com. As yet, that
programming remains somewhat of a mystery, but the cable companies may well be concerned
that BS digital's capacity to utilize fiber optic lines is a direct threat to their own
big-selling point over satellite and other transmission forms. Ultimately, however, it
seems likely that many prospective customers will delay a decision as to which format to
plump for until they can weigh up the respective merits of each system and how long they
may have to wait for the benefits of fiber optic cable to reach their household. Indeed,
playing the waiting game may be the best policy, since prices across the board are likely
to fall to some extent as the various operators try to attract customers to their offering
in an increasingly competitive and cramped market.